<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 March 31, 1998
( ) 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 May 15, 1998
- ------------------------- ---------------------------
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 months ended March 31, 1998
and 1997 3
Condensed consolidated balance
sheets - March 31, 1998 and
December 31, 1997 4
Condensed consolidated statements
of cash flows - three months ended
March 31, 1998 and 1997 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>
<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
March 31,
-------------
1998 1997
--- ----
<S> <C> <C>
Revenues
Revenue earned from purchased accounts receivable $ 467 $ 403
Interest income from affiliates 45 40
Interest income from investments 27 26
Other income 1 2
----- -----
Total 540 471
----- -----
Expenses
Interest expense - affiliates 54 42
Interest expense - other 239 212
Provision for doubtful accounts,
net of recoveries 154 124
Other expenses 7 2
----- -----
Total 454 380
----- -----
Income before taxes 86 91
Income tax provision 30 32
----- -----
Net income 56 59
Retained earnings at beginning of period 1,745 1,683
------ ------
Retained earnings at end of period $1,801 $1,742
====== ======
</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)
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,486 $ 374
Investments 218 218
Accounts receivable 18,053 19,609
Less: reserve for doubtful accounts 626 633
------- -------
17,427 18,976
Loans and deposits with affiliates 3,150 3,150
Deferred charges and other assets 351 335
------- -------
Total assets $22,632 $23,053
======= =======
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,909 $ 1,770
Short-term debt - other 14,476 14,812
Current portion of long-term
debt - other 4 4
Long-term debt with affiliate 910 910
Long-term debt - other 2,496 2,354
------- -------
Total debt 19,795 19,850
Due to affiliates 523 1,027
Accrued interest and other liabilities 242 152
------- -------
Total liabilities 20,560 21,029
------- -------
Deferred discount revenue 109 117
------- -------
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 1,801 1,745
------- -------
Total shareholder's equity 1,963 1,907
------- -------
Total liabilities and
shareholder's equity $22,632 $23,053
======= =======
</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)
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 56 $ 59
Adjustments to reconcile net income to net cash
and cash equivalents provided by operating
activities:
Provision for doubtful accounts, net of recoveries 154 124
Amortization of deferred underwriting fees and
bond discount/premium 1 1
Changes in operating assets and liabilities:
Decrease (increase) in deferred tax assets 4 (13)
(Increase) decrease in interest receivable
and other operating assets (14) 34
Increase in accrued interest and other liabilities 66 12
Increase in due to affiliates 22 30
Decrease in deferred discount revenue (8) (13)
----- -----
Net cash provided by operating activities 281 234
----- -----
Cash Flows from Investing Activities:
Decrease in accounts receivable 1,340 706
Recoveries of accounts receivable previously
written off 43 44
Decrease in due to affiliates from purchased
receivables (498) (328)
------ ------
Net cash provided by investing activities 885 422
------ ------
Cash Flows from Financing Activities:
Net increase (decrease) in short-term debt with
affiliates with maturity less than ninety days 139 (124)
Net (decrease) increase in short-term debt -
other with maturity less than ninety days (415) 1,089
Proceeds from issuance of debt 1,018 1,052
Repayment of debt (796) (2,549)
------ ------
Net cash used in financing activities (54) (532)
------ ------
Net increase in cash and cash equivalents 1,112 124
Cash and cash equivalents at beginning of period 374 267
------- ------
Cash and cash equivalents at end of period $1,486 $391
====== ======
</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 on Form 10-K of
American Express Credit Corporation, including its subsidiaries
where appropriate, ("Credco") for the year ended December 31, 1997.
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 March 31, 1998
and the consolidated results of its operations and changes
in its retained earnings for the three-month periods ended
March 31, 1998 and 1997 and cash flows for the three-month
periods ended March 31, 1998 and 1997. Results of
operations reported for interim periods are not necessarily
indicative of results for the entire year.
2. For the three-month periods ended March 31, 1998 and 1997,
Credco paid $275 million and $243 million of interest,
respectively. Income taxes paid for each of the three-month
periods ended March 31, 1998 and 1997 were $2 million and $1
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 March
31, 1998, 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 March 31, 1998 was $223
million.
4. In early 1998, Credco purchased interest rate caps to
limit the adverse effect of an interest rate increase on
substantially all charge Cardmember receivables funding costs.
The majority of the caps will mature by the end of 1998.
5. In February 1998, Credco issued $150 million 1 1/8% Cash
Exchangeable Notes due February 19, 2003. Holders of these
notes may exchange them for an amount in cash which is linked
to the price of the common shares of American Express Company.
Credco has entered into hedging agreements designed to fully
hedge its obligations under these notes.
6
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At March 31, 1998, American Express Credit Corporation, including
its subsidiaries where appropriate, ("Credco") had the ability to issue
$1.9 billion of debt under the Euro Medium Term Note program for the issuance
of debt outside the United States to non-U.S. persons. This program
was established during 1996 by Credco, American Express Travel Related
Services Company, Inc. ("TRS"), a wholly-owned subsidiary of American
Express Company ("American Express"), American Express Overseas
Credit Corporation Limited ("AEOCC"), a wholly-owned subsidiary of
Credco, and American Express Bank Ltd. (a wholly-owned subsidiary of
American Express). In 1997, American Express Centurion Bank ("Centurion
Bank") a wholly-owned subsidiary of TRS, was added to this program.
The maximum aggregate principal amount of debt instruments
outstanding at any one time under the program will not exceed $3 billion.
In early 1998, Credco purchased interest rate caps to limit
the adverse effect of an interest rate increase on
substantially all charge Cardmember receivables funding costs.
The majority of the caps will mature by the end of 1998.
In February 1998, Credco issued $150 million 1 1/8% Cash
Exchangeable Notes due February 19, 2003. Holders of these
notes may exchange them for an amount in cash which is linked
to the price of the common shares of American Express. Credco
has entered into hedging agreements designed to fully hedge
its obligations under these notes.
At March 31, 1998, Credco had the ability to issue $2.4 billion of
medium- and long-term debt securities under shelf registrations filed
with the Securities and Exchange Commission.
Committed credit line facilities at March 31, 1998 and
1997 totaled $6.8 billion and $6.6 billion, respectively.
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
7
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
the three month periods ended March 31, 1998 and 1997 was 1.29
and 1.36, respectively. The ratio of earnings to fixed charges
for American Express, the parent of TRS, for the three-month periods
ended March 31, 1998 and 1997 was 2.09 and 2.26, 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 $37 billion and $32 billion of Cardmember
receivables during the three-month periods ended March 31,
1998 and 1997, respectively. At March 31, 1998 and December
31, 1997, Credco owned $16.2 billion and $17.8 billion,
respectively, of charge card receivables of which $2.5 billion
and $3.8 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 March 31, 1998 and December 31, 1997, Credco
owned extended payment plan receivables totaling $ 1.9 billion
and $1.8 billion respectively, including revolving credit
loans purchased directly from Centurion Bank. The extended
payment plan receivables owned at March 31, 1998 and December
31, 1997, include $212 million and $229 million, respectively,
of participation interest owned by CRC. This represents a
participation in the seller's interest in revolving credit
receivables that have been conveyed to the American Express
Credit Account Master Trust (the "Master Trust"). This Master
Trust was formed by Centurion Bank in 1996 to securitize
revolving credit loans.
For the three-month periods ended March 31, 1998 and 1997, the
average life of Cardmember receivables owned by Credco was 43
and 44 days, respectively.
Credco's write-offs, net of recoveries, as a percentage of the
volume of Cardmember receivables purchased for the three-month
periods ended March 31, 1998 and 1997 was .44 percent and .41
percent, respectively.
Credco's increase in revenue for the three-month period ended
March 31, 1998, is due to an increase in the volume of receivables
purchased and an increase in discount and interest rates earned
on purchased accounts receivable. Increased interest income for
the three-month period ended March 31, 1998 is attributable to
both increased interest rates and volume of average investments
outstanding. Interest expense increased for the three-month
period ended March 31, 1998 due to an increase in volume and
interest rates. Provision for doubtful accounts for the three-month
period also increased reflecting volume growth as well as, to a
lesser extent, higher provision rates.
8<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
The following is an analysis of the increase (decrease) in
key revenue and expense accounts for the three-month period
ended March 31, 1998, compared with the three-month period
ended March 31, 1997 ($ in millions):
Three
Month
Period
------
<S> <C>
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased 57
Discount and interest rates 7
--
Total 64
==
Interest income from affiliates - changes
attributable to:
Volume of average investments outstanding 4
Interest rates 1
--
Total 5
==
Interest income from investments - changes
attributable to:
Volume of average investments outstanding (1)
Interest rates 2
--
Total 1
==
Interest expense (affiliates) - changes
attributable to:
Volume of average debt outstanding 10
Interest rates 2
--
Total 12
==
Interest expense (other) - changes attributable to:
Volume of average debt outstanding 16
Interest rates 11
--
Total 27
==
Provision for doubtful accounts - changes
attributable to:
Volume of receivables purchased 24
Provision rates and volume of recoveries 6
--
Total 30
==
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
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:
1998 1997
---- ----
<S> <C> <C>
Balance, January 1 $ 633 $ 638
Provision for losses 197 168
Accounts written off (206) (178)
Other 2 (6)
----- -----
Balance, March 31 $ 626 $ 622
===== =====
The following table shows the aging of charge card receivables:
March 31,
---------------
1998 1997
---- ----
Current 81.3% 79.3%
30 to 59 days 13.0 14.6
60 to 89 days 2.1 2.4
90 days and over 3.6 3.7
</TABLE>
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
1. Form 8-K, dated February 10, 1998, Item 5, filed
in connection with the incorporation by reference
of certain financial information of American
Express Company into registration statements of the
Registrant; Exhibits 15 and 23, respectively, a
letter regarding unaudited financial information
and consent of independent auditors.
10
<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 May 15, 1998 /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.
11
<PAGE>
<TABLE>
<CAPTION>
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)
Three Months
Ended March 31, Years Ended December 31,
(Unaudited)
--------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before
extraordinary
charge $ 56 $ 59 $ 212 $ 215 $ 197 $ 139 $ 137
Income tax
provision 30 32 114 115 105 75 64
Interest expense 293 254 1,125 1,117 1,054 736 599
----- ----- ------ ------ ------ ----- -----
Total earnings $ 379 $ 345 $1,451 $1,447 $1,356 $ 950 $ 800
===== ===== ====== ====== ====== ===== =====
Fixed charges -
interest
expense $ 293 $ 254 $1,125 $1,117 $1,054 $ 736 $ 599
===== ===== ====== ====== ====== ===== =====
Ratio of
earnings to
fixed charges 1.29 1.36 1.29 1.30 1.29 1.29 1.34*
</TABLE>
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 charge of $34 million
(pretax) was 1.28.
12
<PAGE>
<TABLE>
<CAPTION>
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
(Dollars in millions)
Three Months Years Ended December 31,
Ended March 31,-----------------------------------------
1998
(Unaudited) 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income
from
continuing
operations $ 614 $2,750 $2,664 $2,183 $1,891 $2,326
Interest expense 530 2,122 2,160 2,343 1,925 1,776
Other adjustments 31 127 139 95 103 88
------ ------ ------ ------ ------ ------
Total earnings(a) $1,175 $4,999 $4,963 $4,621 $3,919 $4,190
------ ------ ------ ------ ------ ------
Fixed charges:
Interest expense $ 530 $2,122 $2,160 $2,343 $1,925 $1,776
Other adjustments 32 129 130 135 142 130
------ ------ ------ ------ ------ ------
Total fixed
charges(b) $ 562 $2,251 $2,290 $2,478 $2,067 $1,906
------ ------ ------ ------ ------ ------
Ratio of earnings
to fixed charges
(a/b) 2.09 2.22 2.17 1.86 1.90 2.20
</TABLE>
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
Statements 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.
13<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Credco's Condensed Consolidated Balance Sheet at March 31, 1998 and
Condensed Consolidated Statement of Income for the three months
ended March 31, 1998 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,486
<SECURITIES> 218
<RECEIVABLES> 18,053
<ALLOWANCES> 626
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,632
<CURRENT-LIABILITIES> 0
<BONDS> 19,795
0
0
<COMMON> 1
<OTHER-SE> 1,962
<TOTAL-LIABILITY-AND-EQUITY> 22,632
<SALES> 0
<TOTAL-REVENUES> 540
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 197
<INTEREST-EXPENSE> 293
<INCOME-PRETAX> 86
<INCOME-TAX> 30
<INCOME-CONTINUING> 56
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
