American Express Earnings From Continuing Operations Rise 12% as
Cardmember Spending Reaches Record Level In Fourth Quarter
NEW YORK, Jan. 24 -- American Express Company today reported fourth quarter
income from continuing operations of $751 million, up 12 percent from $669
million a year ago. Diluted earnings per share from continuing operations rose
to $0.60, up 13 percent from $0.53 a year ago.
(Photo: http://www.newscom.com/cgi-bin/prnh/20051201/AMEXLOGO )
(Dollars in millions, except per share amounts)
Quarters Percentage Years Percentage
Ended Inc/(Dec) Ended Inc/(Dec)
December 31, December 31,
2005 2004 2005 2004
Revenues $6,437 $5,903 9.1% $24,267 $21,964 10.5%
Income From Continuing
Operations Before
Accounting Change $751 $669 12.2% $3,221 $2,686 19.9%
Income/(Loss) From
Discontinued Operations $(6) $227 # $513 $830 (38.2%)
Net Income $745 $896 (16.9%) $3,734 $3,445* 8.4%
Earnings Per Common
Share - Basic:
Income From Continuing
Operations Before
Accounting Change $0.61 $0.54 13.0% $2.61 $2.13 22.5%
Income/(Loss) From
Discontinued
Operations $(0.01) $0.18 # $0.42 $0.66 (36.4%)
Net Income $0.60 $0.72 (16.7%) $3.03 $2.74* 10.6%
Earnings Per Common
Share - Diluted:
Income From Continuing
Operations Before
Accounting Change $0.60 $0.53 13.2% $2.56 $2.09 22.5%
Income/(Loss) From
Discontinued
Operations $(0.01) $0.18 # $0.41 $0.65 (36.9%)
Net Income $0.59 $0.71 (16.9%) $2.97 $2.68* 10.8%
Average Common
Shares Outstanding
Basic 1,232 1,242 (0.8%) 1,233 1,259 (2.0%)
Diluted 1,258 1,270 (1.0%) 1,258 1,285 (2.1%)
Return on Average
Total Shareholders'
Equity** 25.4% 22.0% - 25.4% 22.0% -
* Reflects a $109 million non-cash pre-tax charge ($71 million
after-tax), or $0.05 on a basic per share basis and $0.06 on a diluted
per share basis, associated with discontinued operations, relating to
the January 1, 2004 adoption of Statement of Position 03-1, "Accounting
and Reporting by Insurance Enterprises for Certain Nontraditional Long-
Duration Contracts and for Separate Accounts" (SOP 03-1).
** Computed on a trailing 12-month basis using Net Income and Total
Shareholders' Equity (including discontinued operations prior to
disposal) as included in the Consolidated Financial Statements prepared
in accordance with U.S. generally accepted accounting principles
(GAAP).
# Denotes a variance of more than 100%.
As previously reported, the Company spun-off or sold certain businesses,
including Ameriprise Financial, Inc., in the third quarter of 2005. Including
spin-off costs and prior year results for those businesses, net income totaled
$745 million in the fourth quarter, down 17 percent from $896 million a year
ago. Earnings per share on a diluted basis decreased to $0.59, down 17
percent from $0.71.
The Company's reported return on equity (ROE) was 25.4 percent, up from
22.0 percent a year ago. Pro forma ROE, which is based on continuing
operations, was 31.5 percent. (For further information about pro forma ROE,
see the "Pro Forma ROE" section below.)
Consolidated revenues rose 9 percent to $6.4 billion, up from $5.9 billion
a year ago.
Consolidated expenses totaled $5.5 billion, up 10 percent from $5.0
billion a year ago.
"Fourth quarter results from continuing operations met or exceeded our
long-term targets for earnings, revenues and, on a pro forma basis, return on
equity. Higher spending by affluent consumers, small businesses and corporate
Cardmembers more than offset the impact of an industry-wide spike in
bankruptcy filings before new legislation went into effect last October," said
Kenneth I. Chenault, chairman and chief executive. "We continued to invest
aggressively in business building initiatives throughout the Company. New
product introductions, a global brand advertising campaign and expanded card
acquisition programs helped us to add two million cards-in-force during the
last three months. Spending on American Express cards grew 15 percent.
"Marketing-related spending rose to a record $1.6 billion, and we stepped
up our investment in technology platforms during the quarter to support a
pipeline that continues to broaden the product choice we offer to customers.
"While marketing expense was below our earlier estimates, we were able to
take full advantage of all the major opportunities we targeted for the quarter
and generate results that outpaced our major competitors.
"In addition, our network business took several major steps forward just
before year-end when Citibank began issuing its first American Express-branded
cards and we signed partnership agreements with Bank of America and HSBC. The
momentum continued with last week's announcement of a similar agreement with
GE Consumer Finance. All in all, American Express is entering 2006 in
excellent competitive position."
The quarter's income from continuing operations included substantially
higher provisions for loan losses primarily related to the increased
bankruptcy petitions mentioned above. Other significant items in the quarter
included tax benefits of $60 million primarily related to finalizing state tax
returns, and re-engineering costs of $65 million ($42 million after-tax).
Significant items in the year-ago period included a $117 million net gain ($76
million after-tax) on the sale of a small business financing unit and a $99
million charge ($64 million after-tax) related to the restructuring of the
Company's business travel unit, international banking operations and certain
finance functions.
For the full year, American Express reported income from continuing
operations before accounting change of $3.2 billion, up 20 percent from $2.7
billion a year ago. Diluted earnings per share from continuing operations
rose to $2.56, up 22 percent from $2.09 a year ago. Net income was $3.7
billion, up 8 percent from $3.4 billion a year ago. Earnings per share on a
diluted basis rose to $2.97, up 11 percent from $2.68.
Fourth quarter revenues and expenses
The increase in quarterly revenues reflected higher discount revenue, up
13 percent as a result of a 15 percent increase in cardmember spending.
Average cardmember spending rose 7 percent and total cards-in-force were up 9
percent. The benefits of overall higher cardmember spending were partially
offset by a slightly lower average discount rate and the impact of a stronger
U.S. dollar. Net finance charge revenue increased 25 percent, driven by a 19
percent growth in average cardmember loan balances.
Fourth quarter expenses reflected a 34 percent higher provision for losses
and benefits, as well as an 11 percent increase in marketing, promotion,
rewards and cardmember services.
Discontinued operations
Loss from discontinued operations for the quarter totaled $6 million. The
year ago period reflects income from discontinued operations of $227 million
primarily related to the results from Ameriprise, which is no longer part of
American Express.
Segment results
The following discussion of fourth quarter results presents U.S. Card
Services segment results on a "managed basis," as if there had been no
cardmember lending securitization transactions and to reflect certain tax-
exempt investment income as if it had been earned on a taxable basis. In
addition, International Card & Global Commercial Services reflects a
reclassification of certain foreign exchange services, as revenues on a
managed basis. For these business segments, this is the basis used by
management to evaluate operations. For further information about managed
basis and reconciliation of GAAP and managed information, see the "Managed
Basis" section below. The Global Network & Merchant Services, and Corporate &
Other segment results below are presented on a GAAP basis.
U.S. Card Services reported fourth quarter net income of $411 million, up
13 percent from $363 million a year ago.
Total revenues for the fourth quarter increased 14 percent to
$3.5 billion, reflecting continued strong growth in spending and borrowing on
U.S. consumer and small business cards.
Total expenses increased 15 percent. The provision for losses increased 32
percent, reflecting the impact of the previously mentioned bankruptcies and a
higher level of loans outstanding. Marketing, promotion, rewards and
cardmember services expenses increased 12 percent, reflecting greater rewards
costs and higher marketing and promotion expenses.
For the full year 2005, U.S. Card Services reported net income of
$1.8 billion, up 21 percent from $1.5 billion a year ago.
International Card & Global Commercial Services reported fourth quarter
net income of $241 million, up 30 percent from $184 million a year ago.
Total revenues for the fourth quarter increased 2 percent over the year-
ago period to $2.4 billion. The impact of higher spending and borrowing by
Cardmembers was partially offset by a decline in travel commissions and fees.
Fourth quarter total expenses were essentially unchanged from a year ago.
The provision for losses and benefits rose 43 percent due to higher provision
rates and volume. This increase was offset by a 6 percent decrease in human
resource and other operating expenses, reflecting lower restructuring and re-
engineering costs and the benefits of prior re-engineering activities.
For the full year 2005, International Card & Global Commercial Services
reported net income of $934 million, up 19 percent from $781 million a year
ago.
Global Network & Merchant Services reported fourth quarter net income of
$159 million, up 19 percent from $134 million a year ago.
Total revenues for the fourth quarter increased 6 percent over year-ago
levels to $745 million. The increase reflects continued strong growth in
billed business, offset by the impact of the decline in discount rate, which
is largely allocated to this segment and includes costs associated with
investments in strategic merchant partnerships.
Bank partners that issue cards on the American Express network added close
to 1 million cards in the quarter. Spending on bank-issued American Express
cards increased more than 30 percent from a year ago.
Total expenses were essentially flat. Marketing and promotion increased
35 percent, primarily reflecting higher company-wide brand-related
advertising, offset by a decrease in other operating expenses.
For the full year 2005, Global Network & Merchant Services reported net
income of $564 million, down 2 percent from $574 million a year ago. The
decline reflects the cost of an expanded company-wide brand advertising
campaign in 2005 and a reduction in merchant-related reserves in 2004.
Corporate & Other reported fourth quarter net expenses of $60 million,
compared with $12 million a year ago. The year-ago results primarily reflected
the benefit of the previously mentioned sale of the Company's small business
financing unit. Net expenses for 2005 were $111 million compared with $187
million a year ago. The 2005 results reflect certain tax benefits.
Managed Basis
For U.S. Card Services, managed basis means the presentation assumes there
have been no securitization transactions, i.e. all securitized cardmember
loans and related income effects are reflected as if they were in the
Company's balance sheet and income statements, respectively. The Company
presents U.S. Card Services information on a managed basis because that is the
way the Company's management views and manages the business. Management
believes that a full picture of trends in the Company's cardmember lending
business can only be derived by evaluating the performance of both securitized
and non-securitized cardmember loans. Asset securitization is just one of
several ways for the Company to fund cardmember loans. Use of a managed basis
presentation, including non-securitized and securitized cardmember loans,
presents a more accurate picture of the key dynamics of the cardmember lending
business, avoiding distortions due to the mix of funding sources at any
particular point in time. The Company does not currently securitize
international loans.
Irrespective of the funding mix, it is important for management and
investors to see metrics, such as changes in delinquencies and write-off
rates, for the entire cardmember lending portfolio because they are more
representative of the economics of the aggregate cardmember relationships and
ongoing business performance and trends over time. It is also important for
investors to see the overall growth of cardmember loans and related revenue in
order to evaluate market share. These metrics are significant in evaluating
the Company's performance and can only be properly assessed when all non-
securitized and securitized cardmember loans are viewed together on a managed
basis.
The managed basis presentation for U.S. Card Services also reflects an
increase to interest income recorded to enable management to evaluate tax
exempt investments on a basis consistent with taxable investment securities.
On a GAAP basis interest income associated with tax exempt investments is
recorded based on amounts earned. Accordingly, information presented on a
managed basis assumes that tax exempt securities earned income at rates as if
the securities produced taxable income with a corresponding increase in the
provision for income taxes.
The managed basis presentation for International Card & Global Commercial
Services reflects a foreign exchange services reclassification for revenue
earned related to the sale and purchase of foreign currencies as part of the
foreign exchange business. On a GAAP basis, these revenues are included with
other foreign exchange items that are reflected in other operating expenses.
Accordingly, information presented on a managed basis assumes that the amounts
earned are included in other revenue with a corresponding increase in other
operating expenses.
The following table reconciles the GAAP-basis U.S. Card Services and
International Card & Global Commercial Services income statements to the
managed-basis information.
U.S. Card Services
Selected Financial Information
(preliminary, millions) GAAP Basis
--------------------------------
%
Inc/
Quarters Ended December 31, 2005 2004 (Dec)
-------- -------- ----------
Revenues:
Discount revenue, net card
fees and other $ 2,397 $ 2,127 12.7%
Cardmember lending:
Finance charge revenue 685 455 50.8
Interest expense 200 96 #
-------- --------
Net finance charge revenue 485 359 35.5
Securitization income, net 295 325 (9.3)
-------- --------
Total revenues 3,177 2,811 13.0
-------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,097 976 12.5
Provision for losses 509 386 31.7
Human resources and
other operating
expenses 1,038 950 9.3
-------- --------
Total expenses 2,644 2,312 14.4
-------- --------
Pretax segment income 533 499 6.6
Income tax provision 122 136 (11.0)
-------- --------
Segment income $ 411 $ 363 13.1
======== ========
U.S. Card Services
Selected Financial Information
Securitization Tax Equivalent
(preliminary, millions) Effect Effect Managed Basis
---------------- --------------- -------------
%
Quarters Ended Inc/
December 31, 2005 2004 2005 2004 2005 2004 (Dec)
------ ------ ------ ------ ------ ------ -----
Revenues:
Discount revenue,
net card
fees and other $53 $54 $56 $57 $2,506 $2,238 11.9%
Cardmember lending:
Finance charge
revenue 744 621 1,429 1,076 32.9
Interest expense 226 132 426 228 86.8
----- ----- ------- -------
Net finance
charge revenue 518 489 1,003 848 18.4
Securitization
income, net (295) (325) - - -
------- ------ ------ ------ ------ ------
Total revenues 276 218 56 57 3,509 3,086 13.7
------- ------ ------ ------ ------ ------
Expenses:
Marketing,
promotion,
rewards and
cardmember
services (6) - 1,091 976 11.9
Provision for losses 287 218 796 604 31.7
Human resources and
other operating
expenses (5) - 1,033 950 8.9
------ ------ ------- -------
Total expenses $276 $218 2,920 2,530 15.5
------ ------ ------ ------ ------- -------
Pretax segment income 56 57 589 556 5.7
Income tax provision $56 $57 $178 $193 (8.1)
------ ------ ------- -------
International Card & Global Commercial Services
Selected Financial Information
(preliminary, millions) GAAP Basis
--------------------------------
%
Inc/
Quarters Ended December 31, 2005 2004 (Dec)
-------- -------- ----------
Revenues:
Discount revenue, net card
fees and other $ 2,156 $ 2,103 2.4%
Cardmember lending:
Finance charge revenue 278 240 15.6
Interest expense 94 78 21.1
-------- --------
Net finance charge revenue 184 162 13.0
-------- --------
Total revenues 2,340 2,265 3.2
-------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 321 312 2.2
Provision for losses
and benefits 286 199 43.5
Human resources and
other operating
expenses 1,430 1,518 (5.8)
-------- --------
Total expenses 2,037 2,029 0.3
-------- --------
Pretax segment income 303 236 27.9
Income tax provision 62 52 20.3
-------- --------
Segment income $ 241 $ 184 30.0
======== ========
International Card & Global Commercial Services
Selected Financial Information
Foreign Exchange
Services
(preliminary, millions) Reclassification Managed Basis
--------------- -----------------------
%
Quarters Ended Inc/
December 31, 2005 2004 2005 2004 (Dec)
-------- ------ -------- -------- ----------
Revenues:
Discount revenue, net
card fees and other $32 $42 $2,188 $2,145 1.9%
Cardmember lending:
Finance charge revenue
Interest expense
Net finance charge
revenue
------- ------- -------- --------
Total revenues 32 42 2,372 2,307 2.7
------- ------- -------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services
Provision for losses
and benefits
Human resources and
other operating
expenses 32 42 1,462 1,560 (6.3)
------- ------- -------- --------
Total expenses $32 $42 $2,069 $2,071 (0.2)
------- ------- -------- --------
U.S. Card Services
Selected Financial Information
(preliminary, millions) GAAP Basis
--------------------------------
%
Inc/
Years Ended December 31, 2005 2004 (Dec)
-------- -------- ----------
Revenues:
Discount revenue, net card
fees and other $ 8,897 $ 7,893 12.7%
Cardmember lending:
Finance charge revenue 2,408 1,776 35.6
Interest expense 616 406 51.6
-------- --------
Net finance charge revenue 1,792 1,370 30.8
Securitization income, net 1,260 1,132 11.3
-------- --------
Total revenues 11,949 10,395 14.9
-------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 3,911 3,325 17.7
Provision for losses 1,676 1,508 11.1
Human resources and
other operating
expenses 3,763 3,422 10.0
-------- --------
Total expenses 9,350 8,255 13.3
-------- --------
Pretax segment income 2,599 2,140 21.4
Income tax provision 765 622 22.9
-------- --------
Segment income $ 1,834 $ 1,518 20.7
======== ========
U.S. Card Services
Selected Financial Information
Securitization Tax Equivalent
(preliminary, millions) Effect Effect Managed Basis
-------------- -------------- -------------
%
Years Ended Inc/
December 31, 2005 2004 2005 2004 2005 2004 (Dec)
------- ------- ------ ------- ------- ------- -----
Revenues:
Discount revenue,
net card fees
and other $210 $210 $226 $228 $9,333 $8,331 12.0%
Cardmember lending:
Finance charge
revenue 2,692 2,222 5,100 3,998 27.6
Interest expense 739 384 1,355 790 71.4
------- ------- ------- -------
Net finance
charge revenue 1,953 1,838 3,745 3,208 16.8
Securitization
income, net (1,260) (1,132) - - -
------- ------- ------- ------- ------- -------
Total revenues 903 916 226 228 13,078 11,539 13.3
------- ------- ------- ------- ------- -------
Expenses:
Marketing,
promotion,
rewards and
cardmember
services (13) (16) 3,898 3,309 17.8
Provision for
losses 924 942 2,600 2,450 6.1
Human resources and
other operating
expenses (8) (10) 3,755 3,412 10.1
------- ------- ------- -------
Total expenses $903 $916 10,253 9,171 11.8
------- ------- ------- ------- ------- -------
Pretax segment
income 226 228 2,825 2,368 19.2
Income tax provision $226 $228 $991 $850 16.6
------- ------- -------- -------
International Card & Global Commercial Services
Selected Financial Information
(preliminary, millions) GAAP Basis
--------------------------------
%
Inc/
Years Ended December 31, 2005 2004 (Dec)
-------- -------- ----------
Revenues:
Discount revenue, net card
fees and other $8,354 $7,789 7.2%
Cardmember lending:
Finance charge revenue 1,035 907 14.1
Interest expense 351 267 30.7
-------- --------
Net finance charge revenue 684 640 7.2
-------- --------
Total revenues 9,038 8,429 7.2
-------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,269 1,130 12.2
Provision for losses
and benefits 1,023 740 38.1
Human resources and
other operating
expenses 5,597 5,443 2.9
-------- --------
Total expenses 7,889 7,313 7.9
-------- --------
Pretax segment income 1,149 1,116 3.1
Income tax provision 215 335 (35.3)
-------- --------
Segment income $ 934 $ 781 19.5
======== ========
International Card & Global Commercial Services
Selected Financial Information
Foreign Exchange
Services
(preliminary, millions) Reclassification Managed Basis
---------------- --------------------
%
Inc/
Years Ended December 31, 2005 2004 2005 2004 (Dec)
------ ------ ------ ------ -----
Revenues:
Discount revenue, net card
fees and other $135 $172 $8,489 $7,961 6.6%
Cardmember lending:
Finance charge revenue
Interest expense
Net finance charge revenue
------- ------- -------- --------
Total revenues 135 172 9,173 8,601 6.6
------- ------- -------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services
Provision for losses
and benefits
Human resources and
other operating
expenses 135 172 5,732 5,615 2.1
------- ------- -------- --------
Total expenses $135 $172 $8,024 $7,485 7.2
------- ------- -------- --------
Pro Forma ROE
The Company's consolidated return on equity (ROE) is calculated on a
trailing 12-month basis using reported net income over average total
shareholder's equity (including discontinued operations). The Company also
reports pro forma ROE, which is determined on a trailing 12-month basis using
income from continuing operations (which excludes discontinued operations)
over the average of the month-end shareholders' equity at September 30, 2005
through December 31, 2005. Management believes pro forma ROE is an important
measure because it reflects performance of the Company's continuing businesses
by excluding the impact of Ameriprise Financial, Inc. and American Express Tax
and Business Services, Inc., which were disposed of as of September 30, 2005.
ROE Pro Forma ROE
-------------------------------------------------
Trailing 12-months net income: Trailing four quarters income from
$3.7 billion continuing operations: $3.2 billion
Trailing 12-months average Average month-end shareholders' equity
total shareholders' equity: for the quarter ending Dec. 31, 2005:
$14.7 billion $10.2 billion
ROE: 25.4% Pro forma ROE: 31.5%
American Express Company (www.americanexpress.com) is a leading global
payments, network and travel company founded in 1850.
Note: The 2005 Fourth Quarter/Full Year Earnings Supplement, as well as
CFO Gary Crittenden's presentation from the investor conference call referred
to below, will be available today on the American Express web site at
http://ir.americanexpress.com. An investor conference call to discuss fourth
quarter earnings results, operating performance and other topics that may be
raised during the discussion will be held at 5:00 p.m. (EST) today. Live
audio of the conference call will be accessible to the general public on the
American Express web site at http://ir.americanexpress.com. A replay of the
conference call also will be available today at the same web site address.
This release includes forward-looking statements, which are subject to
risks and uncertainties. The words "believe," "expect," "anticipate,"
"optimistic," "intend," "plan," "aim," "will," "may," "should," "could,"
"would," "likely," and similar expressions are intended to identify forward-
looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on which
they are made. The Company undertakes no obligation to update or revise any
forward-looking statements. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to, the following: the Company's ability to generate sufficient net income to
achieve a return on equity on a GAAP basis of 28% to 30%; the Company's
ability to grow its business and meet or exceed its return on shareholders'
equity target by reinvesting approximately 35% of annually-generated capital,
and returning approximately 65% of such capital to shareholders, over time,
which will depend on the Company's ability to manage its capital needs and the
effect of business mix, acquisitions and rating agency requirements; consumer
and business spending on the Company's credit and charge card products and
Travelers Cheques and other prepaid products and growth in card lending
balances, which depend in part on the ability to issue new and enhanced card
and prepaid products, services and rewards programs, and increase revenues
from such products, attract new cardmembers, reduce cardmember attrition,
capture a greater share of existing cardmembers' spending, sustain premium
discount rates on its card products in light of regulatory and market
pressures, increase merchant coverage, retain cardmembers after low
introductory lending rates have expired, and expand the Global Network &
Merchant Services business; the Company's ability to introduce new products,
reward program enhancements and service enhancements on a timely basis during
2006; the success of the Global Network & Merchant Services business in
partnering with banks in the United States, which will depend in part on the
extent to which such business further enhances the Company's brand, allows the
Company to leverage its significant processing scale, expands merchant
coverage of the network, provides Global Network & Merchant Services' bank
partners in the United States the benefits of greater cardmember loyalty and
higher spend per customer, and merchant benefits such as greater transaction
volume and additional higher spending customers; the continuation of favorable
trends, including increased travel and entertainment spending, and the overall
level of consumer confidence; successfully cross-selling financial, travel,
card and other products and services to the Company's customer base, both in
the United States and abroad; the Company's ability to generate sufficient
revenues for expanded investment spending, and the ability to capitalize on
such investments to improve business metrics; the costs and integration of
acquisitions; the success, timeliness and financial impact (including costs,
cost savings and other benefits including increased revenues), and beneficial
effect on the Company's operating expense to revenue ratio, both in the short-
term and over time, of reengineering initiatives being implemented or
considered by the Company, including cost management, structural and strategic
measures such as vendor, process, facilities and operations consolidation,
outsourcing (including, among others, technologies operations), relocating
certain functions to lower-cost overseas locations, moving internal and
external functions to the Internet to save costs, and planned staff reductions
relating to certain of such reengineering actions; the ability to control and
manage operating, infrastructure, advertising and promotion expenses as
business expands or changes, including the ability to accurately estimate the
provision for the cost of the Membership Rewards program; the Company's
ability to manage credit risk related to consumer debt, business loans,
merchant bankruptcies and other credit trends and the rate of bankruptcies,
which can affect spending on card products, debt payments by individual and
corporate customers and businesses that accept the Company's card products and
returns on the Company's investment portfolios; bankruptcies, restructurings
or similar events affecting the airline or any other industry representing a
significant portion of the Company's billed business, including any potential
negative effect on particular card products and services and billed business
generally that could result from the actual or perceived weakness of key
business partners in such industries; the triggering of obligations to make
payments to certain co-brand partners, merchants, vendors and customers under
contractual arrangements with such parties under certain circumstances; a
downturn in the Company's businesses and/or negative changes in the Company's
and its subsidiaries' credit ratings, which could result in contingent
payments under contracts, decreased liquidity and higher borrowing costs;
risks associated with the Company's agreements with Delta Air Lines to prepay
$350 million for the future purchases of Delta SkyMiles rewards points;
fluctuations in foreign currency exchange rates; fluctuations in interest
rates, which impact the Company's borrowing costs, return on lending products;
accuracy of estimates for the fair value of the assets in the Company's
investment portfolio and, in particular, those investments that are not
readily marketable, including the valuation of the interest-only strip
relating to the Company's lending securitizations; the potential negative
effect on the Company's businesses and infrastructure, including information
technology, of terrorist attacks, disasters or other catastrophic events in
the future; political or economic instability in certain regions or countries,
which could affect lending and other commercial activities, among other
businesses, or restrictions on convertibility of certain currencies; changes
in laws or government regulations, including changes in tax laws or
regulations that could result in the elimination of certain tax benefits;
outcomes and costs associated with litigation and compliance and regulatory
matters; deficiencies and inadequacies in the Company's internal control over
financial reporting, which could result in inaccurate or incomplete financial
reporting; and competitive pressures in all of the Company's major businesses.
A further description of these and other risks and uncertainties can be found
in the Company's Annual Report on Form 10-K for the year ended December 31,
2004, and its other reports filed with the SEC.
All information in the following tables is presented on a basis
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), unless otherwise indicated. The information
presented herein reflects discontinued operations presentation
for the spin-off of Ameriprise effective as of September 30, 2005
and certain dispositions, and is revised from previously reported
results.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
Quarters Ended
December 31,
------------------ Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
Revenues
Discount revenue $ 3,172 $ 2,817 12.6 %
Cardmember lending net
finance charge revenue 703 560 25.5
Net card fees 518 491 5.4
Travel commissions and fees 435 484 (10.1)
Other commissions and fees 640 616 4.0
Securitization income, net 295 325 (9.2)
Other investment and
interest income 279 261 6.8
Other 395 349 13.3
------ ------
Total 6,437 5,903 9.1
------ ------
Expenses
Human resources 1,177 1,232 (4.4)
Marketing, promotion, rewards
and cardmember services 1,581 1,420 11.2
Provision for losses and benefits
Charge card 290 240 21.1
Cardmember lending 415 296 40.3
Investment certificates
and other 108 71 52.1
------ ------
Total 813 607 34.1
Professional services 714 647 10.3
Occupancy and equipment 390 379 2.9
Interest 249 222 12.5
Communications 115 120 (5.2)
Other 439 356 24.2
------ ------
Total 5,478 4,983 10.0
------ ------
Pretax income from continuing
operations 959 920 4.2
Income tax provision 208 251 (17.4)
------ ------
Income from continuing operations 751 669 12.2
Income/(Loss) from discontinued
operations, net of tax (6) 227 #
------ ------
Net income $ 745 $ 896 (16.9)
====== ======
# Denotes a variance of more than 100%
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
Years Ended
December 31,
------------------ Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
Revenues
Discount revenue $11,730 $10,249 14.4 %
Cardmember lending net
finance charge revenue 2,580 2,224 16.1
Net card fees 2,033 1,909 6.5
Travel commissions and fees 1,780 1,795 (0.8)
Other commissions and fees 2,456 2,284 7.2
Securitization income, net 1,260 1,132 11.4
Other investment and
interest income 1,055 997 5.8
Other 1,373 1,374 (0.1)
------ ------
Total 24,267 21,964 10.5
------ ------
Expenses
Human resources 4,829 4,538 6.4
Marketing, promotion, rewards
and cardmember services 5,841 4,965 17.6
Provision for losses and benefits
Charge card 1,038 833 24.7
Cardmember lending 1,349 1,130 19.4
Investment certificates
and other 386 301 27.8
------ ------
Total 2,773 2,264 22.5
Professional services 2,308 2,141 7.8
Occupancy and equipment 1,428 1,353 5.6
Interest 920 814 13.1
Communications 457 474 (3.7)
Other 1,463 1,584 (7.5)
------ ------
Total 20,019 18,133 10.4
------ ------
Pretax income from continuing
operations before accounting
change 4,248 3,831 10.9
Income tax provision 1,027 1,145 (10.4)
------ ------
Income from continuing operations
before accounting change 3,221 2,686 19.9
Income from discontinued operations,
net of tax 513 830 (38.2)
------ ------
Income before cumulative effect
of accounting change 3,734 3,516 6.2
Cumulative effect of accounting
change - (71) (A) #
------ ------
Net income $3,734 $3,445 8.4
====== ======
# Denotes a variance of more than 100%
(A) Reflects a $109 million non-cash pretax charge ($71 million
after-tax) associated with discontinued operations related
to the January 1, 2004 adoption of SOP 03-1.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
December 31, December 31,
2005 2004
------------ ------------
Assets
Cash and cash equivalents $7 $8
Accounts receivable 35 32
Investments 21 22
Loans 41 34
Other assets 10 11
Assets of discontinued operations - 87
------------ ------------
Total assets $114 $194
============ ============
Liabilities and Shareholders' Equity
Short-term debt $16 $14
Long-term debt 31 33
Other liabilities 56 50
Liabilities of discontinued
operations - 81
------------ ------------
Total liabilities 103 178
------------ ------------
Shareholders' Equity* 11 16
------------ ------------
Total liabilities and
shareholders' equity $114 $194
============ ============
* Total Shareholders' Equity at December 31, 2004
includes discontinued operations reflected in the
Company's historical Consolidated Financial Statements.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
Quarters Ended
December 31,
------------------ Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
REVENUES
U.S. Card Services $3,177 $2,811 13.1 %
International Card & Global
Commercial Services 2,340 2,265 3.2
Global Network & Merchant Services 745 703 6.0
------ ------
6,262 5,779 8.3
Corporate & Other,
including adjustments
and eliminations 175 124 44.0
------ ------
CONSOLIDATED REVENUES $6,437 $5,903 9.1
====== ======
PRETAX INCOME (LOSS) FROM
CONTINUING OPERATIONS
U.S. Card Services $533 $499 6.6 %
International Card & Global
Commercial Services 303 236 27.9
Global Network & Merchant Services 242 211 15.0
------ ------
1,078 946 13.8
Corporate & Other (119) (26) #
------ ------
PRETAX INCOME FROM CONTINUING
OPERATIONS $959 $920 4.2
====== ======
NET INCOME (LOSS)
U.S. Card Services $411 $363 13.1 %
International Card & Global
Commercial Services 241 184 30.0
Global Network & Merchant Services 159 134 18.7
------ ------
811 681 18.8
Corporate & Other (60) (12) #
------ ------
Income from continuing operations 751 669 12.2
Income/(Loss) from discontinued
operations, net of tax (6) 227 #
------ ------
NET INCOME $745 $896 (16.9)
====== ======
# Denotes a variance of more than 100%.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
(Millions) Years Ended
December 31,
------------------ Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
REVENUES
U.S. Card Services $11,949 $10,395 15.0 %
International Card & Global
Commercial Services 9,038 8,429 7.2
Global Network & Merchant Services 2,842 2,639 7.8
------ ------
23,829 21,463 11.0
Corporate & Other,
including adjustments
and eliminations 438 501 (13.0)
------ ------
CONSOLIDATED REVENUES $24,267 $21,964 10.5
====== ======
PRETAX INCOME (LOSS) FROM CONTINUING
OPERATIONS
U.S. Card Services $ 2,599 $ 2,140 21.4 %
International Card & Global
Commercial Services 1,149 1,116 3.1
Global Network & Merchant Services 870 904 (3.7)
------ ------
4,618 4,160 11.0
Corporate & Other (370) (329) 13.0
------ ------
PRETAX INCOME FROM CONTINUING
OPERATIONS BEFORE ACCOUNTING
CHANGE $ 4,248 $ 3,831 10.9
====== ======
NET INCOME (LOSS)
U.S. Card Services $ 1,834 $ 1,518 20.8 %
International Card & Global
Commercial Services 934 781 19.5
Global Network & Merchant Services 564 574 (1.9)
------ ------
3,332 2,873 15.9
Corporate & Other (111) (187) (41.4)
------ ------
Income from continuing operations
before accounting change 3,221 2,686 19.9
Income from discontinued operations,
net of tax 513 830 (38.2)
Cumulative effect of accounting
change - (71) (A) #
------ ------
NET INCOME $ 3,734 $ 3,445 8.4
====== ======
# Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million
after-tax) associated with discontinued operations related to
the January 1, 2004 adoption of SOP 03-1.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
Quarters Ended
December 31,
---------------- Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.61 $ 0.54 13.0 %
Income/(Loss) from discontinued
operations (0.01) 0.18 #
------ ------
Net income $ 0.60 $ 0.72 (16.7)%
====== ======
Average common shares outstanding
(millions) 1,232 1,242 (0.8)%
====== ======
DILUTED
Income from continuing operations $ 0.60 $ 0.53 13.2 %
Income/(Loss) from discontinued
operations (0.01) 0.18 #
------ ------
Net income $ 0.59 $ 0.71 (16.9)%
====== ======
Average common shares outstanding
(millions) 1,258 1,270 (1.0)%
====== ======
Cash dividends declared
per common share $ 0.12 $ 0.12 - %
====== ======
SELECTED STATISTICAL INFORMATION
Quarters Ended
December 31,
---------------- Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
Return on average total shareholders'
equity (A) 25.4% 22.0%
Common shares outstanding (millions) 1,241 1,249 (0.7)%
Book value per common share* $ 8.49 $ 12.83 (33.8)%
Shareholders' equity (billions)* $ 10.5 $ 16.0 (34.3)%
(A) Computed on a trailing 12-month basis using net income and
total shareholders' equity (including discontinued operations)
as included in the historical Consolidated Financial Statements
prepared in accordance with GAAP.
* Total Shareholders' Equity and book value per common share
amounts prior to September 30, 2005 include discontinued
operations reflected in the Company's historical Consolidated
Financial Statements.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
Years Ended
December 31,
---------------- Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 2.61 $ 2.13 22.5 %
Income from discontinued operations 0.42 0.66 (36.4)%
Cumulative effect of accounting
change - (0.05) (A) #
------ ------
Net income $ 3.03 $ 2.74 10.6 %
====== ======
Average common shares outstanding
(millions) 1,233 1,259 (2.0)%
====== ======
DILUTED
Income from continuing operations $ 2.56 $ 2.09 22.5 %
Income from discontinued operations 0.41 0.65 (36.9)%
Cumulative effect of accounting
change - (0.06) (A) #
------ ------
Net income $ 2.97 $ 2.68 10.8 %
====== ======
Average common shares outstanding
(millions) 1,258 1,285 (2.1)%
====== ======
Cash dividends declared
per common share $ 0.48 $ 0.44 9.1 %
====== ======
SELECTED STATISTICAL INFORMATION
Years Ended
December 31,
---------------- Percentage
2005 2004 Inc/(Dec)
------ ------ ----------
Return on average total shareholders'
equity (B) 25.4% 22.0%
Common shares outstanding (millions) 1,241 1,249 (0.7)%
Book value per common share* $ 8.49 $ 12.83 (33.8)%
Shareholders' equity (billions)* $ 10.5 $ 16.0 (34.3)%
# Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million
after-tax), or $0.05 on a basic per share basis and $0.06 on
a diluted per share basis, associated with discontinued
operations related to the January 1, 2004 adoption of SOP 03-1.
(B) Computed on a trailing 12-month basis using net income and
total shareholders' equity (including discontinued operations)
as included in the historical Consolidated Financial
Statements prepared in accordance with GAAP.
* Total Shareholders' Equity and book value per common share
amounts prior to September 30, 2005 include discontinued
operations reflected in the Company's historical Consolidated
Financial Statements.
To view additional business segment financials go to:
http://ir.americanexpress.com
SOURCE American Express Company
-0- 01/24/2006
/CONTACT: Robert Glick, +1-212-640-1041, robert.a.glick@aexp.com, or
Michael J. O'Neill, +1-212-640-5951, mike.o'neill@aexp.com, both of American
Express Company/
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20051201/AMEXLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com/
/Web site: http://www.americanexpress.com
http://ir.americanexpress.com /
END
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