UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1994
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 No. 1-6908
AMERICAN EXPRESS CREDIT CORPORATION
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-1988350
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rodney Square, Wilmington, Delaware 19801
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (302) 594-3350
None
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Former name, former address and former fiscal year, if changed since last
report.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a)
AND (b) OF FORM 10-Q AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT
IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER GENERAL
INSTRUCTION H(2).
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 November 10, 1994
- ---------------------------- ---------------------------------
Common Stock, $.10 par value 1,504,938 shares
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Form 10-Q
INDEX
Page No.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Condensed consolidated balance
sheet - September 30, 1994 and
December 31, 1993 3
Condensed consolidated statement
of income - three and nine months ended
September 30, 1994 and 1993 4
Condensed consolidated statement of
retained earnings - nine months ended
September 30, 1994 and 1993 4
Condensed consolidated statement
of cash flows - nine months ended
September 30, 1994 and 1993 5
Notes to condensed consolidated
financial statements 6
Item 2. Management's Discussion and Analysis
------------------------------------
of Financial Condition and Results
----------------------------------
of Operations 6
-------------
Part II. OTHER INFORMATION
Item 6. ExhibitS and Reports on Form 8-K 9
--------------------------------
-2-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
PART I
------
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(millions)
(Unaudited)
September 30, December 31,
1994 1993
------------- ------------
Assets
- ------
Cash and cash equivalents $ 2,693 $ 257
Accounts receivable 12,208 12,968
Less reserve for doubtful accounts 491 542
------ ------
11,717 12,426
Loan to affiliate 2,000 2,000
Deferred charges and other assets 244 260
------ ------
Total assets $16,654 $14,943
====== ======
Liabilities and Shareholder's Equity
- ------------------------------------
Short-term debt $12,248 $ 9,738
Current portion of long-term debt 444 692
Long-term debt 1,984 1,776
------ ------
Total debt 14,676 12,206
Due to affiliates 74 932
Accrued interest and other liabilities 100 97
------ ------
Total liabilities 14,850 13,235
Deferred discount revenue 44 46
Shareholder's equity:
Common stock 1 1
Capital surplus 129 129
Retained earnings 1,630 1,532
------ ------
Total shareholder's equity 1,760 1,662
------ ------
Total liabilities and shareholder's equity $16,654 $14,943
====== ======
See notes to condensed consolidated financial statements.
-3-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
(millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
Revenues:
Revenue earned from purchased
accounts receivable $287 $283 $ 879 $881
Interest income from affiliates 25 18 64 52
Interest income from investments 26 18 62 49
Other income 2 2 5 5
--- --- ----- ---
Total 340 321 1,010 987
Expenses:
Interest 195 148 521 454
Provision for doubtful accounts,
net of recoveries 90 107 333 367
Other expenses 2 2 6 5
--- --- --- ---
Total 287 257 860 826
Income before taxes and extra-
ordinary charge 53 64 150 161
Income tax provision 18 17 52 50
--- --- --- ---
Income before extraordinary charge 35 47 98 111
Extraordinary charge for early
retirement of debt (net of income
tax benefit) - 12 - 22
--- --- --- ---
Net income $ 35 $ 35 $ 98 $ 89
=== === === ===
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
-----------------------------------------------------
(millions)
(Unaudited)
Nine Months Ended
September 30,
------------------
1994 1993
---- ----
Retained earnings at beginning of period $1,532 $1,542
Net income 98 89
----- -----
Retained earnings at end of period $1,630 $1,631
===== =====
See notes to condensed consolidated financial statements.
-4-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(millions)
(Unaudited)
Nine Months Ended
September 30,
-------------------
1994 1993
---- ----
Cash Flows from Operating Activities:
Net income $ 98 $ 89
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Extraordinary charge for early retirement of debt - 34
Provision for doubtful accounts, net of recoveries 333 367
Amortization of deferred underwriting fees and bond
discount/premium 1 3
Decrease in deferred discount revenue (2) (16)
(Increase) decrease in deferred tax assets (14) 27
Increase in interest receivable and
operating assets (7) (48)
Increase (decrease) in accrued interest and other
liabilities 1 (59)
Increase in due to affiliates 13 29
- ----------------------------------------------------------------------------
Net cash provided by operating activities 423 426
- ----------------------------------------------------------------------------
Cash Flows from Investing Activities:
Increase in accounts receivable (551) (430)
Sale of net accounts receivable to an affiliate 1,192 914
Purchase of participation interest in accounts
receivable from an affiliate (1,170) (996)
Sale of participation interest in accounts receivable
to an affiliate 920 640
Purchase of net accounts receivable from an affiliate - (30)
Purchase of net secured receivables from an affiliate (85) -
Recoveries of accounts receivable previously written off 132 133
Repayment from affiliates of loans and deposits - 140
Decrease in due to affiliates from purchased receivables (887) (373)
- ----------------------------------------------------------------------------
Net cash used in investing activities (449) (2)
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Cash Flows from Financing Activities:
Net increase in short-term debt with maturity less
than ninety days 6,042 208
Proceeds from issuance of debt 2,044 6,770
Repayment of debt (5,624) (5,271)
- ----------------------------------------------------------------------------
Net cash provided by financing activities 2,462 1,707
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Net increase in cash and cash equivalents 2,436 2,131
Cash and cash equivalents at beginning of period 257 126
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Cash and cash equivalents at end of period $2,693 $2,257
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See notes to condensed consolidated financial statements.
-5-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
1. The condensed consolidated financial statements should be read in
conjunction with the Annual Report of American Express Credit
Corporation (Credco) on Form 10-K for the year ended December 31, 1993.
Significant accounting policies disclosed therein have not changed.
The condensed consolidated financial statements for September 30, 1994
and 1993 are unaudited; however, in the opinion of management, they
include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the condensed consolidated financial
position of Credco at September 30, 1994 and December 31, 1993 and the
condensed consolidated results of its operations, changes in its retained
earnings and cash flows for the nine-month periods ended September 30, 1994
and 1993. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
2. For the nine-month periods ended September 30, 1994 and 1993, Credco paid
$539 million and $530 million of interest, respectively. Income taxes
paid for each of the nine-month periods ended September 30, 1994 and 1993
were $55 million and $21 million, respectively.
3. In July 1994, Credco purchased a $300 million variable rate bond at
current interest rates, from American Express Company due to mature July
15, 2004. The net amount of indebtedness to American Express Company
is included in long-term debt.
4. As part of American Express Travel Related Services Company, Inc's. (TRS)
asset securitization program, in July 1994, Credco sold back to TRS $1.2
billion of gross receivables arising under specified domestic, consumer
Cardmember accounts. TRS sold these receivables, together with the right to
receive subsequent receivables arising from such Cardmember accounts, to
its subsidiary, American Express Receivables Financing Corporation (RFC),
which conveyed them to American Express Master Trust (the "Trust"). This
resulted in an increase in the participation interest of a subsidiary
of Credco, Credco Receivables Corp. ("CRC"), in securitized receivables,
for which CRC paid $1.2 billion. In September 1994, the Trust issued $900
million of receivables trust certificates in three series. At the time
of such issuance, CRC, sold, at face amount less applicable reserve,
$972 million of gross participation interest in RFC's sellers interest to
RFC.
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Credco is primarily engaged in the business of purchasing a major portion of
the Cardmember receivables arising from the use of the American Express R
Card, American Express R Gold Card, Platinum Card R and Corporate Card,
issued in the United States, including certain related extended payment plan
receivables, and in designated currencies outside the United States. Credco
also purchases certain receivables arising from the use of the Optima sm
Card. These Cardmember receivables are purchased without recourse from TRS
-6-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
and certain of its subsidiaries. As of September 30, 1994, there were 35.6
million Cards in force worldwide. In addition, Credco purchases certain
secured interest-bearing receivables from an affiliate. Credco generally
purchases non-interest-bearing Cardmember receivables at face amount less a
specified discount agreed upon from time to time and interest-bearing
Cardmember receivables at face amount. Non-interest-bearing Cardmember
receivables are purchased under agreements that generally provide that the
discount rates shall not be lower than a rate that yields earnings to Credco
equal to at least 1.25 times fixed charges on an annual basis. The agreements
also provide that consideration will be given from time to time to revising the
discount rate to reflect changes in money market interest rates or significant
changes in the collectibility of receivables.
The average discount rate for the nine-month periods ended September 30, 1994
and 1993 was .96 percent and 1.12 percent, respectively. The ratio of
earnings to fixed charges for the nine-month periods ended September 30, 1994,
and 1993 was 1.29 and 1.35, respectively. For the first nine months of 1993,
the ratio of earnings to fixed charges calculated in accordance with the
Receivables Agreements after the impact of the extraordinary charge was 1.28.
Pretax income depends primarily on the volume and collectibility of American
Express Cardmember receivables purchased, the discount rates applicable
thereto, and the relationship of total discount to Credco's interest expense.
Credco purchased $80.5 billion and $69 billion of Cardmember receivables
during the nine-month periods ended September 1994 and 1993, respectively.
At September 30, 1994 and 1993, Credco owned $10.9 billion and $9.9 billion,
respectively, of non-interest-bearing receivables. These amounts include
$1.5 billion of gross participation interests in non-interest bearing
receivables arising out of TRS's asset securitization program at each September
30, 1994 and 1993. In addition, at September 30, 1994 and 1993, Credco
owned extended payment plan receivables totalling $1.3 billion and $1.1
billion, respectively. These amounts consist of certain interest-bearing
extended payment plan receivables and deferred merchandise receivables. For
the nine-month periods ended September 30, 1994 and 1993, the average life of
Cardmember receivables owned by Credco was 42.7 and 43.1 days, respectively.
Credco generally writes off against its reserve for doubtful accounts the
total balance of non-interest-bearing receivables for which any portion remains
unpaid twelve months from the date of original billing. Interest-bearing
receivables are written off when six contractual payments by the Cardmember are
past due. Accounts are written off earlier if deemed uncollectible.
Credco's write-offs, net of recoveries, as a percentage of the volume of
Cardmember receivables purchased for the nine-month periods ended September 30,
1994 and 1993 were .42 percent and .60 percent, respectively. This decrease is
due to a reduction in write-offs and an increase in the volume of Cardmember
receivables purchased.
-7-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
The following is an analysis of the increase (decrease) in key revenue and
expense accounts for the nine-month period ended September 30, 1994, compared
with the nine-month period ended September 30, 1993 (in millions):
Revenue earned from purchased accounts receivable -
changes attributable to:
Volume of receivables purchased $142
Discount and interest rates (144)
---
Total $ (2)
===
Interest income from affiliates - changes attributable to:
Volume of average investments outstanding $ (2)
Interest rates 14
---
Total $ 12
===
Interest income from investments changes attributable to:
Volume of average investments $ (1)
Interest rates 14
---
Total $ 13
===
Interest expense - changes attributable to:
Volume of average debt outstanding $ 55
Interest rates 12
---
Total $ 67
===
Provision for doubtful accounts - changes attributable to:
Volume of receivables purchased $ 85
Provision rates and volume of recoveries (119)
---
Total $(34)
===
-8-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibit and Reports on Form 8-K
-------------------------------
(a) Exhibit:
12. Computation in support of ratio of earnings to fixed
charges.
27. Financial data schedule.
(b) Reports on Form 8-K:
None.
-9-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
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 CREDIT CORPORATION
(REGISTRANT)
/s/ Vincent P. Lisanke
Vincent P. Lisanke
President and CEO
November 10, 1994
/s/ C. J. Martin
C. J. Martin
Vice President - Finance
(Chief Accounting Officer)
November 10, 1994
-10-
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Description How Filed
----------- ---------
Exhibit 12. Computation in support of ratio of Electronically filed
earnings to fixed charges. herewith.
Exhibit 27. Financial Data Schedule Electronically filed
herewith.
-11-
EXHIBIT 12
AMERICAN EXPRESS CREDIT CORPORATION
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Nine Months Ended
September 30 Year Ended December 31,
(Unaudited)
----------------- ------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before
extraordinary
charge $ 98 $111 $137 $138 $ 174 $ 191 $ 190
Income tax provision 52 50 64 70 87 99 71
Interest expense 521 454 599 728 946 1,022 898
--- --- --- --- ----- ----- ---
Total earnings $671 $615 $800 $936 $1,207 $1,312 $1,159
=== === === === ===== ===== =====
Fixed charges -
interest expense $521 $454 $599 $728 $ 946 $1,022 $898
=== === === === ===== ===== ===
Ratio of earnings
to fixed charges 1.29 1.35* 1.34* 1.29 1.28 1.28 1.29
Note: Gross rentals on long-term leases were minimal in amount in each of
the periods shown.
* The ratio of earnings to fixed charges calculated in accordance
with the Receivables Agreements after the impact of the
extraordinary charge of $34 million (pretax) was 1.28.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at September 30, 1994 and Consolidated
Statement of Income for the nine months ended September 30, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,693
<SECURITIES> 0
<RECEIVABLES> 12,208
<ALLOWANCES> 491
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,654
<CURRENT-LIABILITIES> 0
<BONDS> 14,676
<COMMON> 1
0
0
<OTHER-SE> 1,759
<TOTAL-LIABILITY-AND-EQUITY> 16,654
<SALES> 0
<TOTAL-REVENUES> 1,010
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 333
<INTEREST-EXPENSE> 521
<INCOME-PRETAX> 150
<INCOME-TAX> 52
<INCOME-CONTINUING> 98
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
