American Express 2006 Annual Report Download - page 50

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2006 fi nancial review
american express company
Committed bank credit facilities do not contain
material adverse change clauses, which may preclude
borrowing under the credit facilities. The facilities
may not be terminated should there be a change in the
Company’s credit rating.
Contingent Securitization Capacity
A key source in the Company’s contingent funding plan
is asset securitization. Management expects that $20.6
billion of additional consumer loans, commercial card
loans, small business loans and cardmember receivables
could be sold to investors through the existing
securitization trust over the first 60 days after a liquidity
crisis has occurred. The Company has added, through
the establishment of the Charge Trust, the capabilities to
sell a wider variety of cardmember receivable portfolios
to further enhance the Company’s flexibility in accessing
diverse funding sources on a contingency basis.
The Company believes that the securitized
financing would be available even through adverse
conditions due to the structure, size, and relative
stability of the securitization market. Proceeds from
secured financings completed during a liquidity crisis
could be used to meet current obligations, to reduce or
retire other contingent funding sources such as bank
credit lines, or a combination of the two. However,
other factors affect the Company’s ability to securitize
loans and receivables, such as credit quality of the
assets and the legal, accounting, regulatory, and tax
environment for securitization transactions. Material
changes in any of these factors may potentially limit the
Company’s ability to securitize its loans and receivables
and could introduce certain risks to the Company’s
ability to meet its financial obligations. In such a case,
the use of investment securities, asset dispositions,
asset monetization strategies, and flexibility to reduce
operating cash needs could be utilized to meet its
liquidity needs.
OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS
The Company has identified both on- and off-balance
sheet transactions, arrangements, obligations, and
other relationships that may have a material current
or future effect on its financial condition, changes in
financial condition, results of operations, or liquidity
and capital resources.
CONTRACTUAL OBLIGATIONS
The table below identifies on- and off-balance sheet
transactions that represent material expected or
contractually committed future obligations of the
Company. Purchase obligations include agreements
to purchase goods and services that are enforceable
and legally binding on the Company and that specify
significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum, or variable
price provisions; and the approximate timing of
the transaction.
Payments due by year
(Millions) Total 2007 2008–2009 2010–2011
2012 and
thereafter
On-Balance Sheet:
Long-term debt $42,747 $ 8,754 $22,876 $5,682 $5,435
Other long-term liabilities(a) 4,258 1,185 1,295 752 1,026
Off-Balance Sheet:
Lease obligations 2,435 227 404 313 1,491
Purchase obligations(b) 2,386 943 1,399 40 4
Total $51,826 $11,109 $25,974 $6,787 $7,956
(a) At December 31, 2006, there were no minimum required contributions, and no contributions are currently planned for the U.S. American
Express Retirement Plan. For the U.S. and non-U.S. defined benefit pension and postretirement benefit plans, contributions in 2007 are
anticipated to be approximately $68 million and this amount has been included within other long-term liabilities. Remaining obligations
under defined benefit pension and postretirement benefit plans aggregating $588 million have not been included in the table above as the
timing of such obligations is not determinable.
(b) The purchase obligation amounts include expected spending by period under contracts that were in effect at December 31, 2006. Minimum
contractual payments associated with purchase obligations, including termination payments, were $211 million.