American Express 2006 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2006 American Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

[ 44 ]
2006 fi nancial review
american express company
Short-term debt is defined as any debt with an original
maturity of 12 months or less. Credco’s commercial
paper is a widely recognized name among short-term
investors and is a principal source of short-term debt for
the Company. At December 31, 2006, Credco had $5.8
billion of commercial paper outstanding. The outstanding
amount decreased $1.9 billion or 25 percent from a year
ago. Average commercial paper outstanding was $7.8
billion and $8.1 billion in 2006 and 2005, respectively.
Credco currently manages the level of short-term debt
outstanding such that its back-up liquidity, including
available bank credit facilities and term liquidity portfolio
investment securities, is not less than 100 percent of net
short-term debt. Net short-term debt, which consists
of commercial paper and certain other short-term
borrowings less cash and cash equivalents, was $5.1
billion at December 31, 2006. Based on the maximum
available borrowings under bank credit facilities and
term liquidity portfolio investment securities, Credco’s
total back-up liquidity coverage of net short-term debt
was 212 percent at December 31, 2006.
Centurion Bank and FSB raise short-term debt
through various instruments. Bank notes issued and Fed
Funds purchased by Centurion Bank and FSB totaled
approximately $7.8 billion as of December 31, 2006.
Centurion Bank and FSB also raise customer deposits
through the issuance of certificates of deposit to retail
and institutional customers. As of December 31, 2006,
Centurion Bank and FSB held $11.6 billion in customer
deposits. Centurion Bank and FSB each maintain $400
million of committed bank credit lines as a backup to
short-term funding programs. Long-term funding needs
are met principally through the sale of cardmember loans
in securitization transactions.
The Asset/Liability Committees of Centurion Bank
and FSB provide management oversight with respect
to formulating and ratifying funding strategy and to
ensuring that all funding policies and requirements
are met.
The Company had short-term debt as a percentage
of total debt at December 31 as follows:
2006 2005
Short-term debt percentage
of total debt (GAAP basis) 26.2% 33.7%
The percentage of short-term debt at December 31, 2006
is lower than at December 31, 2005 in part due to the
temporary decline in the amount of commercial paper
outstanding at Credco.
Medium- and long-term debt is raised through
the offering of debt securities in the United States and
international capital markets. Medium-term debt is
generally defined as any debt with an original maturity
greater than 12 months but less than 36 months. Long-
term debt is generally defined as any debt with an
original maturity greater than 36 months.
In 2006, medium- and long-term debt with maturities
primarily ranging from 2 to 10 years was issued. The
Company’s 2006 term offerings, which include those
made by the Parent Company, TRS, Credco, Centurion
Bank, FSB, and the American Express Credit Account
Master Trust (the Lending Trust) are presented in the
following table on both a GAAP and managed basis:
(Billions) Amount
American Express Company
(Parent Company only)(a):
Subordinated Debentures $ 0.8
Fixed Rate Senior Notes 1.0
American Express Travel Related Services
Company, Inc.:
Fixed and Floating Rate Medium-Term Notes 1.5
American Express Credit Corporation:
Floating Rate Senior Notes 6.5
Fixed and Floating Rate Medium-Term Notes 1.9
American Express Centurion Bank:
Floating Rate Medium-Term Notes 3.7
American Express Bank, FSB:
Floating Rate Medium-Term Notes 3.2
GAAP Basis 18.6
American Express Credit Account Master Trust:
Trust Investor Certificates (off-balance sheet) 3.5
Managed Basis $22.1
(a) The table above excludes the remarketing of the Convertible
Senior Debentures to Senior Notes described below.
The Company continues to issue long-term debt with
a wide range of maturities to reduce and spread out the
refinancing requirement in future periods. The Company
expects that its planned funding during 2007 will be
met through a combination of sources similar to those
on which it currently relies. However, the Company
continues to assess its needs and investor demand and
may change its funding mix. The Company’s funding
plan is subject to various risks and uncertainties, such
as disruption of financial markets, market capacity and
demand for securities offered by the Company, regulatory
changes, ability to sell receivables and the performance of
receivables previously sold in securitization transactions.
Many of these risks and uncertainties are beyond the
Company’s control.
At December 31, 2006, the Parent Company had
an unspecified amount of debt or equity securities and
Credco had an unspecified amount of debt available for
issuance under shelf registrations filed with the Securities
and Exchange Commission (SEC). In addition, TRS,