American Express 2005 Annual Report Download - page 82

NOTE 7 Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill reported in the Company’s operating segments were as follows:
(Millions) U.S. Card Services
International Card &
Global Commercial
Services
Global Network &
Merchant Services Total
Balance at January 1, 2004 $ 205 $ 1,198 $ 104 $ 1,507
Acquisitions — 11 — 11
Dispositions
(a)
(22) (4) — (26)
Other, including foreign currency translation — 17 — 17
Balance at December 31, 2004 183 1,222 104 1,509
Other, including foreign currency translation — (20) — (20)
Balance at December 31, 2005 $ 183 $ 1,202 $ 104 $ 1,489
(a)Primarily relates to the sale of the equipment leasing product line of American Express Business Finance Corporation.
Definite-lived intangible assets, which primarily consist
of customer relationships and contracts, had a gross car-
rying amount and accumulated amortization of $271
million and $159 million, respectively, as of
December 31, 2005 and $296 million and $169 million,
respectively, as of December 31, 2004.
The aggregate amortization expense for these intangible
assets during 2005, 2004 and 2003 was $49 million,
$46 million and $45 million, respectively. These assets
have a weighted average remaining useful life of four
years. Estimated amortization expense associated with
intangible assets for the five years ending December 31,
2010 is as follows (millions): 2006, $37; 2007, $15;
2008, $12; 2009, $7; and 2010, $5. During 2005, the
Company acquired $43 million of intangible assets,
which are being amortized, on average, over four years.
In addition, the Company recorded dispositions
and other foreign currency translation adjustments of
$9 million.
NOTE 8 Short- and Long-Term Debt and Borrowing Agreements
Short-Term Debt
The Company’s short-term debt outstanding, defined as debt with original maturities of less than one year, primarily
consists of commercial paper, borrowed funds and bank notes payable. Short-term debt at December 31 was as follows:
(Millions, except percentages) 2005 2004
Outstanding
Balance
Notional
Amount
of Swaps
Year-End
Stated
Rate on
Debt(a)
Year-End
Effective
Interest
Rate with
Swaps(a) Maturity
of Swaps
Outstanding
Balance
Notional
Amount
of Swaps
Year-End
Stated
Rate on
Debt(a)
Year-End
Effective
Interest
Rate with
Swaps(a) Maturity
of Swaps
Commercial paper $ 7,742 $ — 4.19% — — $ 7,604 $ 363 2.17% 2.16% 2005
Borrowed funds 3,257 133 4.72% 4.73% 2006–2010 3,043 — 2.39% — —
Bank notes payable 3,748 — 4.51% — — 3,059 2,800 2.59% 3.49% 2005
Other 886 — 2.86% — — 610 — 0.68% — —
Total $ 15,633 $ 133 4.30% $ 14,316 $ 3,163 2.24%
(a)For floating rate debt issuances, the stated and effective interest rates were based on the respective rates at December 31, 2005 and 2004. These rates
are not indicative of future interest rates.
As of December 31, 2005, there were no derivative
financial instruments outstanding designated as hedges
of the existing commercial paper and bank notes out-
standing. The Company has designated the interest rate
risk associated with cash flows of future commercial
paper as well as bank note issuances as part of its on
going hedging program. The notional amount as
of December 31, 2005, of such designated derivative
financial instruments was $4.5 billion, reflecting the
hedge of future cash flows of anticipated issuances in
2006 through 2008. See Note 10 for additional discus-
sion of the Company’s cash flow hedging strategies.
Unused lines of credit to support commercial paper
borrowings were approximately $9.3 billion and $9.1
billion at December 31, 2005 and 2004, respectively.
Notes to Consolidated
Financial Statements
AXP / AR.2005
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