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, 1999
OR
( ) 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, 301 North Walnut Street 19801-2919
Suite 1002, Wilmington, Delaware (Zip Code)
(Address of principal executive offices)
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 15, 1999
- ------------------------------ --------------------------------
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, 1999 and 1998 3
Condensed consolidated balance
sheets - September 30, 1999 and
December 31, 1998 4
Condensed consolidated statements
of cash flows - nine months ended
September 30, 1999 and 1998 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 11
-2-
<PAGE>
<TABLE>
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)
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Revenue earned from purchased
accounts receivable $ 443 $ 457 $1,336 $1,421
Interest income from affiliates 23 46 102 136
Interest income from investments 36 41 103 105
Other income 1 1 4 4
--- --- ----- -----
Total 503 545 1,545 1,666
--- --- ----- -----
Expenses
Interest expense - affiliates 35 38 105 132
Interest expense - other 240 266 717 767
Provision for doubtful accounts,
net of recoveries 146 148 443 480
Other expenses 5 6 17 20
--- --- ----- -----
Total 426 458 1,282 1,399
--- --- ----- -----
Income before taxes 77 87 263 267
Income tax provision 27 30 92 93
-- -- -- --
Net income 50 57 171 174
Retained earnings at beginning of period 1,953 1,862 1,832 1,745
----- ----- ----- -----
Retained earnings at end of period $2,003 $1,919 $2,003 $1,919
====== ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
<TABLE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 563 $ 648
Investments 956 353
Accounts receivable 21,101 19,241
Less: reserve for doubtful accounts 612 597
------ ------
20,489 18,644
Loans and deposits with affiliates 1,124 3,353
Deferred charges and other assets 429 652
-------- --------
Total assets $ 23,561 $ 23,650
======== ========
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,844 $ 1,261
Short-term debt - other 15,320 16,267
Current portion of long-term debt - other 550 353
Long-term debt with affiliate 910 910
Long-term debt - other 1,625 2,143
----- -----
Total debt 20,249 20,934
Due to affiliates 792 425
Accrued interest and other liabilities 243 182
------ ------
Total liabilities 21,284 21,541
====== ======
Deferred discount revenue 115 115
--- ---
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 2,003 1,832
Other comprehensive income, net of tax:
Net unrealized securities losses (3) --
----- -----
Total shareholder's equity 2,162 1,994
----- -----
Total liabilities and shareholder's equity $ 23,561 $ 23,650
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
<TABLE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)
<CAPTION>
Nine Months
Ended
September 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 171 $ 174
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Provision for doubtful accounts, net of recoveries 443 480
Amortization of deferred underwriting fees and bond
discount/premium 4 4
Changes in operating assets and liabilities:
(Increase) decrease in deferred tax assets (4) 11
Increase in interest receivable and
other operating assets (11) (75)
Increase in due to affiliates 1 4
Increase in accrued interest and other liabilities 90 39
Decrease in deferred discount revenue -- (6)
--- ---
Net cash and cash equivalents provided by operating
activities 694 631
--- ---
Cash Flows from Investing Activities:
(Increase) decrease in accounts receivable (2,217) 216
Recoveries of accounts receivable previously written off 127 127
Purchase of investments (641) (153)
Maturity of investments 33 17
Purchase of participation interest in seller's interest
in accounts receivable from an affiliate (959) (312)
Sale of participation interest in seller's interest
in accounts receivable to an affiliate 247 1,120
Sale of net accounts receivable to an affiliate 447 --
Decrease (increase) in loans and deposits due from
affiliates 2,229 (2)
Net increase in loans and deposits to third parties -- (94)
Increase (decrease) in due to affiliates 668 (998)
--- ----
Net cash and cash equivalents used in investing
activities (66) (79)
---- ---
Cash Flows from Financing Activities:
Net increase (decrease) in short-term debt with
affiliates with maturity less than ninety days 584 (144)
Net (decrease) increase in short-term debt - other
with maturity less than ninety days (1,437) 705
Proceeds from issuance of debt 7,183 4,492
Repayment of debt (7,043) (3,601)
------ ------
Net cash and cash equivalents (used in) provided by
financing activities (713) 1,452
---- -----
Net (decrease) increase in cash and cash equivalents (85) 2,004
Cash and cash equivalents at beginning of period 648 374
--- ---
Cash and cash equivalents at end of period $ 563 $ 2,378
======= =======
</TABLE>
-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, 1998.
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, 1999 and the consolidated
results of its operations and changes in its retained earnings
for the nine-month periods ended September 30, 1999 and 1998 and
cash flows for the nine-month periods ended September 30, 1999
and 1998. 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, 1999 and 1998,
Credco paid $814 million and $885 million of interest, respectively.
Income taxes paid for each of the nine-month periods ended September
30, 1999 and 1998 were $92 million and $70 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, 1999, Credco held $229
million of American Express Master Trust Class B Certificates which
were classified as held to maturity. The fair value of the held to
maturity securities at September 30, 1999 was $227 million.
Available for sale securities are stated at fair value, with the
unrealized gains and losses included in shareholder's equity. At
September 30, 1999, Credco held American Express Credit Account Master
Trust Class C Certificates which were classified as available for
sale. The cost and fair value of these available for sale securities
at September 30, 1999 were $445 million. In addition, Credco has a
portfolio of corporate and government securities which is managed by
American Express Financial Advisors, a wholly-owned subsidiary of
American Express Company. The book value and fair value of these
available for sale securities as of September 30, 1999 were $287
million and $282 million, respectively.
The available for sale classification does not mean that Credco
necessarily expects to sell these securities. They are available to
meet possible liquidity needs should there be significant changes in
market interest rates, customer demand or funding sources and terms.
4. In 1998, Credco adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". Comprehensive
income consists of net income and other comprehensive income; the
latter includes unrealized gains and losses on available for sale
securities and foreign exchange translation adjustments. Actual income
from foreign exchange translation adjustments was not material to
Credco's results.
-6-
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
5. In the second and third quarter of 1999, the American Express
Credit Account Master Trust (the "Master Trust") issued an additional
$2.5 billion and $1.5 billion, respectively, of loans through the
public issuance of two classes of investor certificates and a
privately placed collateral interest in the assets of the Master
Trust. At the time of these issuances, Credco Receivables Corp.
("CRC"), a wholly-owned subsidiary of Credco, sold $158 million and
$95 million in the second and third quarter of 1999, respectively, of
gross seller's interest, net of reserves, to American Express
Receivables Financing Corporation II, a wholly-owned subsidiary of
American Express Travel Related Services Company, Inc., a wholly-owned
subsidiary of American Express Company.
In addition, in the second and third quarter of 1999, CRC
purchased $208 million and $142 million, respectively, in Class C
Certificates issued by the Master Trust.
In July 1999, $500 million Class A Fixed Rate Accounts Receivable
Trust Certificates matured from the charge card securitization
portfolio which increased the participation interests owned by CRC.
CRC owns a participation interest in the seller's interest in charge
Cardmember receivables that have been conveyed to the American Express
Master Trust. In addition, $29 million of Class B Certificates owned
by CRC matured in July 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 30, 1999, American Express Credit Corporation,
including its subsidiaries where appropriate ("Credco"), had the
ability to issue $1.4 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 by Credco, American Express
Travel Related Services Company, Inc. ("TRS"), a wholly-owned
subsidiary of American Express Company ("American Express"), American
Express Centurion Bank ("Centurion Bank"), a wholly-owned subsidiary
of TRS, 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. The maximum
aggregate principal amount of debt instruments outstanding at any one
time under the program will not exceed $3 billion. In January 1999,
under this program, TRS issued and sold $500 million 5.625% Fixed Rate
Notes, maturing in 2004.
At September 30, 1999, Credco had the ability to issue $2.4
billion of medium- and long-term debt and warrants under shelf
registrations filed with the Securities and Exchange Commission.
In May 1999, Credco renegotiated its credit facilities,
increasing available credit lines by $1.1 billion. Committed credit
line facilities at September 30, 1999 and 1998 totaled $8.3 billion
and $7.2 billion, respectively.
-7-
<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
TRS. 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, 1999 and 1998 was 1.32 and 1.30, respectively. The ratio of
earnings to fixed charges for American Express, the parent of TRS, for
the nine-month periods ended September 30, 1999 and 1998 was 2.55 and
2.27, 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 the receivables. Pretax income depends primarily on
the volume of Cardmember receivables purchased, the discount rates
applicable thereto, the relationship of total discount to Credco's
interest expense and the collectibility of receivables purchased.
Credco purchased $123 billion and $113 billion of Cardmember
receivables during the nine-month periods ended September 30, 1999 and
1998, respectively. At September 30, 1999 and December 31, 1998,
Credco owned $18.5 billion and $17.1 billion, respectively, of Charge
Card receivables of which $2.6 billion and $2.9 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"). The
Trust was formed in 1992 by TRS to securitize U.S. charge Cardmember
receivables.
In addition, at September 30, 1999 and December 31, 1998, Credco
owned extended payment plan receivables totaling $2.6 billion and $2.1
billion, respectively, including revolving credit loans purchased
directly from Centurion Bank. The extended payment plan receivables
owned at September 30, 1999 and December 31, 1998 include $412 million
and $154 million, respectively, of participation interest owned by
CRC. This represents a participation interest in the seller's interest
in revolving credit receivables that have been conveyed to the
American Express Credit Account Master Trust (the "Master Trust"). The
Master Trust was formed by Centurion Bank in 1996 to securitize
revolving credit loans.
For the nine-month periods ended September 30, 1999 and 1998, the
average life of Cardmember receivables owned by Credco was 43 days.
Credco's write-offs, net of recoveries, as a percentage of the
volume of Cardmember receivables purchased for the nine-month periods
ended September 30, 1999 and 1998 was .38 percent and .43 percent,
respectively.
Credco's decrease in revenue for the nine-month period ended
September 30, 1999, is attributable to a decrease in the discount and
interest rates on receivables purchased. Interest income decreased for
the nine-month period ended September 30, 1999 due to a lower volume
of average investments outstanding and a decline in interest rates.
Interest expense decreased for the nine months ended September 30,
1999 primarily due to a decrease in interest rates. Provision for
doubtful accounts for the nine-month period also decreased reflecting
lower provision rates.
-8-
<PAGE>
<TABLE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
The following is an analysis of the increase (decrease) in key
revenue and expense accounts for the nine-month period ended September
30, 1999, compared with the nine-month period ended September 30, 1998
($ in millions):
<CAPTION>
Nine-
Month
Period
------
<S> <C>
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased 123
Discount and interest rates (208)
----
Total (85)
===
Interest income from affiliates - changes attributable to:
Volume of average investments outstanding (25)
Interest rates (9)
--
Total (34)
===
Interest income from investments - changes attributable to:
Volume of average investments outstanding 7
Interest rates (9)
--
Total (2)
==
Interest expense (affiliates) - changes attributable to:
Volume of average debt outstanding (15)
Interest rates (12)
---
Total (27)
===
Interest expense (other) - changes attributable to:
Volume of average debt outstanding 48
Interest rates (98)
---
Total (50)
===
Provision for doubtful accounts - changes attributable to:
Volume of receivables purchased 49
Provision rates and volume of recoveries (86)
---
Total (37)
===
</TABLE>
-9-
<PAGE>
<TABLE>
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
($ in millions):
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, January 1 $597 $633
Provision for losses 570 607
Accounts written off (589) (614)
Other 34 (23)
---- ----
Balance, September 30 $612 $603
==== ====
The following table shows the aging of Charge Card receivables:
September 30,
------------------------------
1999 1998
---- ----
Current 81.6% 80.7%
30 to 59 days 13.4 14.2
60 to 89 days 2.1 2.1
90 days and over 2.9 3.0
</TABLE>
Year 2000
The year 2000 ("Y2K") issue is the result of computer programs
having been written using two digits rather than four to define a
year. Any programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than 2000. Credco's internal debt
management systems have been reviewed and remediated in light of the Y2K
issue. The Card issuers, which are subsidiaries or affiliates of TRS, at
their expense and as agents for Credco, perform all services necessary to
bill and collect all Cardmember receivables owned by Credco. American
Express has conducted a comprehensive review of its computer systems and
business processes (including systems and processes of the Card issuers) to
identify the major systems that could be affected by the Y2K issue.
American Express has substantially completed remediation and testing of
individual internal systems and American Express' primary focus is on
planning year-end activities related to Y2K.** The costs related to the Y2K
issue, which are expensed by American Express as incurred have not had, nor
are they expected to have, a material impact on Credco's results of
operations or financial condition.** For further discussion of American
Express' addressing of the Y2K issue, please see pages 10 through 12 of
American Express Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (dated November 12, 1999) and which is
incorporated herein by reference and attached as Exhibit 99.
Various statements in this Y2K discussion marked with two asterisks
(**) are forward-looking statements which are subject to risks and
uncertainties. Important factors that could cause results to differ
materially from these forward-looking statements include, among other
things, the ability of Credco and American Express to successfully identify
systems containing two-digit codes, the nature and amount of programming
required to fix and test the affected systems, the costs of labor and
consultants related to such efforts as well as those involving the
development and implementation of contingency plans, the continued
availability of such personnel, the ability of third parties that interface
with Credco and American Express to successfully address their Y2K issues,
and the ability of American Express and Credco to assess potential internal
and external Y2K exposures and develop effective contingency plans in
connection therewith.
-10-
<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.
99 Pages 10 through 12 of American Express Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, discussing Year 2000.
(b) Reports on Form 8-K
None.
-11-
<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: November 15, 1999 By /s/Walker C. Tompkins, Jr.
--------------------------
Walker C. Tompkins, Jr.
(President, Chief Executive Officer)
/s/Erich Komdat
---------------
Erich Komdat
(Vice President, Chief Accounting
Officer)
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Description How Filed
----------- ---------
Exhibit 12.1 Computation in support of Electronically filed herewith.
ratio of earnings to fixed
charges of American Express
Credit Corporation.
Exhibit 12.2 Computation in support of Electronically filed herewith.
ratio of earnings to fixed
charges of American Express
Company.
Exhibit 27. Financial data schedule. Electronically filed herewith.
Exhibit 99. Pages 10 through 12 of American Electronically filed herewith.
Express Company's Quarterly
Report on Form 10-Q for the
quarter ended September 30,
1999, discussing Year 2000.
-12-
<TABLE>
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)
<CAPTION>
Nine Months
Ended
September 30,
(Unaudited) Years Ended December 31,
------------ -------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net Income $ 171 $ 174 $ 237 $ 212 $ 215 $ 197 $ 139
Income tax provision 92 93 128 114 115 105 75
Interest expense 822 899 1,190 1,125 1,117 1,054 736
------ ------ ------ ------ ------ ------ ------
Total earnings $1,085 $1,166 $1,555 $1,451 $1,447 $1,356 $ 950
====== ====== ====== ====== ====== ====== ======
Fixed charges -
interest expense $ 822 $ 899 $1,190 $1,125 $1,117 $1,054 $ 736
====== ====== ====== ====== ====== ====== ======
Ratio of earnings
to fixed charges 1.32 1.30 1.31 1.29 1.30 1.29 1.29
</TABLE>
Note: Gross rentals on long-term leases were minimal in amount in each
of the periods shown.
<PAGE>
<TABLE>
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)
<CAPTION>
Nine Months
Ended
September 30, Years Ended December 31,
1999 -----------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income from
continuing operations $2,593 $2,925 $2,750 $2,664 $2,183 $1,891
Interest expense 1,566 2,224 2,122 2,160 2,343 1,925
Other adjustments 105 124 127 139 95 103
------ ------ ------ ------ ------ ------
Total earnings (a) $4,264 $5,273 $4,999 $4,963 $4,621 $3,919
------ ------ ------ ------ ------ ------
Fixed charges:
Interest expense $1,566 $2,224 $2,122 $2,160 $2,343 $1,925
Other adjustments 107 129 129 130 135 142
------ ------ ------ ------ ------ ------
Total fixed charges (b) $1,673 $2,353 $2,251 $2,290 $2,478 $2,067
------ ------ ------ ------ ------ ------
Ratio of earnings
to fixed charges (a/b) 2.55 2.24 2.22 2.17 1.86 1.90
</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. In the fourth
quarter of 1995, the Company's ownership in First Data Corporation
("FDC") was 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.
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
EXHIBIT 99
EXCERPT FROM AMERICAN EXPRESS COMPANY'S QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
Year 2000
The Company began addressing the Year 2000 (Y2K) issue in 1995
and has established a plan for resolution, which involves the
remediation, decommissioning and replacement of relevant systems,
including mainframe, mid-range and desktop computers, application
software, operating systems, systems software, data back-up archival
and retrieval services, telephone and other communications systems,
and hardware peripherals and facilities dependent on embedded
technology. The Y2K compliance effort is divided into two initiatives.
The first, known as "Millenniax," relates to mainframe and other
technological systems maintained by the American Express Technologies
organization (AET). The second, known as "Business T," relates to the
technological assets that are owned, managed or maintained by the
Company's individual business and staff units. Our plans for
remediation of the Y2K issue include the following program phases: (i)
employee awareness and mobilization, (ii) inventory collection and
assessment, (iii) impact analysis, (iv) remediation/decommission, (v)
testing and (vi) implementation. With respect to the Millenniax
systems and Business T assets, all of the program phases referred to
above are at least 99 percent complete.
The Company's cumulative costs since inception of the Y2K
initiatives were $495 million through September 30, 1999 and are
estimated to be in the range of $22 - $48 million for the remainder
through 2000.* These costs, which are expensed as incurred, relate to
both Millenniax and Business T, and have not had, nor are they
expected to have, a material adverse impact on the Company's results
of operations or financial condition.* Y2K costs related to Millenniax
represent 6 percent and 1 percent of the AET budget for the years 1999
and 2000, respectively.*
The Company's major businesses are heavily dependent upon
internal computer systems, and all have significant interaction with
systems of third parties, both domestically and internationally. The
Company is working with key external parties, including merchants,
clients, counterparties, vendors, exchanges, utilities, suppliers,
agents and regulatory agencies to mitigate the potential risks to us
of Y2K. As part of our overall compliance program, the Company is
actively communicating with third parties through face-to-face
meetings and correspondence, on an ongoing basis, to ascertain their
state of readiness. Although numerous third parties have indicated to
us in writing that they are addressing their Y2K issues on a timely
basis, the Company does not directly control the remediation efforts
of such parties, and therefore cannot provide assurances that they
will be Y2K compliant. The failure of external parties to resolve
their own Y2K issues in a timely manner could have a material adverse
effct on the Company.*
-10-
<PAGE>
During the third quarter of 1999 our plans for targeted integrated
testing of systems that support our most critical business functions, and
independent validation of such testing, were completed. At this point, the
Company is in the process of finalizing specific Y2K contingency plans and
establishing plans to address our year-end activities related to Y2K. Our
contingency planning effort, which addresses all critical systems and, to a
lesser extent, certain non-critical systems, is a full-scale initiative
that includes both internal and external experts under the guidance of a
Company-wide steering committee. Our contingency plans, which are based in
part on an assessment of the magnitude and probability of potential risks,
primarily focus on proactive steps to prevent Y2K-related failures from
occurring, or if they should occur, detecting them quickly, minimizing
their impact and expediting their repair. The Y2K contingency plans
supplement disaster recovery and business continuity plans already in
place, and include measures such as selecting alternative suppliers and
channels of distribution and setting up manual back-up processes.
Our Y2K contingency plans have been developed generally in
accordance with guidelines established by the Federal Financial
Institutions Examination Council. This effort is divided into four
phases: (i) establishing organizational planning guidelines, (ii)
completing a business impact analysis, (iii) developing the
contingency plans and (iv) validating and verifying the contingency
plans. These phases are to be followed by a detailed year-end plan.*
All four of the above phases have essentially been completed, and have
identified and assessed the need for, and developed, Y2K contingency
plans for the Company's most critical core business functions. Such
functions include, but are not limited to, credit authorization,
Cardmember billing, merchant payment, client investments, funds
transfer, securities settlement and travel reservations. These
contingency plans also address third party systems that the Company's
businesses interface with and rely upon, such as international
telecommunications networks and utilities, global financial payment
and clearing systems, and airline and other travel systems.
Going forward, our primary focus will be on planning year-end
activities related to Y2K.* Such activities include the establishment
of global command centers; scheduling the availability of key
personnel; establishing additional roll-over management procedures,
including proactive monitoring of select critical functions and
assets; the development of Y2K incident tracking and reporting tools;
and the establishment of specific Y2K-related communications.*
Additionally, rehearsals of these year-end activities will be
conducted during the fourth quarter of 1999.*
The Company will continue to refine its contingency and year-end
planning activities throughout 1999 as additional information related
to our exposures is gathered.* To the extent that there are Y2K
failures that affect major internal processes or third party systems
that the Company relies upon, including but not limited to those
described above, such failures could have a material impact on the
Company and its businesses or subsidiaries through business
interruption or shutdown, financial loss, regulatory actions,
reputational damage and legal liability to third parties.* At this
point it appears that some of the major industries in certain
countries outside the United States, such as telecommunications and
utilities, have made less progress in the Y2K compliance effort and,
as a result, may present a somewhat greater exposure to the Company.*
For additional information relating to the Y2K issue, see pages
22 and 23 of the Company's 1998 annual report to shareholders, which
is incorporated by reference in the Company's 1998 10-K report, and
the Company's 10-Q reports for the quarterly periods ended March 31,
1999 and June 30, 1999.
-11-
<PAGE>
* Statements in this Y2K discussion marked with an asterisk are
forward-looking statements which are subject to risks and
uncertainties. Important factors that could cause results to differ
materially from these forward-looking statements include, among other
things, the ability of the Company to successfully identify all
systems containing two-digit codes, the nature and amount of
programming and other resources required to fix and test the affected
systems, the costs of labor and consultants related to such efforts as
well as those involving the development and implementation of
contingency plans, the continued availability of such personnel, the
ability of third parties that interface with the Company to
successfully address their Y2K issues, and the ability of the Company
to assess potential internal and external Y2K exposures and develop
effective contingency plans in connection therewith.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Credco's Condensed Consolidated Balance Sheet at September 30,
1999 and Condensed Consolidated Statement of Income for the nine
months ended September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 563
<SECURITIES> 956
<RECEIVABLES> 21,101
<ALLOWANCES> 612
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,561
<CURRENT-LIABILITIES> 0
<BONDS> 20,249
0
0
<COMMON> 1
<OTHER-SE> 2,161
<TOTAL-LIABILITY-AND-EQUITY> 23,561
<SALES> 0
<TOTAL-REVENUES> 1,545
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<INTEREST-EXPENSE> 822
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