Revenues Up 12% on Higher Cardmember Spending NEW YORK, April 24
/PRNewswire-FirstCall/ -- American Express Company today reported
first quarter income from continuing operations of $876 million, up
18 percent from $745 million a year ago. (Logo:
http://www.newscom.com/cgi-bin/prnh/20051201/AMEXLOGO ) (Dollars in
millions, except per share amounts) Quarters Ended Percentage March
31, Inc/(Dec) 2006 2005 Revenues $ 6,332 $ 5,640 12% Income From
Continuing Operations $ 876 $ 745 18% (Loss)/Income From
Discontinued Operations $ (3) $ 201 # Net Income $ 873 $ 946 (8%)
Earnings Per Common Share - Basic: Income From Continuing
Operations $ 0.71 $ 0.60 18% (Loss)/Income From Discontinued
Operations $ -- $ 0.16 # Net Income $ 0.71 $ 0.76 (7%) Earnings Per
Common Share - Diluted: Income From Continuing Operations $ 0.70 $
0.59 19% (Loss)/Income From Discontinued Operations $ (0.01) $ 0.16
# Net Income $ 0.69 $ 0.75 (8%) Average Common Shares Outstanding
Basic 1,232 1,239 (1%) Diluted 1,258 1,264 -% Return on Average
Total Shareholders' Equity* 27.3% 22.8% * Computed on a trailing
12-month basis using reported net income over average total
shareholders' equity (including discontinued operations) 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%. American Express
Company today reported first quarter income from continuing
operations of $876 million, up 18 percent from $745 million a year
ago. Diluted earnings per share from continuing operations were
$0.70, up 19 percent from $0.59 a year ago. Including results for
businesses* that the Company spun off and sold last year, net
income for the first quarter totaled $873 million, down 8 percent
from $946 million a year ago. Earnings per share on a diluted basis
decreased to $0.69, down 8 percent from $0.75. The Company's
reported return on equity (ROE) was 27.3 percent, up from 22.8
percent a year ago. Pro forma ROE, which is based on continuing
operations, was 32.1 percent. (For further information about pro
forma ROE, see the "Pro Forma ROE" section below.) Consolidated
revenues rose 12 percent to $6.3 billion, up from $5.6 billion a
year ago. Consolidated expenses totaled $5.0 billion, up 10 percent
from $4.6 billion a year ago. * Includes primarily Ameriprise
Financial, Inc. "First quarter results were excellent in each of
our major businesses and overall revenue growth was among the
strongest we've generated in years," said Kenneth I. Chenault,
chairman and chief executive. "The results reflected broad-based
strength in the U.S., in major international markets and with bank
partners who issue cards on the American Express network. "Our
investments in new products, services and marketing initiatives
produced industry-leading growth of 16 percent in billed business
and an equivalent gain in Cardmember loans. Average spending per
Cardmember, already the highest on any card network, continued to
rise among affluent consumers, small businesses and mid-sized
corporations. "Equally important for the longer term, we added 1.5
million cards in force during the last three months, or 6.4 million
since this time last year. The 10 percent growth from a year ago in
this key metric reflects the innovative appeal of our new products
and the competitive advantage of reward programs we've been
designing for specific market segments. The quality of the new
additions to our Cardmember base is excellent and should generate
strong returns as spending on these newer cards ramps up in the
years ahead. "We are also continuing to strengthen our global
merchant network, which increasingly operates like a virtual
marketplace. The aim is to keep building business for our partners
by driving high-spending Cardmembers to the point of sale and
rewarding them with customized offers, experiences and special
access to popular events." Results for the quarter included costs
associated with several significant items: -- A $112 million ($73
million after-tax) charge related to higher redemption estimates
for the U.S. Membership Rewards program; -- A $72 million ($47
million after-tax) net reduction in finance charge revenues and
securitization income related to higher than anticipated cardmember
completion of consumer debt repayment programs and certain
associated payment waivers; -- $63 million ($53 million after-tax)
higher provision for losses in Taiwan due primarily to the impact
of industry-wide credit issues; Results for the quarter also
included: -- An estimated favorable impact of $150 million ($98
million after-tax) from lower early credit write-offs primarily
related to last year's bankruptcy legislation, and lower than
expected costs associated with Hurricane Katrina; -- An $88 million
($40 million after-tax) gain related to the completion of the sale
of the Company's investment in Egyptian American Bank (EAB).
Discontinued operations Loss from discontinued operations for the
quarter totaled $3 million. The year ago period reflects income
from discontinued operations of $201 million primarily related to
the results from Ameriprise, which is no longer part of American
Express. Segment results The following discussion of first 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. 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 International Card &
Global Commercial Services, Global Network & Merchant Services,
and Corporate & Other segment results below are presented on a
GAAP basis. U.S. Card Services reported first quarter net income of
$546 million, up 13 percent from $482 million a year ago. Total
revenues for the first quarter increased 11 percent to $3.4
billion, reflecting growth in spending and borrowing by U.S.
consumers and small businesses. Total expenses increased 11
percent. Marketing, promotion, rewards and cardmember services
expenses increased 26 percent, reflecting greater rewards costs and
marketing and promotion activities. The rewards-related expense
reflects in part the higher redemption estimates mentioned earlier.
Provisions for losses declined 22 percent. Volume-related increases
to the reserves were more than offset by the favorable impact of
lower bankruptcy filings and Hurricane Katrina-related activity
mentioned above. International Card & Global Commercial
Services reported first quarter net income of $213 million, up 11
percent from $192 million a year ago. These results include the
previously mentioned gain on the sale of EAB. Total revenues for
the first quarter increased 7 percent over the year-ago period to
$2.3 billion, primarily reflecting a rise in spending and borrowing
by Cardmembers. These benefits were partially offset by a decline
in travel commissions and fees. First quarter total expenses
increased 5 percent over the year-ago period to $2.0 billion. The
provision for losses and benefits rose 53 percent primarily
relating to credit issues in Taiwan mentioned earlier. Global
Network & Merchant Services reported first quarter net income
of $166 million, up 50 percent from $111 million a year ago. Total
revenues for the first quarter increased 11 percent over year-ago
levels to $705 million. The increase reflects continued strong
growth in billed business, offset by the impact of a decline in
discount rate. Bank partners that issue cards on the American
Express network added 2 million cards from a year ago. Spending on
bank-issued American Express cards increased 25 percent from a year
ago. Total expenses decreased 5 percent from year-ago levels to
$443 million. Marketing and promotion decreased 18 percent,
primarily reflecting a reduced level of brand-related advertising.
Corporate & Other reported first quarter net expenses of $49
million, compared with $40 million a year ago. 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 following table reconciles the
GAAP-basis U.S. Card Services income statements to the
managed-basis information.* U.S. Card Services Selected Financial
Information (preliminary, millions) GAAP Basis
-------------------------------- % Inc/ Quarters Ended March 31,
2006 2005 (Dec) -------- -------- ---------- Revenues: Discount
revenue, net card fees and other $ 2,314 $ 2,059 12% Cardmember
lending: Finance charge revenue 674 522 29 Interest expense 194 120
62 -------- -------- Net finance charge revenue 480 402 19
Securitization income, net 386 316 22 -------- -------- Total
revenues 3,180 2,777 15 -------- -------- Expenses: Marketing,
promotion, rewards and cardmember services 1,034 837 24 Provision
for losses 307 342 (10) Human resources and other operating
expenses 1,043 895 17 -------- -------- Total expenses 2,384 2,074
15 -------- -------- Pretax segment income 796 703 13 Income tax
provision 250 221 13 -------- -------- Segment income $ 546 $ 482
13 ======== ======== U.S. Card Services Selected Financial
Information Securitization Tax Equivalent Managed (preliminary,
Effect Effect Basis millions) ---------------- ---------------
-------------- % Quarters Ended Inc/ March 31, 2006 2005 2006 2005
2006 2005 (Dec) ----- ------ ------ ------ ------ ------ ------
Revenues: Discount revenue, net card fees and other $ 48 $ 53 $ 55
$ 57 $2,417 $2,169 11% Cardmember lending: Finance charge revenue
733 609 1,407 1,131 24 Interest expense 247 140 441 260 70 ------
------ ------ ------ Net finance charge revenue 486 469 966 871 11
Securitization income, net (386) (316) -- -- -- ------ ------
------ ------ ------ ------ Total revenues 148 206 55 57 3,383
3,040 11 ------ ------ ------ ------ ------ ------ Expenses:
Marketing, promotion, rewards and cardmember services 13 (4) 1,047
833 26 Provision for losses 126 212 433 554 (22) Human resources
and other operating expenses 9 (2) 1,052 893 18 ------ ------
------ ------ Total expenses $ 148 $ 206 2,532 2,280 11 ------
------ ------ ------ ------ ------ Pretax segment income 55 57 851
760 12 Income tax provision $ 55 $ 57 $ 305 $ 278 10 ------ ------
------ ------ * Amounts herein reflect certain reclassifications as
noted in the Company's Form 8-K filed with the SEC dated April 5,
2006. 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 shareholders' 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 month-end shareholders' equity at September 30, 2005
through March 31, 2006. 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 12-months income
from $3.7 billion continuing operations: $3.4 billion Trailing
12-months average Average month-end shareholders' equity total
shareholders' for the period from September 30, 2005 equity: $13.4
billion through March 31, 2006: $10.4 billion ROE: 27.3% Pro forma
ROE: 32.1% American Express Company
(http://www.americanexpress.com/) is a leading global payments,
network, travel, and banking company founded in 1850. Note: The
2006 First Quarter 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 first quarter earnings results, operating
performance and other topics that may be raised during the
discussion will be held at 12:00 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 percent to 30
percent; the Company's ability to grow its business and meet or
exceed its return on shareholders' equity target by reinvesting
approximately 35 percent of annually-generated capital, and
returning approximately 65 percent 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 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 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 processing
scale, expands merchant coverage of the network, provides Global
Network 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; 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 Company's ability to reinvest the
benefits arising from such reengineering actions in its businesses;
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 $300 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 and 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; outcomes and costs associated with litigation and
compliance and regulatory matters; 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, 2005,
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. Amounts herein reflect certain
reclassifications as noted in the Company's Form 8-K dated April 5,
2006 filed with the Securities and Exchange Commission.
(Preliminary) AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF
INCOME (Millions) Quarters Ended March 31, ------------------
Percentage 2006 2005 Inc/(Dec) ------ ------ ---------- Revenues
Discount revenue $ 2,969 $ 2,639 13 % Cardmember lending net
finance charge revenue 729 592 23 Net card fees 520 498 4 Travel
commissions and fees 418 422 (1) Other commissions and fees 639 558
15 Securitization income, net 386 316 22 Other investment and
interest income, net 275 261 5 Other 396 354 12 ------ ------ Total
6,332 5,640 12 ------ ------ Expenses Marketing, promotion, rewards
and cardmember services 1,522 1,323 15 Human resources 1,240 1,187
4 Provision for losses and benefits: Charge card 209 215 (3)
Cardmember lending 321 295 9 Investment certificates and other 138
79 75 ------ ------ Total 668 589 13 Professional services 561 487
15 Occupancy and equipment 346 336 3 Interest 279 201 39
Communications 113 117 (3) Other 278 312 (11) ------ ------ Total
5,007 4,552 10 ------ ------ Pretax income from continuing
operations 1,325 1,088 22 Income tax provision 449 343 31 ------
------ Income from continuing operations 876 745 18 (Loss)/Income
from discontinued operations, net of tax (3) 201 # ------ ------
Net income $ 873 $ 946 (8) ====== ====== # Denotes a variance of
more than 100% (Preliminary) AMERICAN EXPRESS COMPANY CONDENSED
CONSOLIDATED BALANCE SHEETS (Billions) March 31, December 31, 2006
2005 ------------ ------------ Assets Cash and cash equivalents $ 5
$ 7 Accounts receivable 34 35 Investments 21 21 Loans 40 41 Other
assets 10 10 ------------ ------------ Total assets $ 110 $ 114
============ ============ Liabilities and Shareholders' Equity
Short-term debt $ 15 $ 16 Long-term debt 31 31 Other liabilities 53
56 ------------ ------------ Total liabilities 99 103 ------------
------------ Shareholders' equity 11 11 ------------ ------------
Total liabilities and shareholders' equity $ 110 $ 114 ============
============ (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL
SUMMARY (Millions) Quarters Ended March 31, ------------------
Percentage 2006 2005 Inc/(Dec) ------ ------ ---------- REVENUES
U.S. Card Services $ 3,180 $ 2,777 15 % International Card &
Global Commercial Services 2,303 2,146 7 Global Network &
Merchant Services 705 638 11 ------ ------ 6,188 5,561 11 Corporate
& Other, including adjustments and eliminations 144 79 82
------ ------ CONSOLIDATED REVENUES $ 6,332 $ 5,640 12 ======
====== PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS U.S. Card
Services $ 796 $ 703 13 % International Card & Global
Commercial Services 311 242 29 Global Network & Merchant
Services 262 171 53 ------ ------ 1,369 1,116 23 Corporate &
Other (44) (28) 57 ------ ------ PRETAX INCOME FROM CONTINUING
OPERATIONS $ 1,325 $ 1,088 22 ====== ====== NET INCOME (LOSS) U.S.
Card Services $ 546 $ 482 13 % International Card & Global
Commercial Services 213 192 11 Global Network & Merchant
Services 166 111 50 ------ ------ 925 785 18 Corporate & Other
(49) (40) 23 ------ ------ Income from continuing operations 876
745 18 (Loss)/Income from discontinued operations, net of tax (3)
201 # ------ ------ NET INCOME $ 873 $ 946 (8) ====== ====== #
Denotes a variance of more than 100%. (Preliminary) AMERICAN
EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) Quarters Ended March
31, ---------------- Percentage 2006 2005 Inc/(Dec) ------ ------
---------- EARNINGS PER COMMON SHARE BASIC Income from continuing
operations $ 0.71 $ 0.60 18 % (Loss)/Income from discontinued
operations -- 0.16 # ------ ------ Net income $ 0.71 $ 0.76 (7)%
====== ====== Average common shares outstanding (millions) 1,232
1,239 (1)% ====== ====== DILUTED Income from continuing operations
$ 0.70 $ 0.59 19 % (Loss)/Income from discontinued operations
(0.01) 0.16 # ------ ------ Net income $ 0.69 $ 0.75 (8)% ======
====== Average common shares outstanding (millions) 1,258 1,264 --
% ====== ====== Cash dividends declared per common share $ 0.12 $
0.12 -- % ====== ====== SELECTED STATISTICAL INFORMATION Quarters
Ended March 31, ---------------- Percentage 2006 2005 Inc/(Dec)
------ ------ ---------- Return on average total shareholders'
equity (A) 27.3% 22.8% Common shares outstanding (millions) 1,233
1,245 (1)% Book value per common share(B) $ 8.60 $ 12.95 (34)%
Shareholders' equity (billions)(B) $ 10.6 $ 16.1 (34)% # Denotes a
variance of more than 100%. (A) Computed on a trailing 12-month
basis using reported net income over average total shareholders'
equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
(B) Total shareholders' equity and book value per common share
amounts prior to September 30, 2005 include discontinued operations
reflected in the Company's Consolidated Financial Statements. To
view additional business segment financials go to:
http://ir.americanexpress.com/
http://www.newscom.com/cgi-bin/prnh/20051201/AMEXLOGODATASOURCE:
American Express Company CONTACT: Robert Glick, +1-212-640-1041, ,
or Michael J. O'Neill, +1-212-640-5951, mike.o', both for American
Express Company Web site: http://www.americanexpress.com/
http://ir.americanexpress.com/
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