American Express 1998 Annual Report Download - page 7

5
met our target of at least eight percent revenue
growth for the second year in a row. In all fair-
ness though, we met the EPS and revenue targets
through rounding the numbers to the nearest per-
centage point.
However, if we exclude significant items in the
first quarter (American Express Bank reserving
actions in Asia, and two partially offsetting
corporate gains) as well as the negative effect of
currency translation, we comfortably exceeded all
our targets. Feel free to judge our performance on
either basis.
Net income for 1998 was $2.14 billion,
up 8 percent from $1.99 billion in 1997. On a
diluted per share basis, earnings were $4.63, up
12 percent from $4.15. Revenues for the year
reached $19.1 billion, up 8 percent from $17.8 bil-
lion. Excluding the first quarter items mentioned
above, income rose 11 percent to $2.2 billion and
diluted earnings per share increased 15 percent
to $4.76.
Overall operating margins remained stable
despite the effect of acquisitions and substantial
investment in the business, as well as the first
quarter provision at American Express Bank.
Our solid capital position and ongoing ability
to add to it from earnings gives us the flexibility
to make attractive investments and continue our
aggressive share repurchase program. In all, we
have repurchased 97 million shares in the open
market since we began the program in September
1994. More than 19 million of these shares were
repurchased in 1998.
In spite of our strong overall performance and
numerous accomplishments, we encountered dis-
appointments during the year as well. The difficult
economic environment in many countries tops
this list. Faltering economies, particularly in Asia,
negatively affected American Express Bank’s
results as well as growth in international travel
sales and spending on our cards. These econ-
omies also affected our customers, who responded
in part by curtailing travel and entertainment
related spending.
While the United States economy remained
relatively healthy throughout the year, volatile
financial markets, particularly in the third
and fourth quarters, presented challenges for
American Express Financial Advisors. Even so,
Financial Advisors turned in another year of
record results.
We dealt with these and other challenges by
continuing our focus on three basic operating
principles: offering superior value to customers,
continually driving toward best-in-class econom-
ics, and building the American Express brand.
The Company’s performance in 1998 once again
validated the wisdom of that focus and of our
business strategies.
FINANCIAL RESULTS
For the sixth year in a row, we met or exceeded
two of our long-term financial targets — to
increase earnings per share (EPS) 12 to 15 per-
cent and to earn a return on equity (ROE) of 18
to 20 percent, on average and over time. We also
During the year, we continued to make investments in online firms to expand
our electronic commerce capabilities. Our aim is to use the Internet to distribute
products and services, to increase the value of these offerings and to create new
business opportunities.