American Express 2003 Annual Report Download - page 55

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(p.53_axp_ financial review)
TRS’ owned portfolio is primarily comprised of cardmember receivables generated by the Company’s charge card products,
unsecuritized U.S. cardmember loans, international cardmember loans and unsecuritized equipment leasing receivables.
As discussed more fully in the TRS Liquidity and Capital Resources section below, the Company securitizes U.S. cardmem-
ber loans as part of its financing strategy; consequently, the level of unsecuritized U.S. cardmember loans is primarily a func-
tion of the Company’s financing requirements. As a portfolio, unsecuritized U.S. cardmember loans tend to be less seasoned
than securitized loans, primarily because of the lead time required to designate and securitize each loan. The Company
does not currently securitize international loans. Delinquency, reserve coverage and net write-off rates have historically been
broadly comparable between the Company’s owned and managed portfolios.
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION (GAAP BASIS)
December 31, (Billions, except percentages) 2003 2002
Accounts receivable, net $30.2 $28.1
Travelers Cheque investments $7.7 $7.4
Worldwide cardmember loans $25.8 $22.6
Total assets $79.3 $72.2
Travelers Cheques outstanding $6.8 $6.6
Short-term debt $21.8 $21.7
Long-term debt $16.6 $14.8
Total liabilities $71.4 $64.9
Total shareholder’s equity $7.9 $7.3
Return on average total shareholder’s equity* 31.3% 30.3%
Return on average total assets** 3.4% 3.2%
*Computed on a trailing 12-month basis using total shareholder’s equity as included in the Consolidated Financial Statements prepared in accordance with GAAP.
** Computed on a trailing 12-month basis using total assets as included in the Consolidated Financial Statements prepared in accordance with GAAP.
Financing Activities
TRS funds its charge card receivables and cardmember loans using various funding sources, such as short- and long-term
debt, medium-term notes, and sales of cardmember receivables and loans in securitizations. In 2003, TRS had uninter-
rupted access to the money and capital markets to fund its business operations. TRS funds its receivables and loans pri-
marily through two entities. Credco funds the vast majority of charge card receivables, and Centurion Bank funds mainly
cardmember loans originated from the Company’s lending activities. In addition, two trusts are used by the Company in
connection with the securitization and sale of receivables and loans generated in the ordinary course of TRS’ card busi-
nesses. The assets securitized consist principally of consumer cardmember receivables and loans arising from TRS’ charge
card and lending activities.
TRS’ funding needs are met primarily through the following sources:
•Commercial paper issued by Credco
•Bank notes, institutional CDs and Fed Funds borrowed by Centurion Bank
•Medium-term notes and senior unsecured debentures
•Sale of cardmember receivables and loans through securitizations
•Local currency borrowings in selected markets
TRS’ debt offerings are placed either directly, as in the case of its commercial paper program through Credco, or through
securities brokers or underwriters. In certain international markets, bank borrowings are used to partially fund cardmem-
ber receivables and loans.