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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 June 30, 1996
( ) 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 Identification No.)
incorporation or organization)
One Christina Centre, Wilmington, Delaware 19801-2919
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 594-3350
- ------------------------------------------------------------------------------
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 INSTRUCTIONS 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 August 13, 1996
- --------------------------- ------------------------------
Common Stock, $.10 par value 1,504,938 shares
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
FORM 10-Q
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated statements of
income and retained earnings -three
and six months ended June 30,1996 and 1995 3
Condensed consolidated balance sheets
- June 30, 1996 and December 31, 1995 4
Condensed consolidated statements of cash
flows - six months ended June 30, 1996
and 1995 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 8
-2-<PAGE>
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
PART I
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Revenues
Revenue earned from purchased
accounts receivable $ 474 $ 402 $ 922 $ 783
Interest income from affiliates 40 42 80 83
Interest income from investments 57 33 99 69
Other income - 2 2 4
----- ----- ----- -----
Total 571 479 1,103 939
----- ----- ----- -----
Expenses
Interest expense - affiliates 33 32 71 72
Interest expense - other 256 228 492 441
Provision for doubtful
accounts, net of recoveries 206 152 378 280
Other expenses 2 1 3 3
----- ----- ----- -----
Total 497 413 944 796
----- ----- ----- -----
Income before taxes 74 66 159 143
Income tax provision 26 23 56 50
----- ----- ----- -----
Net income 48 43 103 93
Retained earnings at
beginning of period 1,673 1,621 1,618 1,571
----- ----- ----- -----
Retained earnings at end
of period $1,721 $1,664 $1,721 $1,664
====== ====== ====== ======
See notes to condensed consolidated financial statements.
-3-
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
June 30, December 31,
1996 1995
---- ----
Assets
Cash and cash equivalents $ 1,767 $ 1,190
Accounts receivable 16,665 16,439
Less: reserve for doubtful
accounts 685 624
------- -------
15,980 15,815
Loans and deposits with affiliates 2,850 2,850
Deferred charges and other assets 290 337
------- -------
Total assets $20,887 $20,192
======= =======
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,815 $ 1,087
Short-term debt - other 13,858 13,115
Current portion of long-term debt-other 452 409
Long-term debt with affiliate 910 910
Long-term debt - other 1,560 1,763
------- -------
Total debt 18,595 17,284
Due to affiliates 213 882
Accrued interest and other liabilities 114 130
------- -------
Total liabilities 18,922 18,296
------- -------
Deferred discount revenue 82 116
------- -------
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 1,721 1,618
------- -------
Total shareholder's equity 1,883 1,780
------- -------
Total liabilities and
shareholder's equity $20,887 $20,192
======= =======
See notes to condensed consolidated financial statements.
-4-
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)
Six Months Ended
June 30,
----------------------
1996 1995
---- ----
Cash Flows from Operating Activities:
Net income $ 103 $ 93
Adjustments to reconcile net income to net
cash and cash equivalents provided by
operating activities:
Provision for doubtful accounts,
net of recoveries 378 280
Amortization of deferred underwriting
fees and bond discount/premium - 1
Changes in operating assets and liabilities:
Increase in deferred tax assets (10) (10)
Increase in interest receivable and other
operating assets (52) (98)
Decrease in accrued interest and other
liabilities (13) -
(Decrease)increase in due to affiliates (35) 28
Decrease in deferred discount revenue (34) (22)
----- -----
Net cash provided by operating activities 337 272
----- -----
Cash Flows from Investing Activities:
Increase in accounts receivable (838) (442)
Sale of net accounts receivable to an affiliate 230 -
Purchase of participation interest in seller's
interest in accounts receivable from an affiliate (103) -
Recoveries of accounts receivable previously
written off 94 84
Increase in loans and deposits with affiliates - (200)
Decrease in due to affiliates from purchased
receivables (575) (480)
------- -------
Net cash used in investing activities (1,192) (1,038)
------- -------
Cash Flows from Financing Activities:
Net increase in short-term debt with affiliates
with maturity less than ninety days 728 130
Net increase(decrease) in short-term debt -
other with maturity less than ninety days 5,153 (5,853)
Proceeds from issuance of debt 4,858 9,174
Repayment of debt (9,307) (1,772)
------- -------
Net cash provided by financing activities 1,432 1,679
------- -------
Net increase in cash and cash equivalents 577 913
Cash and cash equivalents at beginning of period 1,190 460
------- -------
Cash and cash equivalents at end of period $1,767 $1,373
======= =======
See notes to condensed consolidated financial statements.
-5-
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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, including its subsidiaries where appropriate, ("Credco") on
Form 10-K for the year ended December 31, 1995. Certain prior year
amounts have been reclassified to conform to the current year's
presentation. Significant accounting policies disclosed therein have
not changed.
The condensed consolidated financial statements are unaudited; however,
in the opinion of management, they include all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial position of Credco at June 30, 1996 and the
consolidated results of its operations and changes in its retained
earnings for the six-month periods ended June 30, 1996 and 1995 and
cash flows for the six-month periods ended June 30, 1996 and 1995.
Results of operations reported for interim periods are not necessarily
indicative of results for the entire year.
2. For the six-month periods ended June 30, 1996 and 1995, Credco paid
$575 million and $613 million of interest, respectively. Income taxes
paid for each of the six-month periods ended June 30, 1996 and 1995 were
$55 million and $57 million, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, Credco had the ability to issue $1 billion of medium
and long-term debt securities under shelf registrations filed with the
Securities and Exchange Commission.
Results of Operations
Credco purchases Cardmember receivables without recourse from American Express
Travel Related Services Company, Inc. ("TRS") or its subsidiaries.
Non-interest-bearing Cardmember receivables are purchased at face amount less
a specified discount agreed upon from time to time, and interest-bearing
Cardmember receivables are generally purchased at face amount.
Non-interest-bearing receivables are purchased under Receivables Agreements
that generally provide that the discount rate shall not be lower than a rate
that yields earnings of at least 1.25 times fixed charges on an annual basis.
The ratio of earnings to fixed charges for both six month periods ended
June 30, 1996 and 1995 was 1.28. The ratio of earnings to fixed charges for
American Express Company (the "Company"), the parent of TRS, for the six-month
periods ended June 30, 1996 and 1995 was 2.01 and 1.84, respectively. The
Receivables Agreements also provide that consideration will be given from time
to time to revising the discount rate applicable to purchases of new
receivables to reflect changes in money market interest rates or significant
changes in the collectibility of receivables. Pretax income depends primarily
on the volume of Cardmember receivables purchased, the discount rates
applicable thereto, the relationship of total discount to Credco's interest
expense and the collectibility of the receivables purchased.
-6-<PAGE>
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Credco purchased $67 billion and $57 billion of Cardmember receivables during
the six-month periods ended June 30, 1996 and 1995, respectively. At
June 30, 1996 and December 31, 1995, Credco owned $15.0 billion and $14.8
billion, respectively, of non-interest-bearing receivables. At June 30, 1996
and December 31, 1995, non-interest-bearing receivables included $3.8 billion
and $2.3 billion, respectively, of gross participation interests in the
seller's interest in Cardmember receivables owned by a Master Trust which was
formed by TRS as part of an asset securitization program. The gross
participation interests represent undivided interests in the receivables
conveyed to the Master Trust by American Express Receivables Financing Corp.,
a subsidiary of TRS. In addition, at June 30, 1996 and December 31, 1995,
Credco owned extended payment plan receivables totaling $1.6 billion and $1.7
billion, respectively, including revolving credit loans purchased directly from
American Express Centurion Bank ("Centurion Bank"), a subsidiary of TRS. The
extended payment plan receivables owned at June 30, 1996 include $100 million
representing a participation interest owned by a subsidiary of Credco in the
seller's interest in designated revolving credit loans owned by the American
Express Credit Account Master Trust which was created by Centurion Bank and
American Express Receivables Financing Corporation II, a wholly-owned
subsidiary of TRS, during the second quarter of 1996 for the securitization
of revolving credit loans.
For both the six-month periods ended June 30, 1996 and 1995, the average life
of Cardmember receivables owned by Credco was 43 days.
Credco's write-offs, net of recoveries, as a percentage of the volume of
Cardmember receivables purchased for the six-month periods ended June 30,
1996 and 1995 was .46 percent and .41 percent, respectively.
Credco's increase in revenue for the six-month period ended June 30, 1996,
is due to increased volume of receivables purchased. Increased interest
income for the six-month period ended June 30, 1996 is attributable to an
increase in average investments. Interest expense increased for the six-month
period ended June 30, 1996 due to increased volume. Provision for doubtful
accounts for the six-month period also increased primarily reflecting volume
growth.
The following is an analysis of the increase (decrease) in key revenue and
expense accounts for the six-month period ended June 30, 1996, compared with
the six-month period ended June 30, 1995 (in millions):
Six
Month
Period
------
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased $ 132
Discount and interest rates 7
------
Total $ 139
======
-7-<PAGE>
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Interest income from affiliates-changes attributable to:
Volume of average investments outstanding $ 6
Interest rates (9)
-------
Total $ (3)
=======
Interest income from investments-changes attributable to:
Volume of average investments outstanding $ 41
Interest rates (11)
-------
Total $ 30
=======
Interest expense (affiliates)-changes attributable to:
Volume of average debt outstanding $ 9
Interest rates (10)
-------
Total $ (1)
=======
Interest expense (other)-changes attributable to:
Volume of average debt outstanding $ 114
Interest rates (63)
-------
Total $ 51
=======
Provision for doubtful accounts-changes attributable to:
Volume of receivables purchased $ 63
Provision rates and volume of recoveries 35
-------
Total $ 98
=======
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
12.1 Computation in support of ratio of earnings to fixed
charges of American Express Credit Corporation.
12.2 Computation in support of ratio of earnings to fixed
charges of American Express Company.
27. Financial data schedule.
(b) Reports on Form 8-K
None.
-8-
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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)
DATE August 14, 1996 /s/Vincent P. Lisanke
-----------------------------------
Vincent P. Lisanke
(President, Chief Executive Officer
and Chief Accounting Officer)
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Description How Filed
----------- ---------
Exhibit 12.1 Computation in support of Electronically filed herewith.
ratio of earnings to fixed
charges of American
Express Credit Corporation.
Exhibit 12.2 Computation in support of Electronically filed herewith.
ratio of earnings to fixed
charges of American
Express Company.
Exhibit 27. Financial data schedule. Electronically filed herewith.
-9-
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
EXHIBIT 12.1
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
OF AMERICAN EXPRESS CREDIT CORPORATION
(millions)
Six Months
Ended
June 30, Year Ended December 31,
(Unaudited)
------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before
extraordinary
charge $103 $ 93 $ 197 $ 139 $ 137 $ 138 $ 174
Income tax
provision 56 50 105 75 64 70 87
Interest expense 563 513 1,054 736 599 728 946
---- ---- ----- ----- ----- ----- ------
Total earnings $722 $656 $1,356 $ 950 $ 800 $ 936 $1,207
==== ==== ====== ===== ===== ===== ======
Fixed charges -
interest expense $563 $513 $1,054 $ 736 $ 599 $ 728 $ 946
==== ==== ====== ===== ===== ===== =====
Ratio of
earnings to fixed
charges 1.28 1.28 1.29 1.29 1.34* 1.29 1.28
Note: Gross rentals on long-term leases were minimal 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 charges of $34 million (pretax) was 1.28.
-10-
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
EXHIBIT 12.2
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
OF AMERICAN EXPRESS COMPANY
(millions)
Six Months
Ended
June 30, Year Ended December 31,
(Unaudited)
----------- ----------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing
operations $ 1,200 $ 2,183 $ 1,891 $2,326 $ 896 $ 622
Interest expense 1,120 2,343 1,925 1,776 2,171 2,761
Other adjustments 64 95 103 88 196 142
------- ------- ------- ------ ------ ------
Total earnings(a) $ 2,384 $ 4,621 $ 3,919 $4,190 $3,263 $3,525
======= ======= ======= ====== ====== ======
Fixed charges -
Interest expense $ 1,120 $ 2,343 $ 1,925 $1,776 $2,171 $2,761
Other adjustments 65 135 142 130 154 147
------- ------- ------- ------ ------ ------
Total fixed
charges (b) $ 1,185 $ 2,478 $ 2,067 $1,906 $2,325 $2,908
======= ======= ======= ====== ====== ======
Ratio of earnings to
fixed charges (a/b) 2.01 1.86 1.90 2.20 1.40 1.21
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express Company
and TRS' Cardmember lending activities, which is netted against interest and
dividends and Cardmember lending net finance charge revenue, respectively,
in the Consolidated Statement of Income of American Express Company.
For purposes of the "earnings" computation, other adjustments include adding
the amortization of capitalized interest, the net loss of affiliates accounted
for under the equity method 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 under the equity method.
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 for all periods presented. In March 1993, American
Express reduced its ownership in First Data Corporation to approximately
22 percent through a public offering. As a result, beginning in 1993 FDC was
reported as an equity investment in the above computation. In the fourth
quarter of 1995, the Company's ownership was further 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.
-11-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Credco's
Condensed Consolidated Balance Sheet at June 30, 1996 and Condensed
Consolidated Statement of Income for the six months ended June 30, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,767
<SECURITIES> 0
<RECEIVABLES> 16,665
<ALLOWANCES> 685
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,887
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,882
<TOTAL-LIABILITY-AND-EQUITY> 20,887
<SALES> 0
<TOTAL-REVENUES> 1,103
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 563
<INCOME-PRETAX> 159
<INCOME-TAX> 56
<INCOME-CONTINUING> 103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
