<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 June 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 August 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 six months ended June 30,
1997 and 1996 3
Condensed consolidated balance
sheets - June 30, 1997 and
December 31, 1996 4
Condensed consolidated statements
of cash flows - six months ended
June 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 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
PART I
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
- --------
Revenue earned from
purchased accounts receivable $ 441 $ 474 $ 844 $922
Interest income from affiliates 41 40 81 80
Interest income from investments 33 57 59 99
Other income 1 - 3 2
----- ----- ----- -----
Total 516 571 987 1,103
----- ----- ----- -----
Expenses
- --------
Interest expense - affiliates 39 33 81 71
Interest expense - other 233 256 445 492
Provision for doubtful accounts,
net of recoveries 150 206 274 378
Other expenses 13 2 15 3
----- ----- ----- -----
Total 435 497 815 944
----- ----- ----- -----
Income before taxes 81 74 172 159
Income tax provision 28 26 60 56
----- ----- ----- -----
Net income 53 48 112 103
Retained earnings at
beginning of period 1,742 1,673 1,683 1,618
----- ----- ----- -----
Retained earnings at
end of period $1,795 $1,721 $1,795 $1,721
====== ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 728 $ 267
Investments 247 -
Accounts receivable 17,248 17,359
Less: reserve for doubtful accounts 633 638
------- -------
16,615 16,721
Loans and deposits with affiliates 2,850 2,850
Deferred charges and other assets 332 327
------- -------
Total assets $20,772 $20,165
======= =======
Liabilities and shareholder's equity
- ------------------------------------
Short-term debt with affiliates $ 2,450 $ 1,275
Short-term debt - other 12,948 13,262
Current portion of long-term debt - other 4 211
Long-term debt with affiliate 910 910
Long-term debt - other 1,953 1,559
------- -------
Total debt 18,265 17,217
Due to affiliates 328 858
Accrued interest and other liabilities 124 145
------- -------
Total liabilities 18,717 18,220
------- -------
Deferred discount revenue 98 100
---- ----
Shareholder's equity:
- --------------------
Common stock 1 1
Capital surplus 161 161
Retained earnings 1,795 1,683
------- -------
Total shareholder's equity 1,957 1,845
------- -------
Total liabilities and shareholder's equity $20,772 $20,165
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net income $112 $ 103
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Provision for doubtful accounts, net of recoveries 274 378
Changes in operating assets and liabilities:
Increase in deferred tax assets (26) (10)
Decrease(increase) in interest receivable
and other operating assets 41 (52)
Decrease in accrued interest and other liabilities (1) (13)
Increase(decrease) in due to affiliates 78 (35)
Decrease in deferred discount revenue (2) (34)
------ ------
Net cash provided by operating activities 476 337
------ ------
Cash Flows from Investing Activities:
- ------------------------------------
Increase in accounts receivable (334) (838)
Sale of net accounts receivable to an affiliate - 230
Purchase of participation interest in seller's interest
in accounts receivable from an affiliate - (103)
Recoveries of accounts receivable previously written off 92 94
Purchase of investments (247) -
Decrease in due to affiliates from purchased receivables (580) (575)
------ ------
Net cash used in investing activities (1,069) (1,192)
------ ------
Cash Flows from Financing Activities:
- ------------------------------------
Net increase in short-term debt with
affiliates with maturity less than ninety days 1,175 728
Net increase in short-term debt -
other with maturity less than ninety days 2,340 5,153
Proceeds from issuance of debt 2,020 4,858
Repayment of debt (4,481) (9,307)
------- -------
Net cash provided by financing activities 1,054 1,432
------- -------
Net increase in cash and cash equivalents 461 577
Cash and cash equivalents at beginning of period 267 1,190
------- -------
Cash and cash equivalents at end of period $ 728 $1,767
======= =======
</TABLE>
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 June 30, 1997 and the
consolidated results of its operations and changes in its retained
earnings for the six-month periods ended June 30, 1997 and 1996 and cash
flows for the six-month periods ended June 30, 1997 and 1996. Results
of operations reported for interim periods are not necessarily
indicative of results for the entire year.
2. For the six-month periods ended June 30, 1997 and 1996, Credco paid $533
million and $575 million of interest, respectively. Income taxes paid
for each of the six-month periods ended June 30, 1997 and 1996 were $2
million and $55 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. During the second quarter of 1997, Credco purchased $247
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 June 30, 1997 was $248 million.
4. Subsequent to June 30, 1997, Credco issued and sold an additional $400
million of 6.5% Fixed Rate Notes 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 Floating Rate Accounts Receivable Trust
Certificates matured from the charge card securitization portfolio.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
In May 1997, Credco issued and sold, exclusively outside the United States
to non-U.S. persons, $400 million Floating Rate Notes due 2002 listed on
the Luxembourg Stock Exchange. These notes were issued under a 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.
Subsequent to June 30, 1997, Credco issued and sold an additional $400
million of 6.5% Fixed Rate Notes due 2002 under the same program.
In May 1997, Credco renegotiated its credit facilities, increasing available
credit lines by $200 million to $6.8 billion.
At June 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.
6
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Results of Operations
Credco purchases Cardmember receivables without recourse from American
Express Travel Related Services Company, Inc. ("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 six month periods ended June 30, 1997 and 1996 was 1.33 and 1.28,
respectively. The ratio of earnings to fixed charges for American Express
Company (the "Company"), the parent of TRS, for the six-month periods ended
June 30, 1997 and 1996 was 2.24 and 2.01, 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 $68 billion and $67 billion of Cardmember receivables
during the six-month periods ended June 30, 1997 and 1996, respectively.
At June 30, 1997 and December 31, 1996, Credco owned $15.3 billion and
$15.6 billion, respectively, of non-interest-bearing receivables of which
$2.3 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 June 30, 1997 and December 31, 1996, Credco owned extended
payment plan receivables totaling $1.9 billion and $1.8 billion,
respectively, including revolving credit loans purchased directly from
American Express Centurion Bank ("Centurion Bank"), a subsidiary of TRS.
The extended payment plan receivables owned at June 30, 1997 and December
31, 1996 include $99 million and $104 million, respectively, of
participation interest owned by CRC. This represents a participation in
the seller's interest in revolving credit receivables that have been
conveyed to the American Express Credit Account Master Trust (the "Master
Trust"). This Master Trust was formed by Centurion Bank during the second
quarter of 1996 to securitize revolving credit loans.
For the six-month periods ended June 30, 1997 and 1996, the average life of
Cardmember receivables owned by Credco was 44 days and 43 days,
respectively.
Credco's write-offs, net of recoveries, as a percentage of the volume of
Cardmember receivables purchased for the six-month periods ended June 30,
1997 and 1996 was .40 percent and .46 percent, respectively.
7
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Credco's decrease in revenue for the six-month period ended June 30, 1997,
is due primarily to a decrease in discount rates earned on purchased accounts
receivable. Decreased interest income for the six-month period ended
June 30, 1997 is attributable to lower average investments. Interest expense
decreased for the six-month period ended June 30, 1997 due to both a decrease
in volume and interest rates. Provision for doubtful accounts for the
six-month period also decreased primarily reflecting lower provision rates.
The following is an analysis of the increase (decrease) in key revenue and
expense accounts for the six-month period ended June 30, 1997, compared
with the six-month period ended June 30, 1996 ($ in millions):
Six
Month
Period
-------
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased 12
Discount and interest rates (90)
----
Total (78)
====
Interest income from affiliates - changes attributable to:
Volume of average investments outstanding -
Interest rates 1
----
Total 1
====
Interest income from investments - changes attributable to:
Volume of average investments outstanding (43)
Interest rates 3
----
Total (40)
====
Interest expense (affiliates) - changes attributable to:
Volume of average debt outstanding 7
Interest rates 3
----
Total 10
====
Interest expense (other) - changes attributable to:
Volume of average debt outstanding (33)
Interest rates (14)
----
Total (47)
====
Provision for doubtful accounts - changes attributable to:
Volume of receivables purchased 7
Provision rates and volume of recoveries (111)
-----
Total (104)
=====
8<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
The following is an analysis of Cardmember reserve for doubtful accounts:
1997 1996
---- ----
Balance, January 1 $ 638 $ 624
Provision for losses 366 472
Accounts written off 366 405
Other (5) (6)
------ ------
Balance, June 30 $ 633 $ 685
====== ======
The following table shows the aging of charge card receivables:
Current 78.5% 78.3%
30 to 59 days 15.7 15.8
60 to 89 days 2.3 2.3
90 days and over 3.5 3.6
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
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN EXPRESS CREDIT CORPORATION
(REGISTRANT)
DATE August 13, 1997 /s/Vincent P. Lisanke
--------------------------------------
Vincent P. Lisanke
(President, Chief Executive Officer
and Chief Accounting Officer)
10
<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>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
EXHIBIT 12.1
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
OF AMERICAN EXPRESS CREDIT CORPORATION
(millions)
Six Months
Ended
June 30, Year Ended December 31,
(Unaudited)
------------ -----------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before extraordinary
charge $112 $103 $215 $197 $139 $137 $138
Income tax provision 60 56 115 105 75 64 70
Interest expense 526 563 1,117 1,054 736 599 728
----- ----- ----- ----- ---- ---- ----
Total earnings $698 $722 $1,447 $1,356 $950 $800 $936
===== ===== ====== ====== ==== ==== ====
Fixed charges -
interest expense $526 $563 $1,117 $1,054 $736 $599 $728
==== ==== ====== ====== ==== ==== ====
Ratio of earning to
fixed charges 1.33 1.28 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)
Six Months
Ended
June 30,
(Unaudited) Year Ended December 31,
----------- ---------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $1,342 $2,664 $2,183 $1,891 $2,326 $ 896
Interest expense 1,014 2,160 2,343 1,925 1,776 2,171
Other adjustments 59 139 95 103 88 196
------ ------ ------ ------ ------ ------
Total earnings (a) $2,415 $4,963 $4,621 $3,919 $4,190 $3,263
====== ====== ====== ====== ====== ======
Fixed charges -
Interest expense $1,014 $2,160 $2,343 $1,925 $1,776 $2,171
Other adjustments 66 130 135 142 130 154
------ ------ ------ ------ ------ ------
Total fixed charges (b) $1,080 $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 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 June 30, 1997 and Condensed Consolidated
Statement of Income for the six months ended June 30, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 728
<SECURITIES> 247
<RECEIVABLES> 17,248
<ALLOWANCES> 633
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,772
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,956
<TOTAL-LIABILITY-AND-EQUITY> 20,772
<SALES> 0
<TOTAL-REVENUES> 987
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 274
<INTEREST-EXPENSE> 526
<INCOME-PRETAX> 172
<INCOME-TAX> 60
<INCOME-CONTINUING> 112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
