The American Express Company, often abbreviated Amex, AmEx, AX or Amexco, is a global provider of financial services based in New York City, USA. The company is best known for its charge card, credit card, and traveler's cheque businesses.
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 March 31, 1996 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.) World Financial Center, 200 Vesey Street, 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 April 30, 1996 - ------------------------------------- ------------------------------- Common Shares (par value $.60 per share) 478,391,841 shares
AMERICAN EXPRESS COMPANY FORM 10-Q INDEX Page No. Part I. Financial Information: Consolidated Statement of Income--Three 1 months ended March 31, 1996 and 1995 Consolidated Balance Sheet--March 31, 1996 2 and December 31, 1995 Consolidated Statement of Cash Flows--Three 3 months ended March 31, 1996 and 1995 Notes to Consolidated Financial Statements 4 Management's Discussion and Analysis of 5-15 Financial Condition and Results of Operations Review Report of Independent Accountants 16 Part II. Other Information 17-18
PART I--FINANCIAL INFORMATION AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENT OF INCOME (dollars in millions, except per share amounts) (Unaudited) Three Months Ended March 31, -------------------- 1996 1995 Net Revenues: ------ ------ Discount revenue $ 1,141 $1,018 Interest and dividends, net 838 863 Net card fees 421 436 Travel commissions and fees 298 295 Other commissions and fees 307 314 Management and distribution fees 279 206 Cardmember lending net finance charge revenue 275 236 Life insurance premiums 97 207 Other 226 196 ------- ------- Total 3,882 3,771 ------- ------- Expenses: Human resources 1,022 984 Provisions for losses and benefits: Annuities and investment certificates 351 332 Life insurance 122 196 Charge card 210 164 Cardmember lending 188 106 Other 15 14 Interest: Charge card 167 156 Other 124 147 Occupancy and equipment 288 268 Marketing and promotion 207 234 Professional services 202 174 Communications 102 99 Other 319 399 ------- ------- Total 3,317 3,273 ------- ------- Pretax income 565 498 Income tax provision 169 145 ------- ------- Net income $ 396 $ 353 ======= ======= Net income per common share $ 0.80 $ 0.70 ======= ======= Average common and common equivalent shares outstanding 490.6 502.6 ======= ======= Cash dividends declared per common share $ 0.225 $ 0.225 ======= ======= See notes to Consolidated Financial Statements. 1
AMERICAN EXPRESS COMPANY CONSOLIDATED BALANCE SHEET (millions) (Unaudited) March 31, December 31, Assets 1996 1995 - ------ ------------- -------------- Cash and cash equivalents $ 5,629 $ 3,200 Accounts receivable and accrued interest: Cardmember receivables, less reserves: 1996, $758; 1995, $753 15,477 17,154 Other receivables, less reserves: 1996, $59; 1995, $76 2,286 2,760 Investments 41,444 42,561 Loans: Cardmember lending, less reserves: 1996, $510; 1995, $489 10,400 10,268 International banking, less reserves: 1996, $110, 1995, $111 5,215 5,317 Other, net 544 506 Separate account assets 15,760 14,974 Deferred acquisition costs 2,353 2,262 Land, buildings and equipment--at cost, less accumulated depreciation: 1996, $1,732; 1995, $1,763 1,782 1,783 Other assets 7,020 6,620 -------- -------- Total assets $107,910 $107,405 ======== ======== Liabilities and Shareholders' Equity - ------------------------------------ Customers' deposits and credit balances $ 9,335 $ 9,889 Travelers Cheques outstanding 5,900 5,697 Accounts payable 4,371 4,686 Insurance and annuity reserves: Fixed annuities 21,279 21,405 Life and disability policies 3,802 3,752 Investment certificate reserves 3,617 3,606 Short-term debt 18,306 17,654 Long-term debt 7,793 7,570 Separate account liabilities 15,760 14,974 Other liabilities 9,755 9,952 ------ ------ Total liabilities 99,918 99,185 Shareholders' equity: Preferred shares, $1.66 2/3 par value, authorized 20 million shares Convertible Exchangeable Preferred shares, issued and outstanding 4 million shares, stated at liquidation value 200 200 Common shares, $.60 par value, authorized 1.2 billion shares; issued and outstanding 479.1 million shares in 1996 and 483.1 million shares in 1995 287 290 Capital surplus 3,786 3,781 Net unrealized securities gains 641 875 Foreign currency translation adjustment (86) (85) Retained earnings 3,164 3,159 -------- -------- Total shareholders' equity 7,992 8,220 -------- -------- Total liabilities and shareholders' equity $107,910 $107,405 ======== ======== See notes to Consolidated Financial Statements. 2
AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (millions) (Unaudited) Three Months Ended March 31, -------------------- 1996 1995 ---- ---- Cash Flows from Operating Activities Net income $ 396 $ 353 Adjustments to reconcile net income to net cash provided by operating activities: Provisions for losses and benefits 617 455 Depreciation, amortization, deferred taxes and other 37 61 Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable and accrued interest 500 72 Other assets (468) (370) Accounts payable and other liabilities (497) (158) Increase in Travelers Cheques outstanding 203 570 Increase in insurance reserves 66 126 ------ ------ Net cash provided by operating activities 854 1,109 ------ ------ Cash Flows from Investing Activities Sale of investments 1,225 769 Maturity and redemption of investments 1,959 1,457 Purchase of investments (2,367) (2,785) Net decrease in Cardmember receivables 1,299 746 Proceeds from repayment of loans 6,004 5,621 Issuance of loans (6,341) (5,813) Purchase of land, buildings and equipment (88) (75) Sale of land, buildings and equipment 69 9 ------ ------ Net cash provided (used) by investing activities 1,760 (71) ------ ------ Cash Flows from Financing Activities Net decrease in customers' deposits and credit balances (516) (272) Sale of annuities and investment certificates 1,413 1,784 Redemption of annuities and investment certificates (1,579) (1,107) Net increase (decrease) in debt with maturities of 3 months or less 1,670 (2,690) Issuance of debt 4,194 3,192 Principal payments on debt (5,035) (939) Issuance of American Express common shares 110 91 Repurchase of American Express common shares (333) (114) Dividends paid (113) (115) ------ ------ Net cash used by financing activities (189) (170) Effect of exchange rate changes on cash 4 39 ------ ------ Net increase in cash and cash equivalents 2,429 907 Cash and cash equivalents at beginning of period 3,200 3,433 ------ ------ Cash and cash equivalents at end of period $ 5,629 $ 4,340 ====== ====== See notes to Consolidated Financial Statements. 3
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, 1995. 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 March 31, 1996 and December 31, 1995, the consolidated results of its operations for the three months ended March 31, 1996 and 1995 and cash flows for the three months ended March 31, 1996 and 1995. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. 2. Cardmember Lending Net Finance Charge Revenue is presented net of interest expense of $129 million and $118 million for the three months ended March 31, 1996 and 1995, respectively. Interest and Dividends is presented net of interest expense of $134 million and $157 million for the three months ended March 31, 1996 and 1995, respectively, related to the Company's international banking operations. 3. The following is a summary of investments: March 31, December 31, (In millions) 1996 1995 ---------- ----------- Held to Maturity, at amortized cost (fair value: 1996, $16,944; 1995, $17,549) $16,591 $16,790 Available for Sale, at fair value (cost: 1996, $19,604; 1995, $20,452) 21,273 22,435 Investment mortgage loans (fair value: 1996, $3,522; 1995, $3,434) 3,404 3,180 Trading 176 156 -------- -------- $41,444 $42,561 ======== ======== 4. Net income taxes refunded during the three months ended March 31, 1996 were approximately $42 million. Net income taxes paid during the three months ended March 31, 1995 were approximately $34 million. Interest paid during the three months ended March 31, 1996 and 1995 was approximately $612 million and $559 million, respectively. 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated Results Of Operations For The Three Months Ended March 31, 1996 and 1995 The Company's consolidated net income increased 12 percent in the first quarter of 1996, compared with a year ago, while net income per share increased 14 percent. The growth in earnings per share reflected revenue growth, improved margins and a reduction in average shares outstanding. Excluding the revenues of AMEX Life Assurance Company (AMEX Life), a subsidiary that was sold in October 1995, consolidated revenues increased 7 percent compared with last year. Proceeds from this sale are being used to partially fund the Company's share repurchase program which is discussed below. Consolidated Liquidity and Capital Resources Beginning in 1994, the Company put in place two share repurchase programs authorized by the Board of Directors, which permit the repurchase of up to 60 million common shares over the next several years as market conditions allow. The share repurchases are intended to reduce the number of outstanding common shares and common share equivalents to less than 500 million. The average number of outstanding common shares and common share equivalents was 491 million for the quarter ended March 31, 1996, compared with 503 million for the year-ago quarter. Since inception of the initial repurchase plan in 1994, the Company has repurchased and canceled 46.7 million shares under the repurchase programs at an average price of $36.56 per share through April 30, 1996. On May 6, 1996, after receiving a redemption notice from the Company, Nippon Life Insurance Company converted all of its four million $3.875 Convertible Exchangeable Preferred shares into 4,705,882 of the Company's common shares. The increase in outstanding common shares will be offset by the elimination of the preferred dividend. As a result, there will be no impact on earnings per common share. 5
Travel Related Services Results of Operations For The Three Months Ended March 31, 1996 and 1995 Statement of Income ------------------- (Unaudited) (Amounts in millions, except percentages) <TABLE> <CAPTION> Three Months Ended March 31, Percentage ------------------ 1996 1995 Inc/(Dec) ------------------------------ <S> <C> <C> <C> Net Revenues: Discount Revenue $1,141 $1,018 12.1% Net Card Fees 421 436 (3.5) Travel Commissions and Fees 298 295 0.8 Interest and Dividends 191 243 (21.7) Other Revenues 424 513 (17.1) -------------------- 2,475 2,505 (1.2) -------------------- Lending: Finance Charge Revenue 404 354 14.3 Interest Expense 129 118 9.2 -------------------- Net Finance Charge Revenue 275 236 16.9 -------------------- Total Net Revenues 2,750 2,741 0.4 -------------------- Expenses: Marketing and Promotion 200 229 (12.8) Provision for Losses and Claims: Charge Card 210 164 27.5 Lending 188 106 77.8 Other 24 122 (79.9) -------------------- Total 422 392 7.8 -------------------- Interest Expense: Charge Card 167 156 6.8 Other 95 110 (12.9) -------------------- Total 262 266 (1.4) Net Discount Expense * 126 100 26.0 Human Resources 704 693 1.6 Other Operating Expenses 620 684 (9.4) -------------------- Total Expenses 2,334 2,364 (1.2) -------------------- Pretax Income 416 377 10.3 Income Tax Provision 130 114 14.4 -------------------- Net Income $286 $263 8.6 ==================== * The impact of Net Discount Expense (related to TRS'securitized receivables) was to: Decrease the Provision for Losses and Claims - Charge Card $54 $37 44.6 Decrease Interest Expense - Charge Card 41 41 (0.4) Increase Other Revenues 31 22 43.7 --------------------- Total Net Discount Expense $126 $100 26.0 ===================== </TABLE> 6
Travel Related Services Selected Statistical Information -------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) <TABLE> <CAPTION> Three Months Ended March 31, Percentage ------------------ 1996 1995 Inc/(Dec) -------------------------------- <S> <C> <C> <C> Total Cards in Force (millions): United States 27.1 25.1 8.0% Outside the United States* 11.6 11.5 0.7 ---------------------- Total 38.7 36.6 5.7 ====================== Basic Cards in Force (millions): United States 20.5 18.6 10.5 Outside the United States* 9.2 8.9 1.8 ------------------------ Total 29.7 27.5 7.7 ======================== Card Billed Business: United States $29.8 $26.0 14.2 Outside the United States* 11.8 11.0 8.2 ------------------------ Total $41.6 $37.0 12.5 ======================== Travelers Cheque Sales $5.3 $5.4 (1.8) Average Travelers Cheques Outstanding $5.7 $5.4 6.3 Travel Sales $3.6 $3.4 5.7 </TABLE> * Both years include Cards issued by strategic alliance partners and independent operators as well as business billed on those Cards. 7
Travel Related Services' (TRS) 1995 results included income from AMEX Life. Excluding the year ago results for AMEX Life, TRS' net income grew approximately 13 percent, revenues increased approximately 6 percent and expenses were up approximately 4 percent, compared with the year ago quarter. Net revenues increased in the first quarter of 1996 reflecting an increase in worldwide billed business on American Express Cards and growth in Cardmember loans outstanding. The increase in billed business resulted from higher spending per Cardmember, due in part to the benefits of rewards programs and increased merchant coverage, as well as an increase in the number of Cards outstanding. Lending net finance charge revenue increased reflecting higher average loan balances, partly offset by lower net interest spreads. Interest and dividends and other revenues declined primarily reflecting the sale of AMEX Life. The Charge Card provision for losses increased in the first quarter of 1996 reflecting volume growth as well as higher loss rates, while the lending provision for losses increased due to higher loss rates. The other provision for losses declined reflecting the sale of AMEX Life. While certain risk factors exist relating to future credit trends (e.g., consumer credit trends, overall economic conditions), substantial reserving at TRS during the latter part of 1995 and recent improving trends within the TRS credit portfolios relating to charge and credit cards suggest that quarterly year over year provision comparisons will improve over the course of 1996.* The overall increase in the provision for losses was offset by lower marketing and promotion expenses and other operating expenses. For the full year 1996, marketing and promotion expenses are expected to equal or exceed last year's total marketing and promotion expenses.* The increase in Charge Card interest expense was due to increased volume, partly offset by lower rates. * These are forward-looking statements. See Part II, Item 5 of this 10-Q report for certain risks and uncertainties relating to such statements. 8
Travel Related Services Liquidity and Capital Resources Selected Balance Sheet Information ------------------------------------- (Unaudited) (Amounts in billions, except percentages) <TABLE> <CAPTION> March 31, December 31, Percentage March 31, Percentage 1996 1995 Inc/(Dec) 1995 Inc/(Dec) ---------------------------------------------------------- <S> <C> <C> <C> <C> <C> Accounts Receivable, net $16.5 $18.9 (12.8%) $15.8 4.4% Owned and Managed Cardmember Receivables (excluding Revolving Card Products): Total Cardmember Receivables $18.8 $20.5 (8.2) $16.9 11.5 90 Days Past Due as a % of Total Cardmember Receivables 4.1% 3.5% - 3.7% - Total Loss Reserves $1.0 $1.0 4.2 $0.8 18.1 % of Cardmember Receivables 5.3% 4.6% - 5.0% - % of 90 Days Past Due 129% 131% - 135% - Cardmember Receivables Loss Ratio, Net of Recoveries 0.5% 0.5% - 0.5% - U.S. Cardmember Lending (including Revolving Card Products): Total Cardmember Loans $10.2 $10.0 3.0 $8.3 23.0 30 Days Past Due as a % of Total Cardmember Loans 3.5% 3.8% - 3.5% - Total Loss Reserves $0.5 $0.4 9.0 $0.4 32.6 % of Cardmember Loans 4.7% 4.5% - 4.4% - % of 30 Days Past Due 136% 116% - 124% - Write-Off Rates 5.2% 4.4% - 4.1% - Investments $9.0 $9.2 (2.2) $10.9 (17.4) Total Assets $45.2 $45.2 - $42.6 5.9 Travelers Cheques Outstanding $5.9 $5.7 3.6 $5.8 1.0 Short-term Debt $18.5 $17.9 3.4 $14.7 25.9 Long-term Debt $4.6 $4.4 3.9 $3.4 32.1 Total Liabilities $40.3 $40.3 - $38.2 5.4 Total Shareholder's Equity $4.9 $4.9 (0.4) $4.4 10.3 Return on Average Equity 24.7% 24.6% - 24.1% - </TABLE> TRS' total assets were unchanged from year end as the decline in accounts receivable, reflecting repayments since year end when balances reflected seasonal growth, was offset by higher short-term investments. Total shareholder's equity is unchanged from year end as the increase in retained earnings was offset by a lower level of unrealized securities gains primarily due to a decline in market value. 9
American Express Financial Advisors Results of Operations For The Three Months Ended March 31, 1996 and 1995 Statement of Income -------------------- (Unaudited) (Amounts in millions, except percentages and where indicated) Three Months Ended March 31, Percentage ------------------- 1996 1995 Inc/(Dec) ------------------------------ Revenues: Investment Income $569 $535 6.3% Management and Distribution Fees 279 206 35.9 Other Income 155 133 15.9 -------------------- Total Revenues 1,003 874 14.7 -------------------- Expenses: Provision for Losses and Benefits: Annuities 298 273 9.0 Insurance 109 94 14.9 Investment Certificates 53 49 8.5 -------------------- Total 460 416 10.3 Human Resources 246 207 18.9 Other Operating Expenses 101 87 16.4 -------------------- Total Expenses 807 710 13.5 -------------------- Pretax Income 196 164 19.9 Income Tax Provision 66 57 17.8 -------------------- Net Income $130 $107 21.0 ==================== Selected Statistical Information -------------------------------- Life Insurance in Force (billions) $61.2 $54.4 12.4 ===================== Assets Owned and/or Managed (billions): Assets managed for institutions $32.7 $30.3 7.8 Assets owned and managed for individuals: Owned Assets 49.0 42.3 15.8 Managed Assets 51.4 40.4 27.2 --------------------- Total $133.1 $113.0 17.8 ===================== Sales of Selected Products: Mutual Funds $3,569 $2,288 56.0 Annuities $1,155 $1,096 5.4 Investment Certificates $136 $ 412 (67.0) Life and Other Insurance Sales $95 $83 14.8 Number of Financial Advisors 7,954 8,015 (0.8) Fees From Financial Plans (thousands) $11,623 $10,419 11.6 Product Sales Generated from Financial Plans as a Percentage of Total Sales 63.3% 63.5% - 10
American Express Financial Advisors' revenue and earnings growth for the first quarter of 1996 benefited primarily from higher fee revenues, partially offset by the impact of somewhat lower investment margins. The increase in investment income in the first quarter of 1996 reflected higher asset levels, partly offset by lower investment yields compared with the year-ago period. Management and distribution fees increased reflecting increased management fees earned on a higher asset base and increased distribution fees attributable to higher mutual fund sales. The growth in managed assets reflects positive net sales and market appreciation. Other income increased primarily due to higher life insurance contract charges and premiums. Provisions for annuity and insurance benefits increased in the first quarter of 1996 reflecting higher business in force, partly offset by lower accrual rates. The provision for investment certificates increased reflecting higher investment certificates in force and higher accrual rates. The increase in human resources expense reflected higher financial advisors' compensation and, to a lesser extent, an increase in the number of employees compared with last year. Other operating expenses increased primarily reflecting a higher provision for insurance industry guarantee association assessments and higher amortization of deferred acquisition costs. 11
American Express Financial Advisors Liquidity and Capital Resources Selected Balance Sheet Information ---------------------------------- (Unaudited) (Amounts in billions, except percentages) March 31, December 31, Percentage March 31, Percentage 1996 1995 Inc/(Dec) 1995 Inc/(Dec) ------------------------------------------------------- Investments $28.2 $28.8 (1.9%) $26.5 6.4% Separate Account Assets $15.8 $15.0 5.2 $11.8 33.3 Total Assets $49.0 $48.3 1.5 $42.3 15.8 Reserves for Losses and Benefits $28.6 $28.6 (0.2) $26.4 8.5 Total Liabilities $46.1 $45.2 1.9 $39.9 15.4 Total Shareholder's Equity $2.9 $3.1 (3.9) $2.4 22.3 Return on Average Equity 19.6% 19.4% - 18.7% - American Express Financial Advisors' total assets increased from year end primarily reflecting an increase in separate account assets due to market appreciation and positive net sales. The declines in investments and total shareholder's equity from year end primarily reflect a lower level of unrealized securities gains due to a decline in market value. 12
American Express Bank Results of Operations For The Three Months Ended March 31, 1996 and 1995 Statement of Income ------------------- (Unaudited) (Amounts in millions, except percentages) Three Months Ended March 31, Percentage ----------------- 1996 1995 Inc/(Dec) ----------------------------- Net Revenues: Interest Income $211 $239 (11.8%) Interest Expense 134 157 (15.0) ------------------- Net Interest Income 77 82 (5.7) Commissions, Fees and Other Revenues 49 59 (17.7) Foreign Exchange Income 20 19 3.3 -------------------- Total Net Revenues 146 160 (9.1) -------------------- Provision for Credit Losses 4 3 18.8 -------------------- Expenses: Human Resources 56 64 (12.5) Other Operating Expenses 57 71 (20.2) -------------------- Total Expenses 113 135 (16.6) -------------------- Pretax Income 29 22 32.6 Income Tax Provision 10 6 57.6 --------------------- Net Income $19 $16 21.9 ===================== The improvement in American Express Bank's (the Bank) first quarter 1996 earnings was principally due to expense savings, partially offset by lower revenues. These results reflect the impact of the Bank's continued efforts to focus on strategic markets and eliminate low return activities, as well as the impact of cost reduction initiatives. Net interest income declined in the first quarter of 1996 reflecting balance sheet reduction and higher short-term funding costs. The decline in commissions, fees and other revenues and other operating expenses primarily reflected the impact of exiting nonstrategic businesses, including the transfer to the Bank's parent, American Express Company, of certain aircraft assets. In addition, the increase in the effective tax rate reflects a lower level of tax-advantaged securities. 13
American Express Bank Liquidity and Capital Resources Selected Balance Sheet Information ---------------------------------- (Unaudited) <TABLE> <CAPTION> (Amounts in billions, except percentages and where indicated) March 31, December 31, Percentage March 31, Percentage 1996 1995 Inc/(Dec) 1995 Inc/(Dec) ------------------------------------------------------- <S> <C> <C> <C> <C> <C> Investments $2.4 $2.5 (6.6%) $2.8 (15.1%) Total Loans $5.3 $5.4 (1.9) $5.4 (0.8) Reserve for Credit Losses (millions) $110 $111 (0.5) $112 (1.4) Reserves as a Percentage of Total Loans 2.1% 2.0% - 2.1% - Total Nonperforming Loans (millions) $35 $34 4.0 $32 11.1 Other Real Estate Owned (millions) $43 $44 (1.0) $55 (21.0) Total Assets $11.8 $12.3 (4.5) $13.5 (12.5) Deposits $8.1 $8.5 (4.8) $9.2 (12.6) Total Liabilities $11.0 $11.5 (4.1) $12.7 (13.1) Total Shareholder's Equity (millions) $746 $837 (10.9) $771 (3.3) Risk-Based Capital Ratios: Tier 1 9.0% 8.9% - 7.7% - Total 12.9% 13.0% - 14.9% - Leverage Ratio 5.5% 5.8% - 4.9% - Return on Average Assets 0.64% 0.59%* - 0.46% - Return on Average Common Equity 10.57% 9.99%* - 8.14% - * For the full year </TABLE> The Bank's total assets declined from year end primarily due to declines in loans and investments. The decline in the Bank's Leverage Ratio is due to a decrease in retained earnings resulting primarily from a $75 million special dividend to American Express Company, partly offset by decreases in average quarterly assets and deferred tax assets. 14
Corporate and Other Corporate and Other reported first quarter 1996 net expenses of $39 million, compared with net expenses of $33 million a year ago. Both years include the Company's share of the Travelers Inc. revenue participation in accordance with an agreement related to the 1993 sale of the Shearson Lehman Brothers Division, which was offset by expenses related to certain business building initiatives. 15
INDEPENDENT ACCOUNTANTS REVIEW REPORT The Shareholders and Board of Directors of American Express Company We have reviewed the accompanying consolidated balance sheet of American Express Company (the "Company") as of March 31, 1996 and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review 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 review, 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, 1995, 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 8, 1996, 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, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/Ernst & Young LLP New York, New York May 13, 1996 16
PART II. OTHER INFORMATION AMERICAN EXPRESS COMPANY Item 4. Submission of Matters to a Vote of Security Holders The registrant's annual meeting of shareholders was held on April 22, 1996. The matters that were voted upon at the meeting, and the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to each such matter, where applicable, are set forth below. Votes Votes Votes Broker For Against Withheld Abstentions Non-Votes ----- ------- -------- ----------- --------- Selection of Ernst & Young LLP as independent auditors 409,892,321 918,942 - 768,719 - Shareholder proposal relating to cumula- tive voting 81,456,870 242,626,987 - 34,919,282 52,576,843 Proposal relating to amendment of the 1989 Long-Term Incentive Plan 320,959,797 88,221,663 - 2,398,522 - Election of Directors: D.F. Akerson 410,328,971 - 1,251,011 - - A.L. Armstrong 410,140,615 - 1,439,367 - - E.L. Artzt 410,250,204 - 1,329,778 - - W.G. Bowen 410,272,002 - 1,307,980 - - D.M. Culver 410,201,545 - 1,378,437 - - C.W. Duncan Jr. 410,274,473 - 1,305,509 - - H. Golub 410,240,303 - 1,339,679 - - B. Sills Greenough 409,964,699 - 1,615,283 - - F.R. Johnson 409,375,475 - 2,204,507 - - V.E. Jordan Jr. 409,675,746 - 1,904,236 - - D. Lewis 410,068,093 - 1,511,889 - - A. Papone 410,208,895 - 1,371,087 - - F.P. Popoff 410,287,864 - 1,292,118 - - 17
Item 5. Other Information Forward-looking Statements Certain statements in Part I of this 10-Q Report are identified under "TRS Results of Operations For The Three Months Ended March 31, 1996 and 1995" as "forward-looking statements." Such forward-looking statements involve risks and uncertainties. Important factors which may cause actual results to differ materially from the statements made include, but are not limited to, the following: consumer and/or business spending per Cardmember, which may result from general economic conditions affecting consumers or businesses, including the overall levels of consumer debt; the level of competition for TRS products, including a possible willingness on the part of certain large competitors to cut interest rates, card fees and/or discount rates for their card products in order to preserve or gain market share; an increase in spending by competitors on advertising; the risks inherent in new product introductions, including uncertainty of customer acceptance of the product's value proposition relative to competitors' products, and competitors' response to the introduction; the continued effectiveness of TRS' reengineering initiatives on marketing and promotion costs; general economic and business conditions, including higher interest rates and consumer credit trends, which could affect the ability of consumers and businesses to repay credit and charge card debt to TRS; the rate of bankruptcies of consumers and businesses; and the volume of new card products issued by TRS, which typically involve higher provisioning. 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 January 9, 1996, Item 5, reporting the appointment of John A. Ward as Chairman and Chief Executive Officer of American Express Bank. Form 8-K, dated January 22, 1996, Item 5, reporting the registrant's earnings for the quarter and year ended December 31, 1995. Form 8-K, dated April 20, 1996, Item 5, reporting the registrant's earnings for the quarter ended March 31, 1996. Form 8-K, dated April 24, 1996, Item 5, reporting the resignation of the registrant's Chief Financial Officer. 18
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN EXPRESS COMPANY ------------------------ (Registrant) Date: May 15, 1996 By /s/ Daniel T. Henry ------------------ ----------------------- Daniel T. Henry Senior Vice President and Comptroller (Duly Authorized Officer and Chief Accounting Officer)
EXHIBIT INDEX The following exhibits are filed as part of this Quarterly Report: Exhibit Description 10.1 Amended and Restated 1989 Long-Term Incentive Plan, dated April 22, 1996. 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