American Express 2005 Annual Report Download - page 43

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Payments due by year
(Millions) Total 2006 2007–2008 2009–2010
2011 and
thereafter
On-Balance Sheet:
Long-term debt $ 30,781 $ 5,384 $ 11,430 $ 9,877 $ 4,090
Other long-term liabilities 4,815 1,617 1,187 816 1,195
Off-Balance Sheet:
Lease obligations 2,172 229 385 272 1,286
Purchase obligations
(a)
3,523 1,508 1,413 596 6
Total $ 41,291 $ 8,738 $ 14,415 $ 11,561 $ 6,577
(a)The purchase obligation amounts include expected spend by period under contracts that were in effect at December 31, 2005. Minimum contractual
payments associated with purchase obligations, including termination payments, were $360 million.
The Company also has certain contingent obligations for
worldwide business arrangements. These payments
relate to contractual agreements with partners entered
into as part of the ongoing operation of the Company’s
business, primarily with co-brand partners. The
contingent obligations under such arrangements were
$3.3 billion as of December 31, 2005.
In addition to the off-balance sheet contractual obli-
gations noted above, the Company has off-balance sheet
arrangements that include guarantees, retained interests
in structured investments, unconsolidated variable
interest entities and other off-balance sheet arrange-
ments as more fully described below.
Guarantees
The Company’s principal guarantees are associated with
cardmember services provided to enhance the value of
owning an American Express card. At December 31,
2005, the Company had guarantees totaling approxi-
mately $97 billion related to cardmember protection
plans, as well as other guarantees in the ordinary course
of business that are within the scope of Financial
Accounting Standards Board (FASB) Interpretation
No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guar-
antees of Indebtedness of Others” (FIN 45). Expenses
relating to actual claims under these guarantees for 2005
and 2004 were approximately $15 million and $20 mil-
lion, respectively.
The Company had $1.1 billion of bank standby letters
of credit and bank guarantees and other letters of credit
within the scope of FIN 45. At December 31, 2005, the
Company held approximately $936 million of collateral
supporting standby letters of credit and guarantees.
Additionally, at December 31, 2005 the Company had
$493 million of loan commitments and other lines of
credit as well as $529 million of bank standby letters of
credit, bank guarantees and bank commercial and other
bank letters of credit that were outside the scope of
FIN 45. At December 31, 2005, the Company held $337
million of collateral supporting these bank, commercial
and other letters and lines of credit.
See Note 11 to the Consolidated Financial Statements for
further discussion regarding the Company’s guarantees.
Retained Interests In Assets Transferred To
Unconsolidated Entities
The Company held, as an investment, $70 million of
subordinated retained interests from securitizations and
$209 million of an interest-only strip in the cardmember
loan securitization trust at December 31, 2005. See the
Consolidated Liquidity and Capital Resources section
and Note 5 to the Consolidated Financial Statements for
details regarding the Company’s securitization trusts.
Certain Other Off-Balance Sheet Arrangements
At December 31, 2005, the Company had approxi-
mately $213 billion of unused credit available to
cardmembers, as part of established lending product
agreements. Total unused credit available to cardmem-
bers does not represent potential future cash
requirements as a significant portion of this unused
credit will likely not be drawn. The Company’s charge
card products have no pre-set limit and, therefore, are
not reflected in unused credit available to cardmembers.
As discussed in the Consolidated Liquidity and Capital
Resources section, the Company’s securitizations of
cardmember loans are also off-balance sheet. The Com-
pany’s cardmember receivables securitizations remain
on the Consolidated Balance Sheets.
See Note 11 to the Consolidated Financial Statements
for further discussion regarding the Company’s other
off-balance sheet arrangements.
Financial Review
AXP / AR.2005
[41 ]