American Express 2001 Annual Report Download - page 42

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FINANCIAL REVIEW
LIQUIDITY AND CAPITAL RESOURCES
Selected Balance Sheet Information
December 31, (Billions, except percentages) 2001 2000
Accounts receivable, net $ 28.5 $ 29.6
Travelers Cheque investments $ 6.8 $ 6.5
U.S. Cardmember loans $ 16.9 $ 17.4
Total assets $ 69.4 $ 71.4
Travelers Cheques outstanding $ 6.2 $ 6.1
Short-term debt $ 31.8 $ 36.7
Long-term debt $ 6.0 $ 3.3
Total liabilities $ 62.7 $ 64.8
Total shareholder’s equity $ 6.7 $ 6.6
Return on average equity* 21.9% 33.0%
Return on average assets* 2.1% 3.0%
*Excluding the effect of SFAS No. 115 and SFAS No. 133. The company adopted SFAS No. 133 on January 1, 2001.
The American Express Credit Account Master Trust (the Trust) securitized $4.3 billion and $4.0 billion of loans in 2001 and 2000,
respectively, through the public issuance of investor certificates. During 2001, $1.0 billion of investor certificates that were previ-
ously issued by the Trust matured, resulting in $3.3 billion of net additional securitizations during the year. There were no certifi-
cate maturities in 2000. The securitized assets consist of loans arising in a portfolio of designated consumer American Express
credit card, Optima Line of Credit and Sign & Travel/Extended Payment Option revolving credit accounts or features owned by
American Express Centurion Bank (Centurion Bank), a wholly-owned subsidiary of TRS, and, in the future, may include other
charge or credit accounts or features or products. At December 31, 2001 and 2000, TRS had a total of $14.3 billion and $11.0 bil-
lion, respectively, of Trust-related securitized loans which are not on the Consolidated Balance Sheets. In early 2002, the company
securitized an additional $920 million of loans.
Under the terms of the Trust pooling and servicing agreement, the occurrence of certain events,or triggers,could result in the Trust
being required to pay down the investor certificates before their expected payment dates over an early amortization period. Exam-
ples of these events include: the failure or the decline of the securitized assets to generate specified yields over a defined period of
time, and the decline of the total of the securitized assets’ principal balances below a specified percentage of total investor certifi-
cates outstanding after the failure to add additional securitized assets as required by the agreement. The company does not expect
an early amortization event to occur. In the event of a pay-down, $13.1 billion of assets ($14.3 billion securitized less $1.2 billion
retained subordinated interests) would come back on-balance sheet and an alternate source of funding of a commensurate amount
would have to be obtained. Had a total pay-down hypothetically occurred at a single point in time at December 31, 2001, the one-
time negative effect on results of operations would have been approximately $600 million pretax, reflecting approximately $445
million of additional reserve for credit losses related to the $14.3 billion of Cardmember loans that would come back on the bal-
ance sheet, plus $155 million of final amortization of the interest-only strip.
The American Express Master Trust (the Master Trust) securitizes Charge Card receivables generated under designated American
Express Card, Gold Card and Platinum Card consumer accounts through the issuance of trust certificates. In both 2001 and 2000,
$600 million of accounts receivable trust certificates that were previously issued by the Master Trust matured from the Charge Card
securitization portfolio. In 2001, the Master Trust securitized $750 million of Charge Card receivables which remain on the
Consolidated Balance Sheets. In early 2002, the Master Trust securitized an additional $750 million of Charge Card receivables,
which also remain on the balance sheet. As a result of the company’s adoption of SFAS No. 140 during 2001, as further discussed
in Note 1 to the Consolidated Financial Statements, TRS had securitized receivables of $3.0 billion on the Consolidated Balance
Sheets at December 31, 2001; whereas at December 31, 2000, TRS’ $2.85 billion of comparable securitized receivables were
not reflected on the Consolidated Balance Sheets. The Master Trust specifies events, the occurrence of which would result in a
pay-down. The company does not expect a pay-down to occur. While virtually no financial statement impact would result from a
pay-down, as the assets are already on-balance sheet, an alternate source of funding for $3.0 billion of receivables would have to
be obtained.