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[ 96 ]
notes to consolidated fi nancial statements
american express company
primarily for non-delivery of goods and services; and
(v) indemnify cardmembers against losses due to lost
baggage while traveling.
The following table provides information related to
such guarantees as of December 31:
2006 2005
Type of Guarantee
Maximum
amount of
undiscounted
future
payments(a)
(Billions)
Amount
of related
liability(b)
(Millions)
Maximum
amount of
undiscounted
future
payments(a)
(Billions)
Amount
of related
liability(b)
(Millions)
Card and travel
operations(c) $75 $119 $95 $124
International
banking and
other(d) 277 282
Tota l $77 $196 $97 $206
(a) Calculated based on the hypothetical scenario that all claims occur
within the next 12 months.
(b) Included as part of other liabilities on the Company’s Consolidated
Balance Sheets.
(c) Includes Credit Card Registry, Merchandise Protection, Account
Protection, Merchant Protection and Baggage Protection. The
Company generally has no collateral or other recourse provisions
related to these guarantees.
(d) Includes contingent consideration obligations as well as guarantees
the Company provides through its international banking business,
such as financial letters of credit, performance guarantees and
financial guarantees. The international banking guarantees range
in term from three months to one year. The Company receives
a fee related to these guarantees, many of which help facilitate
cross-border transactions. The maximum potential exposure
related to the Company’s international banking guarantees at both
December 31, 2006 and 2005, was approximately $1 billion for
which the Company held supporting collateral of approximately
$940 million at such dates.
The Company’s commitments related to bank letters of
credit are included in Note 14.
The Company also has certain contingent obligations
to make payments under contractual agreements 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 billion as of December 31, 2006.
The Company leases certain facilities and equipment
under noncancelable and cancelable agreements. Total
rental expense amounted to $311 million, $367 million,
and $316 million in 2006, 2005, and 2004, respectively.
At December 31, 2006, the minimum aggregate rental
commitment under all noncancelable operating leases
(net of subleases of $33 million) was:
(Millions)
2007 $ 227
2008 217
2009 187
2010 169
2011 144
Thereafter 1,491
Tota l $2,435
Obligations under capital leases or other similar
arrangements entered into by the Company are not
material.
During 2005, the Company completed sale-leaseback
transactions on four of its owned properties which were
sold at fair value. Pursuant to SFAS No. 13, “Accounting
for Leases,” as amended, all of these transactions are
included in total operating lease obligations. Proceeds
totaled $172 million and the aggregate net book value of
the properties removed from the Company’s Consolidated
Balance Sheet was $124 million. The pretax gain of
approximately $46 million, net of $2 million in closing
costs, has been deferred and is 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
were accounted for as sale-leasebacks and are included in
total operating lease obligations. Proceeds totaled $187
million. The pretax gain of approximately $94 million,
net of $2 million in closing costs, has been deferred and
is 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 a 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 was $92 million
and $93 million as of December 31, 2006 and 2005,
respectively. At December 31, 2006, the Company’s
minimum aggregate rental commitment under this
transaction is approximately $6 million per annum from
2007 through 2011 and $20 million thereafter.
There were no sale-leaseback transactions in 2006.