RNS No 5978e
AMERICAN EXPRESS COMPANY
25 October 1999
PART ONE
AMERICAN EXPRESS COMPANY REPORTS RECORD
QUARTERLY NET INCOME OF $648 MILLION
(millions, except per share amounts)
Nine Months
Quarter Ended Percentage Ended Percentage
September 30 Inc/(Dec) September 30 Inc/(Dec)
------------ ---------- ------------ ----------
1999 1998 1999 1998
---- ---- ---- ----
Net Income $ 648 $ 574 13.0% $ 1,869 $ 1,611 16.0%
Net Revenues $4,879 $4,342 12.4% $14,211 $12,662 12.2%
Per Share
Net Income
Basic $ 1.45 $ 1.27 14.2% $ 4.18 $ 3.53 18.4%
Diluted $ 1.42 $ 1.25 13.6% $ 4.09 $ 3.47 17.9%
Average Common
Shares
Outstanding
Basic 446.0 451.6 (1.2%) 447.0 456.2 (2.0%)
Diluted 456.4 459.6 (0.7%) 456.4 464.9 (1.8%)
Return on
Average
Equity 25.3% 23.9% - 25.3% 23.9% -
The 1998 nine-month results include a $138 million (after-tax) credit loss
provision at American Express Bank relating to its Asia/Pacific portfolio, as
well as income of $78 million (after-tax) representing gains on the sale of
First Data Corporation shares and a preferred dividend based on Lehman Brothers
earnings. Excluding these items, income rose 11.8 percent from $1,671 million
(versus 16.0 percent from $1,611 million) and diluted earnings per share grew
13.9 percent from $3.59 (versus 17.9 percent from $3.47).
NEW YORK -- October 25, 1999 -- American Express Company today reported record
quarterly net income of $648 million, up from $574 million in the same period a
year ago. Diluted earnings per share rose 14 percent to $1.42 compared with
$1.25. Net revenues totaled $4.9 billion, up 12 percent from $4.3 billion. The
Company's return on equity was 25.3 percent.
These results met American Express' long-term targets of 12-15 percent earnings
per share growth, at least 8 percent growth in revenues and a return on equity
of 18-20 percent.
The 1999 third-quarter results reflect strong earnings and revenue growth at
Travel Related Services and American Express Financial Advisors. Due to a change
in accounting rules, the Company is required to capitalize software costs rather
than to expense them as they occur. For the third quarter of 1999, this amounted
to a pre-tax benefit of $68 million (net of amortization). As previously
announced, the benefit was offset by increased investment spending and therefore
had no material impact on net income.
Travel Related Services (TRS) reported record quarterly net income of $413
million, up 14 percent from $362 million in the third quarter a year ago.
TRS' net revenues increased 12 percent from the prior year, reflecting higher
billed business in the United States and internationally as well as strong
growth in Cardmember loans. The improvement in billed business resulted from
higher spending per Cardmember, which was based on several factors, including
the benefits of rewards programs and expanded merchant coverage. This growth
came despite the Company's decision last year to withdraw from the U.S.
Government card business, which represented approximately $3.5 billion in
annualized spending and 1.6 million cards. Excluding the loss of the Government
card business, total cards in force rose 2.3 million or 5 percent from a year
ago, with about 900,000 added in the third quarter. Other revenues also
increased, resulting principally from a higher level of securitized receivables,
acquisitions and fee income.
The provision for losses on the charge card portfolio rose as a result of higher
volume, partly offset by a continued improvement in credit quality. The
provision for losses on the lending portfolio declined as a result of
securitizing a portion of the portfolio and lower loss rates, which more than
offset the impact of higher loan volumes. Human resources expenses rose as a
result of increased business volumes and acquisitions. Other operating expenses
increased due in part to the cost of Cardmember loyalty programs, business
growth and investment spending.
The securitization of credit card receivables produced a gain of $55 million
($36 million after-tax). This gain, and the previously mentioned benefit from
software capitalization, were offset by higher spending on marketing and
promotion related to card acquisition, Internet activities and other business
building initiatives. These items had no material impact on net income or total
expenses.
American Express Financial Advisors (AEFA) reported record third quarter net
income of $240 million, up 14 percent from $211 million reported a year ago.
Net revenues and earnings growth benefited from higher fee revenues due to an
increase in managed assets, reflecting positive net sales and market
appreciation over the past twelve months, as well as wider investment margins.
AEFA reported strong increases in sales of investment certificates, annuities
and life and other insurance products, as well as continued growth in sales of
mutual funds. Human resources expenses rose, largely because of compensation
costs associated with higher sales and asset levels. Other operating expenses
rose primarily from costs related to higher business volumes and investments to
build the business.
American Express Bank/Travelers Cheque (AEB/TC) reported quarterly net income of
$38 million compared with $43 million a year ago. Travelers Cheque results were
in line with the prior year.
Net income declined as a result of lower foreign exchange trading revenues,
primarily in Asia, and higher operating expenses due to costs associated with
expanding the consumer business in new markets and realigning business
activities in certain countries.
Corporate and Other reported net expenses of $43 million, compared with $42
million a year ago.
American Express Company (http://www.americanexpress.com), founded in 1850, is a
global travel, financial and network services provider.
American Express Company
Financial Summary
(Unaudited)
(Dollars in millions)
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- Percentage ------------- Percentage
1999 1998 Inc/(Dec) 1999 1998 Inc/(Dec)
---- ---- ---------- ---- ---- ----------
Net Revenues by
Segment (A)
Travel Related
Services $ 3,737 $ 3,339 11.9 % $10,836 $ 9,692 11.8 %
American Express
Financial Advisors 936 802 16.7 2,738 2,343 16.8
American Express
Bank/Travelers
Cheque 261 255 2.5 767 764 0.4
4,934 4,396 12.2 14,341 12,799 12.0
Corporate and Other,
including adjustments
and eliminations (55) (54) (1.1) (130) (137) 5.1
CONSOLIDATED NET
REVENUES (A) $ 4,879 $ 4,342 12.4 $14,211 $12,662 12.2
Pretax Income
by Segment
Travel Related
Services $ 632 $ 554 14.1 $ 1,814 $ 1,582 14.7
American Express
Financial Advisors 350 308 14.0 1,015 888 14.3
American Express
Bank/Travelers
Cheque 4 20 (78.7) 22 (131) -
986 882 11.9 2,851 2,339 21.9
Corporate and
Other (79) (83) 2.8 (258) (127) #
PRETAX INCOME $ 907 $ 799 13.4 $ 2,593 $ 2,212 17.2
Net Income by Segment
Travel Related
Services $ 413 $ 362 14.1 $ 1,187 $ 1,038 14.4
American Express
Financial Advisors 240 211 14.0 696 609 14.3
American Express
Bank/Travelers
Cheque 38 43 (13.0) 117 7 #
691 616 12.1 2,000 1,654 20.9
Corporate and Other (43) (42) (0.6) (131) (43) #
NET INCOME $ 648 $ 574 13.0 $ 1,869 $ 1,611 16.0
# Denotes variance of more than 100%.
(A) Net revenues are reported net of interest expense, where applicable, and
American Express Financial Advisors' provision for losses and benefits.
American Express Company
Financial Summary (continued)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- Percentage ------------- Percentage
1999 1998 Inc/(Dec) 1999 1998 Inc/(Dec)
EARNINGS PER SHARE
Basic
Earnings Per Common
Share $ 1.45 $ 1.27 14.2 % $ 4.18 $ 3.53 18.4 %
Average common
shares outstanding
(millions) 446.0 451.6 (1.2) 447.0 456.2 (2.0)
Diluted
Earnings Per Common
Share $ 1.42 $ 1.25 13.6 $ 4.09 $ 3.47 17.9
Average common
shares outstanding
(millions) 456.4 459.6 (0.7) 456.4 464.9 (1.8)
Cash dividends
declared per
common share $ 0.225 $ 0.225 - $ 0.675 $ 0.675 -
Selected Statistical Information
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- Percentage -------------- Percentage
1999 1998 Inc/(Dec) 1999 1998 Inc/(Dec)
Return on Average
Equity* 25.3 % 23.9 % - 25.3 % 23.9 % -
Common Shares
Outstanding
(millions) 447.6 452.3 (1.0)% 447.6 452.3 (1.0)%
Book Value per
Common Share:
Actual $ 21.77 $ 20.79 4.7% $ 21.77 $ 20.79 4.7%
Pro Forma* $ 22.41 $ 19.28 16.2% $ 22.41 $ 19.28 16.2%
Shareholders'
Equity
(billions) $ 9.7 $ 9.4 3.6% $ 9.7 $ 9.4 3.6%
* Excludes the effect of SFAS No. 115.
American Express Company
Financial Summary
(Unaudited)
(Dollars in millions)
Quarter Ended
Sept 30, June 30, March 31, Dec 31, Sept 30,
1999 1999 1999 1998 1998
Net Revenues by Segment (A)
Travel Related Services $ 3,737 $ 3,678 $ 3,421 $ 3,545 $ 3,339
American Express
Financial Advisors 936 916 885 837 802
American Express Bank
/Travelers Cheque 261 259 247 239 255
4,934 4,853 4,553 4,621 4,396
Corporate and Other,
including adjustments and
eliminations (55) (33) (42) (67) (54)
CONSOLIDATED NET
REVENUES (A) $ 4,879 $ 4,820 $ 4,511 $ 4,554 $ 4,342
Pretax Income by Segment
Travel Related Services $ 632 $ 628 $ 554 $ 483 $ 554
American Express
Financial Advisors 350 353 312 304 308
American Express Bank
/Travelers Cheque 4 6 12 2 20
986 987 878 789 882
Corporate and Other (79) (92) (87) (76) (83)
PRETAX INCOME $ 907 $ 895 $ 791 $ 713 $ 799
Net Income by Segment
Travel Related Services $ 413 $ 411 $ 363 $ 326 $ 362
American Express
Financial Advisors 240 242 214 209 211
American Express Bank
/Travelers Cheque 38 38 41 36 43
691 691 618 571 616
Corporate and Other (43) (45) (43) (41) (42)
NET INCOME $ 648 $ 646 $ 575 $ 530 $ 574
(A) Net revenues are reported net of interest expense, where applicable, and
American Express Financial Advisors' provision for losses and benefits.
American Express Company
Financial Summary (continued)
(Unaudited)
Quarter Ended
September 30, June 30 March 31 December 31 September 30
1999 1999 1999 1998 1998
EARNINGS PER SHARE
Basic
Earnings Per $1.45 $1.44 $1.28 $1.18 $1.27
Common Share
Average common 446.0 447.4 447.7 448.7 451.6
shares outstanding
(millions)
Diluted
Earnings Per Common $1.42 $1.41 $1.26 $1.16 $1.25
Share
Average common 456.4 457.1 456.2 456.0 459.6
shares outstanding
(millions)
Cash dividends $0.225 $0.225 $0.225 $0.225 $0.225
declared per
common share
Selected Statistical Information
(Unaudited)
Quarter Ended
September 30, June 30 March 31 December 31 September 30
1999 1999 1999 1998 1998
Return on Average 25.3% 25.3% 25.1% 24.0% 23.9%
Equity*
Common Shares 447.6 449.0 450.0 450.5 452.3
Outstanding (millions)
Book Value per
Common Share:
Actual $21.77 $21.74 $21.74 $21.53 $20.79
Pro Forma* $22.41 $21.77 $20.92 $20.24 $19.28
Shareholders' $9.7 $9.8 $9.8 $9.7 $9.4
Equity (billions)
* Excludes the effect of SFAS No.115.
(Preliminary) Travel Related Services
Statement of Income
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30, Percentage
1999 1998 Inc/(Dec)
Net Revenues:
Discount Revenue $ 1,700 $ 1,522 11.7 %
Net Card Fees 395 393 0.4
Travel Commissions 448 441 1.4
and Fees
Other Revenues 846 645 31.2
Lending:
Finance Charge Revenue 513 502 2.3
Interest Expense 165 164 0.9
Net Finance Charge 348 338 3.1
Revenue
Total Net Revenues 3,737 3,339 11.9
Expenses:
Marketing and Promotion 373 310 20.1
Provision for Losses
and Claims:
Charge Card 222 148 50.2
Lending 187 224 (16.6)
Other 10 17 (40.5)
Total 419 389 7.7
Charge Card Interest 208 199 4.4
Expense
Net Discount Expense 105 170 (38.7)
Human Resources 968 924 4.7
Other Operating 1,032 793 30.5
Expenses
Total Expenses 3,105 2,785 11.5
Pretax Income 632 554 14.1
Income Tax Provision 219 192 14.1
Net Income $ 413 $ 362 14.1
(Preliminary) Travel Related Services
Statement of Income
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30, Percentage
1999 1998 Inc/(Dec)
Net Revenues:
Discount Revenue $ 1,700 $ 1,522 11.7%
Net Card Fees 399 395 1.1
Travel Commissions 448 441 1.4
and Fees
Other Revenues 730 562 29.9
Lending:
Finance Charge Revenue 747 636 17.4
Interest Expense 246 209 17.3
Net Finance Charge 501 427 17.5
Revenue
Total Net Revenues 3,778 3,347 12.9
Expenses:
Marketing and Promotion 340 310 9.4
Provision for Losses
and Claims:
Charge Card 247 224 10.5
Lending 312 263 18.5
Other 10 17 (40.5)
Total 569 504 13.0
Charge Card Interest 259 262 (1.3)
Expense
Human Resources 968 924 4.7
Other Operating 1,010 793 27.7
Expenses
Total Expenses 3,146 2,793 12.7
Pretax Income 632 554 14.1
Income Tax Provision 219 192 14.1
Net Income $ 413 $ 362 14.1
This Statement of Income is provided on a Managed Asset Basis for analytical
purposes only. It presents the income statement of TRS as if there had been no
securitization transactions. Under Statement of Financial Accounting Standards
No. 125 (SFAS No. 125), which prescribes the accounting for securitized
receivables, TRS recognized a pretax gain of $55 million ($36 million
after-tax) in the third quarter of 1999 related to the securitization of U.S.
receivables. This gain was invested in additional Marketing and Promotion
expenses and other business building initiatives and had no material impact on
Net Income or Total Expenses in the third quarter of 1999. For purposes of this
presentation such gain and a corresponding increase in Marketing and Promotion
and Other Operating Expenses have been eliminated in the third quarter of
1999.
(Preliminary) Travel Related Services
Selected Statistical Information
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30, Percentage
1999 1998 Inc/(Dec)
Total Cards in Force (millions):
United States 29.2 29.5 (1.0)%
Outside the United States 15.6 14.6 6.9
Total 44.8 44.1 1.6
Basic Cards in Force (millions):
United States 22.9 23.3 (1.6)
Outside the United States 12.0 11.3 5.7
Total 34.9 34.6 0.8
Card Billed Business:
United States $ 47.1 $ 41.5 13.5
Outside the United States 17.0 15.2 11.7
Total $ 64.1 $ 56.7 13.0
Average Discount Rate* 2.73% 2.72% -
Average Basic Cardmember
Spending (dollars)* $ 1,935 $ 1,704 13.6
Average Fee per Card (dollars)* $ 38 $ 37 2.7
Travel Sales $ 5.5 $ 5.1 7.0
Travel Commissions and
Fees/Sales** 8.1% 8.6% -
Total Debt $ 30.8 $ 26.9 14.5
Shareholder's Equity $ 5.4 $ 5.2 5.4
Return on Average Equity*** 29.3% 27.1% -
Return on Average Assets*** 3.3% 3.3% -
* Computed excluding Cards issued by strategic alliance partners and
independent operators as well as business billed on those Cards.
** Computed from information provided herein.
***Excluding the effect of SFAS No. 115.
(Preliminary) Travel Related Services
Selected Statistical Information Continued
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30, Percentage
1999 1998 Inc/(Dec)
Owned and Managed Charge Card
Receivables:
Total Receivables $ 25.3 $ 23.3 8.8%
90 Days Past Due as a % of Total 2.5% 2.7% -
Loss Reserves (millions) $ 907 $ 961 (5.6)
% of Receivables 3.6% 4.1% -
% of 90 Days Past Due 144% 151% -
Net Loss Ratio 0.41% 0.48% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $ 20.6 $ 15.4 33.8
Past Due Loans as a % of Total:
30-89 Days 2.0% 2.2% -
90+ Days 0.8% 1.0% -
Loss Reserves (millions):
Beginning Balance $ 602 $ 577 4.3
Provision 264 236 11.9
Net Charge-Offs/Other (230) (234) (1.8)
Ending Balance $ 636 $ 579 9.9
% of Loans 3.1% 3.8% -
% of Past Due 111% 118% -
Average Loans $ 19.8 $ 15.2 30.0
Net Write-Off Rate 4.7% 6.4% -
Net Interest Yield 8.5% 9.6% -
(Preliminary) Travel Related Services
Statement of Income
(Unaudited)
(Dollars in millions)
Quarter Ended
September June 30, March 31, December September
30, 1999 1999 1999 31, 1998 30, 1998
Net Revenues:
Discount Revenue $ 1,700 $ 1,662 $ 1,514 $ 1,639 $ 1,522
Net Card Fees 395 393 403 398 393
Travel Commissions 448 469 426 452 441
and Fees
Other Revenues 846 845 731 687 645
Lending:
Finance Charge Revenue 513 465 503 535 502
Interest Expense 165 156 156 166 164
Net Finance Charge Revenue 348 309 347 369 338
Total Net Revenues 3,737 3,678 3,421 3,545 3,339
Expenses:
Marketing and Promotion 373 325 270 301 310
Provision for Losses
and Claims:
Charge Card 222 249 182 100 148
Lending 187 137 235 293 224
Other 10 14 14 14 17
Total 419 400 431 407 389
Charge Card Interest Expense 208 198 183 211 199
Net Discount Expense 105 131 143 185 170
Human Resources 968 968 912 990 924
Other Operating Expenses 1,032 1,028 928 968 793
Total Expenses 3,105 3,050 2,867 3,062 2,785
Pretax Income 632 628 554 483 554
Income Tax Provision 219 217 191 157 192
Net Income $ 413 $ 411 $ 363 $ 326 $ 362
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