<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-K
____________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 Center, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (302) 594-3350.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------------------- -------------------
6 1/8% Senior Debentures due June 15, 2000 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND
(b) OF FORM 10-K AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN
ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER INSTRUCTION I.
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-
American Express Company, through a wholly-owned subsidiary, owns all of the
outstanding common stock of the Registrant. Accordingly, there is no market for
the Registrant's common stock. At March 30, 2000, 1,504,938 shares were
outstanding.
Documents incorporated by reference: None
<PAGE>
PART I
ITEM 1. BUSINESS.
INTRODUCTION
American Express Credit Corporation (including its subsidiaries, where
appropriate, "Credco") was incorporated in Delaware in 1962 and was acquired by
American Express Company ("American Express") in December 1965. On January 1,
1983, Credco became a wholly-owned subsidiary of American Express Travel Related
Services Company, Inc. (including its subsidiaries, where appropriate, "TRS"), a
wholly-owned subsidiary of American Express.
Credco is primarily engaged in the business of purchasing most charge
Cardmember receivables arising from the use of the American Express(R)
Card, including the American Express(R) Gold Card, Platinum Card(R) and
Corporate Card issued in the United States, and in designated currencies
outside the United States. Credco also purchases certain revolving credit
receivables arising from the use of American Express credit cards (whether
branded the "Optima(R)Card" or otherwise), interest-bearing extended
payment plan Sign & Travel(R) receivables, Special Purchase Account(SM)
receivables which provide for extended payment for certain charges,
interest-bearing equipment financing installment loans and
non-interest-bearing deferred merchandise receivables arising from direct
mail merchandise sales by TRS. The American Express Card and American
Express credit cards are collectively referred to herein as the "Card."
AMERICAN EXPRESS CARD BUSINESS
TRS currently issues the Card in over 50 currencies (including cards issued by
banks and other qualified institutions). The Card, which is issued to individual
consumers for their personal account or through a corporate account established
by their employer for its business purposes, permits Cardmembers to charge
purchases of goods or services in the United States and in most countries around
the world at establishments that have agreed to accept the Card. TRS accepts and
processes from each participating establishment the charges arising from
Cardmember purchases at a discount that varies with the type of participating
establishment, the charge volume, the timing and method of payment to the
establishment, the method of submission of charges, and in certain instances,
the average charge amount and the amount of information provided.
The Charge Card is primarily designed as a method of payment and not as a means
of financing purchases of goods or services and carries no pre-set spending
limit. Charges are approved based on a variety of factors including a
Cardmember's account history, credit record and personal resources. Except in
the case of certain extended payment plans, Charge Cards require payment of the
full amount billed each month from the Cardmember upon receipt of the bill, and
no finance charges are assessed. Charge Card accounts that are past due are
subject, in most cases, to a delinquency assessment and, if not brought to
current status, subject to cancellation. The American Express credit card
comprises a family of revolving credit cards marketed in the United States
and other countries.
The American Express Charge Card and consumer lending businesses are subject to
extensive regulation in the United States under a number of federal laws and
regulations, including the Equal Credit Opportunity Act, which generally
prohibits discrimination in the granting and handling of credit; the Fair Credit
Reporting Act, which, among other things, regulates the use by creditors of
consumer credit reports and credit prescreening practices and requires certain
disclosures when an application for credit is rejected; the Truth in Lending
Act, which, among other things, requires extensive disclosure of the terms upon
which credit is granted; the Fair Credit Billing Act, which, among other things,
regulates the manner in which
1
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billing inquiries are handled and specifies certain billing requirements;
and the Fair Credit and Charge Card Disclosure Act, which mandates
certain disclosures on credit and charge card applications. Recently,
certain federal privacy-related laws were enacted governing the
collection and use of customer information by financial institutions.
Federal legislation also regulates abusive debt collection practices.
In addition, a number of states and foreign countries have similar
consumer credit protection and disclosure laws. The application of
federal and state bankruptcy and debtor relief laws affect Credco to
the extent such laws result in any amounts owed being classified as
delinquent and/or charged off as uncollectible. These laws and
regulations have not had, and are not expected to have, a material
adverse effect on the Charge Card and consumer lending businesses,
either in the United States or on a worldwide basis.
GENERAL NATURE OF CREDCO'S BUSINESS
Credco purchases certain Cardmember receivables arising from the use of the Card
throughout the world pursuant to agreements (the "Receivables Agreements") with
TRS. Net income primarily depends on the volume of receivables arising from the
use of the Card purchased by Credco, the discount rates applicable thereto, the
relationship of total discount to Credco's interest expense and the
collectibility of the receivables purchased. The average life and collectibility
of accounts receivable generated by the use of the Card are affected by factors
such as general economic conditions, overall levels of consumer debt and the
number of new Cards issued.
Credco purchases Cardmember receivables without recourse. Amounts resulting from
unauthorized charges (for example, those made with a lost or stolen Card) are
excluded from the definition of "receivables" under the Receivables Agreements
and are not eligible for purchase by Credco. If the unauthorized nature of the
charge is discovered after purchase by Credco, TRS repurchases the charge from
Credco.
Credco generally purchases non-interest-bearing charge Cardmember receivables at
face amount less a specified discount agreed upon from time to time and
interest-bearing revolving credit Cardmember receivables at face amount. The
Receivables Agreements generally require that non-interest-bearing receivables
be purchased at discount rates which yield to Credco earnings of not less than
1.25 times its fixed charges on an annual basis. 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 rates or significant changes in the collectibility of receivables.
New groups of Cardmember receivables are generally purchased net of reserve
balances applicable thereto.
Extended payment plan receivables are primarily funded by subsidiaries of TRS
other than Credco, although, certain extended payment plan receivables are
purchased by Credco. At December 31, 1999 and 1998, extended payment plan
receivables owned by Credco totaled $2.7 billion and $2.1 billion representing
11.5 percent and 11.1 percent, respectively, of all interests in receivables
owned by Credco. These extended payment plan receivables consist of certain
interest-bearing extended payment plan receivables comprised principally of
American Express credit card and Sign & Travel receivables, Special Purchase
Account receivables, interest-bearing equipment financing installment loans
and non-interest-bearing deferred merchandise receivables arising from direct
mail merchandise sales by TRS.
Credco, through a wholly-owned subsidiary, Credco Receivables Corp. ("CRC"),
purchases gross participation interests in the seller's interest in both
non-interest-bearing and interest-bearing Cardmember receivables owned by two
master trusts formed by TRS as part of its asset securitization programs. The
gross participation interests represent undivided interests in the receivables
originated by TRS and by American Express Centurion Bank, a wholly-owned
subsidiary of TRS. See note 4 in "Notes to Consolidated Financial Statements"
appearing herein.
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The Card issuers, at their expense and as agents for Credco, perform accounting,
clerical and other services necessary to bill and collect all Cardmember
receivables owned by Credco. The Receivables Agreements provide that, without
prior written consent of Credco, the credit standards used to determine whether
a Card is to be issued to an applicant may not be materially reduced and that
the policy as to the cancellation of Cards for credit reasons may not be
materially liberalized.
American Express, as the parent of TRS, has agreed with Credco that it will take
all necessary steps to assure performance of certain of TRS' obligations under
the Receivables Agreements between TRS and Credco. The Receivables Agreements
may be terminated at any time by the parties thereto, generally upon little or
no notice. Alternatively, such parties may agree to reduce the required 1.25
fixed charge coverage ratio, which could result in lower discount rates and,
consequently, lower revenues and net income for Credco. The obligations of
Credco are not guaranteed under the Receivables Agreements or otherwise by
American Express or the Card issuers.
Credco, to date, has not experienced any material systems failures related to
the Year 2000 ("Y2K") rollover. Credco will continue its Y2K monitoring and
address any issues that may arise from internal systems or those of third
parties.
VOLUME OF BUSINESS
<TABLE>
<CAPTION>
The following table shows the volume of Cardmember receivables purchased by
Credco, net of Cardmember receivables sold to affiliates, during each of the
years indicated, together with receivables owned by Credco at the end of such
years (millions):
Volume of Cardmember Cardmember Receivables Owned
Receivables Purchased at December 31,
Year Domestic Foreign Total Domestic Foreign Total
---- -------- ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
1999 $131,849 $41,822 $173,671 $18,478 $4,985 $23,463
1998 116,957 38,105 155,062 15,198 4,043 19,241
1997 108,573 37,030 145,603 15,581 4,028 19,609
1996 100,512 35,299 135,811 13,530 3,829 17,359
1995 91,299 30,638 121,937 13,179 3,260 16,439
</TABLE>
The Card business does not experience significant seasonal fluctuation, although
Card billed business tends to be moderately higher in the fourth quarter than in
other quarters.
TRS' asset securitization programs disclosed above have reduced the volume of
domestic Cardmember receivables purchased and the amount owned by Credco.
The average life of Cardmember receivables owned by Credco for each of
the five years ended December 31 (based upon the ratio of the average amount
of both billed and unbilled receivables owned by Credco at the end of each
month during the years indicated to the volume of Cardmember receivables
purchased by Credco) were:
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<TABLE>
<CAPTION>
Average Life of Cardmember
Year Receivables (in days)
---- ---------------------
<S> <C> <C>
1999 42
1998 43
1997 43
1996 43
1995 43
</TABLE>
<TABLE>
<CAPTION>
The following table shows the aging of billed, non-interest-bearing charge
Cardmember receivables:
December 31,
1999 1998
---- ----
<S> <C> <C>
Current 82.4% 79.4%
30 to 59 days 12.6 15.2
60 to 89 days 2.1 2.4
90 days and over 2.9 3.0
</TABLE>
LOSS EXPERIENCE
Credco generally writes off against its reserve for doubtful accounts the total
balance in an account for which any portion remains unpaid twelve months from
the date of original billing for non-interest-bearing Charge Card receivables
and after six contractual payments are past due for interest-bearing revolving
credit receivables. Accounts are written off earlier if deemed uncollectible.
<TABLE>
<CAPTION>
The following table sets forth Credco's write-offs, net of recoveries, expressed
in millions and as a percentage of the volume of Cardmember receivables
purchased by Credco in each of the years indicated:
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Write-offs, net of recoveries $616 $647 $615 $630 $508
% of net Cardmember
receivables purchased .35% .42% .42% .46% .42%
</TABLE>
SOURCES OF FUNDS
Credco's business is financed by short-term borrowings consisting principally of
commercial paper, borrowings under bank lines of credit and issuances of medium-
and long-term debt, as well as through operations. The weighted average interest
costs on an annual basis of all borrowings, after giving effect to commitment
fees under lines of credit and the impact of interest rate swaps, during the
following years were:
<TABLE>
<CAPTION>
Weighted Average
Year Interest Cost
---- -------------
<S> <C> <C>
1999 5.16%
1998 5.66
1997 5.66
1996 5.67
1995 6.30
</TABLE>
4
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From time to time, American Express and certain of its subsidiaries purchase
Credco's commercial paper at prevailing rates, enter into variable rate note
agreements at interest rates generally above the 13-week treasury bill rate and
provide lines of credit. The largest amount of borrowings from American Express
or its subsidiaries at any month end during the five years ended December 31,
1999 was $5.8 billion. At December 31, 1999, the amount borrowed was $2.4
billion. See notes 5 and 6 in "Notes to Consolidated Financial Statements"
appearing herein for information about Credco's debt, including Credco's
lines of credit from various banks and long-term debt.
FOREIGN OPERATIONS
See notes 2, 8 and 11 in "Notes to Consolidated Financial Statements" appearing
herein for information about Credco's foreign exchange risks and operations in
different geographical regions.
EMPLOYEES
At December 31, 1999, Credco had 28 employees.
ITEM 2. PROPERTIES.
Credco neither owns nor leases any material physical properties.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which Credco or its
subsidiaries is a party or of which any of their property is the subject. Credco
knows of no such proceedings being contemplated by government authorities or
other parties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
American Express, through a wholly-owned subsidiary, TRS, owns all of the
outstanding common stock of Credco. Therefore, there is no market for Credco's
common stock.
For information about limitations on Credco's ability to pay dividends, see note
7 in "Notes to Consolidated Financial Statements" appearing herein.
5
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
The following summary of certain consolidated financial information of Credco
was derived from audited financial statements for the five years ended December
31:
($ in millions) 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues 2,168 2,214 2,064 2,166 1,988
Interest expense 1,130 1,190 1,125 1,117 1,054
Provision for doubtful
accounts, net of
recoveries 672 632 584 712 625
Income tax provision 120 128 114 115 105
Net income 223 237 212 215 197
BALANCE SHEET DATA
Accounts receivable 23,463 19,241 19,609 17,359 16,439
Reserve for doubtful
accounts (684) (597) (633) (638) (624)
Total assets 27,262 23,650 23,053 20,165 20,192
Short-term debt 20,231 17,528 16,582 14,537 14,202
Current portion of
long-term debt 550 353 4 211 409
Long-term debt 2,575 3,053 3,264 2,469 2,673
Shareholder's equity 2,061 1,994 1,907 1,845 1,780
Cash dividends 150 150 150 150 150
</TABLE>
6
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Credco's receivables portfolio consists of Charge Card receivables and revolving
credit receivables purchased without recourse from TRS throughout the world and
participation interests purchased without recourse in the seller's interest in
both non-interest-bearing and interest-bearing Cardmember receivables. These
participation interests are owned by two master trusts formed by TRS as part of
its asset securitization programs. At December 31, 1999 and 1998, respectively,
Credco owned $20.8 billion and $17.1 billion of Charge Card receivables and
participation in Charge Card receivables, representing 88.5 percent and 88.9
percent, respectively, of the total receivables owned. Revolving credit
receivables, representing 11.5 percent and 11.1 percent of the total receivables
owned, were $2.7 billion and $2.1 billion at December 31, 1999 and 1998,
respectively.
As part of Credco's business of funding receivables, Credco made
variable rate loans to American Express Centurion Bank ("Centurion
Bank"), a wholly-owned subsidiary of TRS, which were secured by Optima
receivables owned by Centurion Bank. At December 31, 1999, there were no
such loans outstanding. At December 31, 1998, $2.3 billion of such loans
were outstanding. The loan agreements required Centurion Bank to maintain,
as collateral, Optima receivables equal to the outstanding loan balance
plus an amount equal to three times the receivable reserve applicable to
such Optima receivables.
Credco's assets are financed through a combination of short-term debt, long-term
senior notes, equity capital and retained earnings. Daily funding requirements
are met primarily by the sale of commercial paper. Credco has readily sold the
volume of commercial paper necessary to meet its funding needs as well as to
cover the daily maturities of commercial paper issued. The average amount of
commercial paper outstanding was $16.5 billion for 1999 and $15.2 billion for
1998.
An alternate source of borrowing consists of committed credit line facilities.
The aggregate commitment of these facilities is generally maintained at 50
percent of short-term debt, net of short-term investments and cash equivalents.
In 1999, Credco renegotiated its credit facilities, increasing available credit
lines by $1 billion. Committed credit line facilities at December 31, 1999 and
1998 totaled $9 billion and $8 billion, respectively. In addition, Credco,
through its wholly-owned subsidiary, American Express Overseas Credit
Corporation Limited ("AEOCC"), had short-term borrowings under uncommitted lines
of credit totaling $36 million and $68 million at December 31, 1999 and 1998,
respectively.
During 1999, 1998 and 1997, Credco's average long-term debt outstanding was $3.1
billion, $3.4 billion and $2.9 billion, respectively. At December 31, 1999,
Credco had approximately $2.4 billion of medium- and long-term debt and warrants
available for issuance under shelf registrations filed with the Securities and
Exchange Commission. In addition, at December 31, 1999, Credco had the ability
to issue $1.4 billion of debt under a 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, TRS, AEOCC, Centurion Bank 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 $3.0 billion.
Credco paid dividends of $150 million to TRS in both December 1999 and 1998.
7
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In 1998, Credco issued $150 million 1 1/8% Cash Exchangeable Notes due
February 2003. These notes were exchangeable for an amount in cash which
was linked to the price of the common shares of American Express. Credco had
entered into agreements to fully hedge its obligations. Credco exercised
its right to call these notes in February 2000. Accordingly, the related
hedging agreements were called at the same time.
In 1999, the American Express Credit Account Master Trust (the "Master Trust")
issued an additional $4.0 billion of loans through the public issuances of two
classes of investor certificates and privately placed collateral interests in
the assets of the Master Trust. At the time of these issuances, CRC sold $253
million of gross seller's interest ($247 million, net of reserves) to American
Express Receivables Financing Corporation II ("RFCII"), a wholly-owned
subsidiary of TRS. In addition, in 1999, CRC purchased $350 million of Class C
Certificates issued by the Master Trust.
In February 2000, the Master Trust securitized an additional $1.0 billion of
loans. At the time of these issuances, CRC sold $66 million of gross seller's
interest ($65 million, net of reserves) to RFCII. In addition, CRC purchased
$85 million of Class C Certificates.
In 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 1999.
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 was 1.30 in 1999, 1.31 in 1998 and 1.29 in
1997. 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. The average life of
Cardmember receivables was 42 days for the year ended December 31, 1999 and 43
days for each of the years ended December 31, 1998 and 1997.
Credco's revenues decreased in 1999 primarily due to lower interest income from
affiliates as a result of a decrease in the volume of average investments
outstanding and interest rates. Interest expense decreased in 1999 primarily due
to a decrease in interest rates. Provision for doubtful accounts increased in
1999 reflecting a higher volume of receivables purchased.
8
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<TABLE>
<CAPTION>
The following is a further analysis of the increase (decrease) in key revenue
and expense accounts (millions):
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue earned from purchased accounts
receivable-changes attributable to:
Volume of receivables purchased $ 230 $ 97 $ 157
Discount and interest rates (222) 40 (214)
----- ----- -----
Total $ 8 $ 137 $ (57)
===== ===== =====
Interest income from affiliates-changes
attributable to:
Volume of average investments outstanding $ (54) $ $11 $9
Interest rates (6) (4) 4
----- ----- -----
Total $ (60) $ 7 $ 13
===== ===== =====
Interest income from investments-changes
attributable to:
Volume of average investments outstanding $ 13 $ 6 $ (65)
Interest rates (6) 0 6
----- ----- -----
Total $7 $ 6 $ (59)
===== ===== =====
Interest expense affiliates-changes
attributable to:
Volume of average debt outstanding $ (9) $(14) $ 37
Interest rates (10) (1) 8
----- ----- -----
Total $ (19) $ (15) $ 45
===== ===== =====
Interest expense other-changes
attributable to:
Volume of average debt outstanding $59 $ 79 $ (31)
Interest rates (100) 1 (6)
----- ----- -----
Total $ (41) $ 80 $ (37)
===== ===== =====
Provision for doubtful accounts-changes
attributable to:
Volume of receivables purchased $ 95 $ 50 $ 65
Provision rates and volume of recoveries (55) (2) (193)
----- ----- -----
Total $ 40 $ 48 $(128)
===== ===== =====
</TABLE>
ACCOUNTING DEVELOPMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2001. This Statement
establishes accounting and reporting standards for derivative instruments,
including some embedded in other contracts, and hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities on the
balance sheet and measure them at fair value. Changes in the fair value of a
derivative will be recorded in income or directly to equity, depending on the
instrument's designated use. The ultimate financial effect of the new rule will
be measured based on the derivatives in place at adoption and cannot be
estimated at this time.
9
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
American Express management establishes and oversees implementation of
Board-approved policies covering its funding, investments and use of derivative
financial instruments and monitors aggregate risk exposures on an ongoing basis.
The objective is to realize returns commensurate with the level of risk assumed
while achieving consistent earnings growth. See note 8 in "Notes to Consolidated
Financial Statements" appearing herein for a discussion of Credco's use of
derivatives.
The following sections include sensitivity analyses of two different tests of
market risk and estimate the effects of hypothetical sudden and sustained
changes in the applicable market conditions on the ensuing year's earnings,
based on year-end positions. The market changes, assumed to occur as of
year-end, are a 100 basis point increase in market interest rates and a 10
percent strengthening of the U.S. dollar versus all other currencies.
Computations of the prospective effects of hypothetical interest rate and
foreign exchange rate changes are based on numerous assumptions, including
relative levels of market interest rates and foreign exchange rates, as well
as the levels of assets and liabilities. The hypothetical changes and
assumptions will be different from what actually occurs in the future.
Furthermore, the computations do not incorporate actions that management could
take if the hypothetical market changes actually occur. As a result, actual
earnings consequences will differ from those quantified below.
Credco's hedging policies are established, maintained and monitored by a central
treasury function. Credco generally manages its exposures along product lines. A
variety of interest rate and foreign exchange hedging strategies are employed to
manage interest rate and foreign currency risks.
Credco funds its Charge Card receivables and Cardmember loans using
on-balance sheet funding sources such as long- and short-term debt, medium-term
notes and commercial paper and other debt. For Credco's Charge Card and fixed
rate lending products, interest rate exposure is managed through the issuance of
long- and short-term debt and the use of interest rate swaps. During 1998,
Credco targeted the funding mix for these products to be approximating 100
percent floating rate and purchased interest rate caps to limit the adverse
effect of an interest rate increase on substantially all U.S. dollar funding
costs. The majority of these caps matured during 1998. In early 1999, Credco
entered into a series of interest rate swaps to convert a majority of its
domestic funding from floating rate to fixed rate. During the second half of
1999 and in early 2000, Credco entered into additional swaps. The effect of
these additional swaps was to increase the amount of fixed rate funding.
For the majority of Credco's Cardmember loans, which are linked to a floating
rate base and generally reprice each month, Credco generally uses floating rate
funding and, to the extent necessary, enters into interest rate swaps to achieve
funding rates that reprice similarly with changes in the base rate of the
underlying loans.
The detrimental effect on Credco's pretax earnings of a hypothetical 100 basis
point increase in interest rates would be approximately $92 million and $115
million, based on 1999 and 1998 year-end positions, respectively. This effect is
primarily due to the extent of variable rate funding of the Charge Card and
fixed rate lending products. The reduction from 1998 to 1999 is primarily due to
interest rate swaps purchased beginning in early 1999. Had the swaps entered
into in early 1999 been in effect at December 31, 1998, the 1998 effect would
have been substantially lower. Had the series of swaps entered into in early
2000 been in effect at December 31, 1999, the 1999 effect would also have been
substantially lower.
Credco's foreign exchange risk arising from cross-currency charges and balance
sheet exposures is managed primarily by entering into agreements to buy and sell
currencies on a spot or forward basis.
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Based on the year-end 1999 and 1998 foreign exchange positions, the effect on
Credco's earnings of the hypothetical 10 percent strengthening of the U.S.
dollar would be immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements.
See "Index to Financial Statements" at page F-1 hereof.
2. Supplementary Financial Information.
Selected quarterly financial data. See note 12 in
"Notes to Consolidated Financial Statements" appearing herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
See "Index to Financial Statements" at page F-1 hereof.
2. Financial Statement Schedule:
See "Index to Financial Statements" at page F-1 hereof.
3. Exhibits:
See "Exhibit Index" hereof.
(b) Reports on Form 8-K:
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 March 30, 2000 By /s/ Walker C. Tompkins, Jr.
------------------------------- -------------------------------
Walker C. Tompkins, Jr.
President and Chief Executive
Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities on the dates indicated.
DATE March 30, 2000 By /s/ Walker C. Tompkins, Jr.
------------------------------- ----------------------------------
Walker C. Tompkins, Jr.
President and Chief Executive
Officer
DATE March 30, 2000 /s/ Erich Komdat
------------------------------- ----------------------------------
Erich Komdat
Vice President, Chief Accounting
Officer
DATE March 30, 2000 /s/ Richard K. Goeltz
------------------------------- ----------------------------------
Richard K. Goeltz
Chairman of the Board
and Director (principal
financial officer)
DATE March 30, 2000 /s/ Kim D. Rosenberg
------------------------------- ----------------------------------
Kim D. Rosenberg
Director
DATE March 30, 2000 /s/ Jay B. Stevelman
------------------------------- ----------------------------------
Jay B. Stevelman
Director
13
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14 (a))
Page Number
-----------
FINANCIAL STATEMENTS:
Report of independent auditors F - 2
Consolidated statements of income for each of the three
years ended December 31, 1999, 1998 and 1997 F - 3
Consolidated balance sheets at December 31, 1999 and 1998 F - 4
Consolidated statements of cash flows for each of the
three years ended December 31, 1999, 1998 and 1997 F - 5
Consolidated statements of shareholder's equity for each
of the three years ended December 31, 1999, 1998 and 1997 F - 6
Notes to consolidated financial statements F - 7 to F - 17
SCHEDULE:
II - Valuation and qualifying accounts for each of the
three years ended December 31, 1999, 1998 and 1997 F - 18
All other schedules are omitted since the required information is not present or
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Express Credit Corporation
We have audited the accompanying consolidated balance sheets of American Express
Credit Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholder's equity and cash flows for each
of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements and schedule are the responsibility of the management
of American Express Credit Corporation. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Express
Credit Corporation at December 31, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ Ernst & Young LLP
New York, New York
February 3, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(millions)
Years Ended December 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues
Revenue earned from purchased
accounts receivable $1,901 $1,893 $1,756
Interest income from affiliates 120 180 173
Interest income from investments 143 136 130
Other income 4 5 5
----- ----- -----
Total 2,168 2,214 2,064
===== ===== =====
Expenses
Interest expense - affiliates 145 164 179
Interest expense - other 985 1,026 946
Provision for doubtful accounts,
net of recoveries of $172, $168
and $183 672 632 584
Other expenses 23 27 29
----- ----- -----
Total 1,825 1,849 1,738
===== ===== =====
Income before taxes 343 365 326
Income tax provision 120 128 114
----- ----- -----
Net income $223 $237 $212
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(millions)
December 31, 1999 1998
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $1,102 $648
Investments 947 353
Accounts receivable 23,463 19,241
Less: reserve for doubtful accounts 684 597
------ ------
22,779 18,644
Loans and deposits with affiliates 1,461 3,353
Deferred charges and other assets 973 652
------ ------
Total assets $27,262 $23,650
====== ======
Liabilities and Shareholder's Equity
Short-term debt with affiliates $1,494 $1,261
Short-term debt - other 18,737 16,267
Current portion of long-term debt 550 353
Long-term debt with affiliate 910 910
Long-term debt - other 1,665 2,143
------ ------
Total debt 23,356 20,934
Due to affiliates 1,459 425
Accrued interest and other liabilities 248 182
------ ------
Total liabilities 25,063 21,541
====== ======
Deferred discount revenue 138 115
------ ------
Shareholder's Equity
Common stock - authorized 3,000,000
shares of $.10 par value; issued
and outstanding 1,504,938 shares 1 1
Capital surplus 161 161
Retained earnings 1,905 1,832
Other comprehensive income, net of tax:
Net unrealized securities losses (6) -
------- ------
Total shareholder's equity 2,061 1,994
======= ======
Total liabilities and shareholder's equity $27,262 $23,650
======= ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $223 $237 $212
Adjustments to reconcile net income to
net cash and cash equivalents provided
by operating activities:
Provision for doubtful accounts,
net of recoveries 672 632 584
Amortization of deferred underwriting
fees and bond discount/premium 1 5 -
Changes in operating assets and
liabilities:
(Increase) decrease in deferred tax
assets (17) (28) 43
Increase in interest receivable and
other operating assets (43) (33) (12)
(Decrease) increase in due to
affiliates (15) 52 8
Increase in accrued interest and
other liabilities 83 42 18
Increase (decrease) in deferred
discount revenue 23 (2) 17
------ ------ ------
Net cash and cash equivalents provided
by operating activities 927 905 870
====== ====== ======
Cash Flows From Investing Activities:
Increase in accounts receivable (4,976) (1,261) (2,694)
Recoveries of accounts receivable
previously written off 172 168 183
Purchase of investments (641) (153) (247)
Maturity of investments 36 17 29
Sale of investments 2 - -
Purchase of participation interest in
seller's interest in accounts
receivable from an affiliate (959) (312) (728)
Sale of participation interest in
seller's interest in accounts
receivable to an affiliate 247 1,120 95
Sale of net accounts receivable to an
affiliate 586 - 219
Decrease (increase) in loans and
deposits due from affiliates 1,892 (201) (300)
Increase (decrease) in due to affiliates 962 (949) 192
------ ------ ------
Net cash and cash equivalents used in
investing activities (2,679) (1,571) (3,251)
====== ====== ======
Cash Flows From Financing Activities:
Net increase (decrease) in short-term
debt with affiliates with maturities
less than ninety days 233 (510) 496
Net increase in short-term debt - other
with maturities less than ninety days 350 795 3,271
Proceeds from issuance of debt 10,426 5,492 8,027
Redemption of debt (8,653) (4,687) (9,156)
Dividend paid to TRS (150) (150) (150)
------ ------ ------
Net cash and cash equivalents provided
by financing activities 2,206 940 2,488
------ ------ ------
Net increase in cash and cash
equivalents 454 274 107
------ ------ ------
Cash and cash equivalents at beginning
of year 648 374 267
------ ------ ------
Cash and cash equivalents at end of year $1,102 $648 $374
------ ------ ------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Years Ended December 31, 1999, 1998 and 1997
(millions)
Accumulated
Total Other
Shareholder's Common Capital Comprehensive Retained
Equity Stock Surplus Losses Earnings
------------ ----- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 $1,845 $1 $161 $ - $1,683
Comprehensive income:
Net income 212 212
---
Total comprehensive income 212
Dividend to TRS (150) - - - (150)
------ --- ---- --- ------
Balances at December 31, 1997 1,907 1 161 - 1,745
Comprehensive income:
Net income 237 237
------
Total comprehensive income 237
Dividend to TRS (150) - - - (150)
------ --- ---- --- ------
Balances at December 31, 1998 1,994 1 161 - 1,832
Comprehensive income:
Net income 223 223
Change in net unrealized
securities losses (6) (6)
------
Total comprehensive income 217
Dividend to TRS (150) - - - (150)
------ --- ---- --- ------
Balances at December 31, 1999 $2,061 $1 $161 $(6) $1,905
====== === ==== === ======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
American Express Credit Corporation together with its subsidiaries ("Credco") is
a wholly-owned subsidiary of American Express Travel Related Services Company,
Inc. ("TRS"), which is a wholly-owned subsidiary of American Express Company
("American Express"). American Express Overseas Credit Corporation Limited
together with its subsidiaries ("AEOCC") and Credco Receivables Corp. ("CRC")
are wholly-owned subsidiaries of Credco.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Credco and all its subsidiaries. All significant intercompany transactions have
been eliminated. Certain prior year amounts have been reclassified to conform
to the current year presentation.
USE OF ESTIMATES AND ASSUMPTIONS
Credco's financial statements include amounts determined using estimates and
assumptions. For example, estimates and assumptions are used in determining the
reserves related to accounts receivable. While these estimates are based on the
best judgment of management, actual results could differ from these estimates.
REVENUE EARNED FROM PURCHASED ACCOUNTS RECEIVABLE
A portion of discount revenue earned on purchases of non-interest-bearing
Cardmember receivables equal to the provision for doubtful accounts is
recognized as revenue at the time of purchase; the remaining portion is deferred
and recorded as revenue ratably over the period that the receivables are
outstanding.
Finance charge income on interest-bearing extended payment plan receivables is
recognized as it is earned. Credco ceases accruing this income after six
contractual payments are past due, or earlier, if deemed uncollectible. Accruals
that cease generally are not resumed.
RESERVE FOR DOUBTFUL ACCOUNTS
The reserve for doubtful accounts is based on historical collection experience
and evaluation of the current status of existing receivable balances. Credco
generally writes off against its reserve for doubtful accounts the total balance
in an account for which any portion remains unpaid twelve months from the date
of original billing for non-interest-bearing Cardmember receivables and after
six contractual payments are past due for interest-bearing Cardmember
receivables. Accounts are written off earlier if deemed uncollectible.
INVESTMENTS
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.
F-7
<PAGE>
Available for sale securities are stated at fair value, with the unrealized
gains and losses included in shareholder's equity.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of financial instruments are estimates based upon current market
conditions and perceived risks at December 31, 1999 and 1998 and require varying
degrees of management judgment. The fair values of the financial instruments
presented may not be indicative of their future fair values.
The fair values of investments, long-term debt and derivative instruments are
included in the related footnotes. For all other financial instruments, the
carrying amounts in the consolidated balance sheets approximate the fair values.
INTEREST RATE TRANSACTIONS
Credco enters into various interest rate agreements as a means of managing its
interest rate exposure. Interest rates charged on consumer lending receivables
are linked to a floating rate base and generally reprice monthly. Credco
generally uses floating rate funding and, to the extent necessary, enters into
interest rate swaps to achieve funding rates that reprice similarly with changes
in the base rate of the underlying loans. These interest rate agreements which
modify the terms of an underlying debt obligation are accounted for by recording
interest expense using the revised interest rate with any fees or other payments
amortized as yield adjustments. It is Credco's normal practice not to terminate,
sell or dispose of interest rate agreements or the underlying debt to which the
agreements are designated prior to maturity. In the event Credco terminates,
sells or disposes of an agreement prior to maturity, the gain or loss would be
deferred and recognized as an adjustment of yield over the remaining life of the
underlying debt.
FOREIGN CURRENCY
Foreign currency assets and liabilities are translated into their U.S. dollar
equivalents based on rates of exchange prevailing at the end of each year.
Revenue and expense accounts are translated at exchange rates prevailing during
the year. Credco enters into various foreign exchange contracts as a means of
managing foreign exchange exposure.
CASH AND CASH EQUIVALENTS
Credco has defined cash and cash equivalents as cash and short-term investments
with a maturity of ninety days or less at the time of purchase.
ACCOUNTING CHANGE
Credco adopted AICPA Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," prospectively as
of January 1, 1999. This SOP requires the capitalization of certain costs
incurred after the date of adoption to develop or obtain software for internal
use. Credco's policy had been to expense such costs as incurred. The amounts
capitalized are amortized on a straight-line basis over a period not to exceed
five years. The adoption of SOP 98-1 had no material effect on Credco for the
year ended December 31, 1999.
F-8
<PAGE>
3. INVESTMENTS
At December 31, 1999 and 1998, Credco held $229 million and $258 million,
respectively, 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 December 31, 1999 and 1998,
was $225 million and $267 million, respectively.
Available for sale securities are stated at fair value, with the unrealized
gains and losses included in shareholder's equity. At December 31, 1999 and
1998, 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 December 31, 1999 and 1998 was
$445 million and $95 million, respectively. 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. The book
value and fair value of these available for sale securities as of December 31,
1999 was $281 million and $273 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
demands or funding sources and terms.
The change in net unrealized securities losses recognized in Other Comprehensive
Income includes two components: (1) unrealized gains (losses) that arose during
the period from changes in market value of securities that were held during the
period (holding gains (losses)), and (2) gains or losses that were previously
unrealized, but have been recognized in the current period net income due to
sales of available for sale securities (reclassification for realized gains).
This reclassification has no effect on total Comprehensive Income or
Shareholder's Equity. For the year ended December 31, 1999, the components of
other comprehensive losses were $6.0 million in holding losses and $0.3 million
in realized losses (net of tax).
4. ACCOUNTS RECEIVABLE
At December 31, 1999 and 1998, respectively, Credco owned $20.8 billion and
$17.1 billion of Charge Card receivables and participation in Charge Card
receivables, representing 88.5 percent and 88.9 percent, respectively, of the
total receivables owned. In connection with TRS' securitization program for U.S.
charge Cardmember receivables, CRC purchases from American Express Receivables
Financing Corporation ("RFC"), a wholly-owned subsidiary of TRS, a participation
interest in RFC's seller's interest in the receivables owned by the American
Express Master Trust (the "Trust"), which was formed in 1992 to securitize U.S.
charge Cardmember receivables. The gross participation interests represent
undivided interests in the receivables conveyed to the Trust by RFC. In 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. In addition, $29 million of Class B Certificates owned
by CRC matured in 1999. At December 31, 1999 and 1998, Credco owned
approximately $4.0 billion and $2.9 billion, respectively, of participation
interests in receivables owned by the Trust, representing 16.9 percent and 14.9
percent, respectively, of its total accounts receivable.
At December 31, 1999 and 1998, Credco owned extended payment plan receivables
totaling $2.7 billion and $2.1 billion, respectively, including revolving credit
loans purchased directly from American Express Centurion Bank ("Centurion
Bank"), a wholly-owned subsidiary of TRS, representing 11.5 percent and 11.1
percent, respectively, of its total interests in accounts receivable. The
extended payment plan receivables owned at December 31, 1999 and 1998 include
$465 million and $154 million, respectively, of participation
F-9
<PAGE>
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"),
formed by Centurion Bank in 1996 to securitize revolving credit loans. In
1999, the Master Trust issued an additional $4.0 billion of loans through
the public issuances of two classes of investor certificates and privately
placed collateral interests in the assets of the Master Trust. At the time
of these issuances, CRC sold $253 million of gross seller's interest ($247
million, net of reserves) to American Express Receivables Financing
Corporation II ("RFCII"), a wholly-owned subsidiary of TRS. In addition, in
1999, CRC purchased $350 million of Class C Certificates issued by the
Master Trust.
In February 2000, the Master Trust securitized an additional $1.0 billion of
loans. At the time of these issuances, CRC sold $66 million of gross seller's
interest ($65 million, net of reserves) to RFCII. In addition, CRC purchased
$85 million of Class C Certificates.
<TABLE>
<CAPTION>
5. SHORT-TERM DEBT
At December 31, short-term debt consisted of (millions):
1999 1998
---- ----
<S> <C> <C>
Commercial paper $18,471 $16,064
Borrowings from affiliates 1,494 1,261
Borrowings under lines of credit 36 68
Borrowing agreements with bank trust
departments and others 230 135
------- -------
Total short-term debt $20,231 $17,528
------- -------
</TABLE>
Credco has various facilities available to obtain short-term credit, including
the issuance of commercial paper and agreements with banks.
In 1999, Credco renegotiated its credit line facilities, increasing available
credit lines by $1 billion. Credco had committed credit line facilities
totaling $9 billion and $8 billion at December 31, 1999 and 1998, respectively.
Credco pays fees to the financial institutions that provide these credit line
facilities. The fair value of the unused lines of credit is not significant at
December 31, 1999 and 1998.
At December 31, 1999 and 1998, Credco, through AEOCC, had short-term borrowings
under uncommitted lines of credit totaling $36 million and $68 million,
respectively.
Credco's annual weighted average short-term interest rate was 5.12 percent, 5.62
percent and 5.60 percent for the years ended December 31, 1999, 1998 and 1997,
respectively. These rates include the cost of maintaining credit line facilities
for the periods and the impact of interest rate swaps. At December 31, 1999,
$4.9 billion of short-term debt outstanding was modified by interest rate swaps,
resulting in a year-end weighted average effective interest rate of 5.04
percent.
Credco paid $962 million, $977 million and $940 million of interest on
short-term debt obligations in 1999, 1998 and 1997, respectively.
F-10
<PAGE>
<TABLE>
<CAPTION>
6. LONG-TERM DEBT
1999
----
Year-End
Notional Stated Rate
December 31, (millions) Outstanding Amount of on Debt
Balance Swaps (a,b)
---------- -------- -------
<S> <C> <C> <C>
Senior notes due 2000-2005 $1,199 $1,200 6.34%
Variable rate debt with
American Express due 2004 910 - 5.84%
Medium-term fixed rate notes due 2002 400 400 6.50%
Medium-term variable rate notes due 400 400 6.26%
2002
Exchangeable notes due 2003 214 150 1.13%
Swiss franc notes due 2002-2003 1 - 5.13%
Other senior notes due 2006-2017 1 - 5.94%
Net unamortized bond discount - - -
------ ------ -----
Total long-term debt $3,125 $2,150
====== ======
</TABLE>
<TABLE>
<CAPTION>
1999
----
Year-End
Effective
Interest
December 31, Rate with Maturity
Swaps (a,b) of Swaps
----------- --------
<S> <C> <C>
Senior notes due 2000-2005 6.41% 2000-2005
Variable rate debt with
American Express due 2004 - -
Medium-term fixed rate notes due 2002 6.06% 2002
Medium-term variable rate notes due 6.51% 2002
2002
Exchangeable notes due 2003 6.11% 2003
Swiss franc notes due 2002-2003 - -
Other senior notes due 2006-2017 - -
Net unamortized bond discount - -
---- -----
Total long-term debt
</TABLE>
<TABLE>
<CAPTION>
1998
----
Year-End
Notional Stated Rate
December 31, (millions) Outstanding Amount of on Debt
Balance Swaps (a,b)
------- ----- -------
<S> <C> <C> <C>
Senior notes due 2000-2005 $1,548 $1,550 6.69%
Variable rate debt with
American Express due 2004 910 - 5.11%
Medium-term fixed rate notes due 2002 400 400 6.50%
Medium-term variable rate notes due 399 399 5.27%
2002
Exchangeable notes due 2003 143 150 1.13%
Swiss franc notes due 2002-2003 5 - 3.87%
Other senior notes due 2006-2017 2 - 7.40%
Net unamortized bond discount (1) - -
------ ------ -----
Total long-term debt $3,406 $2,499
====== ======
(a) For floating rate debt issuances, the stated and effective interest rates
were based on the respective rates at December 31, 1999 and 1998; these rates
are not an indication of future interest rates.
(b) Weighted average rates were determined where appropriate.
</TABLE>
The above table includes the current portion of long-term debt of $550 million
and $353 million at December 31, 1999 and 1998, respectively.
The book value of variable rate long-term debt that reprices within a year
approximates fair value. The fair value of other long-term debt is based on
quoted market price or discounted cash flow. The aggregate fair value of
long-term debt, including the current portion outstanding at December 31, 1999
and 1998, was $3.1 billion and $3.5 billion, respectively.
Aggregate annual maturities of long-term debt for the five years ending
December 31, 2004 are as follows (millions): 2000 - $550; 2001 - $550; 2002 -
$800; 2003 - $214; 2004 - $910.
In 1998, Credco issued $150 million 1 1/8% Cash Exchangeable Notes due
February 2003. These notes were exchangeable for an amount in cash which
was linked to the price of the common shares of American Express. Credco
had entered into agreements to fully hedge its obligations. Credco
exercised its right to call these notes in February 2000. Accordingly, the
related hedging agreements were called at the same time.
Credco paid $175 million in 1999, $209 million in 1998 and $192 million in 1997
of interest on long-term debt obligations.
7. RESTRICTIONS AS TO DIVIDENDS AND LIMITATIONS ON INDEBTEDNESS
The most restrictive limitation on dividends imposed by the debt instruments
issued by Credco is the requirement that Credco maintain a minimum consolidated
net worth of $50 million. There are no limitations on the amount of debt that
can be issued by Credco.
8. DERIVATIVE INSTRUMENTS
Credco uses derivative financial instruments for nontrading purposes to manage
its exposure to interest and foreign exchange rates, financial indices and
funding costs.
F-11
<PAGE>
There are a number of risks associated with derivatives. Market risk is the
possibility that the value of the derivative financial instrument will change.
Credco is not exposed to market risk related to derivatives held for nontrading
purposes beyond that inherent in cash market transactions. Credco does not enter
into derivative contracts with features that would leverage or multiply its
market risk. Credit risk related to derivatives and other off-balance sheet
financial instruments is the possibility that the counterparty will not fulfill
the terms of the contract. It is monitored through established approval
procedures, including setting concentration limits by counterparty and country,
reviewing credit ratings and requiring collateral where appropriate. A
significant portion of Credco's transactions are with counterparties rated A or
better by nationally recognized credit rating agencies. Credco also uses master
netting agreements which allows Credco to settle multiple contracts with a
single counterparty in one net receipt or payment in the event of counterparty
default.
At December 31, 1999 and 1998, the aggregate notional amount of Credco's
derivative instruments was $15.7 billion ($348 million with affiliates) and $9.5
billion ($360 million with affiliates), respectively. Credit risk approximates
the fair value of contracts in a gain position (asset) and totaled $127 million
($0.4 million with affiliates) at December 31, 1999 and $101 million ($1.7
million with affiliates) at December 31, 1998. The fair value represents the
replacement cost and is determined by market values, dealer quotes or pricing
models.
<TABLE>
<CAPTION>
The following tables detail information regarding Credco's derivatives
(millions):
Notional Carrying Value Fair Value
December 31, 1999 Amount Asset Liability Asset Liability
- ----------------- ------ ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
Interest rate products $12,930 $53 $55 $123 $96
Forward contracts 2,767 29 3 4 27
------ ------ ------ ------ ------
Total $15,697 $82 $58 $127 $123
------ ------ ------ ------ ------
Notional Carrying Value Fair Value
December 31, 1998 Amount Asset Liability Asset Liability
- ----------------- ------ ----- --------- ----- ---------
Interest rate products $7,505 $68 $52 $83 $83
Forward contracts 2,037 12 3 18 4
------ ----- ------ ------ ------
Total $9,542 $80 $55 $101 $87
------ ----- ------ ------ ------
</TABLE>
INTEREST RATE PRODUCTS
Credco uses interest rate products to maintain a predetermined mix of fixed and
variable rate debt in order to achieve a desired level of interest rate exposure
to manage funding costs related to its Cardmember receivables and Cardmember
loans. The principal product used is interest rate swaps, which involve the
exchange, for a specified period of time, of fixed or floating rate interest
payments based on a notional or contractual amount. During 1998, Credco targeted
the funding mix for its Charge Card and fixed rate lending products to be
approximating 100 percent floating rate and purchased interest rate caps to
limit the adverse effect of an interest rate increase on substantially all U.S.
dollar funding costs. The majority of these caps matured during 1998. In early
1999, Credco entered into a series of interest rate swaps to convert a
F-12
<PAGE>
majority of its domestic funding from floating rate to fixed rate. During
the second half of 1999 and in early 2000, Credco entered into
additional swaps. The effect of these additional swaps was to increase
the amount of fixed rate funding. Credco enters into currency swaps to
convert U.S. dollar denominated debt into other currencies in order to
match foreign denominated receivables with funding of the same
currency and to achieve a desired level of interest rate exposure.
Currency swap agreements are contracts to exchange currency and
interest payments for a specific period of time.
Interest rates charged on Credco's revolving credit receivables are linked to a
floating rate base and generally reprice each month. Credco generally uses
floating rate funding and, to the extent necessary enters into interest
rate swaps paying rates that reprice similarly with changes in the base rate
of the underlying loans.
As interest rate products manage interest rate exposure, interest is accrued and
reported in accounts receivable and other assets, or accrued interest and other
liabilities, and interest expense, as appropriate.
Aggregate annual expirations of interest rate products are as follows (notional
amount in millions): 2000 - $7,592; 2001 - $3,721; 2002 - $1,125; 2003 - $274;
2004 - $118; 2005 - $100.
<TABLE>
<CAPTION>
The following table details information regarding Credco's interest rate
products at December 31, 1999 (millions):
Weighted Average Interest Rate
Notional Primary Variable ------------------------------
Type Amount Rate Index Fixed Floating
-------------------- ------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Floating to fixed $9,137 USD CP H15/1 month LIBOR 5.45% 5.39%
Fixed to floating $3,393 1 month LIBOR and 5.75% 5.88%
3 month LIBOR
Floating to floating $ 400 1 month LIBOR and - 5.85%/6.00%
3 month LIBOR
</TABLE>
FOREIGN CURRENCY PRODUCTS
Credco uses foreign currency products to manage transactions denominated in
foreign currencies.
Foreign currency exposures are hedged, where practical and economical, through
foreign currency forward contracts. Foreign currency forward contracts involve
the purchase or sale of a designated currency at an agreed upon rate for
settlement on a specified date. As Credco is exposed to transaction risk with
regard to receivables denominated in foreign currencies and since foreign
currency forward contracts reduce that exposure, the contracts are accounted for
as hedges. These foreign currency forward contracts are marked to the current
spot rate with the gain or loss recorded in income to offset the transaction
gain or loss resulting from the receivables. The receivable or payable with the
counterparty to the foreign currency forward contracts which result from this
process is reported in other assets or liabilities, as appropriate. The
discount or premium on foreign currency forward contracts is reported in other
assets or liabilities, as appropriate, and amortized to interest expense over
the terms of the contracts.
F-13
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes Credco's forward contracts by major currencies as
of December 31 (millions):
1999 1998
---- ----
<S> <C> <C>
Pound Sterling $1,413 $ 915
Canadian Dollar 549 501
Australian Dollar 225 35
German Mark 160 178
Hong Kong Dollar 155 223
Swedish Krona 110 97
Other 155 88
----- -----
Total forward contracts $2,767 $2,037
====== ======
</TABLE>
Foreign currency forward contracts generally mature within one year. At December
31, 1999, Credco had no significant unhedged foreign currency exposures.
9. TRANSACTIONS WITH AFFILIATES
In 1999, 1998 and 1997, Credco purchased Cardmember receivables without recourse
from TRS and certain of its subsidiaries totaling approximately $174 billion,
$155 billion and $146 billion, respectively.
Agreements for the purchase of non-interest-bearing receivables generally
provide that Credco purchase such receivables at a discount rate which yields
earnings to Credco equal to at least 1.25 times its fixed charges on an annual
basis.
The agreements require TRS, at its expense, to perform accounting, clerical and
other services necessary to bill and collect all Cardmember receivables owned by
Credco. Since settlements under the agreements occur monthly, an amount due
from, or payable to, such affiliates may arise at the end of each month.
At December 31, 1999 and 1998, Credco owned approximately $4.0 billion and $2.9
billion, respectively, of participation interests in receivables owned by the
Trust, representing 16.9 percent and 14.9 percent, respectively, of its total
accounts receivable.
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 Trust.
The extended payment plan receivables owned at December 31, 1999 and 1998
include $465 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 Master Trust.
F-14
<PAGE>
<TABLE>
<CAPTION>
Other transactions with American Express and its subsidiaries for the years
ended December 31 were as follows (millions):
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash and cash equivalents at December 31 $5 $4 $6
Maximum month-end level of cash and cash
equivalents during the year 7 17 9
Secured loans to American Express Centurion
Bank at December 31 0 2,300 2,300
Other loans and deposits to affiliates
at December 31 1,461 1,053 850
Maximum month-end level of loans and deposits
to affiliates during the year 3,433 3,353 3,150
Borrowings at December 31 2,404 2,171 2,680
Maximum month-end level of borrowings
during the year 4,725 5,819 4,588
Interest income 120 180 173
Other income 4 5 5
Interest expense 145 164 179
------ ------ -----
</TABLE>
At December 31, 1999, Credco had no variable rate secured loans to
Centurion Bank and $2.3 billion at both December 31, 1998 and 1997. These
loans were secured by certain interest-bearing extended payment plan
receivables owned by Centurion Bank.
At December 31, 1999, 1998 and 1997, Credco held variable rate loans to
American Express due in 2004 of $850 million. Additionally, Credco had
$605 million and $199 million loans to American Express ATM Holdings, Inc.,
a wholly-owned subsidiary of TRS, at December 31, 1999 and 1998, respectively.
Interest income from these loans were $120 million, $180 million
and $173 million for 1999, 1998 and 1997, respectively.
10. INCOME TAXES
The taxable income of Credco is included in the consolidated U.S. federal income
tax return of American Express. Under an agreement with TRS, taxes are
recognized on a stand-alone basis. If benefits for all future tax deductions,
foreign tax credits and net operating losses cannot be recognized on a
stand-alone basis, such benefits are then recognized based upon a share, derived
by formula, of those deductions and credits that are recognizable on a TRS
consolidated reporting basis.
<TABLE>
<CAPTION>
The income tax expense for the years ended December 31 consists of the
following ($ in millions):
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal 110 126 114
Foreign 10 2 -
---- ---- ----
Total 120 128 114
==== ==== ====
</TABLE>
Deferred income tax assets and liabilities result from the recognition of
temporary differences. Temporary differences are differences between the tax
bases of assets and liabilities and their reported amounts in the
F-15
<PAGE>
financial statements that will result in differences between income for tax
purposes and income for financial statement purposes in future years. The
current and deferred components of the provision (benefit) for income taxes
consist of the following (millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $134 $156 $71
Deferred (14) (28) 43
---- ---- ----
Total income tax provision $120 $128 $114
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Credco's net deferred tax assets, which are included in other assets, consisted
of the following (millions):
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets $218 $203
Deferred tax liabilities - (1)
---- ----
Net deferred tax assets $218 $202
==== ====
</TABLE>
Deferred tax assets for 1999 and 1998 consists primarily of reserve for loan
losses of $216 million and $201 million, respectively. Deferred tax liabilities
for 1998 consisted primarily of foreign exchange contracts. At December 31, 1999
and 1998, no valuation allowances were required.
Included in due to affiliates is the current federal tax payable to TRS of $4.4
million and $30 million at December 31, 1999 and 1998, respectively.
In 1999, 1998 and 1997, total net income taxes paid, including taxes paid to
TRS, were $159 million, $97 million and $74 million, respectively.
The U.S. Statutory tax rate and effective tax rate for 1999, 1998 and 1997 was
approximately 35%.
The items comprising comprehensive income in the consolidated statements of
shareholder's equity are presented net of income tax. The changes in net
unrealized securities losses are presented net of tax benefits of $3 million
for 1999. There were no net unrealized securities losses for 1998.
11. GEOGRAPHIC SEGMENTS
Credco is principally engaged in the business of purchasing Cardmember
receivables arising from the use of the American Express Card in the United
States and foreign locations. The following presents information about
operations in different geographic areas (millions):
F-16
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues
United States $1,811 $1,857 $1,723
International 357 357 341
------ ------ ------
Consolidated $2,168 $2,214 $2,064
------ ------ ------
Income before taxes
United States $ 295 $ 316 $ 286
International 48 49 40
------ ------ ------
Consolidated $ 343 $ 365 $ 326
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows (millions):
Quarter Ended 12/31 9/30 6/30 3/31
----- ----- ---- ----
1999
----
<S> <C> <C> <C> <C>
Revenues $623 $503 $543 $499
Income before taxes 80 77 93 93
Net income 52 50 61 60
---- ---- ---- ----
1998
----
Revenues $548 $545 $581 $540
Income before taxes 98 87 94 86
Net income 63 57 61 56
---- ---- ---- ----
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS CREDIT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(millions)
1999 1998 1997
Reserve for doubtful accounts: ---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $597 $633 $638
Additions:
Provision for doubtful accounts
charged to income (1) 844 800 767
Other credits (2) 71 48 53
Foreign translation - (1) (5)
Deductions:
Accounts written off 788 815 798
Other charges (3) 40 68 22
---- ---- ----
Balance at end of year $684 $597 $633
==== ==== ====
Reserve for doubtful accounts as a
percentage of Cardmember receivables
owned at year end 2.91% 3.10% 3.23%
==== ==== ====
</TABLE>
(1) Before recoveries on accounts previously written off of (millions):
1999-$172, 1998-$168 and 1997-$183.
(2) Reserve balances applicable to new groups of Cardmember receivables
purchased from TRS and certain of its subsidiaries and participation
interests purchased from affiliates.
(3) Reserve balances applicable to certain groups of Cardmember receivables
and participation interests sold to affiliates.
F-18
<PAGE>
EXHIBIT INDEX
PURSUANT TO ITEM 601 OF REGULATION S-K
EXHIBIT NO. DESCRIPTION
3 (a) Registrant's Certificate of Incorporated by reference to
Incorporation, as amended Exhibit 3(a) to Registrant's
Registration
Statement on Form S-1
dated February 25, 1972
(File No. 2-43170).
3 (b) Registrant's By-Laws, amended Incorporated by reference to
and restated as of November Exhibit 3 (b) to
24, 1980 Registrant's Annual Report
on Form 10-K (Commission
File No. 1-6908) for the
year ended December 31, 1985.
4 (a) Registrant's Debt Securities Incorporated by reference to
Indenture dated as of Exhibit 4 (s) to
September 1, 1987 Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
4 (b) Form of Note with optional Incorporated by reference to
redemption provisions Exhibit 4 (t) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987 (File No.
33-16874).
4 (c) Form of Debenture with optional Incorporated by reference to
redemption and sinking fund Exhibit 4 (u) to
provisions Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
<PAGE>
4 (d) Form of Original Issue Discount Incorporated by reference to
Note with optional redemption Exhibit 4 (v) to
provision Registrant's Registration
Statement on Form S-3 dated
September 2, 1987 (File No.
33-16874).
4(e) Form of Zero Coupon Note with Incorporated by reference to
optional redemption provisions Exhibit 4 (w) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987 (File No.
33-16874).
4 (f) Form of Variable Rate Note with Incorporated by reference to
optional redemption and Exhibit 4 (x) to
repayment provisions Registrant's Registration
Statement on Form S-3 dated
September 2, 1987 (File No.
33-16874).
4 (g) Form of Extendible Note with Incorporated by reference to
optional redemption and Exhibit 4 (y) to
repayment provisions Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
4 (h) Form of Fixed Rate Medium-Term Incorporated by reference to
Note Exhibit 4 (z) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
4 (i) Form of Floating Rate Incorporated by reference to
Medium-Term Note Exhibit 4 (aa) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
<PAGE>
4 (j) Form of Warrant Agreement Incorporated by reference to
Exhibit 4 (bb) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
4 (k) Form of Supplemental Indenture Incorporated by reference to
Exhibit 4 (cc) to
Registrant's Registration
Statement on Form S-3 dated
September 2, 1987
(File No. 33-16874).
4 (l) Terms and conditions of debt Incorporated by reference to
instruments to be issued Exhibit 4(l) to Registrant's
outside the U.S. Annual Report on Form 10-K
(Commission File No. 1-6908)
for the year ended December
31, 1997.
4 (m) The Registrant hereby agrees to furnish the
Commission, upon request, with copies of the
instruments defining the rights of holders of
each issue of long-term debt of the Registrant
for which the total amount of securities
authorized thereunder does not exceed 10% of
the total assets of the Registrant
10 (a) Receivables Agreement dated as Incorporated by reference to
of January 1,1983 between the Exhibit 10 (b) to
Registrant and American Express Registrant's Annual Report
Travel Related Services Company, on Form 10-K (Commission
Inc. File No. 1-6908) for the
year ended December 31, 1987.
10 (b) Secured Loan Agreement dated as Incorporated by reference to
of June 30,1988 between the Exhibit 10 (b) to
Registrant and American Express Registrant's Annual Report
Centurion Bank on Form 10-K (Commission
File No. 1-6908) for the
year ended December 31, 1988.
<PAGE>
10 (c) Participation Agreement dated Incorporated by reference to
as of August 3,1992 between Exhibit 10(c) to
American Express Receivables Registrant's Annual Report
Financing Corporation and on Form 10-K (Commission
Credco Receivables Corp. File No. 1-6908) for the
year ended December 31, 1992.
12.1 Computation in Support of Ratio Electronically filed
of Earnings to Fixed Charges herewith.
of American Express Credit
Corporation
12.2 Computation in Support of Ratio Electronically filed
of Earnings to Fixed Charges herewith.
of American Express Company
23 Consent of Independent Auditors Electronically filed
herewith.
27 Financial Data Schedule Electronically filed
herewith.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.1
AMERICAN EXPRESS CREDIT CORPORATION
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Years Ended December 31,
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Net Income $223 $237 $212 $215 $197
Income tax provision 120 128 114 115 105
Interest expense 1,130 1,190 1,125 1,117 1,054
----- ----- ----- ----- -----
Total earnings $1,473 $1,555 $1,451 $1,447 $1,356
===== ===== ===== ===== =====
Fixed charges - interest expense $1,130 $1,190 $1,125 $1,117 $1,054
===== ===== ===== ===== =====
Ratio of earnings to fixed charges 1.30 1.31 1.29 1.30 1.29
</TABLE>
Note: Gross rentals on long-term leases were minimal in amount in each of the
periods shown.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.2
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Years Ended December 31,
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Pretax income from
continuing operations $3,438 $2,925 $2,750 $2,664 $2,183
Interest expense 2,178 2,224 2,122 2,160 2,343
Other adjustments 151 124 127 139 95
------ ------ ------ ------ ------
Total earnings (a) $5,767 $5,273 $4,999 $4,963 $4,621
------ ------ ------ ------ ------
Fixed charges:
Interest expense $2,178 $2,224 $2,122 $2,160 $2,343
Other adjustments 152 129 129 130 135
------ ------ ------ ------ ------
Total fixed charges (b) $2,330 $2,353 $2,251 $2,290 $2,478
------ ------ ------ ------ ------
Ratio of earnings to
fixed charges (a/b) 2.48 2.24 2.22 2.17 1.86
</TABLE>
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express Company
("American Express") 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.
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 American Express, 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.
In the fourth quarter of 1995, American Express' 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, American Express' investment in FDC is accounted
for as Investments - Available for Sale.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-3 (Registration Statement Nos. 33-47497, 33-62797, 333-38199) of American
Express Credit Corporation and in the related Prospecti of our report dated
February 3, 2000, with respect to the consolidated financial statements and
schedule of American Express Credit Corporation included in this Annual Report
on Form 10-K for the year ended December 31, 1999.
/s/ Ernst & Young LLP
New York, New York
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Credco's
Condensed Consolidated Balance Sheet at December 31, 1999 and Condensed
Consolidated Statement of Income for the twelve months ended December 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,102
<SECURITIES> 947
<RECEIVABLES> 23,463
<ALLOWANCES> 684
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,262
<CURRENT-LIABILITIES> 0
<BONDS> 23,356
0
0
<COMMON> 1
<OTHER-SE> 2,060
<TOTAL-LIABILITY-AND-EQUITY> 27,262
<SALES> 0
<TOTAL-REVENUES> 2,168
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23
<LOSS-PROVISION> 672
<INTEREST-EXPENSE> 1,130
<INCOME-PRETAX> 343
<INCOME-TAX> 120
<INCOME-CONTINUING> 223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
