American Express 2005 Annual Report Download - page 88

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The Company leases certain office facilities and operat-
ing equipment under noncancelable and cancelable
agreements. Total rental expense amounted to $367 mil-
lion, $316 million and $304 million in 2005, 2004 and
2003, respectively. At December 31, 2005, the mini-
mum aggregate rental commitment under all
noncancelable operating leases (net of subleases of
$30 million) was:
(Millions)
2006 $ 229
2007 208
2008 177
2009 146
2010 126
Thereafter 1,286
Total $ 2,172
During 2005, the Company completed sale-leaseback
transactions on four of its owned properties which were
sold at fair value. These transactions have been
accounted for as sale-leasebacks and are included in
total operating lease obligations. Proceeds from these
four transactions totaled $172 million and the aggregate
net book value of these properties removed from the
Company’s Consolidated Balance Sheet was $124 mil-
lion. The pretax gain of approximately $46 million, net
of $2 million in closing costs, has been deferred and will
be amortized over the ten year term of the operating
leasebacks as a reduction to rental expense.
In December 2004, the Company completed sale-
leaseback transactions on five of its owned properties
which were sold at fair value. Four of these transactions
have been accounted for as sale-leasebacks and are
included in total operating lease obligations. Proceeds
from these transactions totaled $187 million and the
aggregate net book value of these four properties
removed from the Company’s Consolidated Balance
Sheet was $91 million. The pretax gain of approximately
$94 million, net of $2 million in closing costs, has been
deferred and will be amortized over the ten year term
of the operating leasebacks as a reduction to rental
expense.
One of the 2004 sale-leaseback transactions has been
accounted for as financing because of certain terms
contained in the lease agreement. The $95 million in
proceeds from this transaction has been classified as
long-term debt and the balance as of December 31, 2005
was $93 million. At December 31, 2005, the Company’s
minimum aggregate rental commitment under this
transaction is approximately $6 million per annum from
2006 through 2010 and $26 million thereafter.
NOTE 12 Contingencies
The Company and its subsidiaries are involved in a
number of legal and arbitration proceedings concerning
matters arising in connection with the conduct of their
respective business activities. These include several class
actions involving the Company’s card businesses among
other matters. The Company believes it has meritorious
defenses to each of these actions and intends to defend
them vigorously.
The Company believes that it is not a party to, nor are
any of its properties the subject of, any pending legal,
arbitration or regulatory proceedings which would have
a material adverse effect on the Company’s consolidated
financial condition, results of operations or liquidity.
However, it is possible that the outcome of any such pro-
ceedings could have a material impact on results of
operations in any particular reporting period as the pro-
ceedings are resolved.
Notes to Consolidated
Financial Statements
AXP / AR.2005
[86 ]