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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
- ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
- ------------------------------- -------------- --------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
American Express Tower, World Financial Center
New York, New York 10285
- ----------------------------------------------- ----------
(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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<PAGE>
Item 5. Other Events
1. On January 24, 1994, American Express Company issued a press
release announcing its plan to issue a special dividend to its common
shareholders, a portion of which follows:
NEW YORK, January 24, 1994 - The American Express Company today announced
plans to issue a special dividend to common shareholders consisting of common
shares of its subsidiary, Lehman Brothers Holdings, Inc.
The tax free dividend would complete a restructuring of the Company
around the businesses that operate under the American Express brand name:
consumer card, corporate services, travel, asset management, financial
planning and international banking.
The move, which is subject to certain conditions, would establish Lehman
Brothers as an independent, publicly-owned corporation during the second
quarter of 1994. Prior to the spin-off, American Express plans to strengthen
Lehman Brothers' equity base, in order to reinforce the firm's strong
competitive position and help it achieve solid credit ratings.
The additional equity at Lehman Brothers will come from:
- the purchase of about $160 million of newly-issued Lehman Brothers
common shares by employees of the firm. Approximately $60 million of this
amount would come from an employee ownership plan that was established last
year.
- the purchase by American Express of $200 million of newly-issued
Lehman Brothers perpetual voting preferred shares, which would be held for
investment purposes.
- the purchase by American Express of $890 million of newly-issued
Lehman Brothers common shares, which will be included in the subsequent
dividend to shareholders.
In recognition of its capital infusion, American Express would receive 50
percent of any Lehman Brothers net income over $400 million per year, with a
cap of $50 million per year for each of the next eight years. The cumulative
payout would not exceed $400 million. In addition, American Express would
receive the revenue and earnings-related participations due to Lehman Brothers
from Travelers Corporation as part of the sale of the retail brokerage and
asset management businesses of Shearson Lehman Brothers last year. The
Travelers participations are expected to yield $50 million pre-tax annually
for the next three years, depending on the revenues and profits of Smith
Barney Shearson.
The special dividend to shareholders would represent all of the common
shares of Lehman Brothers held by American Express. It will also include
common shares that will be received in exchange for Lehman Brothers money
market preferred stock currently held by American Express.
Following the transaction, American Express expects that common
shareholders will receive a cash dividend from the Lehman and American Express
shares that is equivalent to the current dividend now payable on American
Express shares. Future dividends would, however, be based on the determination
of each company's Board of Directors and their respective assessments of the
performance and financial requirements of the companies at that time.
<PAGE>
More than 90 percent of Lehman Brothers common shares are expected to be
publicly held following completion of the transaction. The remainder will be
owned by Lehman Brothers employees. American Express will own $200 million of
preferred shares; it will not hold any common shares. Nippon Life will
continue to hold $508 million of cumulative voting convertible preferred
shares. American Express will not be represented on the Lehman Brothers
Board and there will be no directors in common between the two companies.
Richard S. Fuld Jr. will continue as President and Chief Executive Officer of
Lehman Brothers.
Final terms of the transaction and the special dividend have not yet been
determined. The special dividend and other matters are subject to a number of
conditions including: receipt of a favorable tax opinion, regulatory
clearances, market conditions and final approval by the American Express
Board. In addition, the capital infusion and certain other matters are
subject to approval by the Lehman Brothers' Board. Aside from closing related
costs, no earnings gains or losses are anticipated from this transaction for
either American Express or Lehman Brothers.
2. On January 24, 1994, American Express Company issued the following
press release reporting its 1993 earnings:
NEW YORK, January 24, 1994 -- American Express today reported 1993
consolidated income from continuing operations of $1.6 billion, or $3.17 per
share, compared with $578 million, or $1.12 per share, a year ago. The year
ago earnings are before accounting changes.
Results for both periods reflected a number of significant items. The
1993 results include a gain of $433 million on the secondary public offering
of First Data Corporation (FDC). The 1992 results included a net charge of
$217 million related to a restructuring charge at Travel Related Services
(TRS) and additional reserves at Balcor, which were partially offset by a gain
on the initial public offering of FDC.
Separately, American Express announced plans to spin-off its
subsidiary Lehman Brothers (Lehman) to shareholders through a dividend
payable during the second quarter of 1994. Lehman, which is now treated as a
"discontinued operation," reported 1993 income of $376 million before net
losses from the sale of various businesses and their related earnings for the
year. Lehman results are discussed in more detail in the Lehman section.
Including discontinued operations, American Express consolidated net
income for 1993 totaled $1.5 billion, or $2.92 per share, compared with $461
million, or $0.88 per share a year ago.
For the fourth quarter, American Express reported consolidated income
from continuing operations of $291 million, or $0.57 per share, compared with
$255 million, or $0.51 per share a year ago. Including discontinued
operations, consolidated fourth quarter net income totaled $399 million, or
$0.78 per share, compared with $82 million, or $0.15 per share, a year ago.
Travel Related Services (TRS) reported 1993 net income of $895
million, compared with net income of $243 million before the change in
accounting last year. Year-ago results included a $342 million restructuring
charge ($492 million pre-tax) largely related to reengineering initiatives
designed to lower ongoing costs.
<PAGE>
Net revenues were down slightly, reflecting discount rate reductions,
a decrease in net card fees, and lower net interest on lending products.
This decline was largely offset by an increase in billed business, reflecting
higher spending per Cardmember and an increase in the number of Service
Establishments accepting the Card.
Excluding interest expense, credit provisions and the 1992
restructuring charge, total expenses were essentially flat compared to a year
ago. These results were achieved as a result of the company's ongoing
reengineering initiatives, which offset costs associated with overall growth
in business volumes and franchise building investments.
Credit provisions declined significantly reflecting actions taken last
year to restructure the portfolio, as well as ongoing improvements in credit
management.
For the fourth quarter, TRS net income was $213 million, compared with
$181 million a year ago.
IDS Financial Services (IDS) reported record net income of $358
million, a 21 percent increase from $297 million before the change in
accounting last year.
Revenue and earnings growth benefited primarily from an increase in
management fees and net investment income that resulted from higher asset
levels. Results also benefited from wider investment margins compared to
year-ago levels.
IDS reported record sales of annuities, mutual funds, and life and
related insurance products, while sales of investment certificates decreased
from last year.
For the fourth quarter, IDS net income was $98 million, compared with
$82 million a year ago.
American Express Bank (AEB) reported 1993 net income of $81 million,
compared with $26 million before the change in accounting last year. Last
year's results reflected the recognition of additional reserves on
credit-related exposures, principally those associated with discontinued real
estate lending activities in the United Kingdom, as well as a restructuring
charge.
Results for 1993 reflect growth in fee income and foreign exchange
activities, as well as benefits from lower short-term funding costs.
Total nonperforming loans and other nonperforming assets (in-substance
foreclosures and assets acquired in loan settlements) of $132 million
decreased $53 million from last year and $66 million from the third quarter,
largely as a result of the disposition of United Kingdom real estate loans.
AEB's net income was $20 million for the fourth quarters of both 1993
and 1992.
Lehman Brothers (Lehman) As noted earlier, American Express today
announced plans to spin-off Lehman to its shareholders as a special dividend.
Accordingly, Lehman results are shown in the attached consolidated financial
statement as "discontinued operations."
<PAGE>
The businesses that now comprise Lehman reported 1993 net income of
$376 million, before net losses from the sale of various businesses and their
related earnings for the year. After accounting for these items, Lehman
reported a net loss of $102 million, compared with a net loss of $124 million
last year.
The 1992 results reflected a series of charges that totaled $316
million after-tax, consisting of: $59 million ($90 million pre-tax) of
additional legal provisions; a $107 million ($162 million pre-tax) writedown
in the carrying value of certain real estate invstments in the fourth quarter;
and charges of $150 million ($245 million pre-tax) related to Lehman's
holdings of Computervision Corporation.
Excluding the businesses that have been sold, Lehman's revenues, net
of interest expense, increased 23 percent, reflecting increased market making
and principal transactions across all business lines. Investment banking
revenues increased, reflecting higher underwriting volume. Total
non-interest expenses grew 7 percent, excluding the 1992 charges mentioned
above, as a result of higher levels of compensation and benefits expense
related to increased revenue and profitability.
After preferred dividend requirements, American Express' share of
Lehman's results was a net loss of $127 million, compared with a net loss of
$149 million last year.
For the fourth quarter, Lehman's net income was $114 million, compared
with a net loss of $166 million a year ago, which included the additional
legal provisions and real estate writedowns mentioned above. The Company's
share of Lehman's fourth quarter results was net income of $108 million,
compared with a net loss of $173 million a year ago.
Corporate and Other reported 1993 net expenses of $203 million,
compared with net expenses of $205 million last year before: the Company's
share of FDC's net income of $40 million in 1993 and $92 million in 1992; a
$433 million after-tax gain in 1993 and a $425 million after-tax gain in 1992
from the public offerings of FDC common stock; and $300 million in additional
reserves related to The Balcor Company in 1992. After accounting for these
items, Corporate and Other reported net income of $270 million in 1993 and $12
million last year.
The Company reduced its ownership interest in FDC from 100 percent to
54 percent in April 1992, and to 22 percent in March 1993.
Change in U.S. federal income tax rate. The Company's results for the
12 months ended December 31, 1993 include a $30 million one-time benefit from
the impact of a change in the U.S. federal income tax rate (from 34 percent to
35 percent) on the Company's net deferred tax assets.
Accounting Changes. Results for the 12 months ended December 31, 1992
reflected the Company's adoption of two new accounting standards, SFAS No. 106
and SFAS No. 109, which together increased 1992 income from continuing
operations by $33 million.
* * *
American Express Company is a diversified travel and financial
services company founded in 1850. It is a world leader in charge cards,
Travelers Cheques, travel, financial planning and international banking.
<PAGE>
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Unaudited)
(dollars in millions, except per share amounts)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues by Industry Segment
Travel Related Services $2,570.4 $2,605.6 (1.4%)
IDS Financial Services 806.9 737.7 9.4
American Express Bank 311.8 318.3 (2.0)
------- -------
3,689.1 3,661.6 0.8
Corporate and Other,
including adjustments
and eliminations (B) 19.2 (14.5) -
------- -------
CONSOLIDATED REVENUES $3,708.3 $3,647.1 1.7
======= =======
Pretax Income (Loss) from
continuing operations
before accounting changes
by Industry Segment
Travel Related Services $290.2 $255.7 13.5%
IDS Financial Services 139.3 117.5 18.6
American Express Bank 27.8 26.0 7.0
------ ------
457.3 399.2 14.6
Corporate and Other (B):
Corporate expenses (76.8) (76.9) 0.1
Equity in FDC net income 11.4 23.4 (51.5)
------ ------
Total (65.4) (53.5) (22.4)
------ ------
PRETAX INCOME $391.9 $345.7 13.4
====== ======
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues by Industry Segment
Travel Related Services $9,835.2 $10,205.3 (3.6%)
IDS Financial Services 3,156.0 2,874.4 9.8
American Express Bank 1,191.8 1,328.3 (10.3)
-------- --------
14,183.0 14,408.0 (1.6)
Corporate and Other,
including adjustments
and eliminations (B) (10.2) (112.0) (90.9)
-------- --------
CONSOLIDATED REVENUES $14,172.8 $14,296.0 (0.9)
======== ========
<PAGE>
Pretax Income (Loss) from
continuing operations
before accounting changes
by Industry Segment
Travel Related Services $1,190.2 $277.2 #
IDS Financial Services 518.0 407.6 27.1%
American Express Bank 117.1 13.7 #
------- -----
1,825.3 698.5 #
Corporate and Other (B):
Corporate expenses 451.4 15.1 #
Equity in FDC net income 49.2 92.4 (46.8)
------- ------
Total 500.6 107.5 #
------- ------
PRETAX INCOME $2,325.9 $806.0 #
======= ======
<PAGE>
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Unaudited)
(dollars in millions, except per share amounts)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Income (Loss) from continuing
operations before accounting
changes by Industry Segment
Travel Related Services $213.2 $181.0 17.7%
IDS Financial Services 97.5 82.2 18.6
American Express Bank 19.9 19.6 1.4
------ -----
330.6 282.8 16.9
Corporate and Other (B):
Corporate expenses (51.3) (51.7) (0.8)
Equity in FDC net income 11.4 23.4 (51.5)
------ -----
Total (39.9) (28.3) (40.9)
====== =====
Income from continuing operations
before accounting changes 290.7 254.5 14.2
Discontinued operations (net of
income taxes) (A) 108.0 (172.8) -
Net income before accounting ----- -----
changes 398.7 81.7 #
Cumulative effect of changes in
accounting (C) - - -
----- -----
NET INCOME (D) $398.7 $81.7 #
===== =====
Earnings per common share:
Continuing operations $0.57 $0.51 11.8
Discontinued operations 0.21 (0.36) -
---- ----
Before accounting changes 0.78 0.15 #
Cumulative effect of changes in
accounting - - -
---- ----
NET INCOME PER COMMON SHARE $0.78 $0.15 #
==== ====
Cash dividends declared per common
share $0.25 $0.25 -
======= =======
Average shares outstanding (000's) 505,044 479,189 -
======= =======
<PAGE>
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Income (Loss) from continuing
operations before accounting
changes by Industry Segment
Travel Related Services $895.2 $242.8 #
IDS Financial Services 357.9 296.5 20.7%
American Express Bank 81.2 26.4 #
-------- -------
1,334.3 565.7 #
Corporate and Other (B):
Corporate expenses 230.2 (80.3) -
Equity in FDC net income 40.3 92.4 (56.4)
------- -------
Total 270.5 12.1 #
Income from continuing operations
before accounting changes 1,604.8 577.8 #
Discontinued operations (net of
income taxes) (A) (127.0) (149.3) 14.9
Net income before accounting ------- ------
changes 1,477.8 428.5 #
Cumulative effect of changes in
accounting (C) - 32.8 -
-------- ------
NET INCOME (D) $1,477.8 $461.3 #
======== ======
Earnings per common share:
Continuing operations $3.17 $1.12 #
Discontinued operations (0.25) (0.31) 19.4
------ -----
Before accounting changes 2.92 0.81 #
Cumulative effect of changes in
accounting - 0.07 -
------ -----
NET INCOME PER COMMON SHARE $2.92 $0.88 #
Cash dividends declared per common ======= ======
share $1.00 $1.00 -
======= =======
Average shares outstanding (000's) 500,138 476,713 -
======= =======
(A) In January 1994, the Company announced its plan to complete
a tax free spin - off of Lehman Brothers (LB) through a special
dividend to shareholders. The transaction is expected to occur
in the second quarter of 1994. Accordingly, LB results are
reported as Discontinued Operations for all periods presented.
Discontinued Operations include LB ongoing results, the income
of two businesses sold by LB earlier in the year, as well as the
net loss related to those sales. The following chart details
these amounts:
<PAGE>
Three Months Ended
December 31,
1993 1992
Lehman Brothers Operations $114.4 ($199.6)
TBC Operations - 21.0
SLBD Operations - 12.1
Gain on Sale of TBC - -
Loss on Sale of SLBD - -
Non-Core Business Reserves - -
------ ------
Income (Loss) Before Accounting
Changes 114.4 (166.5)
Accounting Changes - -
------ ------
114.4 (166.5)
Preferred Dividends (6.4) (6.3)
------ ------
Discontinued Operations $108.0 ($172.8)
====== ======
Twelve Months Ended
December 31,
1993 1992
Lehman Brothers Operations $375.8 ($248.2)
TBC Operations 24.4 76.9
SLBD Operations 63.2 54.8
Gain on Sale of TBC 165.0 -
Loss on Sale of SLBD (630.0) -
Non-Core Business Reserves (100.0) -
------ ------
Income (Loss) Before Accounting
Changes (101.6) (116.5)
Accounting Changes - (7.4)
------ ------
(101.6) (123.9)
Preferred Dividends (25.4) (25.4)
------ ------
Discontinued Operations ($127.0) ($149.3)
====== ======
<PAGE>
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Unaudited)
(B) As a result of the Company's public offering of FDC common stock in April
1992, American Express' former 100 percent ownership interest in FDC was
reduced to approximately 54 percent. On March 29, 1993, the Company further
reduced its ownership interest in FDC to approximately 22 percent by the sale
of 34.6 million shares. As a result of the Company's reduced ownership, FDC is
reported under the equity method of accounting effective January 1, 1993. The
$433 million after-tax gain ($779 million pretax) from the March 1993 public
offering is included in Corporate expenses for the twelve months ended
December 31, 1993. The $425 million after-tax gain ($706 million pretax) from
the April 1992 public offering is included in Corporate expenses for the
twelve months ended December 31, 1992. The Company's equity in the net income
of FDC is included on one line in consolidated expenses for all periods.
Corporate expenses for the twelve months ended December 31, 1992 includes
reserves of $388 million ($300 million after-tax) related to The Balcor
Company.
(C) Results for the twelve months ended December 31, 1992 include the effect
of the Company's adoption of two new accounting standards. SFAS No. 106,
covering accounting for postretirement benefits, was adopted in the third
quarter of 1992, effective January 1, 1992. SFAS No. 109, covering accounting
for income taxes, was adopted in the first quarter of 1992, effective January
1, 1992.
Income from
continuing
operations
before Cumulative Cumulative
accounting Effect of Effect of Net
changes SFAS 109 SFAS 106 Income
Travel Related Services $242.8 - ($78.9) $163.9
IDS Financial Services 296.5 - (19.8) 276.7
American Express Bank 26.4 - (7.4) 19.0
Corporate and Other 12.1 $147.0 (8.0) 151.1
------ ------ ------ -----
Consolidated $577.8 $147.0 ($114.1) $610.7
====== ====== ====== =====
(D) The Company's results for the twelve months ended December 31, 1993
include a $30.5 million one-time benefit from the impact of a change in the
U.S. federal income tax rate (from 34 percent to 35 percent) on the Company's
net deferred tax assets.
Adjustment of
Deferred Taxes
Travel Related Services $22.4
IDS Financial Services 0.4
American Express Bank 5.4
Corporate and Other 2.3
-----
Consolidated $30.5
=====
Note: Certain prior year amounts have been reclassified to
conform to the current year's presentation.
# Denotes variance of more than 100%.
<PAGE>
(Preliminary)
Travel Related Services
Statement of Income
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Discount Revenue $980 $967 1.4%
Net Card Fees 426 441 (3.5)
Interest and Dividends 176 179 (1.5)
Other Revenues 663 663 0.2
----- -----
2,245 2,250 (0.2)
----- -----
Lending:
Finance Charge Revenue 325 356 (8.9)
Interest Expense 75 89 (15.4)
----- -----
Net Finance Charge Revenue 250 267 (6.7)
----- -----
Total Net Revenues 2,495 2,517 (0.9)
----- -----
Expenses:
Marketing and Promotion 283 258 10.0
Provision for Losses and Claims:
Charge Card 198 261 (24.3)
Lending 109 142 (23.5)
Other 88 90 (1.4)
----- -----
Total 395 493 (19.9)
Interest Expense:
Charge Card 142 170 (16.6)
Other Interest Expense 49 33 50.1
----- -----
Total 191 203 (5.9)
Net Discount Expense 65 47 39.1
Human Resources 607 601 1.0
Other Operating Expenses 664 659 0.6
Restructuring Charge 0 0 -
----- -----
Total Expenses 2,205 2,261 (2.5)
----- -----
Pretax Income 290 256 13.5
Income Tax Provision 77 75 3.2
----- -----
Net Income Before Accounting
Change $213 $181 17.7
===== =====
<PAGE>
Selected Statistical Information
Total Cards in Force:
United States 24.7 24.3 1.5
Outside the United States 10.7 10.4 2.9
----- -----
Total 35.4 34.7 1.9
===== =====
Basic Cards in Force:
U.S. Charge Card 11.5 12.1 (5.2)
U.S. Corporate Card 6.5 5.3 23.4
International Charge Card 8.0 8.1 (1.7)
----- -----
Total 26.0 25.5 1.8
===== =====
Card Billed Business (billions):
United States $24.5 $22.4 9.4
Outside the United States 9.6 8.9 7.9
----- -----
Total $34.1 $31.3 8.9
===== =====
<PAGE>
Travel Related Services
Statement of Income
(Unaudited)
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Discount Revenue $3,621 $3,656 (1.0%)
Net Card Fees 1,727 1,820 (5.1)
Interest and Dividends 724 720 0.5
Other Revenues 2,441 2,480 (1.5)
----- -----
8,513 8,676 (1.9)
----- -----
Lending:
Finance Charge Revenue 1,321 1,529 (13.6)
Interest Expense 319 451 (29.2)
----- -----
Net Finance Charge Revenue 1,002 1,078 (7.1)
----- -----
Total Net Revenues 9,515 9,754 (2.4)
----- -----
Expenses:
Marketing and Promotion 1,075 1,084 (0.8)
Provision for Losses and Claims:
Charge Card 792 997 (20.6)
Lending 427 793 (46.1)
Other 339 398 (14.7)
----- -----
Total 1,558 2,188 (28.8)
Interest Expense:
Charge Card 662 788 (16.0)
Other Interest Expense 137 111 23.8
----- -----
Total 799 899 (11.1)
Net Discount Expense 219 100 #
Human Resources 2,246 2,260 (0.6)
Other Operating Expenses 2,428 2,454 (1.1)
Restructuring Charge 0 492 #
----- -----
Total Expenses 8,325 9,477 (12.2)
----- -----
Pretax Income 1,190 277 #
Income Tax Provision 295 34 #
----- -----
Net Income Before Accounting
Change $895 $243 #
===== =====
<PAGE>
Selected Statistical Information
Total Cards in Force:
United States 24.7 24.3 1.5
Outside the United States 10.7 10.4 2.9
----- -----
Total 35.4 34.7 1.9
===== =====
Basic Cards in Force:
U.S. Charge Card 11.5 12.1 (5.2)
U.S. Corporate Card 6.5 5.3 23.4
International Charge Card 8.0 8.1 (1.7)
----- -----
Total 26.0 25.5 1.8
===== =====
Card Billed Business (billions):
United States $89.8 $82.0 9.4
Outside the United States 34.3 35.6 (3.6)
----- -----
Total $124.1 $117.6 5.5
===== =====
# Denotes variance of more than 100%.
Note: Certain prior year amounts have been reclassified to
conform to the current year's presentation.
(Preliminary)
Travel Related Services (continued)
Selected Statistical Information
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Number of Service Establishments 3.6 3.4 6.6%
Travelers Cheque Sales (billions) $4.8 $4.7 1.4
Average Travelers Cheques
Outstanding (billions) $4.9 $4.9 (0.3)
Travel Sales (billions) $2.2 $1.8 19.8
Return on Average Shareholder's
Equity 23.2% 6.6% -
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Number of Service Establishments 3.6 3.4 6.6%
Travelers Cheque Sales (billions) $23.6 $24.0 (1.3)
Average Travelers Cheques
Outstanding (billions) $5.0 $4.8 3.6
Travel Sales (billions) $8.0 $7.0 14.1
Return on Average Shareholder's
Equity 23.2% 6.6% -
Note: Certain prior year amounts have been
reclassified/restated to conform to the current
year's presentation.
<PAGE>
(Preliminary)
IDS Financial Services
Statement of Income
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Investment Income $515 $497 3.7%
Fee Income 198 158 25.2
Other Income 94 83 13.1
---- ----
Total Revenues 807 738 9.4
==== ====
Expenses:
Provision for Losses and Benefits:
Annuities 264 266 (0.7)
Insurance 84 78 6.8
Investment Certificates 27 38 (29.7)
Other 0 2 (59.7)
---- ----
Total 375 384 (2.2)
Human Resources 197 159 23.9
Other Operating Expenses 96 78 23.0
---- ----
Total Expenses 668 621 7.6
---- ----
Pretax Income 139 117 18.6
Income Tax Provision 41 35 18.4
---- ----
Net Income Before Accounting
Change $98 $82 18.6
==== ====
Selected Statistical Information
Life Insurance in Force (billions) $46.1 $40.9 12.8
==== ====
Assets Owned and/or Managed (billions):
Assets managed for institutions $25.0 $21.4 16.9
Assets owned and managed for
individuals
Owned Assets 37.3 31.9 16.9
Managed Assets 37.4 30.0 24.6
---- ----
Total $99.7 $83.3 19.7
==== ====
<PAGE>
Sales of Selected Products (millions):
Mutual Funds $2,335 $1,690 38.2
Annuities $1,053 $954 10.4
Investment Certificates $123 $95 29.6
Life and Other Insurance
Sales $89 $70 26.9
Number of Financial Planners 7,655 7,313 4.7
Number of Financial Plans
Completed 30,951 22,529 37.4
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 59.3% 51.4% -
Return on Average Shareholder's
Equity 17.9% 16.5% -
IDS Financial Services
Statement of Income
(Unaudited)
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Investment Income $2,049 $1,938 5.7%
Fee Income 727 598 21.5
Other Income 380 338 12.3
---- ----
Total Revenues 3,156 2,874 9.8
---- ----
Expenses:
Provision for Losses and Benefits:
Annuities 1,065 1,028 3.6
Insurance 321 308 4.0
Investment Certificates 124 178 (30.5)
Other 5 8 (26.6)
---- ----
Total 1,515 1,522 (0.4)
Human Resources 757 635 19.1
Other Operating Expenses 366 309 18.2
---- ----
Total Expenses 2,638 2,466 6.9
---- ----
Pretax Income 518 408 27.1
Income Tax Provision 160 111 44.1
---- ----
Net Income Before Accounting
Change $358 $297 20.7
==== ====
<PAGE>
Selected Statistical Information
Life Insurance in Force (billions) $46.1 $40.9 12.8
==== ====
Assets Owned and/or Managed (billions):
Assets managed for institutions $25.0 $21.4 16.9
Assets owned and managed for
individuals
Owned Assets 37.3 31.9 16.9
Managed Assets 37.4 30.0 24.6
---- ----
Total $99.7 $83.3 19.7
==== ====
Sales of Selected Products (millions):
Mutual Funds $8,583 $6,958 23.4
Annuities $4,105 $3,581 14.6
Investment Certificates $575 $664 (13.3)
Life and Other Insurance
Sales $309 $230 34.4
Number of Financial Planners 7,655 7,313 4.7
Number of Financial Plans
Completed 102,896 85,146 20.8
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 57.5% 50.2% -
Return on Average Shareholder's
Equity 17.9% 16.5% -
Note: Certain prior year amounts have been reclassified to
conform to the current year's presentation.
<PAGE>
(Preliminary)
American Express Bank
Statement of Income
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Net Revenues:
Interest Income $229 $253 (9.4%)
Interest Expense 155 178 (12.7)
---- ----
Net Interest Income 74 75 (1.5)
Commissions, Fees and Other
Revenues 65 52 24.8
Foreign Exchange Income 18 14 31.8
---- ----
Total Net Revenues 157 141 11.4
---- ----
Provision for Credit Losses 5 6 (15.0)
---- ----
Expenses:
Human Resources 57 51 11.9
Other Operating Expenses 67 58 15.8
---- ----
Total Expenses 124 109 13.9
---- ----
Pretax Income 28 26 7.0
Income Tax Provision (Benefit) 8 6 24.4
---- ----
Net Income Before Accounting
Change $20 $20 1.4
==== ====
Selected Statistical Information
Return on Average Assets 0.62% 0.57% -
Return on Average Shareholder's
Equity 12.96% 13.96% -
Total Loans $5,126 $4,788 7.0
Reserve for Credit Losses $111 $134 (16.9)
Total Nonperforming Loans $43 $102 (57.7)
Other Nonperforming Assets $89 $83 6.9
Risk-Based Capital Ratios:
Tier 1 6.3% 5.7% -
Total 10.2% 9.1% -
Leverage Ratio 4.4% 4.3% -
<PAGE>
American Express Bank
Statement of Income
(Unaudited)
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Net Revenues:
Interest Income $893 $1,068 (16.4%)
Interest Expense 601 782 (23.2)
---- ----
Net Interest Income 292 286 2.0
Commissions, Fees and Other
Revenues 229 200 14.5
Foreign Exchange Income 70 60 17.1
---- ----
Total Net Revenues 591 546 8.2
---- ----
Provision for Credit Losses 34 94 (64.2)
---- ----
Expenses:
Human Resources 217 226 (3.7)
Other Operating Expenses 223 212 4.6
---- ----
Total Expenses 440 438 0.3
---- ----
Pretax Income 117 14 #
Income Tax Provision (Benefit) 36 (12) -
---- ----
Net Income Before Accounting
Change $81 $26 #
==== ====
Selected Statistical Information
Return on Average Assets 0.65% 0.19% -
Return on Average Shareholder's
Equity 13.74% 4.57% -
Total Loans $5,126 $4,788 7.0
Reserve for Credit Losses $111 $134 (16.9)
Total Nonperforming Loans $43 $102 (57.7)
Other Nonperforming Assets $89 $83 6.9
Risk-Based Capital Ratios:
Tier 1 6.3% 5.7% -
Total 10.2% 9.1% -
Leverage Ratio 4.4% 4.3% -
# Denotes variance of more than 100%.
Note: Certain prior year amounts have been reclassified to
conform to the current year's presentation.
<PAGE>
(Preliminary)
Lehman Brothers
Statement of Income
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Commissions $127 $108 18.5%
Market Making and Principal
Transactions 359 220 62.8
Investment Banking 246 121 #
Interest and Dividends 1,451 1,363 6.5
Other 20 40 (52.4)
----- -----
Total Revenues 2,203 1,852 19.0
Interest Expense 1,326 1,215 9.1
----- -----
Net Revenues 877 637 37.8
----- -----
Non-Interest Expenses:
Compensation and Benefits 442 342 29.1
Communications 48 46 4.5
Occupancy and Equipment 38 40 (2.0)
Depreciation and Amortization 33 23 36.5
Advertising and Market
Development 33 35 (3.1)
Brokerage, Commissions and
Clearance Fees 42 45 (6.7)
Professional Services 45 40 8.3
Other 33 375 (90.7)
Computervision Writedown 0 0 -
----- -----
Total Non-Interest Expenses 714 946 (24.5)
----- -----
163 (309) -
Businesses Sold 0 61 -
----- -----
Income (Loss) Before Taxes 163 (248) -
Income Tax Provision (Benefit) 49 (82) -
----- -----
Net Income (Loss) Before Accounting
Changes and Preferred Dividends 114 (166) -
Accounting Changes 0 0 -
----- -----
Net Income (Loss) Before
Preferred Dividends 114 (166) -
Preferred Dividends 6 7 0.0
----- -----
American Express' share of Lehman's
Net Income (Loss) $108 ($173) -
===== =====
<PAGE>
Lehman Brothers
Statement of Income
(Unaudited)
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Revenues:
Commissions $488 $446 9.4%
Market Making and Principal
Transactions 1,644 1,122 46.5
Investment Banking 802 674 19.0
Interest and Dividends 5,692 5,435 4.7
Other 135 153 (11.3)
----- -----
Total Revenues 8,761 7,830 11.9
Interest Expense 5,232 4,952 5.7
----- -----
Net Revenues 3,529 2,878 22.6
----- -----
Non-Interest Expenses:
Compensation and Benefits 1,842 1,574 17.0
Communications 192 184 4.4
Occupancy and Equipment 150 143 5.4
Depreciation and Amortization 113 96 17.0
Advertising and Market
Development 128 121 5.7
Brokerage, Commissions and
Clearance Fees 172 169 2.0
Professional Services 163 146 11.6
Other 172 559 (69.1)
Computervision Writedown 0 245 -
----- -----
Total Non-Interest Expenses 2,932 3,237 (9.4)
----- -----
597 (359) -
Businesses Sold (326) 264 -
----- -----
Income (Loss) Before Taxes 271 (95) -
Income Tax Provision (Benefit) 373 21 #
----- -----
Net Income (Loss) Before Accounting
Changes and Preferred Dividends (102) (116) 12.8
Accounting Changes 0 (8) -
----- -----
Net Income (Loss) Before
Preferred Dividends (102) (124) 18.0
Preferred Dividends 25 25 0.0
----- -----
American Express' share of Lehman's
Net Income (Loss) ($127) ($149) 14.9
===== =====
Notes: Certain prior year amounts have been reclassified to conform
to the current year's presentation. In consideration of the sales
of The Boston Company (TBC) and Lehman's retail and asset
management businesses (SLBD), revenues from these businesses are
excluded from reported revenues in all periods presented. Included
in the fourth quarter 1992 Businesses Sold are pretax results of
$40.3 million for TBC and $20.9 million for SLBD. Net income for
TBC and SLBD for the fourth quarter 1992 was $21.0 million and
$12.1 million, respectively. The following chart details the
components of Lehman's full year net income (loss) before
accounting changes and preferred dividends:<PAGE>
Twelve Months Ended December 31,
1993 1992
Pretax After-tax Pretax After-tax
Gain on Sale of TBC $202.0 $165.0
Loss on Sale of SLBD (535.0) (630.0)
Non-Core Business Reserves (151.5) (100.0)
----- -----
(484.5) (565.0)
TBC Operations 41.8 24.4 $151.3 $76.9
SLBD Operations 117.0 63.2 112.2 54.8
------ ------ ------ -----
Businesses Sold (325.7) (477.4) 263.5 131.7
Lehman Brothers' Operations 596.4 375.8 (358.9) (248.2)
------ ------ ------ -----
Income (Loss) Before Accounting
Changes and Preferred
Dividends $270.7 ($101.6) ($95.4) ($116.5)
====== ====== ====== =====
# Denotes variance of more than 100%.
(Preliminary)
Lehman Brothers (continued)
Selected Statistical Information
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Total Stockholders' Equity $2,052 $2,361 (13.1%)
Tangible Equity $1,778 $1,209 47.1
Return on Average Stockholders'
Equity* 22.4% - -
Twelve Months Ended
December 31, Percentage
1993 1992 Inc/(Dec)
Total Stockholders' Equity $2,052 $2,361 (13.1%)
Tangible Equity $1,778 $1,209 47.1
Return on Average Stockholders'
Equity* 18.0% - -
* Calculated based on the net income of remaining businesses,
before recognizing the net loss on the sales of TBC and SLBD.
Note: Certain prior year amounts have been reclassified/restated
to conform to the current year's presentation.
<PAGE>
AMERICAN EXPRESS COMPANY
PRO FORMA IMPACT OF SPIN-OFF OF LEHMAN BROTHERS
($ millions, except per share amounts - preliminary, unaudited)
American
American Express
Twelve months ended Express Lehman Continuing
December 31, 1993 Consolidated Brothers Operations
Net income excluding items
listed (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
Non-core business reserves (100) (100) 0
Net income of TBC / SLBD 87 87 0
Lehman Brothers preferred
dividend to Nippon Life (25) (25) 0
----- ---- ------
Net income / (loss), as reported 1,478 (127) (1) 1,605
Pro Forma adjustments
Interest on capital infusion (2) 50 (23)
New preferred dividend to American
Express (3) (16) 16
Pro Forma net income to common ---- ------
shareholders ($93)
Pro Forma net income ==== $1,598
======
EPS excluding items listed
above (A) $3.06 $2.30
===== =====
EPS, as reported $2.92 $3.17
===== =====
Pro Forma EPS $3.16
=====
(1) Lehman Brothers reported net loss of $102 before
Nippon Life preferred dividend of $25.
(2) Lehman Brothers new capital ($1,250) used to pay down debt at
4% after-tax; American Express lost interest income on $1,090 at
2% after-tax.
(3) Estimated fixed rate of 8% on new Lehman Brothers preferred
security owned by American Express.
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
======
<PAGE>
American Express shareholders'
equity $8,734
Lehman Brothers shareholders' equity 2,052
Less Nippon Life preferred stock (508)
-----
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)
------
Pro Forma American Express shareholders' equity $6,300
======
Lehman
American American Brothers
Express Express Lehman Pro
Preliminary 1993 selected Consolidated Pro Forma Brothers Forma
statistical information
Net income as described above (A) $1,548 $1,165 (4) $376 $426 (5)
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% 12.8%
Return on average assets 0.86% 1.35% 0.40% 0.45%
Average leverage 22.3x 15.4x 45.2x 28.3x
(4) Pro Forma net income reflects $1,172 less lost interest of $23 on
capital infusion plus income from new preferred security of $16.
(5) Pro Forma net income before preferred dividends ($376 plus
interest benefit of $50 on capital infusion).
<PAGE>
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
----------------------------
Name: Stephen P. Norman
Title: Secretary
Dated: January 24, 1994
