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American Express Company
ANNUAL REPORT 2007
uncommon
SERVICE

Table of contents

  • Page 1
    uncommon SERVICE American Express Company A N N UA L R E P O RT 2 0 0 7

  • Page 2
    ...earnings per share Cash dividends declared per common share Book value per common share Average common shares outstanding for diluted earnings per common share Total assets Shareholders' equity Common share cash dividends declared Common share repurchases Return on average equity Number of employees...

  • Page 3
    ... Fifty years ago, we introduced the American Express Card-the product that transformed our company and helped shape a new industry. Our business looks vastly different today, but we're still guided by the same principles- understanding our customers, treating them well and delivering the true reward...

  • Page 4
    ... VALUE By welcoming American Express, merchants improve their odds of attracting high-spending customers. But they don't have to leave it all to chance. Our information management and marketing experts can help them reach new customers, get more repeat business and otherwise expand their enterprises...

  • Page 5

  • Page 6
    ... about getting to experience Fashion Week in New York. There were massive crowds waiting on line and paparazzi everywhere, but all we had to do was present our American Express tickets and we were ushered right in. Once inside the SkyBox, American Express representatives took care of us with VIP...

  • Page 7

  • Page 8
    ...NEAL, ARTIST, wORLd TRAVELER ANd AmERICAN ExPRESS CARdmEmbER SINCE 1958 " UNCOMMON LOYALTY " That's what Ralph T. Reed, then " All we have to sell is service. president of American Express, said in 1958 on the launch of a new and untested product―the American Express Card. Fifty years later, our...

  • Page 9

  • Page 10

  • Page 11
    ...track costs and generate savings. Proprietary travel booking and recordkeeping tools. A complete online system for business-tobusiness payments. Dedicated account management. One source, many solutions-making life simpler in the office and on the road is what we do. " With American Express' global...

  • Page 12
    ... from entrepreneurship to dining and travel. But they aren't just benefiting each other. Those who participated in the inaugural Members Project in 2007 submitted, discussed and voted on ideas to help effect positive change in the world. American Express provided funding for the top vote-getters...

  • Page 13

  • Page 14
    kENNETh I. ChENAULT ChAIRmAN ANd ChIEf ExECUTIVE OffICER

  • Page 15
    ... by events at the end of the year, however, as the U.S. housing downturn and credit crunch began to spill over to other parts of the economy. In december, we began to feel the effects of the weakening U.S. economy as cardmember spending slowed and past-due loans and write-off rates rose. These...

  • Page 16
    ... total cards-in-force to 86.4 million. Consumer and business travel, which complement our payments business and serve our customers around the world, had strong years as well. We achieved these results while also investing substantially in activities to build future business. Expenses for marketing...

  • Page 17
    ...mix of consumer and business-to-business customers and multiple products around the world, is another positive factor in our performance. Our business model is built on driving cardmember spending. Lending is a planned and profitable outcome of our spend-centric strategy as we offer cardmembers the...

  • Page 18
    ...: our unique spend-centric business model, an excellent position in the premium segment of the market, the industry's most successful rewards programs, a brand that resonates with consumers and corporate customers, responsible capital management, and our ability to deliver products and services that...

  • Page 19
    ... Card. Back in 1958, charge and credit cards were a novel idea. Given our experience in travel and overseas payments, it now seems natural that American Express would enter this new business. But the choice wasn't so clear-cut at the time. The decision faced strong opposition inside the company...

  • Page 20
    ...Group, key advantages include our many corporate, merchant and network partner relationships, sales and client management expertise, and processing capabilities. Both businesses also share a number of companywide assets including the American Express brand and premium positioning, customer servicing...

  • Page 21
    ... a line of Gift Cards that large companies and small businesses can customize, and we also expanded partnerships to broaden distribution of our products. • Consumer Travel Experiences -We continued to enhance the American Express Travel Web site, a key driver of travel sales, by adding new offers...

  • Page 22
    ... cards-in-force to 20.3 million. Global Corporate Travel sales rose 11 percent worldwide. EXPANDING ARRAY OF NETWORK CARDS Global Network Services (GNS) works with 117 financial institutions around the world that issue cards accepted on the American Express merchant network. In its 10th year, GNS...

  • Page 23
    ... employees of AEB for the important contributions they have made to our company. Lawsuit Settlement - A little over three years ago, we filed a lawsuit against Visa, MasterCard and certain of their member banks for illegally conspiring to prevent American Express from entering the network business...

  • Page 24
    ...for the damages suffered by American Express. We plan to move forward with the litigation to hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years and to seek full compensation for the value that would have been generated for our shareholders. The...

  • Page 25
    ... cash and checks, meaning significant untapped potential remains. Moreover, countries with rapidly growing consumer economies are also among those with the lowest rates of spending on plastic and other noncash forms of payment. Meanwhile, new technologies are giving consumers and business customers...

  • Page 26
    ... citizenship has been an American Express objective for as long as our company has existed. In 2007, we offered a detailed account of how we go about it in Recognizing Responsibility, our first global corporate citizenship report. It outlines the vision, principles and programs we have in place...

  • Page 27
    ... NA NCI A L R EPORT I NG R EPORT OF I NDEPENDEN T R EGISTER ED PU BLIC ACCOU N T I NG F IR M I NDE X TO CONSOLI DATED F I NA NCI A L STATEMEN TS CONSOLI DATED F I NA NCI A L STATEMEN TS NOTES TO CONSOLI DATED F I NA NCI A L STATEMEN TS CONSOLI DATED F IV E-Y E A R SU M M A RY OF SELEC TED F I NA NCI...

  • Page 28
    ... products and services are sold globally to diverse customer groups, including consumers, small businesses, middle-market companies, and large corporations. These products and services are sold through various channels including direct mail, on-line applications, targeted sales forces, and direct...

  • Page 29
    ... also offers merchants point-of-sale and back-office products, services and marketing programs. Corporate & Other consists of corporate functions and auxiliary businesses, including the Company's publishing businesses, Travelers Cheques and other prepaid products, American Express International...

  • Page 30
    ... GNS Network Arrangements Global Network & Merchant Services segment). A $48 million ($22 million after-tax) loss related to the sale of the Company's international banking activities to Bradesco is reported in discontinued operations for banking activities the Company exited in Brazil. The Company...

  • Page 31
    2007 FINANCIAL REVIEW A M ERICAN EXP RESS COMPANY F I NANC IA L SUM M ARY A summary of the Company's recent financial performance follows: Years Ended December 31, (Millions, except per share amounts and ratio data) Percent Increase (Decrease) Revenues net of interest expense Expenses Provisions...

  • Page 32
    ... rate, the consumer confidence index, the purchasing manager's index, bankruptcy filings, concentration of credit risk based on tenure, industry or geographic regions, and the legal and regulatory environment. To the extent historical credit experience updated for emerging market trends in credit...

  • Page 33
    ...'s card products offer the ability to earn bonus points for certain types of purchases. Membership Rewards points are redeemable for a broad variety of rewards, including travel, entertainment, retail certificates and merchandise. Points generally do not expire and there is no limit on the number...

  • Page 34
    ... observable market inputs. Management uses models to determine the fair value of the interest-only strip and gain on sale at the time of a cardmember securitization. The models are based on projections of finance charges and fees paid related to the securitized assets, coupon payments to investors...

  • Page 35
    ... settlement with the taxing authority. This measurement is based on many factors, including whether a tax dispute may be settled through negotiation with the taxing authority or is only subject to review in the courts. As new information becomes available, the Company evaluates its tax positions...

  • Page 36
    ...of billed business (both proprietary and Global Network Services) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance. (d) Average basic cardmember spending and average fee per card are computed from proprietary card activities only...

  • Page 37
    2007 FINANCIAL REVIEW A M ERICAN EXP RESS COMPANY AMERICAN EXPRESS COMPANY SELE C T ED STAT IST ICAL INFORMAT ION ( CON T IN UED ) Years Ended December 31, (Billions, except percentages and where indicated) The following discussions regarding Consolidated Results of Operations and Consolidated ...

  • Page 38
    ... reï¬,ected the relatively faster growth in billed business related to GNS where the Company shares the discount revenue with thirdparty card issuing partners, and higher cash-back rewards costs and corporate incentive payments which are reported as reductions to revenue (contra-revenue). The 15...

  • Page 39
    ...offset by a lower average discount rate, relatively faster growth in billed business related to GNS, and higher cash-back rewards costs. The 16 percent increase in worldwide billed business in 2006 reï¬,ected increases in average spending per proprietary basic card, growth in cardsin-force, and a 48...

  • Page 40
    .... Marketing expenses reï¬,ected relatively high levels of spending related to various business-building initiatives, but lower costs versus 2005 related to the Company's ongoing global "MyLife, MyCard(SM)" advertising campaign, which was in a more active phase during 2005. Human resources expenses...

  • Page 41
    ... million gain related to the sale of the Company's card and merchant-related activities in Brazil, Malaysia, and Indonesia in 2006, litigation expenses of $74 million related to settlement with Visa, and a $50 million contribution to the American Express Charitable Fund. Other, net expenses in 2006...

  • Page 42
    ...). The Company owns state and municipal securities that primarily support the Travelers Cheques business and are classified as Available-for-Sale. Approximately 73 percent of state and municipal investments owned by the Company are insured by financial guarantors that guarantee timely payment of...

  • Page 43
    ... cost-efficiency consistent with its funding and liquidity strategies. The Company generates equity capital primarily through net income to fund current needs and future business growth and to maintain a targeted debt rating. The maintenance of a solid equity capital base provides the Company...

  • Page 44
    ... of new shares as part of employee compensation plans and reduce shares outstanding. The Company repurchases its common shares primarily by open market purchases. Approximately 71 percent of capital generated has been returned to shareholders since inception of the share repurchase program in...

  • Page 45
    ... funding policies and requirements of the two banks are met. The Company's debt offerings are placed either directly to investors, as in the case of its commercial paper program through Credco, or through securities brokers or underwriters. In certain international markets, bank borrowings are used...

  • Page 46
    ... 2 to 10 years was issued in the U.S. and international markets. The Company's 2007 offerings, which include those made by the Parent Company, Credco, Centurion Bank, FSB, American Express Receivables Financing Corporation LLC V (the Charge Trust) and the American Express Credit Account Master Trust...

  • Page 47
    2007 FINANCIAL REVIEW A M ERICAN EXP RESS COMPANY an unspecified amount of debt available for issuance under shelf registrations filed with the SEC. In addition, TRS, Centurion Bank, FSB, Credco, and American Express Overseas Credit Corporation Limited, a wholly-owned subsidiary of Credco, have ...

  • Page 48
    ... its businesses, cost and availability of alternative liquidity sources, and regulatory and credit rating agency considerations. The Company has developed a contingent liquidity plan that enables it to continuously meet its daily obligations when access to unsecured funds in the debt capital markets...

  • Page 49
    ... access to diverse sources of alternative funding. Such sources include, but are not limited to, the Company's liquidity investment portfolio, sale of consumer, commercial card, and small business loans and cardmember receivables through its existing securitization programs, committed bank credit...

  • Page 50
    ... the value of owning an American Express card. At December 31, 2007, the Company had guarantees totaling approximately $77 billion related to At December 31, 2007, the Company had approximately $265 billion of unused credit available to cardmembers as part of established lending product agreements...

  • Page 51
    ...regarding the Company's other off-balance sheet arrangements. RISK MANAGEMENT IN TRO D U CT ION business unit managers remain jointly accountable for the outcome of risk-return decisions within the Board approved limits. G OV ERNAN C E The key objective of risk management at American Express is to...

  • Page 52
    ..., including prospect targeting, new accounts, line assignment, balance transfer, cross sell, and account management. Each decision benefits from sophisticated modeling capability that uses the most up-todate proprietary information on customers, including payment history, purchase data, as...

  • Page 53
    ... risk to earnings or value resulting from movements in market prices. The Company's market risk exposure is primarily generated by: •฀ Interest rate risk in its card, insurance, and certificate businesses; and •฀ Foreign exchange risk in its international operations. General principles and...

  • Page 54
    ...and International Card Services are aligned within the Global Consumer Group and Global Commercial Services and Global Network & Merchant Services are aligned within the Global Business-to-Business Group. The Company has reclassified the prior period amounts to be consistent with the new reportable...

  • Page 55
    ... income, net Total revenues Interest expense Cardmember lending Charge card and other Revenues net of interest expense Expenses Marketing, promotion, rewards and cardmember services Human resources and other operating expenses Total Provisions for losses Pretax segment income Income tax provision...

  • Page 56
    ...basic cardmember spending (dollars) U.S. Consumer Travel: Travel sales Travel commissions and fees/sales Total segment assets Segment capital (a) Return on segment capital (b) Cardmember receivables: Total receivables 90 days past due as a % of total Net loss ratio as a % of charge volume Cardmember...

  • Page 57
    ... to $4.4 billion, due to higher volume-related rewards costs, the charge associated with certain adjustments to the Membership Rewards reserve model in the United States discussed previously, and increased marketing and promotion costs. Human resources and other operating expenses of $3.4 billion...

  • Page 58
    ...growth in average managed lending balances and higher costs of funds. Provisions for losses increased $1.7 billion or 78 percent to $3.9 billion for 2007, due to increased write-off and delinquency rates, the impact of strong loan and volume growth, and the credit-related charge previously discussed...

  • Page 59
    ... expense Cardmember lending Charge card and other Revenues net of interest expense Expenses Marketing, promotion, rewards and cardmember services Human resources and other operating expenses Total Provisions for losses Pretax segment income Income tax benefit Segment income Years Ended December 31...

  • Page 60
    ... level of charge offs primarily related to industry-wide credit issues in Taiwan. Income Taxes During 2007, International Card Services' expenses increased $601 million or 21 percent to $3.4 billion, due to higher marketing, promotion, rewards and cardmember services costs The effective tax rate...

  • Page 61
    ... expense Charge card and other Revenues net of interest expense Expenses Marketing, promotion, rewards and cardmember services Human resources and other operating expenses Total Provisions for losses Pretax segment income Income tax provision Segment income Global Commercial Services reported...

  • Page 62
    ... related costs effective July 1, 2006. Provisions for Losses S ELE C TED S TAT IS T ICAL IN F ORMAT ION Years Ended December 31, (Billions, except percentages and where indicated) Global Card billed business (a) Global Network & Merchant Services: Total segment assets Segment capital (b) Return...

  • Page 63
    ... Express co-brand card, the Company's business could be adversely affected. The Company has multiple co-brand relationships and rewards partners. The Company's largest airline co-brand partner [is 61 ] Delta Air Lines (Delta). American Express' Delta SkyMiles Credit Card co-brand portfolio accounts...

  • Page 64
    ... from the sale of such securities to pay the purchase price for the underlying receivables or loans. Average discount rate - This calculation is designed to approximate merchant pricing. It represents the percentage of [ 62 ] billed business (both proprietary and Global Network Services) retained by...

  • Page 65
    ...products such as gift cheques and cards as well as reloadable Travelers Cheque cards. These products are sold as safe and convenient alternatives to currency for purchasing goods and services. Total cards-in-force - Represents the number of cards that are issued and outstanding. Total consumer cards...

  • Page 66
    ...for the cost of the Membership Rewards program; ï¬,uctuations in foreign currency exchange rates; the Company's ability to grow its business and meet or exceed its return on shareholders' equity target by reinvesting approximately 35 percent of annually-generated capital, and returning approximately...

  • Page 67
    ... of compliance with the policies or procedures may deteriorate. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007. In making this assessment, the Company's management used the criteria set forth by the Committee...

  • Page 68
    ... A M ERI CAN EXP RESS COMPANY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM T H E B OA RD OF DIRECTORS AND S HAREHOLDERS OF A M ERICA N EX PRESS COMPANY: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash ï¬,ows and of...

  • Page 69
    ... Activities Note 13 - Guarantees Note 14 - Commitments and Contingencies Note 15 - Fair Values of Financial Instruments Note 16 - Significant Credit Concentrations Note 17 - Stock Plans Note 18 - Retirement Plans Note 19 - Income Taxes Note 20 - Earnings Per Common Share (EPS) Note 21 - Reportable...

  • Page 70
    ... Cardmember lending Charge card and other Total Revenues net of interest expense Expenses Marketing, promotion, rewards and cardmember services Human resources Professional services Occupancy and equipment Communications Other, net Total Provisions for losses and benefits Charge card Cardmember...

  • Page 71
    ...' Equity Customers' deposits Travelers Cheques outstanding Accounts payable Investment certificate reserves Short-term debt Long-term debt Other liabilities Liabilities of discontinued operations Total liabilities Shareholders' Equity Common shares, $.20 par value, authorized 3.6 billion shares...

  • Page 72
    ... Cash Flows from Financing Activities Net change in customers' deposits Sale of investment certificates Redemption of investment certificates Net increase (decrease) in debt with maturities of three months or less Issuance of debt Principal payments on debt Issuance of American Express common shares...

  • Page 73
    ... and other post retirement benefit gains Total comprehensive income Repurchase of common shares Other changes, primarily employee plans Adoption of FIN 48 Cash dividends declared Common, $0.63 per share Balances at December 31, 2007 See Notes to Consolidated Financial Statements. $16,020 3,734...

  • Page 74
    ... products and services are sold globally to diverse customer groups, including consumers, small businesses, middle-market companies, and large corporations. These products and services are sold through various channels including direct mail, on-line applications, targeted sales forces, and direct...

  • Page 75
    ...the International Card Services segment, $28 million in the Global Commercial Services segment, and $25 million in the Global Network & Merchant Services segment). A $48 million ($22 million after-tax) loss related to the sale of the Company's international banking activities to Bradesco is reported...

  • Page 76
    ... Revenue The Company generates revenue from a variety of sources including global payments, such as charge and credit cards, travel services and investments funded by the sale of stored value products, such as Travelers Cheques. Discount Revenue Other revenue includes insurance premiums earned...

  • Page 77
    ... receivables represent amounts due from charge card customers. These receivables are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant. Cardmember receivable balances are presented on the Consolidated Balance Sheets net of reserves for losses, discussed...

  • Page 78
    ... due from lending product customers. These loans are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant or when a charge card customer enters into an extended payment arrangement. Cardmember loans are presented on the Consolidated Balance Sheets net of reserves...

  • Page 79
    ... 12 months is used to approximate future redemption costs and is affected by the mix of rewards redeemed. Management uses models to estimate ultimate redemption rates based on historical redemption statistics, card product type, year of program enrollment, enrollment tenure and card spend levels...

  • Page 80
    ... that may not be transferred to American Express' Parent Company (Parent Company) was approximately $7 billion (this includes restrictions on the net assets of Discontinued Operations of $1 billion). RE C EN TLY IS S UED ACCOUN T IN G S TAN DARD S The Financial Accounting Standards Board (FASB) has...

  • Page 81
    ... to be the Company's fiscal year end for years ending after December 15, 2008. The Company currently uses a September 30 measurement date. In order to facilitate this change, the Company will use the September 30, 2007 valuation to estimate pension and other employee benefit plan cost for 2008 and...

  • Page 82
    ... the sale of its card and merchant-related activities and international banking activities in Brazil for approximately $470 million. The international banking portion of the transaction generated an after-tax loss of $22 million reported in discontinued operations for banking activities the Company...

  • Page 83
    ...Company's travel customers, third party card issuing partners, accrued interest on investments, and other receivables due to the Company in the ordinary course of business. For 2007, other receivables also includes $1.13 billion related to the Company's litigation settlement with Visa Inc., Visa USA...

  • Page 84
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY AVAI LABLE -F OR -SA LE INVES T MEN TS The following is a summary of investments classified as Available-for-Sale at December 31: 2007 Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value 2006 Gross Unrealized...

  • Page 85
    ...be in the form of cash or marketable U.S. Treasury or government agency securities. The Company may only retain or sell these securities in the event of a borrower default. The Company's loaned investment securities are classified as investments on the Consolidated Balance Sheet, but are considered...

  • Page 86
    ... TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY EX P O S URE TO A SSE T- BACKED S ECU RI T IES The Company's asset-backed holdings are classified as follows: Classification (Millions) Market Value Trading Available-for-Sale: Continuing operations Discontinued operations Total...

  • Page 87
    ... loan is more than 180 days past due. Interest-only strip Subordinated securities Total 2007 $223 78 $301 2006 $266 - $266 The subordinated securities are accounted for at fair value as Available-for-Sale investment securities and are reported in investments on the Company's Consolidated Balance...

  • Page 88
    ... are based on market prices at the date of transfer for the sold cardmember loans and on the estimated present value of future cash ï¬,ows for retained interests. Gains on sale from securitizations are reported in securitization income, net in the Company's Consolidated Statements of Income. The...

  • Page 89
    ... years ended December 31: (Millions) The Company's securitizations of cardmember receivables are accounted for as secured borrowing, rather than as qualifying sales, because the receivables are transferred to a non-qualifying special purpose entity, the American Express Issuance Trust (the Charge...

  • Page 90
    ... income (loss) for the three years ended December 31, were as follows: Net Unrealized Gains (Losses) on Derivatives Net Unrealized Pension and Other Postretirement Benefit Costs Three Years Ended December 31, (Millions), net of tax(a) Net Unrealized Gains (Losses) on Securities Foreign Currency...

  • Page 91
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY Three Years Ended December 31, (Millions), net of tax(a) Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivatives Foreign Currency Translation Adjustments Net Unrealized Pension and Other ...

  • Page 92
    ... Company's reportable operating segments were as follows: U.S. Card Services International Card Services Global Commercial Services Global Network & Merchant Services Corporate & Other (Millions) Total Balance at January 1, 2006 Acquisitions (a) Dispositions (b) Other, including foreign currency...

  • Page 93
    ... Company's agent and the general partner is most closely related to the partnership as it is the key decision maker and controls the operations. These partnership interests are accounted for under EITF No. 94-01, "Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects...

  • Page 94
    ... Maturity Dates Outstanding Balance Outstanding Balance American Express Company (Parent Company only) Fixed and Floating Rate Senior Notes Subordinated Debentures (c) American Express Travel Related Services Company, Inc. Fixed and Floating Rate Senior Notes American Express Credit Corporation...

  • Page 95
    ... Rewards liabilities Employee-related liabilities (a) Deferred card fees, net Other (b) Total 2007 $ 4,785 1,887 1,126 6,161 $ 13,959 2006 $ 3,760 1,893 987 5,291 $ 11,931 The Company has a share repurchase program to return equity capital in excess of business needs to shareholders. The share...

  • Page 96
    ... investments. For the Company's charge card and fixed-rate lending products, interest rate exposure is managed by using fixed-rate debt and derivative instruments, primarily interest rate swaps, to achieve a targeted mix of fixed and ï¬,oating rate funding. The Company's strategy is to lengthen...

  • Page 97
    ... one year. Foreign currency contracts involve the purchase and sale of a designated currency at an agreed upon rate for settlement on a specified date. From time to time, the Company may enter into interest rate swaps to specifically manage funding costs related to its proprietary card business...

  • Page 98
    ...the airline industry. (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) Other primarily relates to real estate, tax, and Visa...

  • Page 99
    ...rate loans that reprice within one year and for which there has been no significant change in counterparties' creditworthiness, fair values approximate carrying values. The fair values of all other loans are estimated using a discounted cash ï¬,ow analysis, based on current interest rates for loans...

  • Page 100
    ... Express co-brand card, the Company's business could be adversely affected. The Company has multiple co-brand relationships and rewards partners. The Company's largest airline co-brand partner is Delta Air Lines (Delta). American Express' Delta SkyMiles Credit Card co-brand portfolio accounts...

  • Page 101
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY exposure is included in the maximum amount of undiscounted future payments disclosed in Note 13. Historically, even for an airline that is operating under bankruptcy protection, this type of exposure has not generated any signi...

  • Page 102
    ... specified six-year performance or market metric is subsequently achieved. Performance-Based Conditions The fourth stock award component has a market-based condition that vests based on the Company's total shareholder return as compared to the S&P 500 Index. Compensation expense for the fair value...

  • Page 103
    ... by length of service, compensation and other factors. These benefits are funded through a trust and the Company's funding of retirement costs complies with the applicable minimum funding requirements specified by ERISA. The funded status of the Plan on an ERISA basis for the years ended 2007 and...

  • Page 104
    ... on the plan participant's service to date and their expected future compensation at their projected retirement date. The $310 million charge to shareholders' equity, net of tax, represents all previously unrecognized amounts (e.g. unrecognized gains and losses and prior service cost) which were...

  • Page 105
    ... (54) (95) 135 $2,383 Fair value of plan assets, October 1 prior year Actual return on plan assets Employer contributions Benefits paid Settlements Foreign currency exchange rate changes Fair value of plan assets at September 30, Net Funded Status (Millions) Funded status at September 30, Fourth...

  • Page 106
    ... the plan's projected benefit payments based on the plan participant's service to date and their expected future compensation. Use of the rate produced by this model generates a projected benefit obligation that equals the current market value of a portfolio of high-quality zero coupon bonds whose...

  • Page 107
    ... Gains in current year Net actuarial loss Net prior service cost: Reclassified to earnings from equity Net prior service cost Total, pretax Plan Obligations The following table provides a reconciliation of the changes in the plans' projected benefit obligation for all plans accounted for under...

  • Page 108
    ...that match the cash ï¬,ows of the plan's projected benefit payments. Use of the rate produced by this model generates a projected benefit obligation that equals the current market value of a portfolio of high-quality zero coupon bonds whose maturity dates and amounts match the timing and amount of...

  • Page 109
    ... and corresponding foreign tax credits and federal tax effects. The Company is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which the Company has significant business operations. The tax years under examination and open for...

  • Page 110
    ... consumers. International Card Services issues proprietary consumer and small business cards outside the United States. Global Commercial Services offers global corporate payment and travel-related products and services to large and mid-sized companies. Global Network & Merchant Services segment...

  • Page 111
    ... TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY The following table presents certain selected financial information at December 31, 2007, 2006, and 2005 and for each of the years then ended. (Millions, except where indicated) USCS ICS GCS GNMS Corporate & Other(a) Consolidated...

  • Page 112
    ...the volume of merchant business generated by cardmembers. Within the U.S. Card Services, International Card Services, and Global Commercial Services segments, discount revenue reï¬,ects the issuer component of the overall discount rate; within the Global Network & Merchant Services segment, discount...

  • Page 113
    ...exit costs. The charges and any subsequent adjustments related to severance obligations are included in human resources in the Company's Consolidated Statements of Income, while other exit costs are included in occupancy and equipment, professional services, and other expenses. Cash payments related...

  • Page 114
    ...TO CONSOLIDATED FINANCIAL STATEMENTS A M ERI CAN EXP RESS COMPANY The following table summarizes the Company's restructuring charge activity for the years ended December 31, 2007, 2006, and 2005: (Millions) Severance Other Total Liability balance at December 31, 2004 Restructuring charges Payments...

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    ... of accounting change, net of tax: Basic Diluted Net income: Basic Diluted Cash dividends declared per share Book value per share Market price per share(c): High Low Close Average common shares outstanding for earnings per share: Basic Diluted Shares outstanding at period end Other Statistics Number...

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    ... and Chief Information Officer BOARD OF DIRECTORS Daniel F. Akerson Managing Director The Carlyle Group Charlene Barshefsky Senior International Partner WilmerHale Ursula M. Burns President Xerox Corporation Kenneth I. Chenault Chairman and Chief Executive Officer American Express Company Peter...

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    ... PLAN Copies of the company's Form 10-K, proxy statement, press releases and other documents, as well as information on financial results, products and services, are available on the American Express Web site at www.americanexpress.com. The company's global Corporate Citizenship Report and a report...

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    American Express Company 200 Vesey Street New york, Ny 10285 212.640.2000 www.americanexpress.com