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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 September 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 November 14, 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 nine months ended
September 30, 1996 and 1995 3
Condensed consolidated balance
sheets - September 30, 1996 and
December 31, 1995 4
Condensed consolidated statements
of cash flows - nine months ended
September 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 9
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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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Revenues
Revenue earned from purchased
accounts receivable $ 453 $ 408 $1,375 $1,191
Interest income from affiliates 40 43 120 126
Interest income from investments 46 27 145 96
Other income 1 2 3 6
----- ----- ------ ------
Total 540 480 1,643 1,419
----- ----- ------ ------
Expenses
Interest expense - affiliates 33 29 104 101
Interest expense - other 248 231 740 672
Provision for doubtful accounts,
net of recoveries 169 149 547 429
Other expenses 1 2 4 5
----- ----- ------ ------
Total 451 411 1,395 1,207
----- ----- ------ ------
Income before taxes 89 69 248 212
Income tax provision 31 24 87 74
----- ----- ------ ------
Net income 58 45 161 138
Retained earnings at
beginning of period 1,721 1,664 1,618 1,571
----- ----- ------ ------
Retained earnings at
end of period $1,779 $1,709 $1,779 $1,709
====== ====== ====== ======
See notes to condensed consolidated financial statements.
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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)
September 30, December 31,
1996 1995
---- ----
Assets
Cash and cash equivalents $ 2,233 $ 1,190
Accounts receivable 15,324 16,439
Less: reserve for doubtful
accounts 620 624
------ -------
14,704 15,815
Loans and deposits with affiliates 2,850 2,850
Deferred charges and other assets 302 337
------ ------
Total assets $20,089 $20,192
====== ======
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,073 $ 1,087
Short-term debt - other 13,572 13,115
Current portion of long-term
debt - other 452 409
Long-term debt with affiliate 910 910
Long-term debt - other 1,561 1,763
------ ------
Total debt 17,568 17,284
Due to affiliates 361 882
Accrued interest and other
liabilities 131 130
------ ------
Total liabilities 18,060 18,296
------ ------
Deferred discount revenue 88 116
------ ------
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 1,779 1,618
------ ------
Total shareholder's equity 1,941 1,780
------ ------
Total liabilities and
shareholder's equity $20,089 $20,192
====== ======
See notes to condensed consolidated financial statements.
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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)
Nine Months Ended
September 30,
---------------------
1996 1995
---- ----
Cash Flows from Operating Activities:
Net income $ 161 $ 138
Adjustments to reconcile net income to net
cash and cash equivalents provided by
operating activities:
Provision for doubtful accounts, net of 547 429
recoveries
Amortization of deferred underwriting fees
and bond discount/premium 1 1
Changes in operating assets and liabilities:
Increase in deferred tax assets (19) (15)
Increase in interest receivable and other
operating assets (94) (50)
Increase in accrued interest and other
liabilities 4 1
Increase in due to affiliates 71 31
Decrease in deferred discount revenue (28) (11)
------ -------
Net cash provided by operating activities 643 524
------ -------
Cash Flows from Investing Activities:
Increase in accounts receivable (1,017) (1,261)
Sale of net accounts receivable to an affiliate 2,294 -
Purchase of participation interest in seller's
interest in accounts receivable from an
affiliate (2,178) -
Sale of participation interest in seller's
interest in accounts receivable to an
affiliate 1,304 -
Recoveries of accounts receivable previously
written off 141 124
Increase in loans and deposits with affiliates - (200)
Decrease in due to affiliates from purchased
receivables (531) (239)
------ -------
Net cash provided by (used in) investing
activities 13 (1,576)
------ -------
Cash Flows from Financing Activities:
Net decrease in short-term debt with
affiliates with maturity less than
ninety days (14) (240)
Net increase(decrease) in short-term debt -
other with maturity less than ninety days 6,621 (5,353)
Proceeds from issuance of debt 6,167 14,033
Repayment of debt (12,387) (6,355)
-------- -------
Net cash provided by financing activities 387 2,085
-------- -------
Net increase in cash and cash equivalents 1,043 1,033
Cash and cash equivalents at beginning of period 1,190 460
-------- -------
Cash and cash equivalents at end of period $2,233 $1,493
======== =======
See notes to condensed consolidated financial statements.
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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. 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 September 30, 1996 and
the consolidated results of its operations and changes in its retained
earnings for the nine-month periods ended September 30, 1996 and 1995
and cash flows for the nine-month periods ended September 30, 1996 and
1995. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
2. For the nine-month periods ended September 30, 1996 and 1995, Credco
paid $844 million and $869 million of interest, respectively. Income
taxes paid for each of the nine-month periods ended September 30, 1996
and 1995 were $124 million and $103 million, respectively.
3. As part of American Express Travel Related Services Company,Inc.'s
("TRS") securitization program, Credco sold back to TRS $2.2 billion
of gross receivables arising under specified U.S. consumer
Cardmember accounts. TRS sold these receivables, together with the
right to receive subsequent receivables arising from such Cardmember
accounts, to its subsidiary, American Express Receivables Financing
Corporation ("RFC"). RFC, in turn, conveyed them to the American
Express Master Trust (the "Trust"). This resulted in an increase in the
participation interest in RFC's seller's interest in the securitized
receivables owned by Credco Receivables Corp. ("CRC"), a subsidiary of
Credco, for which CRC paid $2.2 billion. In September 1996, the Trust
issued $1.25 billion of receivables trust certificates in two series.
At the time of such issuance, CRC sold, at face amount less applicable
reserve, $1.3 billion of its gross participation interest in RFC's
seller's interest back to RFC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 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
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
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 the nine-month periods ended September 30,
1996 and 1995 was 1.29 and 1.27, respectively. The ratio of earnings to fixed
charges for American Express Company (the "Company"), the parent of TRS, for
the nine-month periods ended September 30, 1996 and 1995 was 2.05 and 1.87,
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.
Credco purchased $100 billion and $88 billion of Cardmember receivables during
the nine-month periods ended September 30, 1996 and 1995, respectively. At
September 30, 1996 and December 31, 1995, Credco owned $13.6 billion and $14.8
billion, respectively, of non-interest-bearing receivables, of which $2.2
billion and $2.3 billion, respectively, were participation interests owned by
Credco Receivables Corp. ("CRC"), a wholly owned subsidiary of Credco.
CRC owns a participation in the seller's interest in Cardmember receivables
that have been conveyed to the American Express Master Trust (the "Trust").
This Trust was formed in 1992 by TRS to securitize U.S. consumer Cardmember
receivables.
In connection with TRS' securitization program for U.S. consumer Cardmember
receivables, CRC purchases from American Express Receivables Financing
Corporation ("RFC"), a subsidiary of TRS, a participation interest in RFC's
seller's interest in the receivables owned by the Trust. In September 1996,
the Trust issued an additional $1.25 billion of accounts receivable trust
certificates to the public. At that time, CRC sold to RFC, at face amount
less applicable reserve, $1.3 billion of its gross participation interest.
The gross participation interests represent undivided interests in the
receivables conveyed to the Trust by RFC.
In addition, at both September 30, 1996 and December 31, 1995, Credco owned
extended payment plan receivables totaling $1.7 billion, including revolving
credit loans purchased directly from American Express Centurion Bank
("Centurion Bank"), a subsidiary of TRS. The extended payment plan receivables
owned at September 30, 1996 include $98 million of participation interest
owned by CRC. This represents a participation in the seller's interest in
revolving credit receivables that have been conveyed to the American Express
Credit Account Master Trust (the "Master Trust"). This Master Trust was
formed by Centurion Bank during the second quarter of 1996 to securitize
revolving credit loans.
For the nine-month periods ended September 30, 1996 and 1995, the average
life of Cardmember receivables owned by Credco was 44 days and 43 days,
respectively.
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Credco's write-offs, net of recoveries, as a percentage of the volume of
Cardmember receivables purchased for the nine-month periods ended
September 30, 1996 and 1995 was .48 percent and .42 percent, respectively.
Credco's increase in revenue for the nine-month period ended September 30,
1996, is due to increased volume of receivables purchased. Increased
interest income for the nine-month period ended September 30, 1996 is
attributable to an increase in average investments. Interest expense
increased for the nine-month period ended September 30, 1996 due to an
increase in volume. Provision for doubtful accounts for the nine-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 nine-month period ended September 30, 1996,
compared with the nine-month period ended September 30, 1995 (in millions):
Nine
Month
Period
------
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased $ 149
Discount and interest rates 35
----
Total $ 184
====
Interest income from affiliates - changes attributable to:
Volume of average investments outstanding $ 6
Interest rates (12)
----
Total $ (6)
=====
Interest income from investments - changes attributable to:
Volume of average investments outstanding $ 64
Interest rates (15)
----
Total $ 49
=====
Interest expense(affiliates) - changes attributable to:
Volume of average debt outstanding $ 15
Interest rates (12)
----
Total $ 3
=====
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AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Interest expense(other) - changes attributable to:
Volume of average debt outstanding $ 159
Interest rates (91)
----
Total $ 68
=====
Provision for doubtful accounts - changes attributable to:
Volume of receivables purchased $ 80
Provision rates and volume of recoveries 38
----
Total $ 118
=====
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.
-9-
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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 November 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
ratio of earnings to fixed filed herewith.
charges of American
Express Credit Corporation.
Exhibit 12.2 Computation in support of Electronically
ratio of earnings to fixed filed herewith.
charges of American Express
Company.
Exhibit 27. Financial data schedule. Electronically
filed herewith.
-10-
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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)
Nine Months
Ended
September 30, Year Ended December 31,
(Unaudited)
-------------- -----------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before
extraordinary
charge $ 161 $ 138 $ 197 $ 139 $ 137 $ 138 $ 174
Income tax
provision 87 74 105 75 64 70 87
Interest expense 844 773 1,054 736 599 728 946
----- ----- ----- ----- ----- ----- -----
Total earnings $1,092 $ 985 $1,356 $ 950 $ 800 $ 936 $1,207
===== ===== ===== ===== ===== ===== =====
Fixed charges:
interest expense $844 $773 $1,054 $736 $599 $728 $946
==== ==== ====== ==== ==== ==== ====
Ratio of earnings
to fixed charges 1.29 1.27 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.
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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)
Nine Months
Ended
September 30,
(Unaudited) Year Ended December 31,
------------- ------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing
operations $1,821 $2,183 $1,891 $2,326 $ 896 $ 622
Interest expense 1,639 2,343 1,925 1,776 2,171 2,761
Other adjustments 108 95 103 88 196 142
------ ------ ------ ------ ------ ------
Total earnings(a) $3,568 $4,621 $3,919 $4,190 $3,263 $3,525
====== ====== ====== ====== ====== ======
Fixed charges:
Interest expense $1,639 $2,343 $1,925 $1,776 $2,171 $2,761
Other adjustments 100 135 142 130 154 147
------ ------ ------ ------ ------ ------
Total fixed
charges (b) $1,739 $2,478 $2,067 $1,906 $2,325 $2,908
====== ====== ====== ====== ====== ======
Ratio of earnings
to fixed charges
(a/b) 2.05 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
(the "Company") and Travel Related Services' Cardmember lending activities,
which is netted against interest and dividends and Cardmember lending net
finance charge revenue, respectively, in the Consolidated Statement of Income.
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,
the Company 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.
-12-
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Credco's
Condensed Consolidated Balance Sheet at September 30, 1996 and Condensed
Consolidated Statement of Income for the nine months ended September 30, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,233
<SECURITIES> 0
<RECEIVABLES> 15,324
<ALLOWANCES> 620
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,089
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,940
<TOTAL-LIABILITY-AND-EQUITY> 20,089
<SALES> 0
<TOTAL-REVENUES> 1,643
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 547
<INTEREST-EXPENSE> 844
<INCOME-PRETAX> 248
<INCOME-TAX> 87
<INCOME-CONTINUING> 161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
