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 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 the Optima-R Card and interest- bearing extended payment plan Sign & Travel-R receivables arising from travel service sales. The American Express Card and the Optima Card are referred to herein as the "Card".
American Express Card Business
TRS currently issues the Card in 37 currencies. 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 and 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.
Except in the case of the Optima Card, a family of revolving credit cards which is marketed in the United States and several other countries, the charge Card is primarily designed as a method of payment and not as a means of financing purchases of goods and services and carries no pre-set spending limit. Charges are approved based on a Cardmember's account history, credit record and personal resources. Except in the case of the Optima Card and certain extended payment plans, payment of the full amount billed each month is due from the Cardmember upon receipt of the bill, and no finance charges are assessed. Charge Card accounts that are past due by approximately 50 days are subject, in most cases, to a delinquency assessment and, if not brought to current status, subject to cancellation.
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 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 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. 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. These laws and regulations have not had, and are not expected to have, a material adverse effect on the charge Card and consumer lending business, 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; however, Credco purchases certain extended payment plan receivables. At December 31, 1996 and 1995, extended payment plan receivables owned by Credco totaled $1.8 billion and $1.7 billion, respectively, representing 10.4 percent and 10.1 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 Optima and Sign & Travel accounts arising from travel service sales and non-interest-bearing deferred merchandise receivables arising from direct mail merchandise sales by TRS.
Credco, through a 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 program. The gross participation interests represent undivided interests in the receivables originated by TRS and by American Express Centurion Bank, a subsidiary of TRS. See note 3 in "Notes to Consolidated Financial Statements" appearing herein.
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 Agreement 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 of Credco. The obligations of Credco are not guaranteed under the Receivables Agreement or otherwise by American Express or the Card issuers.
Volume of Business
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 ---- -------- ------- ----- -------- ------- ----- 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 1994 83,851 25,639 109,490 11,273 2,747 14,020 1993 80,202 14,635 94,837 10,758 2,210 12,968 1992 81,311 13,041 94,352 10,412 1,287 11,699
The card business has not experienced significant seasonal fluctuation, although Card billed business tends to be moderately higher in the fourth quarter than in other calendar quarters.
TRS' asset securitization program disclosed above reduced the volume of domestic Cardmember receivables purchased in 1996, 1995 and 1994 and the amount owned by Credco at December 31, 1996, 1995 and 1994.
In July 1993, Credco began purchasing certain foreign currency Cardmember receivables which had been sold to an affiliate during the period from December 1991 through June 1993. In December 1993, Credco repurchased participation interests in a portion of its foreign receivables which had previously been sold to an affiliate during the period from December 1991 through November 1993. These transactions increased the volume of foreign Cardmember receivables purchased in 1993 and subsequent years and the amount owned by Credco at December 31, 1993 and subsequent dates.
The average life of Cardmember receivables owned by Credco for each of the five years ending December 31, 1996 (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, net of Cardmember receivables sold to affiliates) was 43 days.
The following table shows the aging of billed, non-interest-bearing charge Cardmember receivables:
December 31, 1996 1995 -------------------------------------------------------------------- Current 76.7% 77.3% 30 to 59 days 17.2 16.5 60 to 89 days 2.6 2.5 90 days and over 3.5 3.7
Loss Experience
Credco generally writes off against its reserve for doubtful accounts the total balance in an account for which any portion remains unpaid 12 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.
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, net of Cardmember receivables sold to affiliates, in each of the years indicated:
1996 1995 1994 1993 1992 ---- ---- ---- ---- ----
Write-offs, net of recoveries $630 $508 $444 $529 $663
% of net Cardmember receivables purchased .46% .42% .41% .57% .70%
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:
Weighted Average Year Interest Cost ---- ------------- 1996 5.67% 1995 6.30 1994 5.06 1993 4.61 1992 5.80
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, 1996 was $4.0 billion. At December 31, 1996, the amount borrowed was $2.2 billion. See notes 4 and 5 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, 7 and 10 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, 1996 Credco had 30 employees.
Item 2.
Item 2. PROPERTIES.
Credco neither owns nor leases any material physical properties.
Item 3.
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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK 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.
Credco paid dividends of $150 million to TRS in both December, 1996 and 1995.
For information about limitations on Credco's ability to pay dividends, see note 6 in "Notes to Consolidated Financial Statements" appearing herein.
Item 6.
Item 6. SELECTED FINANCIAL DATA.
The following summary of certain consolidated financial information of Credco was derived from audited financial statements for the five years ended December 31, 1996.
(dollars in millions) 1996 1995 1994 1993 1992 ---- ---- ---- ---- ----
Income Statement Data
Revenues 2,166 1,988 1,401 1,282 1,605
Interest expense 1,117 1,054 736 599 728
Provision for doubtful accounts, net of recoveries 712 625 443 475 661
Income tax provision 115 105 75 64 70
Extraordinary charges, net of taxes - - - 22 -
Net income 215 197 139 115 138
Balance Sheet Data
Accounts receivable 17,359 16,439 14,020 12,968 11,699
Reserve for doubtful accounts (638) (624) (498) (542) (603)
Total assets 20,165 20,192 16,868 14,943 13,631
Short-term debt 14,537 14,202 11,525 9,738 7,581
Current portion of long-term debt 211 409 405 692 969
Long-term debt 2,469 2,673 2,282 1,776 2,303
Shareholder's equity 1,845 1,780 1,733 1,662 1,672
Cash dividends 150 150 100 125 250
Item 7.
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 owned by two master trusts formed by TRS as part of its asset securitization program. At December 31, 1996 and 1995, respectively, Credco owned $15.6 billion and $14.8 billion of charge card receivables and participations in charge card receivables, representing 89.6 percent and 89.9 percent of the total receivables owned, and $1.8 billion and $1.7 billion of revolving credit receivables, representing 10.4 percent and 10.1 percent of the total receivables owned.
As part of Credco's business of funding receivables, Credco makes variable rate loans to American Express Centurion Bank ("Centurion Bank") which are secured by Optima receivables owned by Centurion Bank. At both December 31, 1996 and 1995, $2 billion of such loans were outstanding. The loan agreements require 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 $14.7 billion for 1996 and $12.1 billion for 1995.
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. Total committed credit line facilities at December 31, 1996 and 1995 totaled $6.6 billion and $5.8 billion, respectively. Credco, through its wholly- owned subsidiary, American Express Overseas Credit Corporation Limited ("AEOCC"), had no outstanding borrowings at December 31, 1996 and $54 million in outstanding borrowings at December 31, 1995, under these committed lines of credit. In addition, Credco, through AEOCC, had short-term borrowings under uncommitted lines of credit totaling $200 million and $342 million at December 31, 1996 and 1995, respectively.
During 1995, Credco issued long-term senior notes of $250 million at 6 3/4 percent due 2001, $250 million at 6 1/2 percent due 2000 and $300 million at 6 1/8 percent due 2001, the proceeds of which were used to reduce short-term debt. During 1996, 1995 and 1994, Credco's average long-term debt outstanding was $2.9 billion, $2.0 billion and $2.6 billion, respectively. At December 31, 1996, Credco had the ability to issue $1.0 billion of medium and long- term debt securities under shelf registrations filed with the Securities and Exchange Commission.
In addition, during 1996, TRS, Credco, AEOCC and American Express Bank Ltd. established a program for the issuance, exclusively outside the United States to non-U.S. persons, of debt instruments to be listed on the Luxembourg Stock Exchange. The maximum aggregate principal amount of debt instruments outstanding at any one time under the program will not exceed $3 billion. At December 31, 1996, this program had the ability to issue $2.7 billion medium and long-term debt securities. Credco and AEOCC have no debt issued under this program.
Credco paid dividends to TRS of $150 million in both December, 1996 and 1995.
See note 7 in "Notes to Consolidated Financial Statements" appearing herein for a discussion of Credco's use of derivatives.
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 1996, and 1.29 in both 1995 and 1994. 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 43 days for each of the years ended December 31, 1996, 1995 and 1994.
Credco's increase in revenues in 1996 is primarily due to an increase in volume of receivables purchased. Increased interest income in 1996 was attributable to increased levels of average investments. Interest expense increased in 1996 reflecting increased volume offset by a decrease in borrowing rates. Provision for doubtful accounts in 1996 increased primarily reflecting volume growth.
The following is a further analysis of the increase (decrease) in key revenue and expense accounts (millions):
-------------------------------------------------------------- 1996 1995 1994 -------------------------------------------------------------- Revenue earned from purchased accounts receivable-changes attributable to: Volume of receivables purchased $ 166 $ 149 $ 186 Discount and interest rates (28) 313 (112) --------------------------------------------------------------- Total $ 138 $ 462 $ 74 --------------------------------------------------------------- Interest income from affiliates- changes attributable to: Volume of average investments outstanding $ 5 $ 28 $ 3 Interest rates (15) 41 28 --------------------------------------------------------------- Total $ (10) $ 69 $ 31 --------------------------------------------------------------- Interest income from investments- changes attributable to: Volume of average investments outstanding $ 71 $ 17 $ (8) Interest rates (19) 40 21 --------------------------------------------------------------- Total $ 52 $ 57 $ 13 --------------------------------------------------------------- Interest expense (affiliates)- changes attributable to: Volume of average debt outstanding $ 11 $ 15 $ 29 Interest rates (13) 25 19 --------------------------------------------------------------- Total $ (2) $ 40 $ 48 ---------------------------------------------------------------
Interest expense (other) - changes attributable to: Volume of average debt outstanding $ 178 $ 96 $ 37 Interest rates (113) 182 52 --------------------------------------------------------------- Total $ 65 $ 278 $ 89 --------------------------------------------------------------- Provision for doubtful accounts- changes attributable to: Volume of receivables purchased $ 91 $ 70 $ 104 Provision rates and volume of recoveries (4) 112 (136) --------------------------------------------------------------- Total $ 87 $ 182 $ (32) ---------------------------------------------------------------
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements.
See "Index to Financial Statements" at page hereof.
2. Supplementary Financial Information.
Selected quarterly financial data. See note 11 in "Notes to Consolidated Financial Statements" appearing herein.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 11.
Item 11. EXECUTIVE COMPENSATION.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: See "Index to Financial Statements" at page hereof.
2. Financial Statement Schedule: See "Index to Financial Statements" at page hereof.
3. Exhibits: See "Exhibit Index" hereof.
(b) Reports on Form 8-K:
None.
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 31, 1997 /s/ Vincent P. Lisanke ------------------------------------------------------------- Vincent P. Lisanke President, Chief Executive Officer and Director
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 31, 1997 /s/ Vincent P. Lisanke ------------------------------------------------------------- Vincent P. Lisanke President, Chief Executive Officer and Director (principal executive and principal accounting officer)
DATE March 31, 1997 /s/ Richard K. Goeltz ------------------------------------------------------------- Richard K. Goeltz Chairman of the Board and Director (principal financial officer)
DATE March 31, 1997 /s/ Jay B. Stevelman ------------------------------------------------------------- Jay B. Stevelman Treasurer and Director
AMERICAN EXPRESS CREDIT CORPORATION
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, 1996, 1995 and 1994............................. F - 3
Consolidated balance sheets at December 31, 1996 and 1995......................... F - 4
Consolidated statements of cash flows for each of the three years ended December 31, 1996, 1995 and 1994............................... F - 5
Consolidated statements of shareholder's equity for each of the three years ended December 31, 1996, 1995 and 1994........... F - 6
Notes to consolidated financial statements. F - 7 to F - 15
Schedule: II - Valuation and qualifying accounts for the three years ended December 31, 1996 F - 16
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.
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, 1996 and 1995, 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, 1996. 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 American Express Credit Corporation's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 7, 1997
AMERICAN EXPRESS CREDIT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (millions)
---------------------------------------------------------------- Year Ended December 31, 1996 1995 1994 ---------------------------------------------------------------- Revenues
Revenue earned from purchased accounts receivable $1,813 $1,675 $1,213 Interest income from affiliates 160 170 101 Interest income from investments 189 137 80 Other income 4 6 7
---------------------------------------------------------------- Total 2,166 1,988 1,401 ---------------------------------------------------------------- Expenses
Interest expense - affiliates 134 136 96 Interest expense - other 983 918 640 Provision for doubtful accounts, net of recoveries of $186, $176 and $177 712 625 443 Other expenses 7 7 8 ---------------------------------------------------------------- Total 1,836 1,686 1,187 ----------------------------------------------------------------
Income before taxes 330 302 214 Income tax provision 115 105 75 ---------------------------------------------------------------- Net income $ 215 $ 197 $ 139 ---------------------------------------------------------------- ---------------------------------------------------------------- ----------------------------------------------------------------
See notes to consolidated financial statements.
AMERICAN EXPRESS CREDIT CORPORATION CONSOLIDATED BALANCE SHEETS (millions)
---------------------------------------------------------------- December 31, 1996 1995 ---------------------------------------------------------------- Assets
Cash and cash equivalents $ 267 $ 1,190 Accounts receivable 17,359 16,439 Less reserve for doubtful accounts 638 624 ---------------------------------------------------------------- 16,721 15,815 Loans and deposits with affiliates 2,850 2,850 Deferred charges and other assets 327 337 ---------------------------------------------------------------- Total assets $20,165 $20,192 ---------------------------------------------------------------- ----------------------------------------------------------------
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,275 $ 1,087 Short-term debt - other 13,262 13,115 Current portion of long-term debt 211 409 Long-term debt with affiliate 910 910 Long-term debt - other 1,559 1,763 -------- ------- Total debt 17,217 17,284
Due to affiliates 858 882 Accrued interest and other liabilities 145 130
---------------------------------------------------------------- Total liabilities 18,220 18,296 ----------------------------------------------------------------
Deferred discount revenue 100 116
----------------------------------------------------------------
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 1,683 1,618
---------------------------------------------------------------- Total shareholder's equity 1,845 1,780 ---------------------------------------------------------------- ---------------------------------------------------------------- Total liabilities and shareholder's equity $20,165 $20,192 ---------------------------------------------------------------- ----------------------------------------------------------------
See notes to consolidated financial statements.
AMERICAN EXPRESS CREDIT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (millions)
- ----------------------------------------------------------------------- Year Ended December 31, 1996 1995 1994 - ----------------------------------------------------------------------- Cash Flows From Operating Activities: Net Income $ 215 $ 197 $ 139
Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts, net of recoveries 712 625 443 Amortization of deferred underwriting fees and bond discount / premium 1 - 2 (Decrease) increase in deferred discount revenue (16) 21 48 (Increase) decrease in deferred tax assets (11) (56) 38 Increase in interest receivable and operating assets (6) (5) (23) (Decrease) increase in accrued interest and other liabilities (18) 3 24 Increase (decrease) in due to affiliates 79 (27) (10) - ------------------------------------------------------------------------- Net cash and cash equivalents provided by operating activities 956 758 661 - ------------------------------------------------------------------------- Cash Flows From Investing Activities: Increase in accounts receivable (3,194) (3,047) (2,434) Sale of net accounts receivable to an affiliate 2,294 - 1,192 Sale of participation interest in seller's interest in accounts receivable to an affiliate 1,304 - 920 Purchase of participation interest in seller's interest in accounts receivable from an affiliate (2,178) - (1,170) Purchase of net secured receivables from an affiliate - - (85) Recoveries of accounts receivable previously written off 186 176 177 Loans and deposits with affiliates - (200) (650) (Decrease) increase in due to affiliates from purchased receivables (57) 182 (487) - -------------------------------------------------------------------------- Net cash and cash equivalents used in investing activities (1,645) (2,889) (2,537) - -------------------------------------------------------------------------- Cash Flows From Financing Activities: Net increase (decrease) in short-term debt with affiliates with maturities less than ninety days 188 (40) 539 Net increase (decrease) in short-term debt - other with maturities less than ninety days 4,469 (5,178) 4,699 Proceeds from issuance of debt 9,684 20,039 2,633 Redemption of debt (14,425) (11,810) (5,692) Dividends paid to TRS (150) (150) (100) - -------------------------------------------------------------------------- Net cash and cash equivalents (used in) provided by financing activities (234) 2,861 2,079 - -------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (923) 730 203 - -------------------------------------------------------------------------- Cash and cash equivalents at beginning of year 1,190 460 257 - -------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 267 $ 1,190 $ 460 - --------------------------------------------------------------------------
See notes to consolidated financial statements.
AMERICAN EXPRESS CREDIT CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY Years ended December 31, 1996, 1995 and 1994 (millions)
--------------------------------------------- Total Shareholder's Common Capital Retained Equity Stock Surplus Earnings --------------------------------------------- Balances at January 1, 1994 $ 1,662 $ 1 $ 129 $ 1,532
Net income 139 139 Dividends to TRS (100) (100) Contributions from TRS 32 - 32 - -------- ------- ------- --------
Balances at December 31, 1994 1,733 1 161 1,571
Net income 197 197 Dividends to TRS (150) - - (150) -------- ------- ------- -------
Balances at December 31, 1995 1,780 1 161 1,618 -------- ------- ------- -------
Net income 215 215 Dividends to TRS (150) - - (150) -------- ------ ------ -------
Balances at December 31, 1996 $ 1,845 $ 1 $ 161 $ 1,683 ======== ====== ====== =======
See notes to consolidated financial statements.
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.
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.
Fair Values of Financial Instruments
The fair values of financial instruments are estimates based upon current market conditions and perceived risks at December 31, 1996 and 1995 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 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 base rate and generally reprice monthly. Credco generally enters into interest rate agreements paying a rate that reprices when the base rate of the underlying receivables changes. 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. At December 31, 1996 and 1995, included in cash and cash equivalents was $100 million and $420 million, respectively, of overnight securities purchased to resell.
3. Accounts Receivable
At December 31, 1996 and 1995, respectively, Credco owned $15.6 billion and $14.8 billion of charge card receivables and participations in charge card receivables, representing 89.6 percent and 89.9 percent, respectively, of the total receivables owned. In connection with TRS' securitization program for U.S. consumer Cardmember receivables, CRC purchases from American Express Receivables Financing Corporation ("RFC"), a subsidiary of TRS, a participation interest in RFC's seller's interest in the receivables owned by the American Express Master Trust, which was formed in 1992 to securitize U.S. consumer Cardmember receivables. In September 1996, the American Express Master Trust issued an additional $1.25 billion of accounts receivable trust certificates to the public. At that time, CRC sold to RFC, at face amount less applicable reserve, $1.3 billion of its gross participation interest. The gross participation interests represent undivided interests in the receivables conveyed to the American Express Master Trust by RFC. At December 31, 1996 and 1995 Credco owned approximately $3.4 billion and $2.3 billion, respectively, of participation interests in receivables owned by the trust, representing 19.3 percent and 14.1 percent, respectively, of its total accounts receivable.
Credco owned extended payment plan receivables totaling $1.8 billion and $1.7 billion, including revolving credit loans purchased directly from American Express Centurion Bank ("Centurion Bank"), a subsidiary of TRS, at December 31, 1996 and 1995, representing 10.4 percent and 10.1 percent, respectively, of its total interests in accounts receivable. The extended payment plan receivables owned at December 31, 1996 include $104 million 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, formed by Centurion Bank during the second quarter of 1996 to securitize revolving credit loans.
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," is effective January 1, 1997. With respect to existing securitizations, the new rule is not expected to have a material effect on Credco's results of operations or financial condition. The consequences of additional securitizations could be material depending on their level.
4. Short-term Debt
At December 31, short-term debt consisted of (millions) :
------------------------------------------------------------ 1996 1995 ------------------------------------------------------------ Commercial paper $ 12,966 $ 12,633 Borrowings from affiliates 1,275 1,087 Borrowings under lines of credit 200 396 Borrowing agreements with bank trust departments and others 96 86 ------------------------------------------------------------ Total short-term debt $ 14,537 $ 14,202 ------------------------------------------------------------
Credco has various facilities available to obtain short-term credit, including the issuance of commercial paper and agreements with banks.
Credco had unused committed credit lines totaling $6.6 billion and $5.8 billion at December 31, 1996 and 1995, 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, 1996 and 1995.
At December 31, 1996 and 1995, Credco, through AEOCC, had short- term borrowings under uncommitted lines of credit totaling $200 million and $342 million, respectively. In addition, there were no outstanding borrowings under committed lines of credit at December 31, 1996 and $54 million at December 31, 1995.
Credco's annual weighted average short-term interest rate was 5.57 percent, 6.16 percent and 4.74 percent for the years ended December 31, 1996, 1995 and 1994, respectively. These rates include the cost of maintaining credit line facilities for the periods and the impact of interest rate swaps. At December 31, 1996, $300 million of short-term debt outstanding was modified by interest rate swaps, resulting in a year-end weighted average effective interest rate of 5.64%.
Credco paid $913 million, $942 million and $508 million of interest on short-term debt obligations in 1996, 1995 and 1994, respectively.
5. Long-term Debt - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Year-End Year-End Effective Notional Stated Rate Interest December 31, (millions) Outstanding Amount of on Debt Rate With Maturity Balance Swaps (a,b) Swaps(b) of Swaps - ------------------------------------------------------------------------------ Senior notes due 1997-2005 $1,725 $1,650 6.79% 6.25% 1997-2005 Variable rate debt with American Express due 2004 910 - 5.36% - - Medium-term notes due 1997 36 - 7.17% - - Other senior notes due 1999-2017 2 - 7.65% - - Swiss franc notes due 1998-2003 10 - 3.45% - - Japanese yen senior bonds due 1996 - - - - - Net unamortized bond discount (3) - - - - - ------------------------------------------------------------------------------- Total long-term debt $2,680 $1,650 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Notional Year-End December 31, (millions) Outstanding Amount of Stated Rate Balance Swaps on Debt(b) - ------------------------------------------------------------------------------- Senior notes due 1997-2005 $2,008 $1,400 6.98% Variable rate debt with American Express due 2004 910 - 5.59% Medium-term notes due 1997 61 - 7.02% Other senior notes due 1999-2017 5 - 7.34% Swiss franc notes due 1998-2003 3 - 4.75% Japanese yen senior bonds due 1996 98 98 8.00% Net unamortized bond discount (3) - - - ------------------------------------------------------------------------------- Total long-term debt $3,082 $1,498 - ------------------------------------------------------------------------------- (a) For the floating rate debt issuance, the stated rate was based on the rate at December 31, 1996; this rate is not an indication of future interest rates. (b) Weighted average rates were determined where appropriate.
The above table includes the current portion of long-term debt of $211 million and $409 million at December 31, 1996 and 1995, 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, 1996 and 1995, was $2.7 billion and $3.1 billion, respectively.
Aggregate annual maturities of long-term debt for the five years ending December 31, 2001 are as follows (millions): 1997 - $215, 1998 - $4, 1999 - $355, 2000 - $550, 2001 - $550.
Credco paid $217 million in 1996, $218 million in 1995, and $222 million in 1994 of interest on long-term debt obligations.
6. 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.
7. Derivative Instruments
Credco uses derivative financial instruments for nontrading purposes to manage its exposure to interest and foreign exchange rate risks and to manage its funding costs.
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 embedded options or other features that would leverage or multiply its market risk.
Credit risk 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 allow Credco to settle multiple contracts with a single counterparty in one net receipt or payment in the event of counterparty default. At December 31, 1996 and 1995, the aggregate notional amount of Credco's derivative instruments was $6.4 billion ($233 million with affiliates) and $4.9 billion ($46 million with an affiliate), respectively. Credit risk approximates the fair value of contracts in a gain position (asset) and totaled $37 million ($2.2 million with affiliates) at December 31, 1996 and $34 million ($.4 million with an affiliate) at December 31, 1995. The fair value represents the replacement cost and is determined by market values, dealer quotes or pricing models.
The following tables detail information regarding Credco's derivatives (millions):
Notional Carrying Value Fair Value December 31, 1996 Amount Asset Liability Asset Liability - ----------------- -------- ----- --------- ----- ---------
Interest rate products $4,386 $ 19 $ 50 $ 25 $ 87 Forward contracts 1,972 14 31 12 30 ------- ----- -------- ------ --------- Total $6,358 $ 33 $ 81 $ 37 $117 ------- ----- -------- ----- ---------
Notional Carrying Value Fair Value December 31, 1995 Amount Asset Liability Asset Liability - ----------------- -------- ----- --------- ----- ---------
Interest rate products $3,723 $ 19 $ 48 $ 28 $136 Forward contracts 1,185 6 3 6 3 ------- ----- --------- ----- --------- Total $4,908 $ 25 $ 51 $ 34 $139 ------ ----- --------- ----- ---------
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. Credco also 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 enters into interest rate swaps paying rates that reprice when the base rates of the underlying loans change.
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 swaps are as follows (notional amount in millions): 1997 - $1,575, 1998 - $846, 1999 - $474, 2000 - $809, 2001 - $682.
The following table details information regarding Credco's interest rate products at December 31, 1996 (millions):
------------------------------------------------------------------------- Notional Primary Variable Weighted Average Interest Rate Type Amount Rate Index Fixed Floating ------------------------------------------------------------------------- Floating to fixed $2,320 1 month LIBOR and 6.94% 5.71% 1 month Commercial paper
Fixed to floating $2,066 1 month Commercial paper 6.37% 5.71%
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 are 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.
The following table summarizes Credco's forward contracts by major currencies as of December 31 (millions):
--------------------------------------------------- 1996 1995 ---------------------------------------------------
Canadian Dollar $ 334 $ 281 Pound Sterling 578 233 Australian Dollar 307 198 Hong Kong Dollar 199 144 German Mark 218 120 Other 336 209
--------------------------------------------------- Total forward contracts $1,972 $1,185 ---------------------------------------------------
Foreign currency forward contracts generally mature within one year. At December 31, 1996, Credco had no significant unhedged foreign currency exposures.
8. Transactions with Affiliates
In 1996, 1995 and 1994, Credco purchased Cardmember receivables without recourse from TRS and certain of its subsidiaries totaling approximately $136 billion, $122 billion and $109 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 the month.
In 1996, as part of TRS' asset securitization program for U.S. consumer Cardmember receivables, Credco sold back to TRS approximately $2.2 billion of gross receivables arising under specified U.S. consumer Cardmember accounts. TRS sold these receivables, together with the right to receive subsequent receivables arising from such Cardmember accounts, to its subsidiary, RFC. RFC, in turn, conveyed them to the American Express Master Trust (the "Trust"). This resulted in an increase in the gross participation interest in RFC's seller's interest in the securitized receivables owned by CRC, for which CRC paid $2.2 billion. In September 1996, the Trust issued $1.25 billion of receivables trust certificates in two series. At the time of such issuance, CRC sold, at face amount less applicable reserve, $1.3 billion of its gross participation interest in RFC's seller's interest back to RFC.
The extended payment plan receivables owned at December 31, 1996 include $104 million 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, formed by Centurion Bank during the second quarter of 1996 to securitize revolving credit loans.
Other transactions with American Express and its subsidiaries for the years ended December 31 were as follows (millions):
-------------------------------------------------------------------- 1996 1995 1994 --------------------------------------------------------------------
Cash and cash equivalents at December 31 $ 2 $ 9 $ - Maximum month-end level of cash and cash equivalents during the year 9 12 20 Secured loans to American Express Centurion Bank at December 31 2,000 2,000 2,000 Other loans and deposits to an affiliate at December 31 850 850 650 Maximum month-end level of loans and deposits to affiliates during the year 2,850 2,850 2,650 Borrowings at December 31 2,185 1,997 2,037 Maximum month-end level of borrowings during the year 4,024 3,709 2,734 Interest income 160 170 101 Other income 4 6 6 Interest expense 134 136 96 --------------------------------------------------------------------
At December 31, 1996, 1995 and 1994, Credco held $2 billion of variable rate secured loans to Centurion Bank. At both December 31, 1996 and 1995, Credco also held variable rate loans to American Express due in 2004 of $850 million and $650 million at December 31, 1994. The loans to Centurion Bank are secured by certain interest-bearing extended payment plan receivables owned by Centurion Bank. Interest income from these variable rate loans was $160 million, $169 million, and $101 million for 1996, 1995 and 1994, respectively.
In 1994, TRS made a noncash contribution to Credco of AEB(CFS) Limited, a foreign company incorporated to fund certain Optima Card receivables outside the U.S., for book value.
9. 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.
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 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):
------------------------------------------------------------------ 1996 1995 1994 ------------------------------------------------------------------
Current $ 126 $ 161 $ 36 Deferred (11) (56) 39 ------------------------------------------------------------------ Total income tax provision $ 115 $ 105 $ 75 ------------------------------------------------------------------
Credco's net deferred tax assets, which are included in other assets, consisted of the following (millions):
----------------------------------------------------------- 1996 1995 ----------------------------------------------------------- Gross deferred tax assets: Reserve for loan losses $ 218 $ 207
----------------------------------------------------------- Total gross deferred tax assets 218 207
Gross deferred tax liabilities: Foreign exchange contracts (1) (1)
------------------------------------------------------------ Total gross deferred tax liabilities (1) (1) ------------------------------------------------------------
Net deferred tax assets $ 217 $ 206
At December 31, 1996 and 1995, no valuation allowances were required.
A federal tax overpayment of $27 million and underpayment of $3 million at December 31, 1996 and 1995, respectively, are included in due to affiliates.
Income taxes paid to TRS during 1996, 1995 and 1994 were $155 million, $125 million and $55 million, respectively.
The U.S. statutory tax rate and effective tax rate for 1996, 1995 and 1994 was approximately 35 percent.
10. 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):
----------------------------------------------------------------- 1996 1995 1994 ----------------------------------------------------------------- Revenues United States $ 1,855 $ 1,695 $ 1,180 International 311 293 221 ----------------------------------------------------------------- Consolidated $ 2,166 $ 1,988 $ 1,401 ----------------------------------------------------------------- Income before taxes United States $ 275 $ 244 $ 171 International 55 58 43 ----------------------------------------------------------------- Consolidated $ 330 $ 302 $ 214 ----------------------------------------------------------------- Identifiable assets United States $ 16,444 $ 17,027 $ 14,174 International 3,721 3,165 2,694 ----------------------------------------------------------------- Consolidated $ 20,165 $ 20,192 $ 16,868 -----------------------------------------------------------------
11. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data is as follows (millions):
--------------------------------------------------------------- Quarter Ended 12/31 9/30 6/30 3/31 --------------------------------------------------------------- --------------------------------------------------------------- Revenues $ 523 $ 540 $ 571 $ 532 Income before taxes 82 89 74 85 Net income 54 58 48 55 --------------------------------------------------------------- --------------------------------------------------------------- Revenues $ 569 $ 480 $ 479 $ 460 Income before taxes 90 69 66 77 Net income 59 45 43 50 ---------------------------------------------------------------
AMERICAN EXPRESS CREDIT CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (millions)
1996 1995 1994 ---- ---- ---- Reserve for doubtful accounts:
Balance at beginning of year $ 624 $ 498 $ 542 Additions: Provision for doubtful accounts charged to income (1) 898 801 620 Other credits (2) 94 7 75 Foreign translation 2 2 3 Deductions: Accounts written off 816 684 621 Other charges (3) 164 - 121 ------ ------ ------ Balance at end of year $ 638 $ 624 $ 498 ====== ====== ====== Reserve for doubtful accounts as a percentage of Cardmember receivables owned at year end 3.68% 3.79% 3.55% ====== ====== ======
(1) Before recoveries on accounts previously written off of (millions): 1996-$186, 1995-$176 and 1994-$177.
(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.
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit No. Description
3(a) Registrant's Certificate Incorporated by of Incorporation, as amended reference to 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, Incorporated by amended and restated as of reference to November 24, 1980 Exhibit 3 (b) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (Commission File No. 1-6908)
4(a) Registrant's Debt Incorporated by Securities reference to Indenture dated as of Exhibit 4 (s) September 1, 1987 to 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 redemption provisions reference to 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 Incorporated by optional redemption and reference to sinking fund provisions Exhibit 4 (u) to Registrant's Registration Statement on Form S-3 dated September 2, 1987 (File No. 33-16874).
4(d) Form of Original Issue Incorporated by Discount Note with reference to optional redemption Exhibit 4 (v) provision to Registrant's Registration Statement on Form S-3 dated September 2, 1987 (File No. 33-16874).
4(e) Form of Zero Coupon Note Incorporated by with optional redemption reference to 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 Incorporated by with optional redemption reference to and repayment provisions Exhibit 4 (x) to Registrant's Registration Statement on Form S-3 dated September 2, 1987 (File No. 33-16874).
4(g) Form of Extendible Note Incorporated by with optional redemption reference to and repayment provisions Exhibit 4 (y) to Registrant's Registration Statement on Form S-3 dated September 2, 1987 (File No. 33-16874).
4(h) Form of Fixed Rate Medium- Incorporated by Term Note reference to 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 Medium-Term Note reference to Exhibit 4 (aa) to Registrant's Registration Statement on Form S-3 dated September 2, 1987 (File No. 33-16874).
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 Incorporated by Indenture 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 Electronically filed Instruments to be issued herewith. outside the U.S.
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 Incorporated by dated as of January 1, reference to 1983 between the Exhibit 10 (b) Registrant and American to Registrant's Express Travel Related Annual Report on Services Company, Inc. Form 10-K for the year ended December 31, 1987. (Commission File No. 1-6908)
10(b) Secured Loan Agreement Incorporated by dated as of June 30, 1988 reference to between the Registrant and Exhibit 10 (b) American Express Centurion to Registrant's Bank Annual Report on Form 10-K for the year ended December 31, 1988. (Commission File No. 1-6908)
10(c) Participation Agreement Incorporated by dated as of August 3, 1992 reference to between American Express Exhibit 10(c) Receivables Financing to Registrant's Corporation and Credco Annual Report on Receivables Corp. Form 10-K for the year ended December 31, 1992. (Commission File No. 1-6908)
12.1 Computation in Support of Electronically Ratio of Earnings to Fixed filed herewith. Charges of American Express Credit Corporation
12.2 Computation in Support of Electronically Ratio of Earnings to Fixed filed herewith. Charges of American Express Company
23 Consent of Independent Electronically Auditors filed herewith.
27 Financial Data Schedule Electronically filed herewith.