American Express 2003 Annual Report Download - page 92

The table below summarizes cash flows received from securitization trusts in:
(Millions) 2003 2002
Proceeds from new securitizations during the period $3,442 $4,589
Proceeds from collections reinvested in revolving cardmember securitizations $45,907 $36,942
Servicing fees received $378 $331
Other cash flows received on retained interests $1,713 $1,514
The Company also securitizes equipment lease receivables. At December 31, 2003 and 2002, the amounts sold and
outstanding to third-party investors were $138 million and $254 million, respectively. These sales result in a reduction of
interest expense and provisions for losses, as well as servicing revenue, all of which are insignificant to the Company’s results
of operations.
(Note 5) GOODWILL AND OTHER INTANGIBLES
Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which established
new accounting and reporting standards for goodwill and other intangible assets. Under the rules, goodwill and other intan-
gible assets deemed to have indefinite lives are not amortized but are instead subject to annual impairment tests. Manage-
ment completed goodwill impairment tests as of the date of initial adoption, and again during 2002 and 2003. Such tests
did not indicate impairment.
As of December 31, 2003 and 2002, the Company held acquired identifiable intangible assets with definite lives of $522
million (net of accumulated amortization of $145 million) and $238 million (net of accumulated amortization of $84 mil-
lion), respectively. The aggregate amortization expense for these intangible assets during the years ended December 31,
2003, 2002 and 2001 was $56 million, $42 million and $18 million, respectively. During 2003, the Company acquired
$312 million of intangible assets primarily related to AEFA’s acquisition of Threadneedle Asset Management Holdings LTD
and TRS’ acquisition of Rosenbluth International. These assets have a weighted average useful life of 14 years. Estimated
amortization expense associated with intangible assets for the five years ending December 31, 2008 is as follows (millions):
2004, $77; 2005, $77; 2006, $75; 2007, $73 and 2008, $60.
Net goodwill was approximately $2.1 billion and $1.3 billion at December 31, 2003 and 2002, respectively. At December
31, 2003, this consisted of approximately $1.5 billion at TRS and $0.6 billion at AEFA. At December 31, 2002, the net bal-
ance consisted of approximately $1.1 billion at TRS and $0.2 billion at AEFA.
The following table presents the impact to net income and EPS of goodwill amortization for the year ended December
31, 2001:
Net Basic Diluted
(Millions, except per share amounts) Income EPS EPS
Reported $1,311 $ 0.99 $ 0.98
Add back: Goodwill amortization (after-tax) 82 0.06 0.06
Adjusted $1,393 $ 1.05 $ 1.04
(Note 6) SHORT- AND LONG-TERM DEBT AND BORROWING AGREEMENTS
Short-Term Debt
At December 31, 2003 and 2002, the Company’s total short-term debt outstanding, defined as debt with original maturi-
ties of less than one year, was $19.0 billion and $21.1 billion, respectively, with weighted average interest rates of 1.2% and
1.7%, respectively. At December 31, 2003 and 2002, $7.5 billion and $8.7 billion, respectively, of short-term debt outstanding
was hedged by interest rate swaps. The year-end weighted average interest rates after giving effect to hedges were 2.1% and
2.4% for 2003 and 2002, respectively. The Company generally paid fixed rates of interest under the terms of interest rate
swaps. Unused lines of credit to support commercial paper borrowings were approximately $9.2 billion and $10.0 billion
at December 31, 2003 and 2002, respectively.
(p.90_axp_ notes to consolidated financial statements)