AMERICAN EXPRESS CO — Earnings Release 1995

Jul 25, 1995

============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 24, 1995 AMERICAN EXPRESS COMPANY ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 1-7657 13-4922250 ------------------------------- -------------- ------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification) American Express Tower, World Financial Center New York, New York 10285 ----------------------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, (212) 640-2000 including area code -------------- ----------------------------------------------------------------- (Former name or former address, if changed since last report.) ============================================================================== Item 5. Other Events On July 24, 1995, American Express Company issued the following press release: NEW YORK, July 24, 1995 - American Express Company today reported second quarter net income of $410 million, up 14 percent compared with last year's income from continuing operations of $359 million. Including the net loss at Lehman Brothers, which is reported as a discontinued operation, last year's second quarter net income was $357 million. On a per share basis, second quarter income from continuing operations was $0.81, compared with $0.70 a year ago, an increase of 16 percent. Travel Related Services (TRS) reported record quarterly net income of $298 million, a 13 percent increase over last year's net income of $263 million. Net revenues increased 16 percent reflecting an increase in worldwide billed business and higher business travel sales resulting from acquisitions and growth. The increase in billed business resulted from higher spending per Cardmember and an increase in the number of Cards outstanding. Operating expenses, which excludes interest and the provision for losses, increased 9 percent, reflecting business travel acquisitions and growth, as well as continuing investments in certain business initiatives. Although the lending provision for losses was higher, credit quality in the portfolio was comparable with that of the prior year. Charge Card interest expense increased, primarily due to higher rates. The decline in the U.S. dollar relative to other currencies increased to a limited extent both revenues and expenses, but with essentially no effect on net income. American Express Financial Advisors (AXP Advisors) reported record quarterly net income of $129 million, an 18 percent increase over last year's net income of $109 million. Revenue and earnings growth 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. AXP Advisors reported higher sales of investment certificates and life and other insurance products, while sales of annuities decreased from last year. American Express Bank (AEB) reported net income of $19 million in both the 1995 and 1994 second quarters. Results reflect growth in fee income, offset by lower net interest income due to lower spreads on the investment portfolio. Operating expenses were flat compared with the year ago level. Corporate and Other reported second quarter net expenses of $36 million, compared with net expenses of $32 million last year. The 1995 second quarter includes a gain from the previously announced sale of common stock and warrants of Mellon Bank Corporation, which was offset by expenses primarily related to various business building initiatives. * * * American Express Company is a diversified travel and financial services company founded in 1850. It is a leader in charge and credit cards, Travelers Cheques, travel, financial planning, investment products, insurance and international banking. AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (dollars in millions, except per share amounts) Three Months Ended June 30, Percentage 1995 1994 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) Travel Related Services $2,902 $2,503 16.0% American Express Financial Advisors 911 812 12.1 American Express Bank 163 162 0.5 ----- ----- 3,976 3,477 14.4 Corporate and Other, including adjustments and eliminations (9) 29 - ----- ----- CONSOLIDATED REVENUES (A) $3,967 $3,506 13.1 ===== ===== Pretax Income from continuing operations by Industry Segment Travel Related Services $423 $365 16.1% American Express Financial Advisors 192 161 19.1 American Express Bank 28 28 (1.2) ----- ----- 643 554 16.1 Corporate and Other (71) (76) 6.5 ----- ----- PRETAX INCOME $572 $478 19.7 ===== ===== Income from continuing operations by Industry Segment Travel Related Services $298 $263 13.2% American Express Financial Advisors 129 109 18.0 American Express Bank 19 19 (2.1) ----- ----- 446 391 13.8 Corporate and Other (36) (32) (11.0) ----- ----- Income from continuing operations 410 359 14.0 Discontinued operations (net of income taxes) (B) - (2) - ----- ----- NET INCOME $410 $357 14.8 ===== ===== Earnings per common share: Continuing operations $0.81 $0.70 15.7 Discontinued operations - (0.01) - ----- ----- NET INCOME PER COMMON SHARE $0.81 $0.69 17.4 ===== ===== Cash dividends declared per common share (C) $0.225 $0.225 ===== ===== Average shares outstanding (000's) 499,269 511,283 ======= ======= AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (dollars in millions, except per share amounts) Six Months Ended June 30, Percentage 1995 1994 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) Travel Related Services $5,643 $4,862 16.1% American Express Financial Advisors 1,785 1,628 9.6 American Express Bank 323 330 (2.1) ----- ----- 7,751 6,820 13.7 Corporate and Other, including adjustments and eliminations (13) 56 - ----- ----- CONSOLIDATED REVENUES (A) $7,738 $6,876 12.5 ===== ===== Pretax Income from continuing operations by Industry Segment Travel Related Services $800 $691 15.8% American Express Financial Advisors 356 297 19.8 American Express Bank 50 64 (21.9) ----- ----- 1,206 1,052 14.6 Corporate and Other (136) (134) (1.4) ----- ----- PRETAX INCOME $1,070 $918 16.6 ===== ===== Income from continuing operations by Industry Segment Travel Related Services $562 $498 12.9% American Express Financial Advisors 236 200 18.2 American Express Bank 35 44 (20.9) ----- ----- 833 742 12.3 Corporate and Other (70) (65) (7.2) ----- ----- Income from continuing operations 763 677 12.8 Discontinued operations (net of income taxes) (B) - 33 - ----- ----- NET INCOME $763 $710 7.5 ===== ===== Earnings per common share: Continuing operations $1.51 $1.31 15.3 Discontinued operations - 0.07 - ----- ----- NET INCOME PER COMMON SHARE $1.51 $1.38 9.4 ===== ===== Cash dividends declared per common share (C) $0.450 $0.450 ===== ===== Average shares outstanding (000's) 500,638 509,284 ======= ======= (A) Revenues are reported net of interest expense, where applicable. (B) On May 31, 1994, the Company completed a tax free spin-off of Lehman Brothers (LB) through a special dividend to shareholders. Accordingly, LB results are reported as Discontinued Operations, which represents American Express' share of LB's results after preferred dividends to Nippon Life Insurance Company. (C) 1994 cash dividends declared have been adjusted to reflect the LB spin-off. Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. (Preliminary) Travel Related Services Statement of Income (Unaudited) (Amounts in millions, except percentages) Three Months Ended June 30, Percentage 1995 1994 Inc/(Dec) Net Revenues: ---- ---- ---------- Discount Revenue $1,112 $983 13.1% Net Card Fees 436 431 1.1 Travel Commissions and Fees 320 223 43.6 Interest and Dividends 256 187 37.0 Other Revenues 526 444 18.9 ----- ----- 2,650 2,268 16.9 Lending: ----- ----- Finance Charge Revenue 376 304 23.7 Interest Expense 124 69 80.4 ----- ----- Net Finance Charge Revenue 252 235 7.1 ----- ----- Total Net Revenues 2,902 2,503 16.0 ----- ----- Expenses: Marketing and Promotion 250 273 (8.4) Provision for Losses and Claims: Charge Card 199 177 12.3 Lending 126 63 99.9 Other 124 120 3.4 ----- ----- Total 449 360 24.6 ----- ----- Interest Expense: Charge Card 233 168 38.8 Other Interest Expense 51 41 25.4 ----- ----- Total 284 209 36.2 Net Discount Expense * 107 68 58.2 Human Resources 705 625 12.7 Other Operating Expenses 684 603 13.4 ----- ----- Total Expenses 2,479 2,138 15.9 ----- ----- Pretax Income 423 365 16.1 Income Tax Provision 125 102 23.8 ----- ----- Net Income $298 $263 13.2 ===== ===== * The impact of Net Discount Expense (related to TRS' securitized receivables) was to: Decrease the Provision for Losses and Claims - Charge Card $46 $29 61.0 Decrease Interest Expense - Charge Card 41 24 71.0 Increase Other Revenues 20 15 32.8 ----- ----- Total Net Discount Expense $107 $68 58.2 ===== ===== (Preliminary) Travel Related Services (continued) Selected Statistical Information (Unaudited) (Amounts in millions, except percentages and where indicated) Three Months Ended June 30, Percentage 1995 1994 Inc/(Dec) ---- ---- ---------- Total Cards in Force: United States 25.7 24.8 3.6% Outside the United States 11.2 10.8 3.7 ----- ----- Total 36.9 35.6 3.6 ===== ===== Basic Cards in Force: United States 19.1 18.1 5.5 Outside the United States 8.7 8.0 8.2 ----- ----- Total 27.8 26.1 6.3 ===== ===== Card Billed Business (billions): United States $28.7 $25.3 13.1 Outside the United States 11.7 9.3 26.5 ----- ----- Total $40.4 $34.6 16.7 ===== ===== U.S. Consumer Lending Loan Balances (billions) $8.6 $7.4 16.9 Travelers Cheque Sales (billions) $6.9 $6.5 5.2 Average Travelers Cheques Outstanding (billions) $6.1 $5.3 16.9 Travel Sales (billions) $4.0 $2.5 55.6 Return on Average Equity 24.5% 23.8% - (Preliminary) American Express Financial Advisors Statement of Income (Unaudited) (Amounts in millions, except percentages and where indicated) Three Months Ended June 30, Percentage 1995 1994 Inc/(Dec) Revenues: ---- ---- ---------- Investment Income $549 $497 10.4% Management and Distribution Fees 227 199 14.0 Other Income 135 116 16.1 ----- ----- Total Revenues 911 812 12.1 ----- ----- Expenses: Provision for Losses and Benefits: Annuities 290 252 15.1 Insurance 103 85 20.5 Investment Certificates 46 25 83.1 ----- ----- Total 439 362 21.1 Human Resources 216 198 8.9 Other Operating Expenses 64 91 (29.2) ----- ----- Total Expenses 719 651 10.4 ----- ----- Pretax Income 192 161 19.1 Income Tax Provision 63 52 21.3 ----- ----- Net Income $129 $109 18.0 ===== ===== Selected Statistical Information Life Insurance in Force (billions) $55.9 $49.3 13.5 ===== ===== Assets Owned and/or Managed (billions): Assets managed for institutions $33.1 $25.6 28.9 Assets owned and managed for individuals Owned Assets 45.0 37.8 19.2 Managed Assets 43.3 37.2 16.6 ----- ----- Total $121.4 $100.6 20.7 ===== ===== Sales of Selected Products: Mutual Funds $2,364 $2,324 1.7 Annuities $961 $1,158 (17.0) Investment Certificates $604 $215 # Life and Other Insurance Sales $96 $77 24.4 Fees From Financial Plans (thousands) $9,625 $9,624 - Number of Financial Advisors 7,918 7,780 1.8 Product Sales Generated from Financial Plans as a Percentage of Total Sales 64.1% 61.5% - Return on Average Equity 20.0% 18.3% - # Denotes variance of more than 100%. Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. (Preliminary) American Express Bank Statement of Income (Unaudited) (Amounts in millions, except percentages and where indicated) Three Months Ended June 30, Percentage 1995 1994 Inc/(Dec) Net Revenues: ---- ---- ---------- Interest Income $233 $237 (1.9%) Interest Expense 152 153 (0.5) ----- ----- Net Interest Income 81 84 (4.4) Commissions, Fees and Other Revenues 61 58 7.3 Foreign Exchange Income 21 20 1.9 ----- ----- Total Net Revenues 163 162 0.5 ----- ----- Provision for Credit Losses 1 2 (20.0) Expenses: ----- ----- Human Resources 65 63 2.6 Other Operating Expenses 69 69 (0.2) ----- ----- Total Expenses 134 132 1.1 ----- ----- Pretax Income 28 28 (1.2) Income Tax Provision 9 9 0.9 ----- ----- Net Income $19 $19 (2.1) ===== ===== Selected Statistical Information Return on Average Assets 0.57% 0.51% - Return on Average Common Equity 10.01% 10.46% - Total Loans $5,431 $5,625 (3.4) Reserve for Credit Losses $115 $115 0.4 Total Nonperforming Loans $32 $34 (6.4) Other Nonperforming Assets $53 $59 (10.9) Risk-Based Capital Ratios: Tier 1 8.3% 6.6% - Total 15.8% 13.0% - Leverage Ratio 5.2% 4.2% - Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. SIGNATURE 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 By: /s/ Stephen P. Norman ------------------------- Name: Stephen P. Norman Title: Secretary Dated: July 25, 1995