<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-K
--------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] 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 Christina Centre, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (302) 576-4900.
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------------------------ -----------------------
6 1/8% Senior Debentures due June 15, 2000 New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b) OF FORM 10-K AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM
THIS REPORT IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED
UNDER INSTRUCTION J.
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
American Express Company, through a wholly-owned subsidiary, owns all of
the outstanding common stock of the Registrant. Accordingly, there is no
market for the Registrant's common stock. At March 28, 1996, 1,504,938
shares were outstanding.
Documents incorporated by reference: None.<PAGE>
PART I
Item 1. BUSINESS.
Introduction
American Express Credit Corporation (including its subsidiaries, where
appropriate, ``Credco'') was incorporated in Delaware in 1962 and was
acquired by American Express Company (``American Express'') in December
1965. On January 1, 1983, Credco became a wholly-owned subsidiary of
American Express Travel Related Services Company, Inc. (including its
subsidiaries, where appropriate, ``TRS''), a wholly-owned subsidiary of
American Express.
Credco is primarily engaged in the business of purchasing most Cardmember
receivables arising from the use of the American Express-R Card, including
the American Express-R Gold Card, Platinum Card-R and Corporate Card issued
in the United States, and 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-R Card and interest bearing extended payment plan Sign & Travel-R
receivables arising from travel service sales. The American Express Card
and the Optima Card are referred to herein as the ``Card''.
American Express Card Business
TRS currently issues the Card in 35 currencies. The Card, which is issued
to individual consumers for their personal account or through a corporate
account established by their employer for its business purposes, permits
Cardmembers to charge purchases of goods and services in the United States
and in most countries around the world at establishments that have agreed
to accept the Card. TRS accepts from each participating establishment the
charges arising from Cardmember purchases at a discount that varies with
the type of participating establishment, the charge volume, the timing and
method of payment to the establishment, the method of submission of
charges, and in certain instances, the average charge amount and the amount
of information provided.
Except in the case of the Optima Card, a family of revolving credit cards
which is marketed to individuals in the United States and several other
countries, the Card is primarily designed for use as a method of payment
and not as a means of financing purchases of goods and services and carries
no pre-set spending limit. Charges are approved based on a Cardmember's
past spending and payment patterns, credit history and personal resources.
Except in the case of the Optima Card and certain extended payment plans,
payment of the full amount billed each month is due from the Cardmember
upon receipt of the bill, and no finance charges are assessed. Card accounts
that are past due by a given number of days are subject, in most cases, to a
delinquency assessment and, if not brought to current status, subject to
cancellation.
The American Express Card and consumer lending businesses are subject to
extensive regulation in the United States under a number of federal laws
and regulations. Federal legislation regulates abusive debt collection
practices. In addition, a number of states and foreign countries have
similar consumer credit protection and disclosure laws. These laws and
regulations have not had, and are not expected to have, a material adverse
effect on the Card and consumer lending business, either in the United
States or on a worldwide basis.
1<PAGE>
General Nature of Credco's Business
Credco purchases certain Cardmember receivables arising from the use of
the Card throughout the world pursuant to agreements (the ``Receivables
Agreements'') with TRS. Net income primarily depends on the
volume of receivables arising from the use of the Card purchased by Credco,
the discount rates applicable thereto, the relationship of total discount
to Credco's interest expense and the collectibility of the receivables
purchased. The average life and collectibility of accounts receivable
generated by the use of the Card are affected by factors such as general
economic conditions, overall levels of consumer debt and the number of new
Cards issued.
Credco purchases Cardmember receivables without recourse. Amounts
resulting from unauthorized charges (for example, those made with a lost or
stolen Card) are excluded from the definition of ``receivables'' under the
Receivables Agreements and are not eligible for purchase by Credco. If the
unauthorized nature of the charge is discovered after purchase by Credco,
TRS repurchases the charge from Credco.
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. The Receivables
Agreements generally require that non-interest-bearing receivables be
purchased at discount rates which yield to Credco earnings of not less than
1.25 times its fixed charges on an annual basis. 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 rates or significant changes in the
collectibility of receivables. New groups of Cardmember receivables are
generally purchased net of reserve balances applicable thereto.
Extended payment plan receivables are primarily funded by subsidiaries of
TRS other than Credco; however, Credco purchases certain extended payment
plan receivables. At December 31, 1995 and 1994, extended payment plan
receivables owned by Credco totaled $1.7 billion and $1.5 billion,
respectively, representing 10.1 percent and 10.4 percent, respectively, of
all receivables owned by Credco. These extended payment plan receivables
consist of certain interest-bearing extended payment plan receivables
comprised principally of Optima and Sign & Travel accounts arising from
travel service sales and non-interest-bearing deferred merchandise
receivables arising from direct mail merchandise sales by TRS.
Credco, through a subsidiary, Credco Receivables Corp.("CRC"), purchases
gross participation interests in the seller's interest in non-interest-
bearing 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. (``AERFC''), a
subsidiary of TRS. See note 3 in ``Notes to Consolidated Financial
Statements'' appearing herein.
The Card issuers, at their expense and as agents for Credco, perform
accounting, clerical and other services necessary to bill and collect all
Cardmember receivables owned by Credco. The Receivables Agreements provide
that, without prior written consent of Credco, the credit standards used to
determine whether a Card is to be issued to an applicant may not be
2<PAGE>
materially reduced and that the policy as to the cancellation of Cards for
credit reasons may not be materially liberalized.
American Express, as the parent of TRS, has agreed with Credco that it
will take all necessary steps to assure performance of certain of TRS'
obligations under the Receivables Agreement between TRS and Credco. The
Receivables Agreements may be terminated at any time by the parties
thereto, generally upon little or no notice. Alternatively, such parties
may agree to reduce the required 1.25 fixed charge coverage ratio, which
could result in lower discount rates and, consequently, lower revenues and
net income of Credco. The obligations of Credco are not guaranteed under
the Receivables Agreement or otherwise by American Express or the Card
issuers.
Volume of Business
The following table shows the volume of Cardmember receivables purchased by
Credco, net of Cardmember receivables sold to affiliates, during each of
the years indicated, together with receivables owned by Credco at the end
of such years (millions):
Volume of Cardmember Cardmember Receivables Owned
Receivables Purchased at December 31,
Year Domestic Foreign Total Domestic Foreign Total
---- -------- ------- ----- -------- ------- -----
1995 $ 91,299 $ 30,638 $121,937 $ 13,179 $ 3,260 $16,439
1994 83,851 25,639 109,490 11,273 2,747 14,020
1993 80,202 14,635 94,837 10,758 2,210 12,968
1992 81,311 13,041 94,352 10,412 1,287 11,699
1991 80,844 18,934 99,778 10,581 1,639 12,220
The card business has not experienced significant seasonal fluctuation,
although Card billed business tends to be moderately higher in the fourth
quarter than in other calendar quarters.
TRS's asset securitization program disclosed above reduced the volume of
domestic Cardmember receivables purchased in 1995, 1994 and 1993 and the
amount owned by Credco at December 31, 1995, 1994 and 1993.
In July 1993, Credco began purchasing certain foreign currency Cardmember
receivables which had been sold to an affiliate during the period from
December 1991 through June 1993. In December 1993, Credco repurchased
participation interests in a portion of its foreign receivables which had
previously been sold to an affiliate during the period from December 1991
through November 1993. These transactions increased the volume of foreign
Cardmember receivables purchased in 1993 and subsequent years and the
amount owned by Credco at December 31, 1993 and subsequent dates.
The average life of Cardmember receivables owned by Credco for each of the
five years ending December 31, 1995 (based upon the ratio of the average
amount of both billed and unbilled receivables owned by Credco at the end
of each month during the years indicated to the volume of Cardmember
receivables purchased by Credco, net of Cardmember receivables sold to
affiliates) was 43 days.
3<PAGE>
The following table shows the aging of billed, non-interest-bearing
Cardmember receivables:
December 31,
1995 1994
-----------------------------------------------------------------
Current 77.3% 78.4%
30 to 59 days 16.5 15.8
60 to 89 days 2.5 2.4
90 days and over 3.7 3.4
Loss Experience
Credco generally writes off against its reserve for doubtful accounts the
total balance in an account for which any portion remains unpaid 12 months
from the date of original billing for non-interest-bearing Cardmember
receivables and after six contractual payments are past due for interest-
bearing Cardmember receivables. Accounts are written off earlier if deemed
uncollectible.
The following table sets forth Credco's write-offs net of recoveries
expressed in millions and as a percentage of the volume of Cardmember
receivables purchased by Credco, net of Cardmember receivables sold to
affiliates, in each of the years indicated:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Write-offs, net of
recoveries $508 $444 $529 $663 $806
% of net Cardmember
receivables purchased .42% .41% .57% .70% .81%
Sources of Funds
Credco's business is financed by short-term borrowings consisting
principally of commercial paper, borrowings under bank lines of credit and
issuances of medium and long-term debt, as well as through operations. The
weighted average interest costs on an annual basis of all borrowings, after
giving effect to commitment fees under lines of credit and the impact of
interest rate swaps, during the following years were:
Weighted Average
Year Interest Cost
---- ----------------
1995 6.30%
1994 5.06
1993 4.61
1992 5.80
1991 7.54
4<PAGE>
From time to time, American Express and certain of its subsidiaries
purchase Credco's commercial paper at prevailing rates, enter into variable
rate note agreements at interest rates generally above the 13-week treasury
bill rate and provide lines of credit. The largest amount of borrowings
from American Express or its subsidiaries at any month end during the five
years ended December 31, 1995 was $3.7 billion. At December 31, 1995, the
amount borrowed was $2.0 billion. See notes 4 and 5 in ``Notes to
Consolidated Financial Statements'' appearing herein for information about
Credco's debt, including Credco's lines of credit from various banks and
long-term debt.
Foreign Operations
See notes 2, 7 and 10 in ``Notes to Consolidated Financial Statements''
appearing herein for information about Credco's foreign exchange risks and
operations in different geographical regions.
Employees
At December 31, 1995 Credco had 30 employees.
Item 2. PROPERTIES.
Credco neither owns nor leases any material physical properties.
Item 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which Credco or its
subsidiaries is a party or of which any of their property is the subject.
Credco knows of no such proceedings being contemplated by government
authorities or other parties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
American Express, through a wholly-owned subsidiary, TRS, owns all of the
outstanding common stock of Credco. Therefore, there is no market for
Credco's common stock.
Credco paid dividends of $150 million and $100 million to TRS in December,
1995 and 1994, respectively.
For information about limitations on Credco's ability to pay dividends, see
note 6 in ``Notes to Consolidated Financial Statements'' appearing herein.
5<PAGE>
Item 6. SELECTED FINANCIAL DATA.
The following summary of certain consolidated financial information of
Credco was derived from audited financial statements for the five years
ended December 31, 1995.
(dollars in 1995 1994 1993 1992 1991
millions) ---- ---- ---- ---- ----
Income Statement Data
Revenues 1,988 1,401 1,282 1,605 2,070
Interest expense 1,054 736 599 728 946
Provision for
doubtful accounts,
net of recoveries 625 443 475 661 855
Income tax
provision 105 75 64 70 87
Extraordinary
charge net
of taxes - - 22 - -
Net income 197 139 115 138 174
Balance Sheet Data
Accounts receivable 16,439 14,020 12,968 11,699 12,220
Reserve for
doubtful accounts (624) (498) (542) (603) (731)
Total assets 20,192 16,868 14,943 13,631 14,127
Short-term debt 14,202 11,525 9,738 7,581 7,918
Current portion
of long-term debt 409 405 692 969 768
Long-term debt 2,673 2,282 1,776 2,303 3,136
Shareholder's
equity 1,780 1,733 1,662 1,672 1,784
Cash dividends 150 100 125 250 -
6<PAGE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
Credco's receivables portfolio consists of charge card receivables and
extended payment plan receivables purchased without recourse from TRS
throughout the world and participation interests purchased without recourse
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. At
December 31, 1995 and 1994, respectively, Credco owned $14.8 billion and
$12.6 billion of charge card receivables and participations in charge card
receivables, representing 89.9 percent and 89.6 percent of the total
receivables owned, and $1.7 billion and $1.5 billion of extended payment
plan receivables, representing 10.1 percent and 10.4 percent of the total
receivables owned.
As part of Credco's business of funding receivables, Credco makes variable
rate loans to American Express Centurion Bank (``Centurion Bank'') which
are secured by Optima receivables owned by Centurion Bank. At December 31,
1995 and 1994, $2 billion of such loans were outstanding. The loan
agreements require Centurion Bank to maintain, as collateral, Optima
receivables equal to the outstanding loan balance plus an amount equal to
three times the receivable reserve applicable to such Optima receivables.
Credco's assets are financed through a combination of short-term debt,
long-term senior notes, equity capital and retained earnings. Daily
funding requirements are met primarily by the sale of commercial paper.
Credco has readily sold the volume of commercial paper necessary to meet
its funding needs as well as to cover the daily maturities of commercial
paper issued. The average amount of commercial paper outstanding was $12.1
billion for 1995 and $10.0 billion for 1994.
An alternate source of borrowing consists of committed credit line
facilities. The aggregate commitment of these facilities is generally
maintained at 50 percent of short-term debt, net of short-term investments
and cash equivalents. Total committed credit line facilities at December
31, 1995 and 1994 totaled $5.8 billion and $4.9 billion, respectively. At
December 31, 1995 and 1994, Credco, through its wholly-owned subsidiary,
American Express Overseas Credit Corporation Limited (``AEOCC''), had
outstanding borrowings of $54 million and $42 million, respectively, under
these committed lines of credit. In addition, Credco, through AEOCC, had
short-term borrowings under uncommitted lines of credit totaling $342
million and $150 million at December 31, 1995 and 1994, respectively.
During 1995, Credco issued long-term senior notes of $250 million at 6 3/4
percent due 2001, $250 million at 6 1/2 percent due 2000 and $300 million
at 6 1/8 percent due 2001, the proceeds of which were used to reduce short-
term debt. During 1995, 1994 and 1993, Credco's average long-term debt
outstanding was $2.0 billion, $2.6 billion and $2.8 billion, respectively.
At December 31, 1995, Credco had the ability to issue $1.0 billion of medium
and long-term debt securities under shelf registrations filed with the
Securities and Exchange Commission.
Credco paid dividends to TRS of $150 million and $100 million in December
1995 and 1994, respectively.
See note 7 in "Notes to Consolidated Financial Statements" appearing herein
for a discussion of Credco's use of derivatives.
7<PAGE>
<PAGE>
Results of Operations
Credco purchases Cardmember receivables without recourse from TRS. 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 was 1.29 in both 1995 and
1994, and 1.34 in 1993. The ratio of earnings to fixed charges in 1993
calculated in accordance with the Receivables Agreements after the impact
of the extraordinary charge, resulting from the early retirement of debt,
was 1.28. 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 the 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
receivables purchased. The average life of Cardmember receivables was 43
days for each of the years ended December 31, 1995, 1994 and 1993.
Credco's increase in revenues in 1995 is primarily due to higher discount
rates charged to TRS for Cardmember receivables purchased as well as increased
volume of receivables purchased. Increased interest income in 1995 was
attributable to both increased levels of average investments and increased
interest rates. Interest expense increased in 1995 reflecting higher
borrowing rates and increased volume. Provision for doubtful accounts in
1995 increased reflecting higher loss rates as well as volume growth.
The following is a further analysis of the increase (decrease) in key
revenue and expense accounts (millions):
----------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------
Revenue earned from purchased
accounts receivable-changes
attributable to:
Volume of receivables purchased $ 149 $ 186 $ 24
Discount and interest rates 313 (112) (334)
----------------------------------------------------------------------
Total $ 462 $ 74 $ (310)
----------------------------------------------------------------------
Interest income from affiliates-
changes attributable to:
Volume of average investments
outstanding $ 28 $ 3 $ (7)
Interest rates 41 28 (14)
----------------------------------------------------------------------
Total $ 69 $ 31 $ (21)
----------------------------------------------------------------------
Interest income from investments-
changes attributable to:
Volume of average investments
outstanding $ 17 $ (8) $ 14
Interest rates 40 21 (11)
----------------------------------------------------------------------
Total $ 57 $ 13 $ 3
----------------------------------------------------------------------
Interest expense (affiliates)-
changes attributable to:
Volume of average debt
outstanding $ 15 $ 29 $ 31
Interest rates 25 19 (61)
----------------------------------------------------------------------
Total $ 40 $ 48 $ (30)
----------------------------------------------------------------------
8<PAGE>
<PAGE>
Interest expense (other) changes
attributable to:
Volume of average debt
outstanding $ 96 $ 37 $ 3
Interest rates 182 52 (102)
----------------------------------------------------------------------
Total $ 278 $ 89 $ (99)
----------------------------------------------------------------------
Provision for doubtful accounts-
changes attributable to:
Volume of receivables purchased $ 70 $104 $ 9
Provision rates and volume of
recoveries 112 (136) (195)
----------------------------------------------------------------------
Total $ 182 $(32) $(186)
----------------------------------------------------------------------
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements.
See ``Index to Financial Statements'' at page F-1 hereof.
2. Supplementary Financial Information.
Selected quarterly financial data. See note 11 in
``Notes to Consolidated Financial Statements'' appearing
herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Omitted pursuant to general Instruction J(2) (c) to Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
9<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements:
See ``Index to Financial Statements'' at page F-1 hereof.
2. Financial Statement Schedule:
See ``Index to Financial Statements'' at page F-1 hereof.
3. Exhibits:
See ``Exhibit Index'' hereof.
(b) Reports on Form 8-K:
None.
10<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 March 28, 1996 /s/ Vincent P. Lisanke
------------------------------------------------------------
Vincent P. Lisanke
President and
Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.
DATE March 28, 1996 /s/ Vincent P. Lisanke
------------------------------------------------------------
Vincent P. Lisanke
President, Chief Executive
Officer and Director (principal
executive and principal
accounting officer)
DATE March 28, 1996 /s/ Walter S. Berman
------------------------------------------------------------
Walter S. Berman
Chairman of the Board
and Director (principal financial
officer)
DATE March 28, 1996 /s/ Michael P. Monaco
------------------------------------------------------------
Michael P. Monaco
Director
11<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
(Item 14 (a))
Page Number
-----------
Financial Statements
Report of independent auditors................ F - 2
Consolidated statements of income
for the three years ended December 31,
1995.......................................... F - 3
Consolidated balance sheets at December 31, F - 4
1995 and 1994.................................
Consolidated statements of cash
flows for the three years ended December 31,
1995.......................................... F - 5
Consolidated statements of
shareholder's equity for the three years ended
December 31, 1995............................. F - 6
Notes to consolidated financial statements.... F -7 to F- 15
Schedule:
II - Valuation and qualifying accounts for
the three years ended December 31, 1995.. F - 16
All other schedules are omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements or notes thereto.
F-1<PAGE>
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------
The Board of Directors
American Express Credit Corporation
We have audited the accompanying consolidated balance sheets of American
Express Credit Corporation as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholder's equity and cash
flows for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedule listed in the
Index at Item 14 (a). These financial statements and schedule are the
responsibility of American Express Credit Corporation's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Express Credit Corporation at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
Ernst & Young LLP
New York, New York
February 8, 1996
F-2<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(millions)
-------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
-------------------------------------------------------------
Revenues
Revenue earned from purchased
accounts receivable $1,675 $1,213 $1,139
Interest income from affiliates 170 101 70
Interest income from investments 137 80 67
Other income 6 7 6
-------------------------------------------------------------
Total 1,988 1,401 1,282
-------------------------------------------------------------
Expenses
Interest expense - affiliates 136 96 48
Interest expense - other 918 640 551
Provision for doubtful accounts,
net of recoveries of $176,
$177 and $175 625 443 475
Other expenses 7 8 7
-------------------------------------------------------------
Total 1,686 1,187 1,081
-------------------------------------------------------------
Income before taxes 302 214 201
Income tax provision 105 75 64
-------------------------------------------------------------
Income before extraordinary
charges 197 139 137
Extraordinary charges for
early retirement of debt (net
of income taxes of $12 million) - - 22
-------------------------------------------------------------
Net income $ 197 $ 139 $ 115
-------------------------------------------------------------
See notes to consolidated financial statements.
F-3<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(millions)
-------------------------------------------------------------
December 31, 1995 1994
-------------------------------------------------------------
Assets
Cash and cash equivalents $ 1,190 $ 460
Accounts receivable 16,439 14,020
Less reserve for
doubtful accounts 624 498
-------------------------------------------------------------
15,815 13,522
Loans and deposits with
affiliates 2,850 2,650
Deferred charges and other
assets 337 236
-------------------------------------------------------------
Total assets $20,192 $16,868
-------------------------------------------------------------
-------------------------------------------------------------
Liabilities and
shareholder's equity
Short-term debt with
affiliates $1,087 $1,127
Short-term debt - other 13,115 10,398
Current portion of long -
term debt 409 405
Long-term debt with
affiliates 910 910
Long-term debt - other 1,763 1,372
----- -----
Total debt 17,284 14,212
Due to affiliates 882 707
Accrued interest and other
liabilities 130 121
-------------------------------------------------------------
Total liabilities 18,296 15,040
-------------------------------------------------------------
Deferred discount revenue 116 95
-------------------------------------------------------------
Shareholder's equity:
Common stock-authorized
3,000,000 shares of $.10 par
value; issued and outstanding
1,504,938 shares 1 1
Capital surplus 161 161
Retained earnings 1,618 1,571
-------------------------------------------------------------
Total shareholder's equity 1,780 1,733
-------------------------------------------------------------
-------------------------------------------------------------
Total liabilities and
shareholder's equity $20,192 $16,868
-------------------------------------------------------------
See notes to consolidated financial statements.
F-4<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
----------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
----------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $ 197 $ 139 $ 115
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary charge for early
retirement of debt - - 34
Provision for doubtful accounts,
net of recoveries 625 443 475
Amortization of deferred underwriting
fees and bond discount/premium - 2 5
Increase (decrease) in deferred
discount revenue 21 48 (26)
(Increase) decrease in deferred tax
assets (19) 38 46
Increase in interest receivable and
operating assets (42) (23) (33)
Increase (decrease) in accrued interest
and other liabilities 3 24 (43)
Decrease in due to affiliates (27) (10) (16)
----------------------------------------------------------------
Net cash and cash equivalents
provided by operating activities 758 661 557
----------------------------------------------------------------
Cash Flows From Investing Activities:
Increase in accounts receivable (3,047) (2,434) (2,488)
Sale of net accounts receivable to an
affiliate - 1,192 914
Sale of participation in seller's
interest in accounts receivable
to an affiliate - 920 -
Purchase of participation interest in
seller's interest in accounts receivable
from an affiliate - (1,170) (435)
Purchase of net secured receivables
from an affiliate - (85) -
Recoveries of accounts receivable
previously written off 176 177 175
Loans and deposits with affiliates (200) (650) -
Increase (decrease) in due to
affiliates from purchased receivables 182 (487) 62
Repayment from affiliates of loans and
deposits - - 141
----------------------------------------------------------------
Net cash and cash equivalents used
in investing activities (2,889) (2,537) (1,631)
----------------------------------------------------------------
Cash Flows From Financing Activities:
Net (decrease) increase in short-term
debt with affiliates with maturies
less than ninety days (40) 539 151
Net (decrease) increase in short-term
debt - other with maturities less
than ninety days (5,178) 4,699 (145)
Proceeds from issuance of debt 20,039 2,633 9,071
Redemption of debt (11,810) (5,692) (7,747)
Dividends paid to TRS (150) (100) (125)
----------------------------------------------------------------
Net cash and cash equivalents provided
by financing activities 2,861 2,079 1,205
----------------------------------------------------------------
Net increase in cash and cash
equivalents 730 203 131
----------------------------------------------------------------
Cash and cash equivalents at beginning
of year 460 257 126
----------------------------------------------------------------
Cash and cash equivalents at end
of year $1,190 $ 460 $ 257
----------------------------------------------------------------
See notes to consolidated financial statements.
F-5<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Years ended December 31, 1995, 1994 and 1993
(millions)
Total
Shareholder's Common Capital Retained
Equity Stock Surplus Earnings
-----------------------------------------------
Balances at January 1, 1993 $1,672 $ 1 $ 129 $1,542
Net income 115 115
Dividends to TRS (125) - - (125)
------ ------ ------ ------
Balances at December 31, 1993 1,662 1 129 1,532
Net income 139 139
Dividends to TRS (100) (100)
Contributions from TRS 32 - 32 -
------ ------ ------ ------
Balances at December 31, 1994 1,733 1 161 1,571
Net income 197 197
Dividends to TRS (150) - - (150)
------ ------ ------ ------
Balances at December 31, 1995 $1,780 $ 1 $ 161 $1,618
====== ====== ====== ======
See notes to consolidated financial statements.
F-6<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
American Express Credit Corporation together with its subsidiaries
(``Credco'') is a wholly-owned subsidiary of American Express Travel
Related Services Company, Inc. (``TRS''), which is a wholly-owned
subsidiary of American Express Company (``American Express''). American
Express Overseas Credit Corporation Limited together with its subsidiaries
(``AEOCC'') and Credco Receivables Corp. (``CRC'') are wholly-owned
subsidiaries of Credco.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Credco and all its subsidiaries. All significant intercompany transactions
have been eliminated.
Use of Estimates and Assumptions
Credco's financial statements include amounts determined using estimates
and assumptions. For example, estimates and assumptions are used in
determining the reserves related to accounts receivable. While these
estimates are based on the best judgement of management, actual results
could differ from these estimates.
Revenue Earned from Purchased Accounts Receivable
A portion of discount revenue earned on purchases of non-interest-bearing
Cardmember receivables equal to the provision for doubtful accounts is
recognized as revenue at the time of purchase; the remaining portion is
deferred and recorded as revenue ratably over the period that the
receivables are outstanding.
Finance charge income on interest-bearing extended payment plan receivables
is recognized as it is earned. Credco ceases accruing this income after
six contractual payments are past due, or earlier, if deemed uncollectible.
Accruals that cease generally are not resumed.
Reserve for Doubtful Accounts
The reserve for doubtful accounts is established at the time receivables
are purchased and is based on historical collection experience and
evaluation of the current status of existing receivable balances. Credco
generally writes off against its reserve for doubtful accounts the total
balance in an account for which any portion remains unpaid twelve months
from the date of original billing for non-interest-bearing Cardmember
receivables and after six contractual payments are past due for interest-
bearing Cardmember receivables. Accounts are written off earlier if deemed
uncollectible.
Fair Values of Financial Instruments
The fair values of financial instruments are estimates based upon current
market conditions and perceived risks and require varying degrees of
management judgment. The fair values of the financial instruments
presented may not be indicative of their future fair values.
F-7<PAGE>
<PAGE>
The fair values of long-term debt and derivative instruments are included
in the related footnotes. For all other financial instruments, the
carrying amounts in the consolidated balance sheets approximate the fair
values.
Interest Rate Transactions
Credco enters into various interest rate agreements as a means of managing
its interest rate exposure. Interest rates charged on consumer lending
receivables are linked to a floating base rate and generally reprice
monthly. Credco generally enters into interest rate agreements paying a
rate that reprices when the base rate of the underlying receivables
changes. These interest rate agreements which modify the terms of an
underlying debt obligation are accounted for by recording interest expense
using the revised interest rate with any fees or other payments amortized
as yield adjustments. It is Credco's normal practice not to terminate,
sell or dispose of interest rate agreements or the underlying debt to which
the agreements are designated prior to maturity. In the event Credco
terminates, sells or disposes of an agreement prior to maturity, the gain
or loss would be deferred and recognized as an adjustment of yield over the
remaining life of the underlying debt.
Foreign Currency
Foreign currency assets and liabilities are translated into their U.S.
dollar equivalents based on rates of exchange prevailing at the end of each
year. Revenue and expense accounts are translated at exchange rates
prevailing during the year. Credco enters into various foreign exchange
contracts as a means of managing foreign exchange exposure.
Cash and Cash Equivalents
Credco has defined cash and cash equivalents as cash and short-term
investments with a maturity of ninety days or less at the time of purchase.
At December 31, 1995 and 1994, included in cash and cash equivalents was
$420 million and $75 million, respectively, of overnight securities
purchased to resell.
3. Accounts Receivable
At December 31, 1995 and 1994, respectively, Credco owned $14.8 billion and
$12.6 billion of charge card receivables and participations in charge card
receivables, representing 89.9 percent and 89.6 percent, respectively, of the
total receivables owned. Credco purchases 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.
("RFC"), a subsidiary of TRS. At December 31, 1995 and 1994 Credco owned
approximately $2.3 billion and $2.2 billion, respectively, of participation
interests in receivables owned by the Master Trust, representing 14.1
percent and 15.9 percent, respectively, of its total accounts receivable.
Credco purchases certain billed and unbilled Cardmember receivables arising
from extended payment plans from certain TRS subsidiaries. Credco owned
$1.7 billion and $1.5 billion of these receivables as of December 31, 1995
and 1994, representing 10.1 percent and 10.4 percent, respectively, of its
total accounts receivable. Finance charges arising from these receivables,
which are included in revenues, were $214 million, $181 million and $136
million for 1995, 1994 and 1993, respectively.
F-8<PAGE>
<PAGE>
4. Short-term Debt
At December 31, short-term debt consisted of (millions):
-----------------------------------------------------------
1995 1994
-----------------------------------------------------------
Commercial paper $ 12,633 $ 9,849
Borrowings from affiliates 1,087 1,127
Borrowings under lines of credit 396 192
Borrowing agreements with bank
trust departments and others 86 357
-----------------------------------------------------------
Total short-term debt $ 14,202 $ 11,525
-----------------------------------------------------------
Credco has various facilities available to obtain short-term credit,
including the issuance of commercial paper and agreements with banks.
Credco had unused committed credit lines totaling $5.8 billion and $4.9
billion at December 31, 1995 and 1994, respectively. Credco pays fees to
the financial institutions that provide these credit line facilities. The
fair value of the unused lines of credit is not significant at December 31,
1995 and 1994.
At December 31, 1995 and 1994, Credco, through AEOCC, had short-term
borrowings under uncommitted lines of credit totaling $342 million and $150
million, respectively, and borrowings under committed lines of credit
totaling $54 million and $42 million, respectively.
Credco's annual weighted average short-term interest rate was 6.16 percent,
4.74 percent and 3.57 percent for the years ended December 31, 1995, 1994
and 1993, respectively. These rates include the cost of maintaining credit
line facilities for the periods and the impact of interest rate swaps. At
December 31, 1995, $450 million of short-term debt outstanding was modified
by interest rate swaps, resulting in a year-end weighted average effective
interest rate of 5.53%.
Credco paid $942 million, $508 million and $347 million of interest on
short-term debt obligations in 1995, 1994 and 1993, respectively.
5. Long-term Debt
<TABLE>
<CAPTION>
------------------------------------------------------------- -------------------------------
1995 1994
------------------------------------------------------------- -------------------------------
Year-End
Year-End Effective
Notional Stated Rate Interest Year-End
December 31, Outstanding Amount of On Debt Rate with Maturity Outstanding Stated Rate
(millions) Balance Swaps (a,b) Swaps (b) of Swaps Balance On Debt (b)
- --------------- ----------- --------- ------------ ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Senior notes
due 1996-2005 $2,008 $1,400 6.98% 6.69% 1996-2001 $1,285 7.43%
Japanese yen
senior bonds
due 1995 - - - - - 119 8.00%
due 1996 98 98 8.00% 9.66% 1996 98 8.00%
Variable rate
debt with
American Express
due 2004 910 - 5.59% - - 910 5.59%
Medium-term notes 61 - 7.02% - - 270 5.40%
Other senior notes 5 - 7.34% - - 6 7.33%
Swiss franc notes
due 1998-2003 3 - 4.75% - - - -
Net unamortized
bond discount (3) - - - - (1) -
- ------------------------------------------------------------------------------ ------------------------------
Total long-term
debt $3,082 $1,498 $2,687
- ------------------------------------------------------------------------------ ------------------------------
</TABLE>
(a) For the floating rate debt issuance, the stated rate was based on the
rate at December 31, 1995; this rate is not an indication of future
interest rates.
(b) Weighted average rates were determined where appropriate.
F-9
<PAGE>
<PAGE>
The above table includes the current portion of long-term debt of $409
million and $405 million at December 31, 1995 and 1994, respectively.
The book value of variable rate long-term debt that reprices within a year
approximates fair value. The fair value of other long-term debt is based
on quoted market price or discounted cash flow. The aggregate fair value
of long-term debt, including the current portion outstanding at December
31, 1995 and 1994, was $3.1 billion and $2.6 billion, respectively.
Aggregate annual maturities of long-term debt for the five years ending
December 31, 2000 are as follows (millions): 1996 - $409, 1997 - $211,
1998 - $0, 1999 - $351, 2000 - $550.
Credco paid $218 million, $222 million and $290 million of interest on
long-term debt obligations in 1995, 1994 and 1993, respectively.
6. Restrictions as to Dividends and Limitations on Indebtedness
The most restrictive limitation on dividends imposed by the debt
instruments issued by Credco is the requirement that Credco maintain a
minimum consolidated net worth of $50 million. There are no limitations on
the amount of debt that can be issued by Credco.
7. Derivative Instruments
Credco enters into transactions involving derivative financial instruments
as an end user. Credco uses such derivatives for nontrading purposes to
manage its exposure to interest and foreign exchange rate risks and to
manage its funding costs. These instruments are used when they provide a
more efficient means for Credco to manage its risk exposure than if Credco
entered into the cash marketplace. Credco manages risk associated with
derivatives as described below.
Market risk is the possibility that the value of the derivative financial
instrument will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate or a foreign
exchange rate. Credco is not impacted by market risk related to
derivatives beyond that inherent in cash market transactions. Foreign
currency and certain interest rate products that manage related risks have
cash flow and income effects that are inverse to the effects of the
underlying transactions. Credco does not enter into derivative contracts
with embedded options or other features that would leverage or multiply its
market risk.
Credit exposure is the possibility that the counterparty will not fulfill
the terms of the contract. Credco monitors credit exposure related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty and industry,
reviewing credit ratings and requiring collateral where appropriate. A
significant portion of Credco's credit risk is with counterparties rated A
or better by nationally recognized credit rating agencies. Whenever
possible, Credco's credit exposure is further reduced through the use of
master netting agreements, which allows Credco to settle all contracts
under the agreement in one net receipt or payment in the event of
counterparty default.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over
the life of the agreement. Notional amounts do not represent market risk
or credit exposure. At December 31, 1995 and 1994, the aggregate notional
amount of Credco's derivative instruments was $4.9 billion ($46 million
with an affiliate) and $5.9 billion ($105 million with an affiliate),
respectively. The related credit exposure approximates the fair value of
contracts in a gain position (asset)
F-10<PAGE>
<PAGE>
totaling $34 million ($.4 million with an affiliate) at December 31, 1995
and $58 million ($.4 million with an affiliate) at December 31, 1994.
Including contracts in a loss position, Credco was in a net liability
position of $105 million at December 31, 1995, compared with a net
liability of $52 million at December 31, 1994. The fair value represents
the replacement cost and is determined by the market values, dealer quotes
or pricing models.
The following tables detail information regarding Credco's derivatives
(millions):
Notional Carrying Value Fair Value
December 31, 1995 Amount Asset Liability Asset Liability
----------------- -------- ----- --------- ----- ---------
Interest rate products $ 3,723 $ 19 $ 48 $ 28 $ 136
Forward contracts 1,185 6 3 6 3
----- ----- ----- ----- -----
Total $ 4,908 $ 25 $ 51 $ 34 $ 139
----- ----- ----- ----- -----
Notional Carrying Value Fair Value
December 31, 1994 Amount Asset Liability Asset Liability
----------------- -------- ----- --------- ----- ---------
Interest rate products $ 4,760 $ 33 $ 36 $ 35 $ 109
Forward contracts 1,125 7 1 23 1
----- ----- ----- ----- -----
Total $ 5,885 $ 40 $ 37 $ 58 $ 110
----- ----- ----- ----- -----
Interest Rate Products
Credco uses interest rate products to maintain a predetermined mix of
fixed and variable rate debt in order to achieve a desired level of
interest rate exposure to manage funding costs related to its
Cardmember receivables and Cardmember loans. The principal product
used is interest rate swaps, which involve the exchange for a specified
period of time of fixed or floating rate interest payments based on a
notional or contractual amount. Credco also enters into currency
swaps to convert US dollar denominated debt into other currencies in
order to match foreign denominated receivables with funding of the same
currency and to achieve a desired level of interest rate exposure. Currency
swap agreements are contracts to exchange currency and interest payments
for a specific period of time.
Interest rates charged on Credco's Cardmember loans are linked to a
floating rate base and generally reprice each month (prior to 1995, theses
loans generally repriced every six months). Credco generally enters into
interest rate swaps paying rates that reprice when the base rates of the
underlying loans change. At December 31, 1994, the notional amount for
interest rate swaps included $975 million of swaps that went into effect in
January and February of 1995.
As interest rate products manage interest rate exposure, interest is
accrued and reported in accounts receivable and other assets, or accrued
interest and other liabilities, and interest expense, as appropriate.
Aggregate annual expirations of interest rate swaps are as follows
(notional amount in millions):
1996 - $1,343, 1997 - $566, 1998 - $600, 1999 - $105, 2000 - $1,109.
F-11
<PAGE>
<PAGE>
The following table details information regarding Credco's interest rate
products at December 31, 1995 (millions):
---------------------------------------------------------------------------
Weighted Average
Notional Primary Variable Interest Rate
Type Amount Rate Index Fixed Floating
---------------------------------------------------------------------------
Floating to fixed $ 2,073 1 month LIBOR 7.42% 5.83%
and 1 month
Commercial paper
Fixed to floating $ 1,650 1 month 6.27% 5.78%
Commercial paper
Foreign Currency Products
As an end user, Credco uses foreign currency products to manage
transactions denominated in foreign currencies. Foreign currency forward
contracts are used primarily to fund the purchase of Cardmember receivables
and hedge positions arising from these purchases. As Credco is exposed to
transaction risk with regard to receivables denominated in foreign
currencies and since foreign currency forward contracts reduce that
exposure, the contracts are accounted for as hedges. These foreign
currency forward contracts are marked to the current spot rate with the
gain or loss recorded in income to offset the transaction gain or loss
resulting from the receivables. The receivable or payable with the
counterparty to the foreign currency forward contracts which result from
this process are reported in other assets or liabilities, as appropriate.
The discount or premium on foreign currency forward contracts is reported
in other assets or liabilities, as appropriate, and amortized to interest
expense over the terms of the contracts.
The following table summarizes Credco's forward contracts by major
currencies as of December 31 (millions):
-----------------------------------------------
1995 1994
-----------------------------------------------
Canadian Dollar $ 281 $ 311
Pound Sterling 233 141
Australian Dollar 198 170
Hong Kong Dollar 144 178
German Mark 120 102
Other 209 223
-----------------------------------------------
Total forward
contracts $ 1,185 $ 1,125
-----------------------------------------------
Foreign currency forward contracts generally mature within one year. At
December 31, 1995, Credco had no significant unhedged foreign currency
exposures.
8. Transactions with Affiliates
In 1995, 1994 and 1993, Credco purchased Cardmember receivables without
recourse from TRS and certain of its subsidiaries totaling approximately
$122 billion, $109 billion and $95 billion, respectively. Agreements for
the purchase of non-interest-bearing receivables generally provide that
Credco purchase such receivables at a discount rate which yields earnings
to Credco equal to at least 1.25 times its fixed charges on an annual basis.
F-12<PAGE>
<PAGE>
The agreements require TRS, at its expense, to perform accounting, clerical
and other services necessary to bill and collect all Cardmember receivables
owned by Credco. Since settlements under the agreements occur monthly, an
amount due from, or payable to, such affiliates may arise at the end of the
month.
As part of TRS's 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 RFC, its subsidiary, which conveyed them to American Express
Master Trust (the ``Trust''). Credco, through CRC, purchased gross
participation interests representing undivided interests in RFC's seller's
interest in the receivables conveyed to the Trust, which resulted in an
increase in the gross participation interest owned by CRC, 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 interests in RFC's seller's interest back to RFC.
In July 1993, Credco began repurchasing certain foreign currency Cardmember
receivables which had been sold to an affiliate during the period from
December 1991 through June 1993. In December 1993, Credco repurchased the
participation interests in a portion of its foreign currency receivables
which had been previously sold to an affiliate during the period from
December 1991 through November 1993.
Other transactions with American Express and its subsidiaries for the years
ended December 31 were as follows (millions):
----------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------------
Cash and cash equivalents at
December 31 $ 9 $ - $ 3
Maximum month-end level of cash and
cash equivalents during the year 12 20 229
Secured loans to American Express
Centurion Bank at December 31 2,000 2,000 2,000
Other loans and deposits to an
affiliate at December 31 850 650 -
Maximum month-end level of loans
and deposits to affiliates
during the year 2,850 2,650 2,001
Borrowings at December 31 1,997 2,037 588
Maximum month-end level of
borrowings during the year 3,709 2,734 2,451
Other income 6 6 6
----------------------------------------------------------------------------
At December 31, 1995, 1994 and 1993, Credco held $2 billion of variable
rate secured loans to American Express Centurion Bank (``Centurion
Bank''), a wholly-owned subsidiary of TRS. At December 31, 1995 and 1994,
Credco also held variable rate loans to American Express due in 2004 of
$850 million and $650 million, respectively. The loans to Centurion Bank
are secured by certain interest-bearing extended payment plan receivables
owned by Centurion Bank. Interest income from these variable rate loans
was $169 million, $101 million and $67 million for 1995, 1994 and 1993,
respectively.
In 1994, American Express spun-off Lehman Brothers Holdings Inc.
(``Lehman'') to its shareholders through a special dividend. References to
an affiliate contained in the footnotes, for periods prior to May 1994,
include subsidiaries of Lehman.
F-13<PAGE>
<PAGE>
In 1994, TRS made a noncash contribution to Credco of AEB(CFS) Limited, a
foreign company incorporated to fund certain Optima Card receivables
outside the U.S., for book value.
9. Income Taxes
The taxable income of Credco is included in the consolidated U.S. federal
income tax return of American Express. Under an agreement with TRS, taxes
are recognized on a stand-alone basis. If benefits for all future tax
deductions, foreign tax credits and net operating losses cannot be
recognized on a stand-alone basis, such benefits are then recognized based
upon a share, derived by formula, of those deductions and credits that are
recognizable on a TRS consolidated reporting basis.
Deferred income tax assets and liabilities result from the recognition of
temporary differences. Temporary differences are differences between the
tax bases of assets and liabilities and their reported amounts in the
financial statements that will result in differences between income for tax
purposes and income for financial statement purposes in future years. The
current and deferred components of the provision (benefit) for income taxes
consist of the following (millions):
------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------
Current $ 161 $ 36 $ 18
Deferred (56) 39 46
------------------------------------------------------------
Total income tax provision
before extraordinary item 105 75 64
Income tax benefit from
extraordinary item - - (12)
------------------------------------------------------------
Total income tax provision $ 105 $ 75 $ 52
------------------------------------------------------------
Credco's net deferred tax assets, which are included in other assets,
consisted of the following (millions):
------------------------------------------------------------
1995 1994
------------------------------------------------------------
Gross deferred tax assets:
Reserve for loan losses $ 207 $ 158
------------------------------------------------------------
Total gross deferred tax assets 207 158
Gross deferred tax liabilities:
Foreign exchange contracts (1) (5)
Other - (3)
------------------------------------------------------------
Total gross deferred tax
liabilities (1) (8)
------------------------------------------------------------
Net deferred tax assets $ 206 $ 150
------------------------------------------------------------
Credco has not recorded a valuation allowance.
F-14<PAGE>
<PAGE>
A federal tax underpayment of $3 million and overpayment of $33 million at
December 31, 1995 and 1994, respectively, are included in due to
affiliates.
Income taxes paid to TRS during 1995, 1994 and 1993 were $125 million, $55
million and $21 million, respectively.
The U.S. statutory tax rate and effective tax rate for 1995 and 1994 was
approximately 35 percent. In 1993, the U.S. federal tax rate increased
from 34 percent to 35 percent, resulting in a one-time benefit of $6
million in Credco's deferred tax assets. As a result of this one-time
benefit, the income tax provision for continuing operations for 1993 is
different than that computed using the U.S. statutory tax rate of 35
percent.
10. Geographic Segments
Credco is principally engaged in the business of purchasing Cardmember
receivables arising from the use of the American Express Card in the United
States and foreign locations. The following presents information about
operations in different geographic areas (millions):
1995 1994 1993
-------------------------------------------------------------
Revenues
United States $ 1,695 $ 1,180 $ 1,134
International 293 221 148
-------------------------------------------------------------
Consolidated $ 1,988 $ 1,401 $ 1,282
-------------------------------------------------------------
Income before taxes
United States $ 244 $ 171 $ 173
International 58 43 28
-------------------------------------------------------------
Consolidated $ 302 $ 214 $ 201
-------------------------------------------------------------
Identifiable assets
United States $17,027 $14,174 $12,787
International 3,165 2,694 2,156
-------------------------------------------------------------
Consolidated $20,192 $16,868 $14,943
-------------------------------------------------------------
11. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data is as follows (millions):
-------------------------------------------------------------
Quarter Ended 12/31 9/30 6/30 3/31
-------------------------------------------------------------
1995
-------------------------------------------------------------
Revenues $ 569 $ 480 $ 479 $ 460
Income before taxes 90 69 66 77
Net income 59 45 43 50
-------------------------------------------------------------
1994
-------------------------------------------------------------
Revenues $ 391 $ 340 $ 356 $ 314
Income before taxes 64 53 53 44
Net income 41 35 34 29
-------------------------------------------------------------
F-15<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(millions)
1995 1994 1993
Reserve for doubtful accounts: ---- ---- ----
Balance at beginning of year $ 498 $ 542 $ 603
Additions:
Provision for doubtful
accounts charged to income (1) 801 620 650
Other credits (2) 7 75 55
Foreign translation 2 3 -
Deductions:
Accounts written off 684 621 704
Other charges (3) - 121 62
---- ---- ----
Balance at end of year $ 624 $ 498 $ 542
==== ==== ====
Reserve for doubtful accounts
as a percentage of Cardmember
receivables owned at year end 3.79% 3.55% 4.18%
==== ==== ====
(1) Before recoveries on accounts previously written off of (millions):
1995-$176, 1994-$177 and 1993-$175.
(2) Reserve balances applicable to new groups of Cardmember receivables
purchased from TRS and certain of its subsidiaries.
(3) Reserve balances applicable to certain groups of Cardmember
receivables and participation interests sold to affiliates.
F-16<PAGE>
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit No. Description
3 (a) Registrant's Certificate Incorporated by reference
of Incorporation, as amended to Exhibit 3(a) to
Registrant's Registration
Statement on Form S-1
dated February 25, 1972
(File No. 2-43170).
3 (b) Registrant's By-Laws, Incorporated by reference
amended and restated as of to Exhibit 3 (b) to
November 24, 1980 Registrant's Annual Report
on Form 10-K for the year
ended December 31, 1985.
4 (a) Registrant's Debt Incorporated by reference
Securities to Exhibit 4 (s) to
Indenture dated as of Registrant's Registration
September 1, 1987 Statement on Form S-3 dated
September 2, 1987 (File No. 33-
16874).
4 (b) Form of Note with optional Incorporated by reference
redemption provisions to Exhibit 4 (t) to Registrant's
Registration Statement on
Form S-3 dated September 2,
1987 (File No. 33-16874).
4 (c) Form of Debenture with Incorporated by reference
optional redemption and to Exhibit 4 (u) to
sinking fund provisions Registrant's Registration
Statement on Form S-3 dated
September 2, 1987 (File No. 33-
16874).
4 (d) Form of Original Issue Incorporated by reference
Discount Note with to Exhibit 4 (v) to Registrant's
optional redemption Registration Statement on
provision Form S-3 dated September 2, 1987
(File No. 33-16874).
<PAGE>
<PAGE>
4(e) Form of Zero Coupon Note Incorporated by reference
with optional redemption to Exhibit 4 (w) to Registrant's
provisions Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (f) Form of Variable Rate Note Incorporated by reference
with optional redemption to Exhibit 4 (x) to Registrant's
and repayment provisions Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (g) Form of Extendible Note Incorporated by reference
with optional redemption to Exhibit 4 (y) to Registrant's
and repayment provisions Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (h) Form of Fixed Rate Medium- Incorporated by reference
Term Note to Exhibit 4 (z) to Registrant's
Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (i) Form of Floating Rate Incorporated by reference
Medium-Term Note to Exhibit 4 (aa) to Registrant's
Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (j) Form of Warrant Agreement Incorporated by reference
to exhibit 4 (bb) to Registrant's
Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
4 (k) Form of Supplemental Incorporated by reference
Indenture to exhibit 4 (cc) to Registrant's
Registration Statement on
Form S-3 dated September 2, 1987
(File No. 33-16874).
<PAGE>
<PAGE>
4 (l) The Registrant hereby
agrees to furnish the
Commission, upon request,
with copies of the
instruments defining the
rights of holders of each
issue of long-term debt of
the Registrant for which
the total amount of
securities authorized
thereunder does not exceed
10% of the total assets of
the Registrant
10 (a) Receivables Agreement Incorporated by reference
dated as of January 1, to Exhibit 10 (b) to Registrant's
1983 between the Annual Report on Form 10-K
Registrant and American for the year ended December
Express Travel Related 31, 1987.
Services Company, Inc.
10 (b) Secured Loan Agreement Incorporated by reference
dated as of June 30, 1988 to Exhibit 10 (b) to Registrant's
between the Registrant and Annual Report on Form 10-K
American Express Centurion for the year ended December
Bank 31, 1988.
10 (c) Participation Agreement Incorporated by reference
dated as of August 3, 1992 to Exhibit 10(c) to Registrant's
between American Express Annual Report on Form 10-K
Receivables Financing for the year ended December
Corporation and Credco 31, 1992.
Receivables Corp.
12.1 Computation in Support for Electronically filed herewith.
Ratio of Earnings to Fixed
Charges of American
Express Credit Corporation
12.2 Computation in Support for Electronically filed herewith.
Ratio of Earnings to Fixed
Charges of American
Express Company
23 Consent of Independent Electronically filed herewith.
Auditors
27 Financial Data Schedule Electronically filed herewith.
<PAGE>
<PAGE>
EXHIBIT 12.1
AMERICAN EXPRESS CREDIT CORPORATION
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Year Ended December 31,
-----------------------
____________________________________
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Earnings:
Income before extraordinary
charge $ 197 $ 139 $ 137 $ 138 $ 174
Income tax provision 105 75 64 70 87
Interest expense 1,054 736 599 728 946
----- ----- ----- ----- -----
Total earnings $1,356 $ 950 $ 800 $ 936 $1,207
===== ===== ===== ===== =====
Fixed charges -
interest expense $1,054 $ 736 $ 599 $ 728 $ 946
===== ===== ===== ===== =====
Ratio of earnings to
fixed charges 1.29 1.29 1.34* 1.29 1.28
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.
<PAGE>
<PAGE>
EXHIBIT 12.2
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Year Ended December 31,
-----------------------
____________________________________
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $2,183 $1,891 $2,326 $ 896 $ 622
Interest expense 2,343 1,925 1,776 2,171 2,761
Other adjustments 95 103 88 196 142
----- ----- ----- ----- -----
Total earnings (a) $4,621 $3,919 $4,190 $3,263 $3,525
===== ===== ===== ===== =====
Fixed charges:
Interest expense $2,343 $1,925 $1,776 $2,171 $2,761
Other adjustments 135 142 130 154 147
----- ----- ----- ----- -----
Total fixed charges (b) $2,478 $2,067 $1,906 $2,325 $2,908
===== ===== ===== ===== =====
Ratio of earnings to
fixed charges (a/b) 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 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.
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 American Express,
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, American Express 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, American Express' 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, American Express' investment in FDC is accounted for as Investments -
Available for Sale.
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statements on Form S-3 (Registration Statement Nos. 33-47497 and 33-62797)
of American Express Credit Corporation and in the related prospecti of our
report dated February 8, 1996, with respect to the consolidated financial
statements and schedule of American Express Credit Corporation included in
this Annual Report on Form 10-K for the year ended December 31, 1995.
By: /s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
March 28, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Credco's
Condensed Consolidated Balance Sheet at December 31, 1995 and Condensed
Consolidated Statement of Income for the twelve months ended December 31, 1995
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,190
<SECURITIES> 0
<RECEIVABLES> 16,439
<ALLOWANCES> 624
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,192
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,779
<TOTAL-LIABILITY-AND-EQUITY> 20,192
<SALES> 0
<TOTAL-REVENUES> 1,988
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 625
<INTEREST-EXPENSE> 1,054
<INCOME-PRETAX> 302
<INCOME-TAX> 105
<INCOME-CONTINUING> 197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
