<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
---------------- ----------------
Commission file number 1-7657
AMERICAN EXPRESS COMPANY
------------------------
(Exact name of registrant as specified in its charter)
New York 13-4922250
-------------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Financial Center, 200 Vesey Street, New York, NY 10285
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 640-2000
--------------
None
- -----------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1999
- ---------------------------------------- -----------------------------
Common Shares (par value $.60 per share) 450,552,274 shares
<PAGE>
AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Page No.
Part I. Financial Information:
Consolidated Statements of Income - Three
months ended March 31, 1999 and 1998 1
Consolidated Balance Sheets - March 31, 1999
and December 31, 1998 2
Consolidated Statements of Cash Flows - Three
months ended March 31, 1999 and 1998 3
Notes to Consolidated Financial Statements 4-6
Review Report of Independent Accountants 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-23
Part II. Other Information 24
<PAGE>
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------
1999 1998
------ ------
<S> <C> <C>
Revenues:
Discount revenue $1,514 $1,429
Interest and dividends, net 795 810
Management and distribution fees 522 418
Net card fees 403 398
Travel commissions and fees 426 351
Other commissions and fees 417 409
Cardmember lending net finance charge
revenue 347 317
Life and other insurance premiums 123 113
Other 424 276
----- -----
Total 4,971 4,521
----- -----
Expenses:
Human resources 1,431 1,234
Provisions for losses and benefits:
Annuities and investment certificates 334 370
Life insurance, international banking,
and other 157 364
Charge card 182 218
Cardmember lending 235 218
Interest 234 226
Occupancy and equipment 308 283
Marketing and promotion 297 265
Professional services 281 230
Communications 122 109
Other 599 390
----- -----
Total 4,180 3,907
----- -----
Pretax income 791 614
Income tax provision 216 154
----- -----
Net income $575 $460
===== =====
Earnings Per Common Share:
Basic $1.28 $1.00
==== ====
Diluted $1.26 $0.98
==== ====
Average common shares outstanding for
earnings per common share (millions):
Basic 447.7 460.7
===== =====
Diluted 456.2 469.5
===== =====
Cash dividends declared per
common share $0.225 $0.225
===== =====
</TABLE>
See notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
March 31, December 31,
Assets 1999 1998
- ------ ------ ------
<S> <C> <C>
Cash and cash equivalents $5,438 $4,092
Accounts receivable and accrued interest:
Cardmember receivables, less reserves:
1999, $491; 1998, $524 18,559 19,176
Other receivables, less reserves:
1999, $89; 1998, $75 3,446 3,048
Investments 40,776 41,299
Loans:
Cardmember lending, less reserves:
1999, $593; 1998, $593 14,733 14,721
International banking, less reserves:
1999, $218; 1998, $214 5,057 5,404
Other, net 942 929
Separate account assets 28,244 27,349
Deferred acquisition costs 3,015 2,990
Land, buildings and equipment--at cost,
less accumulated depreciation: 1999,
$2,109; 1998, $2,067 1,732 1,637
Other assets 6,355 6,288
------- -------
Total assets $128,297 $126,933
======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Customers' deposits $9,998 $10,398
Travelers Cheques outstanding 5,769 5,823
Accounts payable 6,315 5,373
Insurance and annuity reserves:
Fixed annuities 21,036 21,172
Life and disability policies 4,312 4,261
Investment certificate reserves 5,123 4,854
Short-term debt 22,242 22,605
Long-term debt 7,176 7,019
Separate account liabilities 28,244 27,349
Other liabilities 7,797 7,881
------- -------
Total liabilities 118,012 116,735
------- -------
Guaranteed preferred beneficial interests
in the Company's junior subordinated
deferrable interest debentures 500 500
Shareholders' equity:
Common shares, $.60 par value,
authorized 1.2 billion shares; issued
and outstanding 450.0 million shares
in 1999 and 450.5 million shares in 1998 270 270
Capital surplus 4,930 4,809
Retained earnings 4,312 4,148
Other comprehensive income, net of tax:
Net unrealized securities gains 373 583
Foreign currency translation adjustments (100) (112)
------- -------
Accumulated other comprehensive income 273 471
------- -------
Total shareholders' equity 9,785 9,698
------- -------
Total liabilities and shareholders' equity $128,297 $126,933
======= =======
</TABLE>
See notes to Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)
Three Months Ended
March 31,
-------------------
1999 1998
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $575 $460
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for losses and benefits 576 835
Depreciation, amortization, deferred taxes
and other 66 (63)
Changes in operating assets and liabilities,
net of effects of acquisitions and
dispositions:
Accounts receivable and accrued interest (410) 242
Other assets (98) 58
Accounts payable and other liabilities 868 (55)
Decrease in Travelers Cheques outstanding (52) (60)
Increase in insurance reserves 40 37
----- -----
Net cash provided by operating activities 1,565 1,454
----- -----
Cash Flows from Investing Activities
Sale of investments 341 462
Maturity and redemption of investments 2,334 1,827
Purchase of investments (2,367) (2,499)
Net decrease in Cardmember receivables 237 1,200
Proceeds from repayment of loans 5,605 5,584
Issuance of loans (5,464) (5,353)
Purchase of land, buildings and equipment (198) (67)
Sale of land, buildings and equipment 7 7
Acquisitions, net of cash acquired (17) (44)
----- -----
Net cash provided by investing activities 478 1,117
----- -----
Cash Flows from Financing Activities
Net (decrease) increase in customers' deposits (233) 407
Sale of annuities and investment certificates 1,282 1,337
Redemption of annuities and investment
certificates (1,196) (1,348)
Net decrease in debt with maturities of three
months or less (728) (2,218)
Issuance of debt 3,544 1,788
Principal payments on debt (2,991) (1,710)
Issuance of American Express common shares 77 25
Repurchase of American Express common shares (334) (494)
Dividends paid (101) (105)
----- -----
Net cash used by financing activities (680) (2,318)
----- -----
Effect of exchange rate changes on cash (17) (90)
----- -----
Net increase in cash and cash equivalents 1,346 163
Cash and cash equivalents at beginning of period 4,092 4,179
----- -----
Cash and cash equivalents at end of period $5,438 $4,342
===== =====
</TABLE>
See notes to Consolidated Financial Statements.
3
<PAGE>
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements should be read in conjunction
with the financial statements in the Annual Report on Form 10-K of
American Express Company (the Company or American Express) for the
year ended December 31, 1998. Significant accounting policies
disclosed therein have not changed. Certain reclassifications of
prior period amounts have been made to conform to the current
presentation.
Cardmember Lending Net Finance Charge Revenue is presented net of
interest expense of $156 million and $161 million for the first
quarter of 1999 and 1998, respectively. Interest and Dividends is
presented net of interest expense of $121 million and $141 million
for the first quarter of 1999 and 1998, respectively, related
primarily to the Company's international banking operations.
The interim financial information in this report has not been
audited. In the opinion of management, all adjustments necessary
for a fair presentation of the consolidated financial position and
the consolidated results of operations for the interim periods have
been made. All adjustments made were of a normal, recurring
nature. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
2. Accounting Development
In March 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The SOP, which has been adopted
prospectively as of January 1, 1999, requires the capitalization of
certain costs incurred after the date of adoption to develop or
obtain software for internal use. The Company's policy had been to
expense such costs as incurred. The amounts capitalized will be
amortized straight line over a five-year period. See the
consolidated section of Management's Discussion and Analysis of
Financial Condition and Results of Operations for further
information.
4
<PAGE>
<TABLE>
<CAPTION>
3. Investment Securities
The following is a summary of investments at March 31, 1999 and
December 31, 1998:
March 31, December 31,
(in millions) 1999 1998
--------- ------------
<S> <C> <C>
Held to Maturity, at amortized cost
(fair value: 1999, $10,397; 1998,
$11,144) $9,963 $10,526
Available for Sale, at fair value
(cost: 1999, $25,888; 1998, $25,895) 26,488 26,764
Investment mortgage loans (fair value:
1999, $4,021; 1998, $4,089) 3,899 3,840
Trading 426 169
------ ------
Total $40,776 $41,299
====== ======
</TABLE>
4. Comprehensive Income
Comprehensive income is defined as the aggregate change in
shareholders' equity, excluding changes in ownership interests.
For the Company, it is the sum of net income and changes in (i)
unrealized gains or losses on available-for-sale securities and
(ii) foreign currency translation adjustments. The components of
comprehensive income, net of related tax, for the three months
ended March 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
(in millions) 1999 1998
------ ------
<S> <C> <C>
Net income $575 $460
Change in:
Net unrealized securities
gains (210) (17)
Foreign currency
translation adjustments 12 (2)
--- ---
Total $377 $441
=== ===
</TABLE>
5. Taxes and Interest
Net income taxes paid during the three months ended March 31, 1999
and 1998 were approximately $97 million and $63 million,
respectively. Interest paid during the three months ended March
31, 1999 and 1998 was approximately $588 million and $636 million,
respectively.
5
<PAGE>
<TABLE>
<CAPTION>
6. Earnings per Share
The computations of basic and diluted earnings per common share
(EPS) for the three months ended March 31, 1999 and 1998 are as
follows:
(in millions, except per Three Months Ended
share amounts) March 31,
------------------
1999 1998
------ ------
<S> <C> <C>
Numerator: Net income $575 $460
Denominator:
Denominator for basic EPS -
weighted-average shares 447.7 460.7
Effect of dilutive securities:
Stock Options and Restricted
Stock Awards 8.5 8.7
Other - 0.1
----- -----
Potentially dilutive
common shares 8.5 8.8
----- -----
Denominator for diluted EPS 456.2 469.5
----- -----
Basic EPS $1.28 $1.00
----- -----
Diluted EPS $1.26 $0.98
----- -----
</TABLE>
<TABLE>
<CAPTION>
7. Segment Information
Results for the Company's operating segments, based on management's
internal reporting structure, are as follows:
Revenues Three Months Ended
March 31,
------------------
(in millions) 1999 1998
------ ------
<S> <C> <C>
Travel Related Services $3,421 $3,083
American Express
Financial Advisors 1,345 1,221
American Express Bank/
Travelers Cheque 247 257
Corporate and Other (42) (40)
----- -----
Total $4,971 $4,521
===== =====
<CAPTION>
Net Income Three Months Ended
March 31,
------------------
(in millions) 1999 1998
------ ------
<S> <C> <C>
Travel Related Services $363 $315
American Express
Financial Advisors 214 186
American Express Bank/
Travelers Cheque 41 (83)
Corporate and Other (43) 42
--- ---
Total $575 $460
=== ===
</TABLE>
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Shareholders and Board of Directors
American Express Company
We have reviewed the accompanying consolidated balance sheet of American
Express Company (the "Company") as of March 31, 1999 and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1999 and 1998. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the consolidated financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1998, and the related consolidated statements of income, shareholders' equity,
and cash flows for the year then ended (not presented herein), and in our
report dated February 4, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1998 is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ Ernst & Young LLP
New York, New York
May 14, 1999
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Consolidated Results Of Operations For The Three Months
Ended March 31, 1999
The Company's consolidated net income and diluted earnings per share
rose 25 and 29 percent in the three month period ended March 31, 1999,
respectively. The year-ago results included several items: a $138
million ($213 million pretax) credit loss provision at American
Express Bank relating to its Asia/Pacific portfolio and income in the
Corporate and Other segment of $78 million ($106 million pretax)
comprising a gain from the sale of First Data Corporation shares and a
preferred stock dividend based on Lehman Brothers earnings. Excluding
these items, income and diluted earnings per share increased 11 and 14
percent, respectively. The Company's return on equity was 25.1
percent.
Consolidated revenues rose 10 percent for the three months ended March
31, 1999. Revenues, net of American Express Financial Advisors'
(AEFA) provisions for losses and benefits, were up 12 percent for the
three months ended March 31, 1999, reflecting an increase in worldwide
billed business and Cardmember loans, higher travel commissions and
fees, greater management and distribution fees and wider investment
margins at AEFA. The growth in travel commissions and fees primarily
resulted from acquisitions during the latter part of 1998, which
increased revenues and expenses but did not have a material effect on
net income. Consolidated expenses rose, primarily due to higher
expenses related to human resources and marketing and promotion
expenses to support business building initiatives and acquisitions,
partially offset by lower loss provisions.
These results were in line with the Company's long-term targets of:
12-15 percent earnings per share growth, at least 8 percent revenue
growth and a return on equity of 18-20 percent.
Due to a change in accounting rules, the Company is required to
capitalize software costs rather than expense them as incurred. For
the three month period ended March 31, 1999, this amounted to a
benefit of $59 million (net of amortization). Of this amount, $47
million related to Travel Related Services and $10 million to American
Express Financial Advisors. These benefits were offset by increased
investment spending and therefore had no effect on net income.
Consolidated Liquidity and Capital Resources
In the first three months of 1999, the Company repurchased 2.6 million
common shares at an average price of $114.73 per share and canceled
1.5 million common shares under its repurchase program.
8
<PAGE>
Year 2000
The Company's Year 2000 (Y2K) compliance effort is divided into two
initiatives. The first, known as "Millenniax," relates to mainframe
and other technological systems maintained by the American Express
Technologies organization (AET). The second, known as "Business T,"
relates to the technological assets that are owned, managed or
maintained by the Company's individual business and staff units. Our
plans for remediation of the Y2K issue include the following program
phases: (i) employee awareness and mobilization, (ii) inventory
collection and assessment, (iii) impact analysis, (iv)
remediation/decommission, (v) testing and (vi) implementation. With
respect to systems maintained by the Company, the first three phases
referred to above have largely been completed for both Millenniax and
Business T. In addition, the remediation/decommission phase for
critical systems is nearly complete. As of March 31, 1999, for
Millenniax, the remediation/decommission, testing and implementation
phases for critical and non-critical systems in total are 91%, 85% and
74% complete, respectively. For Business T, such phases are 94%, 85%
and 84% complete, respectively.
The Company's cumulative costs since inception of the Y2K initiatives
were $427 million through March 31, 1999 and are estimated to be in
the range of $90 - $116 million for the remainder through 2000.* These
costs, which are expensed as incurred, relate to both Millenniax and
Business T, and have not had, nor are they expected to have, a
material adverse impact on the Company's results of operations or
financial condition.* Y2K costs related to Millenniax represent 6%
and 1% of the AET budget for the years 1999 and 2000, respectively.*
The Company's major businesses are heavily dependent upon internal
computer systems, and all have significant interaction with systems of
third parties, both domestically and internationally. The Company is
working with key external parties, including merchants, clients,
counterparties, vendors, exchanges, utilities, suppliers, agents and
regulatory agencies to mitigate the potential risks to us of Y2K. As part
of our overall compliance program, the Company is actively communicating
with third parties through face-to-face meetings and correspondence, on
an ongoing basis, to ascertain their state of readiness. Although numerous
third parties have indicated to us in writing that they are addressing
their Y2K issues on a timely basis, the readiness of third parties overall
varies across the spectrum. The failure of external parties to resolve
their own Y2K issues in a timely manner could result in a material financial
risk to the Company.
At this point, with remediation and testing of individual internal
systems substantially complete, the Company's primary focus is on
testing of systems on an integrated basis, independent validation of
such testing and completing Y2K contingency plans. The contingency
planning effort is a full-scale initiative that includes both internal
and external experts under the guidance of a Company-wide steering
committee. Our contingency plans, which are based in part on an
assessment of the magnitude and probability of potential risks,
primarily focus on proactive steps to prevent Y2K-related failures
from occurring, or if they should occur, detecting them quickly,
minimizing their impact and expediting their repair. The Y2K
contingency plans supplement disaster recovery and business continuity
plans already in place, and include measures such as selecting
alternative suppliers and channels of distribution and developing our
own technology infrastructure in lieu of those provided by third
parties.
9
<PAGE>
Such plans encompass the creation of both remediation and business
resumption contingency plans, generally in accordance with guidelines
established by the Federal Financial Institutions Examination Council.
For the Company's critical systems that are not yet Y2K compliant,
we are on track to achieving remediation by the second quarter of
1999*; to the extent that unforeseen circumstances arise that result
in non-compliance of any such systems, remediation contingency plans
are also being developed to mitigate such risk. Our business resumption
contingency planning effort is divided into four phases: (i) establishing
organizational planning guidelines; (ii) completing a business impact
analysis; (iii) developing the business resumption contingency plans
and (iv) validating and verifying the business resumption contingency
plans. The first two of these phases have essentially been completed,
and have identified and assessed the need for Y2K business resumption
contingency plans for the Company's most critical core business
processes. Such processes include, but are not limited to, credit
authorization, Cardmember billing, merchant payment, client investments,
funds transfer, securities settlement, and travel reservations. The
contingency plans also address third party systems that the Company's
businesses interface with and rely upon, such as international
telecommunications networks, global financial payment and clearing
systems, and airline and other travel systems. The Company expects
that the development phase of its business resumption contingency plans
will be substantially complete by the second quarter of 1999.* The final
phase, which will include independent validation and verification of
these plans, will take place during the third quarter of 1999.* The Company
will continue to refine its contingency planning activities throughout
1999 as additional information related to our exposures is gathered.*
To the extent that there are Y2K failures that affect major internal
processes or third party systems that the Company relies upon, including
but not limited to those described above, such failures could have a
material impact on the Company and its businesses or subsidiaries
through business interruption or shutdown, financial loss, reputational
damage and legal liability to third parties.
For a more complete discussion of the Y2K issue, see pages 22 and 23
of the Company's 1998 annual report to shareholders, which is
incorporated by reference in the Company's 1998 10-K report.
* Statements in this Y2K discussion marked with an asterisk are
forward-looking statements which are subject to risks and
uncertainties. Important factors that could cause results to differ
materially from these forward-looking statements include, among other
things, the ability of the Company to successfully identify all
systems containing two-digit codes, the nature and amount of
programming required to fix the affected systems, the costs of labor
and consultants related to such efforts, the continued availability of
such resources, and the ability of third parties that interface with
the Company to successfully address their Y2K issues.
10
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Results of Operations For The Three Months Ended March 31, 1999 and
1998
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
------------------ Percentage
1999 1998 Inc/(Dec)
------ ------ ---------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,514 $1,429 5.9 %
Net Card Fees 403 398 1.4
Travel Commissions and Fees 426 351 21.6
Other Revenues 731 588 24.3
Lending:
Finance Charge Revenue 503 478 5.1
Interest Expense 156 161 (3.2)
----- -----
Net Finance Charge Revenue 347 317 9.4
----- -----
Total Net Revenues 3,421 3,083 11.0
----- -----
Expenses:
Marketing and Promotion 270 244 10.6
Provision for Losses and Claims:
Charge Card 182 218 (16.2)
Lending 235 218 7.7
Other 14 13 7.0
----- -----
Total 431 449 (3.9)
----- -----
Charge Card Interest Expense 183 197 (6.9)
Net Discount Expense 143 140 1.9
Human Resources 912 787 15.9
Other Operating Expenses 928 784 18.3
----- -----
Total Expenses 2,867 2,601 10.2
----- -----
Pretax Income 554 482 15.1
Income Tax Provision 191 167 14.9
----- -----
Net Income $363 $315 15.1
===== =====
</TABLE>
The following table, which is presented for analytical purposes only,
presents the effect on the above Statement of Income related to TRS'
securitized receivables and loans:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
------ ------
<S> <C> <C>
Increase in Other Revenues $92 $77
Decrease in Lending Finance Charge Revenue (149) (106)
Decrease in Lending Interest Expense 44 33
Decrease in Provision for Losses and Claims:
Charge Card 51 55
Lending 47 30
Decrease in Charge Card Interest Expense 58 51
Increase in Net Discount Expense (143) (140)
--- ---
Pretax Income $- $-
=== ===
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except where indicated)
Three Months Ended
March 31,
------------------- Percentage
1999 1998 Inc/(Dec)
------ ------ ---------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 27.9 29.5 (5.5)%
Outside the United States 15.0 13.8 8.6
---- ----
Total 42.9 43.3 (1.0)
==== ====
Basic Cards in Force (millions):
United States 21.8 23.3 (6.2)
Outside the United States 11.5 10.6 8.0
---- ----
Total 33.3 33.9 (1.7)
==== ====
Card Billed Business:
United States $41.6 $38.5 8.2
Outside the United States 15.2 14.1 7.2
---- ----
Total $56.8 $52.6 8.0
==== ====
Average Discount Rate* 2.73% 2.74% -
Average Basic Cardmember
Spending (dollars)* $1,781 $1,600 11.3
Average Fee per Card (dollars)* $40 $38 5.3
Travel Sales $5.3 $4.3 25.3
Travel Commissions and Fees/Sales** 8.0% 8.2% -
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5 $22.0 6.7
90 Days Past Due as a % of Total 3.0% 3.4% -
Loss Reserves (millions) $876 $967 (9.4)
% of Receivables 3.7% 4.4% -
% of 90 Days Past Due 126% 131% -
Net Loss Ratio 0.43% 0.47% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7 $14.2 17.9
Past Due Loans as a % of Total:
30-89 Days 2.1% 2.5% -
90+ Days 1.0% 1.1% -
Loss Reserves (millions):
Beginning Balance $619 $589 5.1
Provision 244 221 10.4
Net Charge-Offs/Other (240) (219) 9.2
--- ---
Ending Balance $623 $591 5.5
=== ===
% of Loans 3.7% 4.2% -
% of Past Due 121% 117% -
Average Loans $16.7 $14.2 17.3
Net Write-Off Rate 5.9% 6.3% -
Net Interest Yield 9.4% 9.6% -
</TABLE>
Note: Owned and managed Cardmember receivables and loans include securitized
assets not reflected in the Consolidated Balance Sheet.
* Computed excluding Cards issued by strategic alliance partners and
independent operators as well as business billed on those Cards.
** Computed from information provided herein.
12
<PAGE>
Travel Related Services
- -----------------------
Travel Related Services' (TRS) net income rose 15 percent in the first
quarter of 1999 from a year ago. Net revenues increased 11 percent
for the same period, reflecting higher billed business in the United
States and internationally, growth in Cardmember loans and higher
travel commissions and fees.
The improvement in discount revenue resulted from higher billed
business. The growth in billed business reflects higher spending per
Cardmember, which grew due to several factors, including the benefits
of rewards programs and expanded merchant coverage. Billed business
grew, despite a general tightening of corporate travel and
entertainment expenses and the cancellation of 1.6 million U.S.
Government cards in the fourth quarter of 1998, representing
approximately $3.5 billion in annualized spending, due to the
Company's decision to withdraw from this business. Total cards in
force declined as a result of this decision. This decrease was
partially offset by substantial growth in cards outside the United
States. Excluding the U.S. Government account, domestic billed
business grew by 11 percent from a year ago. U.S. spending per basic
Cardmember increased 16 percent from last year, reflecting strong
growth in the consumer and small business areas. The increase in
travel commissions and fees was primarily due to acquisitions during
the latter part of 1998, which increased revenues and expenses, but
did not have a material effect on earnings. The increase in other
revenues resulted principally from acquisitions of accounting firms
and ATM networks, and higher lending assessments and fees. Lending net
finance charge revenue, excluding securitizations, rose by 16 percent
for the first quarter of 1999, compared with a year ago. This
increase is primarily due to the 19 percent growth in worldwide
managed lending balances, partially offset by lower net interest
yields, mainly resulting from a higher proportion of the portfolio on
introductory rates compared with the prior year.
Marketing and promotion expenses rose as a result of business building
initiatives. The provision for losses on charge cards declined due to
improved loss rates. The provision for the lending portfolio grew,
primarily reflecting a higher level of loans outstanding, partly
offset by lower loss rates. Human resources expenses rose, mainly due
to a higher average number of employees, resulting from acquisitions
and increased business volumes, merit increases and greater contract
programmer costs for technology related projects. Other operating
expenses rose, in part from the cost of Cardmember loyalty programs,
business growth and investment spending. This increase was partially
offset by the benefits of ongoing cost containment efforts.
13
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited)
(Dollars in billions, except percentages)
March 31, December 31, Percentage March 31, Percentage
1999 1998 Inc/(Dec) 1998 Inc/(Dec)
--------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Accounts Receivable, net $20.8 $21.3 (2.5)% $19.1 9.1 %
U.S. Cardmember Loans $13.7 $13.7 0.2 $12.2 12.7
Total Assets $45.3 $44.7 1.3 $39.3 15.3
Short-term Debt $22.7 $22.9 (0.9) $18.6 21.6
Long-term Debt $ 5.5 $5.1 7.0 $6.3 (12.5)
Total Liabilities $40.2 $39.8 1.0 $34.5 16.5
Total Shareholder's Equity $5.1 $4.9 3.8 $4.8 6.6
Return on Average Equity* 28.4% 27.8% - 25.7% -
Return on Average Assets* 3.3% 3.3% - 3.1% -
</TABLE>
* Computed based on the past twelve months of net income and
excludes the effect of SFAS No. 115.
In January 1999, TRS issued and sold, exclusively outside the United
States and to non-U.S. persons, $500 million 5.625% Fixed Rate Notes.
These notes are listed on the Luxembourg Stock Exchange and will
mature in 2004.
In April 1999, the American Express Credit Account Master Trust (the Trust)
securitized an additional $1 billion of loans through the issuance of asset
backed certificates. The Trust expects to securitize an additional $1.5 billion
of loans at a closing expected to occur in May 1999. The securitized assets
consist of loans arising in a portfolio of designated Optima Card, Optima Line
of Credit and Sign and Travel/Special Purchase revolving credit
accounts owned by American Express Centurion Bank, a wholly-owned
subsidiary of TRS.
14
<PAGE>
<TABLE>
<CAPTION>
American Express Financial Advisors
Results of Operations For The Three Months Ended March 31, 1999 and
1998
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
------------------- Percentage
1999 1998 Inc/(Dec)
------ ------ ---------
<S> <C> <C> <C>
Net Revenues:
Investment Income $595 $613 (2.9)%
Management and Distribution Fees 522 418 25.0
Other Revenues 228 190 19.5
----- -----
Total Revenues 1,345 1,221 10.1
Provision for Losses and Benefits:
Annuities 270 297 (9.0)
Insurance 126 117 7.1
Investment Certificates 64 73 (12.5)
----- -----
Total 460 487 (5.6)
----- -----
Net Revenues 885 734 20.6
----- -----
Expenses:
Human Resources 416 351 18.5
Other Operating Expenses 157 112 40.7
----- -----
Total Expenses 573 463 23.9
----- -----
Pretax Income 312 271 14.9
Income Tax Provision 98 85 14.8
----- -----
Net Income $214 $186 14.9
===== =====
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
American Express Financial Advisors
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended
March 31,
------------------- Percentage
1999 1998 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Investments (billions) $30.6 $31.1 (1.6)%
Client Contract Reserves (billions) $30.5 $30.3 0.6
Shareholder's Equity (billions) $4.1 $3.8 5.5
Return on Average Equity* 22.6% 22.1% -
Life Insurance in Force (billions) $82.9 $76.1 9.0
Deferred Annuities in Force (billions) $44.0 $43.1 2.1
Assets Owned, Managed or Administered
(billions):
Assets managed for institutions $46.9 $42.3 10.7
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 28.2 26.0 8.6
Other Owned Assets 37.4 37.0 1.0
----- -----
Total Owned Assets 65.6 63.0 4.1
Managed Assets 91.2 80.2 13.8
Administered Assets 15.7 9.9 57.8
----- -----
Total $219.4 $195.4 12.2
===== =====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $912 $2,610 (65.1)
Other Owned Assets $(204) $18 #
Total Managed Assets $2,889 $8,844 (67.3)
Sales of Selected Products:
Mutual Funds $6,033 $5,095 18.4
Annuities $579 $651 (11.1)
Investment Certificates $660 $458 44.2
Life and Other Insurance Products $92 $83 10.5
Number of Financial Advisors 10,372 9,838 5.4
Fees from Financial Plans $21.3 $17.5 21.3
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.5% 65.1% -
</TABLE>
# Denotes variances of more than 100%.
* Computed based on the past twelve months of net income and excludes the
effect of SFAS No. 115.
16
<PAGE>
American Express Financial Advisors
American Express Financial Advisors' (AEFA) net income in the first
quarter of 1999 rose 15% from a year ago. Net revenues and earnings
grew due to higher fee revenues and wider investment margins.
Management fees rose as a result of increased managed asset levels,
including separate account assets, and distribution fees grew
reflecting record mutual fund sales and higher asset levels. Managed
assets rose since last year reflecting positive net sales and market
appreciation. Other revenues benefited from higher insurance premiums
and financial planning fees. Investment income, net of provisions for
losses and benefits, rose due to improved spreads on annuity,
insurance and certificate products and higher insurance and
certificate in-force levels.
Human resource expenses rose, largely as a result of a volume-driven
increase in advisors' compensation reflecting growth in sales and
asset levels. The rise in other operating expenses is primarily due to
increased costs related to higher business volumes and investments to
build the business.
17
<PAGE>
<TABLE>
<CAPTION>
American Express Financial Advisors
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited)
(Amounts in billions, except percentages)
March 31, December 31, Percentage March 31, Percentage
1999 1998 Inc/(Dec) 1998 Inc/(Dec)
--------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Investments $30.6 $30.9 (0.8)% $31.1 (1.6)%
Separate Account Assets $28.2 $27.3 3.3 $26.0 8.6
Total Assets $65.6 $64.6 1.6 $63.0 4.1
Client Contract Reserves $30.5 $30.3 0.6 $30.3 0.6
Total Liabilities $61.6 $60.6 1.7 $59.2 4.0
Total Shareholder's Equity $4.1 $4.1 (0.9) $3.8 5.5
Return on Average Equity* 22.6% 22.5% - 22.1% -
</TABLE>
* Computed based on the past twelve months of net income and excludes the
effect of SFAS No. 115.
Separate account assets and liabilities increased due to higher net
sales and market appreciation.
18
<PAGE>
<TABLE>
<CAPTION>
American Express Bank/Travelers Cheque (AEB/TC)
Results of Operations For The Three Months Ended March 31, 1999 and
1998
Statement of Income
-------------------
(Unaudited)
(Dollars in millions, except percentages)
Three Months Ended
March 31,
------------------ Percentage
1999 1998 Inc/(Dec)
------ ------ ---------
<S> <C> <C> <C>
Net Revenues:
Interest Income $193 $210 (8.0)%
Interest Expense 119 139 (13.9)
--- ---
Net Interest Income 74 71 3.6
Travelers Cheque Investment Income 79 80 (1.0)
Foreign Exchange Income 18 48 (61.9)
Commissions, Fees and Other Revenues 76 58 30.7
--- ---
Total Net Revenues 247 257 (4.1)
--- ---
Expenses:
Human Resources 82 74 10.5
Other Operating Expenses 136 124 9.5
Provision for Losses 17 233 (92.8)
--- ---
Total Expenses 235 431 (45.6)
--- ---
Pretax Income/(Loss) 12 (174) #
Income Tax Benefit (29) (91) (68.6)
--- ---
Net Income/(Loss) $41 $(83) #
=== ===
</TABLE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
Three Months Ended
March 31,
------------------ Percentage
1999 1998 Inc/(Dec)
------ ------ ---------
<S> <C> <C> <C>
American Express Bank:
Assets Managed / Administered * $6.3 $5.1 22.3 %
Assets of Non-Consolidated Joint
Ventures $2.6 $2.6 1.9
Travelers Cheque:
Sales $4.6 $4.8 (4.2)
Average Outstanding $5.8 $5.7 3.3
Average Investments $5.6 $5.4 2.1
Tax equivalent yield 8.9% 9.2% -
</TABLE>
# Denotes variance of more than 100%.
* Includes assets managed by American Express Financial Advisors.
19
<PAGE>
American Express Bank/Travelers Cheque (AEB/TC)
AEB/TC reported net income of $41 million for the first quarter of
1999, compared with a net loss of $83 million a year ago. The prior
year results included a $138 million ($213 million pretax) credit
loss provision related to AEB's business in the Asia/Pacific region,
particularly Indonesia. Travelers Cheque results were consistent with
the prior year. Foreign exchange income declined due to lower client
trading volumes and reduced spreads, resulting from increased
stability in currency markets, particularly in Asia. Commissions,
fees and other revenues increased in part due to higher Private
Banking fees and losses in the prior year on Indonesian securities
positions. Operating expenses rose due to costs associated with new
consumer product introductions.
20
<PAGE>
<TABLE>
<CAPTION>
American Express Bank/Travelers Cheque (AEB/TC)
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
March 31, December 31, Percentage March 31, Percentage
1999 1998 Inc/(Dec) 1998 Inc/(Dec)
--------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Travelers Cheque Investments $6.1 $6.3 (3.1)% $5.8 4.1%
Total Loans $5.3 $5.6 (6.1) $6.0 (12.2)
Total Nonperforming Loans (millions) $209 $180 15.9 $149 39.9
Other Nonperforming Assets (millions) $64 $63 1.3 $102 (37.6)
Reserve for Credit Losses (millions)* $261 $259 0.9 $359 (27.1)
Loan Loss Reserves as a
Percentage of Total Loans 4.1% 3.8% - 4.9% -
Total Assets $18.2 $18.5 (1.8) $18.6 (2.3)
Deposits $7.9 $8.3 (5.2) $8.3 (5.7)
Travelers Cheques Outstanding $5.8 $5.8 (0.9) $5.6 3.3
Total Liabilities $17.0 $17.3 (1.6) $17.5 (2.6)
Total Shareholder's Equity (millions) $1,148 $1,197 (4.1) $1,119 2.6
Return on Average Assets** 0.90% 0.23% - 0.61% -
Return on Average Common Equity** 19.7% 4.9% - 12.5% -
Risk-Based Capital Ratios:
Tier 1 9.8% 9.8% - 9.0% -
Total 12.1% 12.6% - 12.2% -
Leverage Ratio 5.4% 5.5% - 5.1% -
# Denotes variance of more than 100%.
* Allocation:
Loans $218 $214 - $294 -
Other Assets, primarily derivatives 41 43 - 59 -
Other Liabilities 2 2 - 6 -
--- --- ---
Total Credit Loss Reserves $261 $259 - $359 -
=== === ===
</TABLE>
** Computed based on the past twelve months of net income and
excludes the effect of SFAS No. 115.
AEB loans outstanding declined to $5.3 billion at March 31, 1999, down
from $5.6 billion at December 31, 1998 and $6.0 billion at March 31,
1998. The reduction since first quarter 1998 resulted from a $1.0
billion decrease in corporate and correspondent bank loans and a $320
million increase in consumer and private banking loans, largely in the
Asia/Pacific region. Since December 31, 1998, corporate and
correspondent bank loans fell by $360 million and consumer and private
banking loans rose by $40 million. As presented in the table below,
there are other banking activities, such as forward contracts, various
contingencies and market placements, which added approximately $7.6
billion to AEB's credit exposures at March 31, 1999 (compared with
$7.4 billion at March 31, 1998 and unchanged from December 31, 1998).
Total nonperforming loans for AEB rose primarily reflecting the
anticipated deterioration in the Indonesian loan portfolio. Other
nonperforming assets declined from March 31, 1998 due to write-offs
related to Indonesia, as anticipated in the provision recorded in the
first quarter of 1998.
21
<PAGE>
<TABLE>
<CAPTION>
American Express Bank
Exposures By Country and Region
(Unaudited)
($ in billions)
Net
Guarantees 3/31/99 12/31/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure**
- ------- ----- ----------- ----------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.8 $- $- $0.1 $1.0 $1.1
Indonesia 0.2 - - 0.1 0.4 0.4
Singapore 0.3 - 0.1 0.1 0.5 0.6
Korea 0.1 - 0.1 0.2 0.4 0.3
Taiwan 0.3 - 0.1 0.1 0.6 0.5
China - - - - - -
Japan - - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.1 0.1 0.1
--- --- --- --- ---- ----
Total Asia/
Pacific Region** 1.9 0.1 0.3 0.8 3.1 3.2
--- --- --- --- ---- ----
Chile 0.2 - - 0.1 0.4 0.4
Brazil 0.3 - - 0.1 0.4 0.4
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.1 - 0.1 0.2 0.4 0.4
--- --- --- --- ---- ----
Total Latin
America** 0.9 - 0.2 0.4 1.4 1.4
--- --- --- --- ---- ----
India 0.3 - - 0.4 0.8 0.8
Pakistan 0.1 - - 0.1 0.2 0.2
Other 0.1 - - 0.1 0.2 0.2
--- --- --- --- ---- ----
Total
Subcontinent** 0.5 - 0.1 0.6 1.2 1.2
--- --- --- --- ---- ----
Egypt 0.5 - - 0.2 0.6 0.7
Other 0.2 - 0.1 - 0.3 0.3
--- --- --- --- ---- ----
Total Middle
East & Africa** 0.7 - 0.1 0.2 0.9 1.0
--- --- --- --- ---- ----
Total Europe*** 1.0 0.1 1.1 2.0 4.3 4.4
Total North
America** 0.2 0.1 0.1 1.5 1.8 1.9
--- --- --- --- ---- ----
Total Worldwide** $5.3 $0.3 $1.8 $5.5 $12.8 $13.2
=== === === === ==== ====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 3/31/99 and 12/31/98 include $20 million of exposures to
Russia.
Note: Includes cross-border and local exposure and does not net local funding or
liabilities against any local exposure.
22
<PAGE>
Corporate and Other
Corporate and Other reported net expenses of $43 million for the three
months ended March 31, 1999, compared with net income of $42 million
last year. The current year results include a $39 million ($46 million
pretax) preferred stock dividend based on earnings from Lehman
Brothers, which was offset by expenses related to the Year 2000 issue
and business building initiatives. The prior year results included
income of $78 million ($106 million pretax) comprising a $39 million
($60 million pretax) gain from sales of common stock of First Data
Corporation and an equivalent Lehman Brothers dividend.
23
<PAGE>
PART II.--OTHER INFORMATION
AMERICAN EXPRESS COMPANY
Item 1. Legal Proceedings
On March 29, 1999 an action entitled LAMBERT V. AMERICAN EXPRESS FINANCIAL
CORPORATION; AMERICAN EXPRESS FINANCIAL ADVISORS INC.; IDS LIFE INSURANCE
AGENCIES, INC.; IDS LIFE INSURANCE COMPANY; AMERICAN EXPRESS PLAN COMMITTEE;
CAREER DISTRIBUTORS PLAN COMMITTEE AND JOHN/JANE DOES 1-20 ("Companies")
commenced in U.S. District Court, District of Minnesota, Fourth Division. The
sole named plaintiff purports to represent a class consisting of financial
advisors who were independent contractors from January 1, 1993 to the present.
The complaint alleges class members were misclassified as independent
contractors and seeks retroactive coverage in all employee health, welfare,
retirement and compensation plans, and payment of FICA and FUTA taxes. The
complaint also alleges violation of ERISA, breach of contract, breach of duty of
good faith and fair dealing and unjust enrichment. The Companies will file an
answer or otherwise plead by May 19, 1999. The Company believes it has
meritorious defenses to such action and intends to pursue them vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on April 26,
1999. The matters that were voted upon at the meeting, and the number of votes
cast for, against or withheld, as well as the number of abstentions and broker
non-votes, as to each such matter, where applicable, are set forth below.
<TABLE>
<CAPTION>
Votes Votes Votes Broker
For Against Withheld Abstentions Non-Votes
----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Selection of
Ernst & Young LLP as independent
auditors 383,433,218 797,648 - 1,869,165 -
Shareholder proposal
relating to cumulative voting 65,323,532 263,063,621 - 4,074,367 53,639,588
Shareholder proposal
relating to political contributions 9,912,349 306,843,857 - 15,702,616 53,642,286
Shareholder proposal relating
to stock options 9,471,599 315,045,476 - 7,941,763 53,642,270
Election of Directors:
D.F. Akerson 383,147,834 - 2,953,274 - -
A.L. Armstrong 382,760,999 - 3,340,109 - -
E.L. Artzt 383,044,828 - 3,056,280 - -
W.G. Bowen 383,039,912 - 3,061,196 - -
K.I. Chenault 383,099,374 - 3,001,734 - -
R.L. Crandall 382,815,380 - 3,285,728 - -
H. Golub 383,072,727 - 3,028,381 - -
B. Sills Greenough 382,585,326 - 3,515,782 - -
F.R. Johnson 382,211,089 - 3,890,019 - -
V.E. Jordan, Jr. 379,410,680 - 6,690,428 - -
J. Leschly 383,111,165 - 2,989,943 - -
D. Lewis 382,835,016 - 3,266,092 - -
R.A. McGinn 382,938,506 - 3,162,602 - -
F.P. Popoff 382,950,238 - 3,150,870 - -
</TABLE>
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page E-1 hereof.
(b) Reports on Form 8-K:
Form 8-K, dated January 25, 1999, Item 5, reporting the Company's
earnings for the quarter and year ended December 31, 1998.
Form 8-K, dated February 3, 1999, Item 5, reporting certain
information from speeches presented by Harvey Golub, the Company's
Chairman and Chief Executive Officer and James M. Cracchiolo,
President, International TRS, to the financial community on
February 3, 1999.
Form 8-K, dated February 22, 1999, Item 5, reporting the election
of Robert L. Crandall to the Board of Directors of the Company.
Form 8-K, dated April 22, 1999, Item 5, reporting the Company's
earnings for the quarter ended March 31, 1999.
Form 8-K, dated April 26, 1999, Item 5, reporting the Company's
chief executive officer succession plans.
25
<PAGE>
SIGNATURES
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
------------------------
(Registrant)
Date: May 14, 1999 By /s/ Richard Karl Goeltz
----------------------- ------------------------
Richard Karl Goeltz
Vice Chairman and
Chief Financial Officer
Date: May 14, 1999 /s/ Daniel T. Henry
----------------------- -----------------------
Daniel T. Henry
Senior Vice President and
Comptroller
(Chief Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report:
Exhibit Description
------- -----------
12 Computation in Support of Ratio of Earnings to Fixed
Charges.
15 Letter re Unaudited Interim Financial Information.
27 Financial Data Schedule.
E-1
<TABLE>
<CAPTION>
EXHIBIT 12
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months Years Ended December 31,
Ended March 31, -------------------------------------
1999
(Unaudited) 1998 1997 1996 1995 1994
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income from
continuing
operations $791 $2,925 $2,750 $2,664 $2,183 $1,891
Interest expense 511 2,224 2,122 2,160 2,343 1,925
Other adjustments 33 124 127 139 95 103
----- ----- ----- ----- ----- -----
Total earnings (a) $1,335 $5,273 $4,999 $4,963 $4,621 $3,919
----- ----- ----- ----- ----- -----
Fixed charges:
Interest expense $511 $2,224 $2,122 $2,160 $2,343 $1,925
Other adjustments 35 129 129 130 135 142
---- ----- ----- ----- ----- -----
Total fixed
charges (b) $546 $2,353 $2,251 $2,290 $2,478 $2,067
---- ----- ----- ----- ----- -----
Ratio of earnings to
fixed charges (a/b) 2.45 2.24 2.22 2.17 1.86 1.90
</TABLE>
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express
Company (the Company) and Travel Related Services' Cardmember lending
activities, which is netted against interest and dividends and Cardmember
lending net finance charge revenue, respectively, in the Consolidated
Statements of Income.
For purposes of the "earnings" computation, other adjustments include
adding the amortization of capitalized interest, the net loss of
affiliates accounted for at equity whose debt is not guaranteed by the
Company, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental
expense and subtracting undistributed net income of affiliates accounted
for at equity.
For purposes of the "fixed charges" computation, other adjustments include
capitalized interest costs and the interest component of rental expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers
through a dividend to American Express common shareholders. Accordingly,
Lehman Brothers' results are reported as a discontinued operation and are
excluded from the above computation. In the fourth quarter of 1995, the
Company's ownership in First Data Corporation ("FDC") was reduced to
approximately 10 percent as a result of shares issued by FDC in connection
with a merger transaction. Accordingly, as of December 31, 1995, the
Company's investment in FDC is accounted for as Investments - Available
for Sale.
Exhibit 15
May 14, 1999
The Shareholders and Board of Directors
American Express Company
We are aware of the incorporation by reference in the Registration Statements
(Form S-8 No. 2-46918, No. 2-59230, No. 2-64285, No. 2-73954,
No. 2-89680, No. 33-01771, No. 33-02980, No. 33-28721, No. 33-33552,
No. 33-36422, No. 33-48629, No. 33-62124, No. 33-65008, No. 33-53801,
No. 333-12683, No. 333-41779, No. 333-52699 and No. 333-73111; Form S-3
No. 2-89469, No. 33-43268, No. 33-50997, No. 333-32525, No. 333-45445,
No. 333-47085 and No. 333-55761) of American Express Company of our report
dated May 14, 1999 relating to the unaudited consolidated interim financial
statements of American Express Company which are included in its Form 10-Q
for the three-month period ended March 31, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Consolidated Balance Sheet at March 31, 1999 and
Consolidated Statement of Income for the three months ended
March 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,438
<SECURITIES> 40,776
<RECEIVABLES> 22,585
<ALLOWANCES> 580
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,841
<DEPRECIATION> 2,109
<TOTAL-ASSETS> 128,297
<CURRENT-LIABILITIES> 0
<BONDS> 29,418
0
0
<COMMON> 270
<OTHER-SE> 9,515
<TOTAL-LIABILITY-AND-EQUITY> 128,297
<SALES> 0
<TOTAL-REVENUES> 4,971
<CGS> 0
<TOTAL-COSTS> 2,439
<OTHER-EXPENSES> 599
<LOSS-PROVISION> 908
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> 791
<INCOME-TAX> 216
<INCOME-CONTINUING> 575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 575
<EPS-PRIMARY> 1.28<F1>
<EPS-DILUTED> 1.26
<FN>
<F1> Represents basic earnings per share
</FN>
</TABLE>
