<PAGE>
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, 1997
( ) 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 13, 1997
- ----------------------------- --------------------------------
Common Stock, $.10 par value 1,504,938 shares
<PAGE>
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, 1997 and 1996 3
Condensed consolidated balance sheets -
September 30, 1997 and December 31, 1996 4
Condensed consolidated statements of cash flows
- nine months ended September 30, 1997 and 1996 5
Notes to condensed consolidated
financial statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
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,
1997 1996 1997 1996
---- ---- ---- ----
Revenues
Revenue earned from purchased
accounts receivable $ 456 $ 453 $1,300 $1,375
Interest income from affiliates 46 40 127 120
Interest income from investments 39 46 98 145
Other income 1 1 4 3
----- ----- ------ ------
Total 542 540 1,529 1,643
----- ----- ------ ------
Expenses
Interest expense - affiliates 49 33 130 104
Interest expense - other 245 248 690 740
Provision for doubtful accounts,
net of recoveries 155 169 429 547
Other expenses 7 1 22 4
----- ----- ------ ------
Total 456 451 1,271 1,395
----- ----- ------ ------
Income before taxes 86 89 258 248
Income tax provision 30 31 90 87
----- ----- ------ ------
Net income 56 58 168 161
Retained earnings at beginning of period 1,795 1,721 1,683 1,618
------ ------ ------ ------
Retained earnings at end of period $1,851 $1,779 $1,851 $1,779
====== ====== ====== ======
See notes to condensed consolidated financial statements.
3
<PAGE>
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,
1997 1996
---- ----
Assets
Cash and cash equivalents $ 1,382 $ 267
Investments 218 -
Accounts receivable 17,871 17,359
Less: reserve for doubtful accounts 634 638
------- -------
17,237 16,721
Loans and deposits with affiliates 3,150 2,850
Deferred charges and other assets 412 327
------- -------
Total assets $22,399 $20,165
======= =======
Liabilities and shareholder's equity
Short-term debt with affiliates $ 2,219 $ 1,275
Short-term debt - other 14,184 13,262
Current portion of long-term debt - other 4 211
Long-term debt with affiliate 910 910
Long-term debt - other 2,360 1,559
------- -------
Total debt 19,677 17,217
Due to affiliates 467 858
Accrued interest and other liabilities 153 145
------- -------
Total liabilities 20,297 18,220
------- -------
Deferred discount revenue 89 100
------- -------
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 1,851 1,683
------- -------
Total shareholder's equity 2,013 1,845
------- -------
Total liabilities and sharesholder's equity $22,399 $20,165
======= =======
See notes to condensed consolidated financial statements.
4
<PAGE>
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,
------------------
1997 1996
---- ----
Cash Flows from Operating Activities:
Net income $ 168 $ 161
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Provision for doubtful accounts, net of recoveries 429 547
Amortization of deferred underwriting fees and bond
discount/premium 6 1
Changes in operating assets and liabilities:
Increase in deferred tax assets (50) (19)
Decrease(increase) in interest receivable and other
operating assets 5 (94)
Increase in accrued interest and other liabilities 40 4
Increase in due to affiliates 89 71
Decrease in deferred discount revenue (11) (28)
------ ------
Net cash provided by operating activities 676 643
------ ------
Cash Flows from Investing Activities:
Increase in accounts receivable (785) (1,017)
Sale of net accounts receivable to an affiliate 219 2,294
Purchase of participation interest in seller's interest
in accounts receivable from an affiliate (728) (2,178)
Sale of participation interest in seller's interest
in accounts receivable to an affiliate 95 1,304
Recoveries of accounts receivable previously written off 136 141
Purchase of investments (247) -
Maturity of investments 29 -
Increase in loans and deposits due from affiliates (300) -
Decrease in due to affiliates from purchased receivables (450) (531)
------- ------
Net cash(used in) provided by investing activities (2,031) 13
------- ------
Cash Flows from Financing Activities:
Net increase(decrease) in short-term debt with affiliates
with maturity less than ninety days 944 (14)
Net (decrease)increase in short-term debt - other
with maturity less than ninety days (4) 6,621
Proceeds from issuance of debt 6,561 6,167
Repayment of debt (5,031) (12,387)
------- --------
Net cash provided by financing activities 2,470 387
------- --------
Net increase in cash and cash equivalents 1,115 1,043
Cash and cash equivalents at beginning of period 267 1,190
------ ------
Cash and cash equivalents at end of period $1,382 $2,233
====== ======
See notes to condensed consolidated financial statements.
5
<PAGE>
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, 1996. 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,
1997 and the consolidated results of its operations and
changes in its retained earnings for the nine-month periods
ended September 30, 1997 and 1996 and cash flows for the
nine-month periods ended September 30, 1997 and 1996.
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, 1997 and
1996, Credco paid $809 million and $844 million of interest,
respectively. Income taxes paid for each of the nine-month
periods ended September 30, 1997 and 1996 were $44 million
and $124 million, respectively.
3. Management determines the appropriate classification of
debt securities at the time of purchase. Debt securities are
classified as held to maturity when Credco has the positive
intent and ability to hold the securities to maturity. Held
to maturity securities are stated at amortized cost. At
September 30, 1997, Credco held $218 million of American
Express Master Trust Class B Certificates. These securities
are classified as held to maturity and are stated at amortized
cost. The fair value of these securities at September 30,
1997 was $220 million.
4. In May and August 1997, Credco issued and sold $400
million Floating Rate Notes and $400 million of 6.5% Fixed
Rate Notes, respectively, due 2002 under the Euro Medium Term
Notes program established during 1996 by Credco, American
Express Travel Related Services Company, Inc. ("TRS"),
American Express Overseas Credit Corporation Limited
("AEOCC"), a wholly-owned subsidiary of Credco, and American
Express Bank Ltd. The maximum aggregate principal amount of
debt instruments outstanding at any one time under the program
will not exceed $3 billion.
5. In July 1997, $500 million Class A Fixed Rate Accounts
Receivable Trust Certificates matured from the charge card
securitization portfolio which increases the participation interests
owned by Credco Receivables Corp. ("CRC"), a wholly-owned subsidiary of
Credco. CRC owns a participation in the seller's interest in charge
Cardmember receivables that have been conveyed to the American
Express Master Trust.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
In May and August 1997, Credco issued and sold, exclusively outside the
United States to non-U.S. persons, $400 million Floating Rate Notes and
$400 million 6.5% Fixed Rate Notes, respectively, due 2002 listed on the
Luxembourg Stock Exchange. These notes were issued under the Euro Medium
Term Notes program established during 1996 by Credco, American Express
Travel Related Services Company, Inc. ("TRS"), American Express Overseas
Credit Corporation Limited ("AEOCC"), a wholly-owned subsidiary of Credco,
and American Express Bank Ltd. The maximum aggregate principal amount of
debt instruments outstanding at any one time under the program will not
exceed $3 billion.
In May 1997, Credco renegotiated its credit facilities, increasing available
credit lines by $200 million to $6.8 billion.
At September 30, 1997, 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. In October 1997, Credco filed a
registration statement on Form S-3 with the Securities and Exchange Commission
to increase by $1.5 billion the amount of medium- and long-term debt to
be available for issuance under shelf registrations. This registration
statement was declared effective on November 3, 1997.
Results of Operations
Credco purchases Cardmember receivables without recourse from
TRS or its subsidiaries. Non-interest-bearing charge Cardmember
receivables are purchased at face amount less a specified discount
agreed upon from time to time, and interest-bearing revolving credit
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, 1997 and 1996 was 1.32 and 1.29,
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, 1997 and 1996 was 2.24 and 2.05, 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 $105 billion and $100 billion of Cardmember receivables
during the nine-month periods ended September 30, 1997 and 1996, respectively.
At September 30, 1997 and December 31, 1996, Credco owned $16.1 billion and
$15.6 billion, respectively, of non-interest-bearing receivables of which
7
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
$2.8 billion and $3.4 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 charge
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 charge Cardmember receivables.
In addition, at both September 30, 1997 and December 31, 1996, Credco owned
extended payment plan receivables totaling $1.8 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, 1997 and December 31, 1996 include
$225 million and $104 million, respectively, of participation interest owned
by CRC. This represents a participation in the seller's interest in revolving
credit receivables that have been conveyed to the American Express Credit
Account Master Trust (the "Master Trust"). This Master Trust was formed by
Centurion Bank during the second quarter of 1996 to securitize revolving
credit loans.
For both nine-month periods ended September 30, 1997 and 1996, the average
life of Cardmember receivables owned by Credco was 44 days.
Credco's write-offs, net of recoveries, as a percentage of the volume of
Cardmember receivables purchased for the nine-month periods ended
September 30, 1997 and 1996 was .43 percent and .48 percent, respectively.
Credco's decrease in revenue for the nine-month period ended September 30,
1997, is due primarily to a decrease in discount rates earned on purchased
accounts receivable. Decreased interest income for the nine-month period
ended September 30, 1997 is attributable to lower average investments.
Interest expense decreased for the nine-month period ended September 30,
1997 due to an overall decrease in volume and interest rates.
Provision for doubtful accounts for the nine-month period also decreased
primarily reflecting lower provision rates.
The following is an analysis of the increase (decrease) in key revenue and
expense accounts for the nine-month period ended September 30, 1997,
compared with the nine-month period ended September 30, 1996 ($ in millions):
Nine
Month
Period
------
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased 84
Discount and interest rates (159)
-----
Total (75)
=====
Interest income from affiliates-changes attributable to:
Volume of average investments outstanding 4
Interest rates 3
-----
Total 7
=====
8
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Interest income from investments- changes attributable to:
Volume of average investments outstanding (55)
Interest rates 8
-----
Total (47)
=====
Interest expense (affiliates)-changes attributable to:
Volume of average debt outstanding 21
Interest rates 5
-----
Total 26
=====
Interest expense (other)-changes attributable to:
Volume of average debt outstanding (37)
Interest rates (13)
-----
Total (50)
=====
Provision for doubtful accounts-changes attributable to:
Volume of receivables purchased 30
Provision rates and volume of recoveries (148)
-----
Total (118)
=====
The following is an analysis of Cardmember reserve for doubtful accounts:
1997 1996
---- ----
Balance, January 1 $ 638 $ 624
Provision for losses 565 687
Accounts written off 583 621
Other 14 (70)
----- -----
Balance, September 30 $ 634 $ 620
===== =====
The following table shows the aging of charge card receivables:
September 30,
1997 1996
---- ----
Current 78.7% 77.4%
30 to 59 days 15.5 16.6
60 to 89 days 2.3 2.5
90 days and over 3.5 3.5
9
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
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.
10
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsdiary 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 13, 1997 /s/Vincent P. Lisanke
------------------------------------
Vincent P. Lisanke
(President, Chief Executive Officer
and Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Description How Filed
----------- ---------
Exhibit 12.1 Computation in support of ratio of Electronically
earnings to fixed charges of filed herewith.
American Express Credit Corporation.
Exhibit 12.2 Computation in support of ratio of Electronically
earnings to fixed charges of filed herewith.
American Express Company.
Exhibit 27 Financial data schedule. Electronically
filed herewith.
<PAGE>
<PAGE>
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)
-------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before
extraordinary charge $168 $161 $215 $197 $139 $137 $138
Income tax provision 90 87 115 105 75 64 70
Interest expense 820 844 1,117 1,054 736 599 728
------ ------ ------ ------ ---- ---- ----
Total earnings $1,078 $1,092 $1,447 $1,356 $950 $800 $936
====== ====== ====== ====== ==== ==== ====
Fixed charges -
interest expense $820 $844 $1,117 $1,054 $736 $599 $728
==== ==== ====== ====== ==== ==== ====
Ratio of earnings
to fixed charges 1.32 1.29 1.30 1.29 1.29 1.34* 1.29
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.
<PAGE>
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,
---------- ------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $ 2,060 $2,664 $2,183 $1,891 $2,326 $ 896
Interest expense 1,557 2,160 2,343 1,925 1,776 2,171
Other adjustments 97 139 95 103 88 196
------- ------ ------ ------ ------ ------
Total earnings(a) $ 3,714 $4,963 $4,621 $3,919 $4,190 $3,263
======= ====== ====== ====== ====== ======
Fixed charges -
Interest expense $ 1,557 $2,160 $2,343 $1,925 $1,776 $2,171
Other adjustments 98 130 135 142 130 154
------- ------ ------ ------ ------ ------
Total fixed charges(b) $ 1,655 $2,290 $2,478 $2,067 $1,906 $2,325
======= ====== ====== ====== ====== ======
Ratio of earnings
to fixed charges(a/b) 2.24 2.17 1.86 1.90 2.20 1.40
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
of American Express Company.
For purposes of the "earnings" computation, other adjustments include adding
the amortization of capitalized interest, the net loss of affiliates accounted
for at equity whose debt is not guaranteed by the Company, the minority
interest in the earnings of majority-owned subsidiaries with fixed charges,
and the interest component of rental expense and subtracting undistributed net
income of affiliates accounted for at equity.
For purposes of the "fixed charges" computation, other adjustments include
capitalized interest costs and the interest component of rental expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers through
a dividend to American Express common shareholders. Accordingly, Lehman
Brothers' results are reported as a discontinued operation and are excluded
from the above computation for all periods presented. In March 1993, the
Company reduced its ownership in First Data Corporation ("FDC") 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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Credco's Condensed Consolidated Balance Sheet at September 30, 1997
and Condensed Consolidated Statement of Income for the nine months
ended September 30, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,382
<SECURITIES> 218
<RECEIVABLES> 17,871
<ALLOWANCES> 634
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,399
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 2,012
<TOTAL-LIABILITY-AND-EQUITY> 22,399
<SALES> 0
<TOTAL-REVENUES> 1,529
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 429
<INTEREST-EXPENSE> 820
<INCOME-PRETAX> 258
<INCOME-TAX> 90
<INCOME-CONTINUING> 168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
