American Express 2007 Annual Report Download - page 50

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2007 FINANCIAL 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.
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 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 2008 2009–2010 2011–2012 2013 and
thereafter
On-Balance Sheet(a):
Long-term debt $ 55,285 $ 11,815 $ 22,323 $ 12,206 $ 8,941
Interest payments on long-term debt(b) 12,965 2,604 3,355 2,010 4,996
Other long-term liabilities(c) 291 114 44 30 103
Off-Balance Sheet:
Lease obligations 2,678 247 431 312 1,688
Purchase obligations(d) 3,182 1,037 1,223 842 80
Total $ 74,401 $ 15,817 $ 27,376 $ 15,400 $ 15,808
(a) The above table excludes approximately $1.1 billion of tax liabilities that have been recorded in accordance with FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes,” as inherent complexities and the number of tax years currently open for examination in multiple jurisdictions do not permit
reasonable estimates of payments, if any, to be made over a range of years.
(b) Estimated interest payments were calculated using the effective interest rate in place at December 31, 2007, and reflects the effect of existing interest rate swaps.
Actual cash flows may differ from estimated payments.
(c) At December 31, 2007, 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 2008 are anticipated to be approximately $41 million,
and this amount has been included within other long-term liabilities. Remaining obligations under defined benefit pension and postretirement benefit plans
aggregating $465 million have not been included in the table above as the timing of such obligations is not determinable. Additionally, other long-term liabilities
do not include $4.8 billion of Membership Rewards liabilities as the Company does not consider these to be long-term obligations. In previous years, Membership
Reward obligations were included in the table above.
(d) The purchase obligation amounts include expected spending by period under contracts that were in effect at December 31, 2007. Minimum contractual payments
associated with purchase obligations, including termination payments, were $528 million.
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 approximately $4.3 billion as of
December 31, 2007.
In addition to the off-balance sheet contractual obligations
noted above, the Company has off-balance sheet arrangements
that include guarantees, retained interests in structured
investments, unconsolidated variable interest entities and other
off-balance sheet arrangements as more fully described below.
GUARANTEES
The Company’s principal guarantees are associated with
cardmember services to enhance the value of owning an
American Express card. At December 31, 2007, the Company
had guarantees totaling approximately $77 billion related to
cardmember protection plans, as well as other guarantees in the
ordinary course of business that are within the scope of FASB
Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others” (FIN 45).
See Note 13 to the Consolidated Financial Statements for
further discussion regarding the Company’s guarantees.
CERTAIN OTHER OFF-BALANCE SHEET
ARRANGEMENTS
At December 31, 2007, the Company had approximately $265
billion of unused credit available to cardmembers as part of
established lending product agreements. Total unused credit
available to cardmembers does not represent potential future
cash requirements, as a significant portion of this unused
credit will likely not be drawn. The Company’s charge card
products have no pre-set limit and, therefore, are not reflected
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