UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________
FORM 10-Q
____________________
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 August 14, 2000
----- ------------------------------
Common Stock, $.10 par value 1,504,938 shares
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
FORM 10-Q
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated statements
of income and retained earnings - three and
six months ended June 30, 2000 and 1999 3
Condensed consolidated balance
sheets - June 30, 2000 and
December 31, 1999 4
Condensed consolidated statements
of cash flows - six months ended
June 30, 2000 and 1999 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 Six Months
Ended Ended
June 30, June 30,
------------ -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Revenue earned from purchased
accounts receivable $ 620 $ 468 $1,171 $ 893
Interest income from affiliates 22 36 43 79
Interest income from investments 47 38 81 67
Other income 1 1 4 3
--- --- ----- -----
Total 690 543 1,299 1,042
--- --- ----- -----
Expenses
Interest expense - affiliates 52 32 98 70
Interest expense - other 310 242 585 477
Provision for doubtful accounts,
net of recoveries 205 169 380 297
Other expenses 5 7 11 12
--- --- ----- ---
Total 572 450 1,074 856
--- --- ----- ---
Income before taxes 118 93 225 186
Income tax provision 42 32 79 65
---- ---- ---- ----
Net income 76 61 146 121
Retained earnings at beginning of period 1,975 1,892 1,905 1,832
----- ----- ----- -----
Retained earnings at end of period $2,051 $1,953 $2,051 $1,953
====== ====== ====== ======
</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)
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 399 $ 1,102
Investments 1,232 947
Accounts receivable 23,425 23,325
Less: reserve for doubtful accounts 755 684
------- -------
22,670 22,641
Loans and deposits with affiliates 1,308 1,461
Deferred charges and other assets 386 575
------- -------
Total assets $25,995 $26,726
======= =======
Liabilities and shareholder's equity
Short-term debt with affiliates $ 2,452 $ 1,494
Short-term debt - other 18,285 18,737
Current portion of long-term debt - other 500 550
Long-term debt with affiliate 910 910
Long-term debt - other 1,201 1,665
------ ------
Total debt 23,348 23,356
Due to affiliates 341 1,061
Accrued interest and other liabilities 100 248
------ ------
Total liabilities 23,789 24,665
------ ------
Shareholder's equity:
Common stock 1 1
Capital surplus 161 161
Retained earnings 2,051 1,905
Other comprehensive income, net of tax:
Net unrealized securities losses (7) (6)
------- -------
Total shareholder's equity 2,206 2,061
------- -------
Total liabilities and shareholder's equity $25,995 $26,726
======= =======
</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>
Six Months
Ended
June 30,
--------
2000 1999
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 146 $ 121
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Provision for doubtful accounts, net of recoveries 380 297
Amortization of deferred underwriting fees and bond
discount/premium - 3
Changes in operating assets and liabilities:
Increase in deferred tax assets (18) (2)
Decrease (increase) in interest receivable and
other operating assets 218 (70)
Decrease in due to affiliates (12) (212)
(Decrease) increase in accrued interest
and other liabilities (150) 154
----- -----
Net cash and cash equivalents provided by
operating activities 564 291
----- -----
Cash Flows from Investing Activities:
Increase in accounts receivable (799) (1,014)
Recoveries of accounts receivable previously written off 88 82
Purchase of participation interest in seller's interest
in accounts receivable from an affiliate (72) (317)
Sale of participation interest in seller's interest in
accounts receivable to an affiliate 160 154
Sale of net accounts receivable to an affiliate 74 325
Purchase of investments (295) (445)
Maturity of investments 9 -
Net decrease in loans and deposits due from affiliates 153 1,247
(Decrease) increase in due to affiliates (683) 380
----- -----
Net cash and cash equivalents (used in) provided by
investing activities (1,365) 412
------ -----
Cash Flows from Financing Activities:
Net increase in short-term debt with affiliates with
maturities less than ninety days 958 498
Net increase (decrease) in short-term debt - other with
maturities less than ninety days 3,181 (868)
Proceeds from issuance of debt 1,320 5,028
Redemption of debt (5,361) (4,219)
------ ------
Net cash and cash equivalents provided by
financing activities 98 439
------ ------
Net (decrease) increase in cash and cash equivalents (703) 1,142
Cash and cash equivalents at beginning of period 1,102 648
------ ------
Cash and cash equivalents at end of period $ 399 $1,790
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements should be read in
conjunction with the Annual Report on Form 10-K of American
Express Credit Corporation, including its subsidiaries where
appropriate ("Credco"), for the year ended December 31, 1999.
Significant accounting policies disclosed therein have not
changed.
The condensed consolidated financial statements are unaudited;
however, in the opinion of management, they include all
adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial
position of Credco at June 30, 2000 and the consolidated results
of its operations and changes in its retained earnings for the
six-month periods ended June 30, 2000 and 1999 and cash flows for
the six-month periods ended June 30, 2000 and 1999. Results of
operations reported for interim periods are not necessarily
indicative of results for the entire year. Certain prior year
amounts have been reclassified to conform to the current year
presentation.
2. For the six-month periods ended June 30, 2000 and 1999, Credco
paid $686 million and $547 million of interest, respectively.
Income taxes paid for each of the six-month periods ended June
30, 2000 and 1999 were $117 million and $47 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 June 30,
2000 and 1999, Credco held $229 million and $258 million,
respectively, 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 June 30, 2000 and
1999 was $225 million and $259 million, respectively.
Available for sale securities are stated at fair value, with the
unrealized gains and losses included in shareholder's equity. At
June 30, 2000 and 1999, Credco held American Express Credit
Account Master Trust Class C Certificates which were classified
as available for sale. The cost approximates the fair value of
these available for sale securities which were valued at $740
million and $303 million at June 30, 2000 and 1999, respectively.
In addition, Credco has a portfolio of corporate and government
securities which is managed by American Express Financial
Advisors, Inc., a wholly-owned indirect subsidiary of American Express
Company ("American Express"). The book value of these available
for sale securities as of June 30, 2000 and 1999 was $272 million
and $237 million, respectively. The fair value of these
investments as of June 30, 2000 and 1999 was $263 million and
$235 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.
6
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
4. In the first and second quarter of 2000, the American Express
Credit Account Master Trust (the "Master Trust") securitized an
additional $1.0 billion and $2.2 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 $66 million ($65 million, net of reserves) and $98
million ($95 million, net of reserves) in the first and second
quarter of 2000, respectively, of gross seller's interest to
American Express Receivables Financing Corporation II ("RFCII"),
a wholly-owned subsidiary of American Express Travel Related
Services Company, Inc., a wholly-owned subsidiary of American
Express. In addition, in the first and second quarter of 2000,
CRC purchased $85 million and $210 million, respectively, of
Class C Certificates.
5. In the first quarter of 2000, Credco called $150 million 1 1/8%
Cash Exchangeable Notes due 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. Accordingly, the related hedging
agreements were called at the same time.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 2000, American Express Credit Corporation, including its
subsidiaries where appropriate ("Credco"), had the ability to issue
$4.4 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, 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
indirect subsidiary of American Express. The maximum authorized
aggregate principal amount of debt instruments outstanding at any one
time under the program will not exceed $6.0 billion.
At June 30, 2000, Credco had the ability to issue approximately $2.4
billion of medium- and long-term debt and warrants under shelf
registrations filed with the Securities and Exchange Commission.
Committed credit line facilities at June 30, 2000 and 1999 totaled
$9.2 billion and $8.3 billion, respectively.
In the second quarter of 2000, Credco entered into additional interest
rate swaps. The effect of these additional swaps was to increase the
amount of fixed rate funding.
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 six-month periods ended June 30,
2000 and 1999 was 1.33 and 1.34, respectively. The ratio of earnings
to fixed charges for American Express, the parent of TRS, for the
six-month periods ended June 30, 2000 and 1999 was 2.32 and 2.53,
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 $99 billion and $79 billion of Cardmember receivables
during the six-month periods ended June 30, 2000 and 1999,
respectively. At June 30, 2000 and December 31, 1999, Credco owned
$20.9 billion and $20.6 billion, respectively, of Charge Card
receivables of which $2.9 billion and $4.0 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 both June 30, 2000 and December 31, 1999, Credco owned
extended payment plan receivables totaling $2.5 billion and $2.7
billion, respectively, including revolving credit loans purchased
directly from Centurion Bank. The extended payment plan receivables
owned at June 30, 2000 and December 31, 1999 include $289 million and
$465 million, respectively, of participation interest owned by CRC.
This represents a participation interest in the seller's interest in
revolving credit receivables that have been conveyed to the American
Express Credit Account Master Trust (the "Master Trust"), formed by
Centurion Bank in 1996 to securitize revolving credit loans.
For the six-month periods ended June 30, 2000 and 1999, the average life
of Cardmember receivables owned by Credco was 42 days and 43
days, respectively.
Credco's write-offs, net of recoveries, as a percentage of the volume
of Cardmember receivables purchased for the six-month periods ended
June 30, 2000 and 1999 was .30 percent and .36 percent, respectively.
Credco's increase in revenue for the six-month period ended June 30,
2000, is mainly attributable to an increase in the volume of
receivables purchased. Interest income decreased for the six-month
period ended June 30, 2000 primarily due to a lower volume of average
investments outstanding. Interest expense increased for the six months
ended June 30, 2000 due to an increase in the volume of average debt
outstanding and higher interest rates. Provision for doubtful accounts
for the six-month period also increased reflecting a higher volume of
receivables purchased.
8
<PAGE>
<TABLE>
AMERICAN EXPRESS CREDIT CORPORATION
(a wholly-owned subsidiary of American Express
Travel Related Services Company, Inc.)
The following is an analysis of the increase (decrease) in key revenue
and expense accounts for the six-month period ended June 30, 2000,
compared with the six-month period ended June 30, 1999 ($ in
millions):
<CAPTION>
Six-
Month
Period
------
<S> <C>
Revenue earned from purchased accounts receivable-
changes attributable to:
Volume of receivables purchased 215
Discount and interest rates 63
----
Total 278
====
Interest income from affiliates - changes attributable to:
Volume of average investments outstanding (46)
Interest rates 10
----
Total (36)
====
Interest income from investments - changes attributable to:
Volume of average investments outstanding (3)
Interest rates 17
----
Total 14
====
Interest expense affiliates - changes attributable to:
Volume of average debt outstanding 10
Interest rates 18
----
Total 28
====
Interest expense other - changes attributable to:
Volume of average debt outstanding 34
Interest rates 74
----
Total 108
====
Provision for doubtful accounts - changes attributable to:
Volume of receivables purchased 93
Provision rates and volume of recoveries (10)
----
Total 83
====
</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>
2000 1999
---- ----
<S> <C> <C>
Balance, January 1 $684 $597
Provision for losses 468 379
Accounts written off (389) (372)
Other (8) 11
---- ----
Balance, June 30 $755 $615
==== ====
</TABLE>
<TABLE>
The following table shows the aging of Charge Card receivables:
<CAPTION>
June 30,
------------------------------
2000 1999
---- ----
<S> <C> <C>
Current 84.1% 81.3%
30 to 59 days 11.4 13.8
60 to 89 days 1.8 2.0
90 days and over 2.7 2.9
</TABLE>
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.
(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: August 14, 2000 By /s/Walker C. Tompkins, Jr.
--------------------------
Walker C. Tompkins, Jr.
President and Chief Executive Officer
/s/Erich Komdat
---------------
Erich Komdat
Vice President and Chief Accounting
Officer
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Description How Filed
----------- ---------
Exhibit 12.1 Computation in Support of Ratio of Electronically
Earnings to Fixed Charges of American filed herewith.
Express Credit Corporation.
Exhibit 12.2 Computation in Support of Ratio of Electronically
Earnings to Fixed Charges of American Express filed herewith.
Company.
Exhibit 27. Financial Data Schedule. Electronically
filed herewith.
12
