UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ________________ to _________________
Commission file number 1-7657
AMERICAN EXPRESS COMPANY
------------------------
(Exact name of registrant as specified in its charter)
New York State 13-4922250
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
American Express Tower, World Financial Center, New York, NY 10285
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 640-2000
--------------
None
--------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
--------------------------------------- ----------------------------
Common Shares (par value $.60 per share) 487,716,977 shares
AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Part I. Financial Information:
Consolidated Statement of Income--Three and 1-2
six months ended June 30, 1995 and 1994
Consolidated Balance Sheet--June 30, 1995 and 3
December 31, 1994
Consolidated Statement of Cash Flows--Six 4
months ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis of 7-16
Financial Condition and Results of Operations
Review Report of Independent Auditors 17
Part II. Other Information 18
PART I--FINANCIAL INFORMATION
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
------------------
1995 1994
Revenues: ---- ----
Interest and dividends, net $ 1,135 $ 1,018
Discount revenue 1,112 983
Net card fees 436 431
Travel commissions and fees 320 223
Management and distribution fees 227 199
Other commissions and fees 321 267
Life insurance premiums 209 192
Other 207 193
----- -----
Total 3,967 3,506
----- -----
Expenses:
Human resources 1,006 911
Provisions for losses and benefits:
Annuities and investment certificates 347 286
Credit, banking and other 340 257
Life insurance 202 182
Interest 319 257
Marketing and promotion 260 280
Occupancy and equipment 268 242
Professional services 202 174
Communications 101 91
Other 350 348
----- -----
Total 3,395 3,028
----- -----
Pretax income from continuing operations 572 478
Income tax provision 162 119
----- -----
Income from continuing operations 410 359
Discontinued operations, net of
income taxes - (2)
----- -----
Net income $ 410 $ 357
===== =====
Income per common share
from continuing operations $ 0.81 $ 0.70
Income (loss) per common share
from discontinued operations - (0.01)
----- -----
Net income per common share $ 0.81 $ 0.69
===== =====
Weighted average number of common
shares outstanding (000's) 499,269 511,283
======= =======
Cash dividends declared per
common share $ 0.225 $ 0.225
====== ======
See notes to Consolidated Financial Statements.
1
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share amounts)
(Unaudited)
Six Months Ended
June 30,
-----------------
1995 1994
Revenues: ---- ----
Interest and dividends, net $ 2,234 $ 2,032
Discount revenue 2,130 1,889
Net card fees 872 862
Travel commissions and fees 615 406
Management and distribution fees 432 404
Other commissions and fees 636 535
Life insurance premiums 416 376
Other 403 372
----- -----
Total 7,738 6,876
----- -----
Expenses:
Human resources 1,990 1,793
Provisions for losses and benefits:
Annuities and investment certificates 679 572
Credit, banking and other 624 528
Life insurance 398 362
Interest 622 490
Marketing and promotion 494 514
Occupancy and equipment 536 485
Professional services 376 312
Communications 200 180
Other 749 722
----- -----
Total 6,668 5,958
----- -----
Pretax income from continuing operations 1,070 918
Income tax provision 307 241
----- -----
Income from continuing operations 763 677
Discontinued operations, net of
income taxes - 33
----- -----
Net income $ 763 $ 710
===== =====
Income per common share
from continuing operations $ 1.51 $ 1.31
Income per common share
from discontinued operations - 0.07
----- -----
Net income per common share $ 1.51 $ 1.38
===== =====
Weighted average number of common
shares outstanding (000's) 500,638 509,284
======= =======
Cash dividends declared per
common share $ 0.450 $ 0.450
======= =======
See notes to Consolidated Financial Statements.
2
AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEET
(millions)
(Unaudited)
June 30, December 31,
Assets 1995 1994
------ -------- ------------
Cash and cash equivalents $ 4,754 $ 3,433
Accounts receivable and accrued interest, less
reserves: 1995, $787; 1994, $807 17,482 17,147
Investments 42,880 40,108
Loans and discounts, less reserves:
1995, $559; 1994, $545 15,245 14,722
Land, buildings and equipment--at cost, less
accumulated depreciation: 1995, $1,705;
1994, $1,563 1,843 1,840
Assets held in segregated asset accounts 12,969 10,881
Deferred acquisition costs 2,367 2,280
Other assets 6,638 6,595
------- -------
Total assets $ 104,178 $ 97,006
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Customers' deposits and credit balances $ 9,867 $ 10,013
Travelers Cheques outstanding 6,657 5,271
Accounts payable 4,263 4,228
Insurance and annuity reserves:
Fixed annuities 21,122 20,163
Life and disability policies 5,089 4,686
Investment certificate reserves 3,430 2,866
Short-term debt 16,201 14,810
Long-term debt 6,491 7,162
Liabilities related to segregated asset accounts 12,969 10,881
Other liabilities 10,935 10,493
------- -------
Total liabilities 97,024 90,573
Shareholders' equity:
Preferred shares, $1.66 2/3 par value,
authorized 20,000,000 shares
Convertible Exchangeable Preferred shares,
issued and outstanding 4,000,000 shares,
stated at liquidation value 200 200
Common shares, $.60 par value, authorized
1,200,000,000 shares; issued and outstanding
487,420,764 shares in 1995 and 495,865,678
shares in 1994 292 298
Capital surplus 3,671 3,651
Net unrealized securities gains/(losses) 171 (389)
Foreign currency translation adjustment (68) (77)
Retained earnings 2,888 2,750
------- -------
Total shareholders' equity 7,154 6,433
------- -------
Total liabilities and shareholders' equity $ 104,178 $ 97,006
======= =======
See notes to Consolidated Financial Statements.
3
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions)
(Unaudited)
Six Months Ended
June 30,
----------------
1995 1994
---- ----
Cash Flows from Operating Activities
Income from continuing operations $ 763 $ 677
Adjustments to reconcile income from continuing operations
to net cash provided (used) by operating activities:
Provisions for losses and benefits 978 718
Depreciation, amortization, deferred taxes and other 170 138
Changes in operating assets and liabilities, net of effects of
acquisitions/dispositions:
Accounts receivable and accrued Interest (127) 2
Other assets (202) (648)
Accounts payable and other liabilities (40) (128)
Increase in Travelers Cheques outstanding 1,385 1,018
Increase in insurance reserves 212 206
Net cash flows used by operating activities of
discontinued operations - (3,656)
------ ------
Net cash provided (used) by operating activities 3,139 (1,673)
------ ------
Cash Flows from Investing Activities
Sale of investments 1,398 2,518
Maturity and redemption of investments 2,315 3,736
Purchase of investments (5,497) (6,495)
Net increase in Cardmember receivables (677) (261)
Proceeds from repayment of loans 10,810 10,688
Issuance of loans (11,263) (10,023)
Purchase of land, buildings and equipment (150) (138)
Sale of land, buildings and equipment 15 30
Acquisitions/dispositions, net of cash acquired/sold (7) (15)
Net cash flows used by investing activities of
discontinued operations - (36)
------ ------
Net cash (used) provided by investing activities (3,056) 4
------ ------
Cash Flows from Financing Activities
Net (decrease) increase in customers' deposits and
credit balances (367) 49
Sale of annuities and investment certificates 3,615 2,667
Redemption of annuities and investment certificates (2,204) (2,721)
Net (decrease) increase in debt with maturities of
3 months or less (5,395) 4,520
Issuance of debt 25,272 2,864
Principal payments on debt (19,125) (7,011)
Issuance of American Express common shares 169 132
Repurchase of American Express common shares (517) (111)
Cash Infusion to Lehman Brothers - (904)
Dividends paid (231) (267)
Net cash flows provided by financing activities of
discontinued operations - 3,737
------ ------
Net cash provided by financing activities 1,217 2,955
Net change in cash and cash equivalents of
discontinued operations - 45
Effect of exchange rate changes on cash 21 80
------ ------
Net increase in cash and cash equivalents 1,321 1,321
Cash and cash equivalents at beginning of period 3,433 3,312
------ ------
Cash and cash equivalents at end of period $ 4,754 $ 4,633
====== ======
See notes to Consolidated Financial Statements.
4
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. The consolidated financial statements should be read in conjunction
with the financial statements presented in the Annual Report on Form
10-K of American Express Company (the Company or American Express) for
the year ended December 31, 1994. Certain prior year's amounts have
been reclassified to conform to the current year's presentation.
Significant accounting policies disclosed therein have not changed.
The consolidated financial statements are unaudited; however, in the
opinion of management, they include all normal recurring adjustments
necessary for a fair presentation of the consolidated financial
position of the Company at June 30, 1995 and December 31, 1994, the
consolidated results of its operations for the three and six months
ended June 30, 1995 and 1994 and cash flows for the six months ended
June 30, 1995 and 1994. Results of operations reported for interim
periods are not necessarily indicative of results for the entire year.
2. Interest and dividends, net, reflects gross interest and dividends, net
of $276 million and $222 million of interest expense for the three
months ended June 30, 1995 and 1994, respectively, and $551 million and
$428 million for the six months ended June 30, 1995 and 1994,
respectively, related to the Company's international banking operations
and Travel Related Services' consumer lending activities.
3. On May 31, 1994, the Company completed the spin-off of Lehman Brothers
Holdings Inc. (Lehman Brothers) through a dividend to its common
shareholders of all of the Lehman Brothers common stock held by
American Express on that date. As a result of this transaction, Lehman
Brothers' results are reported as a discontinued operation in the
Consolidated Statement of Income through May 31, 1994. Cash dividends
declared per share for 1994 have been adjusted to reflect the Lehman
Brothers' spin-off.
4. The following is a summary of investments:
June 30, December 31,
(In millions) 1995 1994
-------- ------------
Held to Maturity, at amortized cost
(fair value: 1995, $22,687; 1994,
$21,387) $22,067 $21,909
Available for Sale, at fair value
(cost: 1995, $17,532; 1994,
$15,912) 17,807 15,293
Trading 168 225
Investment mortgage loans 2,838 2,681
------- -------
$42,880 $40,108
======= =======
5. As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 114, ``Accounting by Creditors for
Impairment of a Loan,'' as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
5
Disclosures.'' The adoption of the new rules did not have a material
impact on the Company's results of operations or financial condition.
6. Net income taxes paid during the six months ended June 30, 1995 and
1994 were approximately $284 million and $79 million, respectively.
Interest paid during the six months ended June 30, 1995 and 1994 was
approximately $1.3 billion and $783 million, respectively.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Consolidated Results Of Operations For The Three and Six Months
Ended June 30, 1995 and 1994
The Company's consolidated net income increased 14 percent in the second
quarter of 1995, compared with income from continuing operations last year.
Net income increased 15 percent compared with last year, which included the
net loss at Lehman Brothers Holdings Inc. (Lehman Brothers), which is
reported as a discontinued operation. Second quarter net income per share
increased 16 percent, compared with per share income from continuing
operations a year ago.
The Company's consolidated net income increased 13 percent in the first six
months of 1995, compared with income from continuing operations during the
same period last year. Net income increased 7.5 percent compared with last
year, which included the results of Lehman Brothers. Net income per share
for the first six months of 1995 increased 15 percent, compared with per
share income from continuing operations a year ago.
Consolidated Liquidity and Capital Resources
On March 27, 1995, the Company's Board of Directors approved a plan to
repurchase up to 40 million common shares over the next two to three years,
from time to time as market conditions allow. This authorization is in
addition to a plan announced in September 1994, whereby the Company was
authorized to repurchase up to 20 million common shares. A portion of the
share repurchases is being used to offset share issuances under employee
compensation plans. The authorized share repurchases were intended to
reduce the number of outstanding common shares and common share equivalents
to less than 500 million and maintain the number of shares below that
level. The number of outstanding common shares and common share
equivalents totaled 499 million for the quarter ended June 30, 1995. The
repurchase plans will help the Company achieve its goal of building
shareholder value while maintaining appropriate capital levels. Since
inception of the initial plan, the Company had repurchased approximately
29.5 million shares at an average price of $32.52 through July 31, 1995.
In the second quarter of 1995, in connection with the share repurchase
program, the Company sold three million put options with maturities up to
twelve months and a weighted average strike price of $35.52 per share.
Upon the sale of these put options, the Company received premiums totaling
$5.7 million.
During the second quarter of 1995, the parent company paid down $700
million of a $945 million Floating Medium-Term Note due 1996 in exchange
for an extension and modification of terms on the remaining balance through
the year 2000. In addition, the parent company restructured its $1.2 billion
multi-purpose credit facility, reducing the cost of the facility and extending
the multi-year portion from three years to five years under more favorable
terms.
The $560 million increase in Net Unrealized Securities Gains/(Losses) was
due to declining medium- and long-term interest rates.
7
Travel Related Services
Results of Operations For The Three and Six Months Ended June 30, 1995 and
1994
Statement of Income
(Unaudited)
(Amounts in millions, except percentages)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percentage ---------------- Percentage
1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
Net Revenues: ---- ---- ---------- ---- ---- ----------
Discount Revenue $1,112 $983 13.1% $2,130 $1,889 12.7%
Net Card Fees 436 431 1.1 872 862 1.2
Travel Commissions and Fees 320 223 43.6 615 406 51.6
Interest and Dividends 256 187 37.0 499 361 38.4
Other Revenues 526 444 18.9 1,039 880 18.0
----- ----- ----- -----
2,650 2,268 16.9 5,155 4,398 17.2
----- ----- ----- -----
Lending:
Finance Charge Revenue 376 304 23.7 730 596 22.5
Interest Expense 124 69 80.4 242 132 83.4
----- ----- ----- -----
Net Finance Charge Revenue 252 235 7.1 488 464 5.2
----- ----- ----- -----
Total Net Revenues 2,902 2,503 16.0 5,643 4,862 16.1
----- ----- ----- -----
Expenses:
Marketing and Promotion 250 273 (8.4) 480 502 (4.5)
Provision for Losses and Claims:
Charge Card 199 177 12.3 364 325 11.8
Lending 126 63 99.9 232 177 31.2
Other 124 120 3.4 246 224 9.8
----- ----- ----- -----
Total 449 360 24.6 842 726 15.9
----- ----- ----- -----
Interest Expense:
Charge Card 233 168 38.8 441 326 35.2
Other Interest Expense 51 41 25.4 109 66 65.1
----- ----- ----- -----
Total 284 209 36.2 550 392 40.2
Net Discount Expense * 107 68 58.2 207 135 52.9
Human Resources 705 625 12.7 1,398 1,211 15.4
Other Operating Expenses 684 603 13.4 1,366 1,205 13.6
----- ----- ----- -----
Total Expenses 2,479 2,138 15.9 4,843 4,171 16.1
----- ----- ----- -----
Pretax Income 423 365 16.1 800 691 15.8
Income Tax Provision 125 102 23.8 238 193 23.2
----- ----- ----- -----
Net Income $298 $263 13.2 $562 $498 12.9
===== ===== ===== =====
/TABLE
* The impact of Net Discount Expense (related to TRS' securitized
receivables) was to:
Decrease the Provision for Losses
Claims - Charge Card $46 $29 61.0 $83 $56 48.7
Decrease Interest Expense -
Charge Card 41 24 71.0 82 48 71.0
Increase Other Revenues 20 15 32.8 42 31 33.1
----- ----- ----- -----
Total Net Discount Expense $107 $68 58.2 $207 $135 52.9
===== ===== ===== =====
8
Selected Statistical Information
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percentage ---------------- Percentage
1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
Total Cards in Force: ---- ---- ---------- ---- ---- ----------
United States 25.7 24.8 3.6% 25.7 24.8 3.6%
Outside the United States 11.2 10.8 3.7 11.2 10.8 3.7
---- ---- ---- ----
Total 36.9 35.6 3.6 36.9 35.6 3.6
==== ==== ==== ====
Basic Cards in Force:
United States 19.1 18.1 5.5 19.1 18.1 5.5
Outside the United States 8.7 8.0 8.2 8.7 8.0 8.2
---- ---- ---- ----
Total 27.8 26.1 6.3 $27.8 $26.1 6.3
==== ==== ==== ====
Card Billed Business (billions):
United States $28.7 $25.3 13.1 54.7 48.3 13.3
Outside the United States 11.7 9.3 26.5 22.5 18.1 24.0
---- ---- ---- ----
Total $40.4 $34.6 16.7 $77.2 $66.4 16.2
==== ==== ==== ====
Travelers Cheque Sales (billions) $6.9 $6.5 5.2 $12.2 $11.4 7.6
Average Travelers Cheques
Outstanding (billions) $6.1 $5.3 16.9 $5.8 $5.1 13.9
Travel Sales (billions) $4.0 $2.5 55.6 $7.4 $4.6 58.5
TRS' net revenues increased for the three and six months ended June 30,
1995 reflecting an increase in worldwide billed business and higher
business travel sales resulting from acquisitions and growth. The increase
in worldwide billed business resulted from higher spending per Cardmember,
growth in Corporate Card billed business and an increase in the number of
Cards outstanding. The rate of growth in discount revenue for the three
and six months ended June 30, 1995 is below the growth in worldwide billed
business, reflecting a change in the mix of Cardmember spending, as well as
increasing electronic merchant data capture in selected international
markets. Lending net finance charge revenue increased reflecting higher
average receivables which, in the six month period, was partly offset by
lower net interest spreads.
The increase in the worldwide charge Card provision for the three and six
months ended June 30, 1995 reflected the increase in billed business,
partly offset by a higher level of securitized receivables. Although the
worldwide lending provision for losses was higher in these periods, credit
quality in the portfolio was comparable with that of the prior year.
Charge Card interest expense increased primarily due to higher rates as
well as increased funding requirements. The increase in human resources
expense for the three and six months ended June 30, 1995 primarily
reflected the impact of acquisitions and growth to support increased
business volumes. The rate of growth in human resources expense for the
second quarter of 1995 was below the year-to-date growth rate reflecting a
reduction in the number of employees during the second quarter. Other
operating expenses increased primarily reflecting business travel
acquisitions and growth, as well as continuing investments in certain
business initiatives. The decline in the U.S. dollar relative to other
currencies increased, to a limited extent, both revenues and expenses in
the three and six months ended June 30, 1995, but had essentially no effect
on net income.
9
Travel Related Services
Liquidity and Capital Resources
Selected Balance Sheet Information
(Unaudited)
(Amounts in billions, except percentages)
June 30, December 31, Percentage June 30, Percentage
1995 1994 Inc/(Dec) 1994 Inc/(Dec)
------- ----------- ---------- ------- ----------
Accounts Receivable, net $17.1 $16.8 1.5% $15.7 8.7%
Investments $11.5 $10.7 7.3 $10.7 8.2
U.S. Consumer Lending
Loan Balances $8.6 $8.1 7.1 $7.4 16.9
Total Assets $45.3 $42.5 6.7 $41.9 8.1
Travelers Cheques Outstanding $6.7 $5.3 26.3 $5.8 14.4
Accounts Payable $3.8 $3.8 0.4 $3.4 9.4
Short-term Debt $15.8 $15.1 4.3 $13.7 15.2
Long-term Debt $3.5 $3.4 3.3 $4.3 (18.8)
Total Liabilities $40.7 $38.2 6.6 $37.8 7.7
Total Shareholder's Equity $4.6 $4.3 7.7 $4.1 12.6
Return on Average Equity 24.5% 24.0% - 23.8% -
TRS' total assets increased from year end reflecting higher short-term
investments and time deposits, funded by increases in short-term
debt and Travelers Cheques outstanding. The increase in U.S. Consumer
Lending loan balances was partly attributable to a transfer of balances
from other business lines. During the first six months of 1995, TRS issued
$200 million 8.125% Eurodollar Notes due 1997, the proceeds of which were
used to fund lending receivables in replacement of maturing debt, as well as
$250 million 6.75% Senior Notes due 2001, the proceeds of which were used to
reduce short-term senior debt.
In the second quarter of 1995, GE Capital Corporation (GE Capital) and TRS
announced an agreement under which GE Capital will purchase AMEX Life
Assurance Company (AMEX Life) from TRS. The transaction, which is
contingent upon approval by applicable regulatory authorities, is expected
to close in the fourth quarter of 1995 and will have no material impact on
the Company's results of operations. The sale of AMEX Life is consistent
with the Company's strategy of focusing on its core businesses.
10
American Express Financial Advisors
Results of Operations For The Three and Six Months Ended June 30, 1995 and
1994
Statement of Income
(Unaudited)
(Amounts in millions, except percentages and where indicated)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percentage ---------------- Percentage
1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
Revenues: ---- ---- ---------- ---- ---- ----------
Investment Income $549 $497 10.4% $1,084 $1,000 8.4%
Management and Distribution Fees 227 199 14.0 432 404 7.1
Other Income 135 116 16.1 269 224 19.8
----- ----- ----- -----
Total Revenues 911 812 12.1 1,785 1,628 9.6
----- ----- ----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 290 252 15.1 562 506 11.1
Insurance 103 85 20.5 197 173 13.7
Investment Certificates 46 25 83.1 96 48 #
----- ----- ----- -----
Total 439 362 21.1 855 727 17.6
Human Resources 216 198 8.9 424 407 4.3
Other Operating Expenses 64 91 (29.2) 150 197 (23.9)
----- ----- ----- -----
Total Expenses 719 651 10.4 1,429 1,331 7.4
----- ----- ----- -----
Pretax Income 192 161 19.1 356 297 19.8
Income Tax Provision 63 52 21.3 120 97 23.3
----- ----- ----- -----
Net Income $129 $109 18.0 $236 $200 18.2
===== ===== ===== =====
Selected Statistical Information
Life Insurance in Force (billions) $55.9 $49.3 13.5 $55.9 $49.3 13.5
===== ===== ===== =====
Assets Owned and/or Managed
(billions):
Assets managed for institutions $33.1 $25.6 28.9 $33.1 $25.6 28.9
Assets owned and managed
for individuals
Owned Assets 45.0 37.8 19.2 45.0 37.8 19.2
Managed Assets 43.3 37.2 16.6 43.3 37.2 16.6
----- ----- ----- -----
Total $121.4 $100.6 20.7 $121.4 $100.6 20.7
===== ===== ===== =====
Sales of Selected Products:
Mutual Funds $2,364 $2,324 1.7 $4,652 $4,850 (4.1)
Annuities $961 $1,158 (17.0) $2,057 $2,168 (5.1)
Investment Certificates $604 $215 # $1,016 $370 #
Life and Other Insurance Sales $96 $77 24.4 $179 $152 17.6
Fees From Financial Plans
(thousands) $9,625 $9,624 - $20,044 $19,798 1.2
Number of Financial Advisors 7,918 7,780 1.8 7,918 7,780 1.8
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 64.1% 61.5% - 63.8% 60.6% -
# Denotes variance of more than 100%.
11
American Express Financial Advisors' revenue and earnings growth for the three
and six months ended June 30, 1995 benefited primarily from an increase in
managed assets, as well as an increase in life insurance in force. These
increases were partially offset by the impact of lower investment margins and
lower distribution fees.
The increase in investment income for the three and six months ended June
30, 1995 reflected higher asset levels, which were partly offset by lower
investment yields compared with the same periods in 1994. Management and
distribution fees increased reflecting increased management fees earned on
a higher asset base, partly offset by a decline in distribution fees due to
the availability of a broader range of rear-load funds beginning in the
second quarter of 1995. The decline in distribution fees in the first half
of 1995 was also attributable to lower mutual fund sales. The growth in
managed assets reflects market appreciation and, to a lesser extent,
positive net sales. Other income increased in the three and six months
ended June 30, 1995 primarily due to higher life insurance contract charges
and premiums.
Provisions for losses and benefits increased in the three and six months
ended June 30, 1995 reflecting higher business in force and higher accrual
rates for annuities, life insurance and investment certificates. Human
resources expense increased in the first half of 1995 reflecting an
increase in the number of employees and financial advisors compared with
last year, partly offset by the effect of lower commissionable sales.
Other operating expenses for the three and six months ended June 30, 1994
reflected a provision for insurance industry guarantee association
assessments. In addition, other operating expenses in 1994 included
accelerated amortization of deferred acquisition costs and surrenders as a
result of an annuity exchange plan announced during the first quarter.
12
American Express Financial Advisors
Liquidity and Capital Resources
Selected Balance Sheet Information
(Unaudited)
(Amounts in billions, except percentages)
June 30, December 31, Percentage June 30, Percentage
1995 1994 Inc/(Dec) 1994 Inc/(Dec)
------- ----------- ---------- -------- ----------
Investments $27.9 $25.2 10.5% $24.2 15.3%
Assets Held in Segregated Accounts $13.0 $10.9 19.2 $9.8 32.4
Total Assets $45.0 $40.2 12.0 $37.8 19.2
Reserves for Losses and Benefits $27.3 $25.6 6.5 $24.5 11.3
Total Liabilities $42.2 $38.0 11.1 $35.6 18.7
Total Shareholder's Equity $2.8 $2.1 28.9 $2.2 27.1
Return on Average Equity 20.0% 19.3% - 18.3% -
American Express Financial Advisors' total assets increased from year end
primarily reflecting increases in investments and assets held in segregated
asset accounts. These increases reflected market appreciation and positive
net sales.
13
American Express Bank
Results of Operations For The Three and Six Months Ended June 30, 1995 and
1994
Statement of Income
(Unaudited)
(Amounts in millions, except percentages)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percentage ---------------- Percentage
1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
---- ---- ---------- ---- ---- ----------
Net Revenues:
Interest Income $233 $237 (1.9%) $472 $470 0.4%
Interest Expense 152 153 (0.5) 309 295 4.9
----- ----- ----- -----
Net Interest Income 81 84 (4.4) 163 175 (7.1)
Commissions, Fees and Other
Revenues 61 58 7.3 120 115 4.7
Foreign Exchange Income 21 20 1.9 40 40 0.7
----- ----- ----- -----
Total Net Revenues 163 162 0.5 323 330 (2.1)
----- ----- ----- -----
Provision for Credit Losses 1 2 (20.0) 4 8 (47.0)
----- ----- ----- -----
Expenses:
Human Resources 65 63 2.6 129 124 3.6
Other Operating Expenses 69 69 (0.2) 140 134 5.0
----- ----- ----- -----
Total Expenses 134 132 1.1 269 258 4.3
----- ----- ----- -----
Pretax Income 28 28 (1.2) 50 64 (21.9)
Income Tax Provision 9 9 0.9 15 20 (24.3)
----- ----- ----- -----
Net Income $19 $19 (2.1) $35 $44 (20.9)
===== ==== ===== =====
American Express Bank's (the Bank) results for the three and six months
ended June 30, 1995 reflected growth in fee income as well as a reduction
in the provision for credit losses, offset by lower net interest income.
The Bank's results for the first six months of 1995 also reflected higher
operating expenses.
Net interest income declined due to lower spreads on the investment
portfolio, as well as higher short-term funding costs. Commissions, fees
and other revenues increased primarily reflecting growth in commercial and
correspondent banking fee income. Operating expenses increased in the first
half of 1995 over the year ago level, in part due to spending related to
systems technology.
14
American Express Bank
Liquidity and Capital Resources
Selected Balance Sheet Information
(Unaudited)
(Amounts in billions, except percentages and where indicated)
June 30, December 31, Percentage June 30, Percentage
1995 1994 Inc/(Dec) 1994 Inc/(Dec)
------- ----------- ----------- ------- ----------
Investments $2.7 $2.8 (1.6%) $3.0 (10.4%)
Total Loans $5.4 $5.0 8.8 $5.6 (3.4)
Reserve for Credit Losses (millions) $115 $109 5.3 $115 0.4
Total Assets $13.0 $13.3 (2.0) $14.4 (9.2)
Deposits $8.9 $9.1 (2.4) $10.4 (14.3)
Total Liabilities $12.2 $12.5 (2.4) $13.7 (10.4)
Total Shareholder's Equity $0.8 $0.8 5.3 $0.7 13.3
Reserves as a Percentage of Total
Loans 2.1% 2.2% - 2.0% -
Total Nonperforming Loans (millions) $32 $20 63.8 $34 (6.4)
Other Nonperforming Assets (millions) $53 $56 (5.5) $59 (10.9)
Risk-Based Capital Ratios:
Tier 1 8.3% 7.5% - 6.6% -
Total 15.8% 14.7% - 13.0% -
Leverage Ratio 5.2% 4.8% - 4.2% -
Return on Average Assets 0.52% * 0.54% * - 0.58% * -
Return on Average Common Equity 9.21% * 10.78% * - 11.80% * -
* For the year-to-date period
The Bank's total assets declined slightly from year end as loan growth was
more than offset by a decrease in cash and cash equivalents. The increase
in nonperforming loans since year end primarily reflects newly classified
exposures, partly offset by repayments. The increase in the Bank's Tier 1
and Total Capital Ratios primarily relates to an increase in retained
earnings and general balance sheet reductions, particularly risk weighted
loans. The increase in the Leverage Ratio is due to an increase in
retained earnings and a decrease in quarterly average assets.
15
Corporate and Other
Corporate and Other reported second quarter 1995 net expenses of $36
million, compared with net expenses of $32 million last year. The 1995
second quarter includes a gain from the sale of common stock and warrants
of Mellon Bank Corporation (Mellon), which was offset by expenses primarily
related to various business building initiatives.
Corporate and Other reported net expenses of $70 million in the first six
months of 1995, compared with net expenses of $65 million a year ago.
Results for the first half of 1995 included the Company's share of the
Travelers Inc. (Travelers) revenue participation in accordance with an
agreement related to the 1993 sale of the Shearson Lehman Brothers Division
(the 1993 sale) and the gain from the sale of common stock and warrants of
Mellon, which were offset by expenses primarily related to various business
building initiatives.
Results for the first six months of 1994 included income from the Company's
share of the Travelers revenue participation, as well as a capital gain on
the sale of Travelers preferred stock and warrants which were acquired as
part of the 1993 sale. These gains were offset by the Company's costs
associated with the Lehman Brothers spin-off and certain business building
initiatives.
16
INDEPENDENT ACCOUNTANTS REVIEW REPORT
The Shareholders and Board of Directors
American Express Company
We have reviewed the accompanying consolidated balance sheet of American Express
Company (the "Company") as of June 30, 1995, and the related consolidated
statements of income for the three-month and six-month periods ended June 30,
1995 and 1994 and the consolidated statement of cash flows for the six-month
periods ended June 30, 1995 and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the consolidated financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for the year then ended (not presented herein), and in our report
dated February 2, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1994, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
ERNST & YOUNG LLP
/s/Ernst & Young LLP
New York, New York
August 14, 1995
17
PART II. OTHER INFORMATION
AMERICAN EXPRESS COMPANY
Item 4. Submission of Matters to a Vote of Securities Holders
For information relating to the matters voted upon at the registrant's
annual meeting for shareholders held on April 24, 1995, see Item 4 on page 14 of
the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, which is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page E-1 hereof.
(b) Reports on Form 8-K:
Form 8-K, dated April 4, 1995, Item 5, announcing the appointment
of George L. Farr as Vice Chairman.
Form 8-K, dated April 20, 1995, Item 5, reporting the registrant's
earnings for the quarter ended March 31, 1995.
Form 8-K, dated June 9, 1995, Item 5, announcing the sale of AMEX
Life Assurance Company and the sale of Mellon Bank Corporation
Common Stock and Warrants.
Form 8-K, dated July 24, 1995, Item 5, reporting the registrant's
earnings for the quarter ended June 30, 1995.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
AMERICAN EXPRESS COMPANY
------------------------
(Registrant)
Date: August 14, 1995 By /s/ Michael P. Monaco
--------------------- --------------------------------
Michael P. Monaco
Executive Vice President,
Chief Financial Officer and
Treasurer
Date:August 14, 1995 /s/ Daniel T. Henry
-------------------- -----------------------------
Daniel T. Henry
Senior Vice President and
Comptroller
(Chief Accounting Officer)
18
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report:
Exhibit Description
12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
15 Letter re Unaudited Interim Financial Information.
27 Financial Data Schedule.
E-1