American Express 2007 Annual Report Download - page 82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
NOTE 2 DISCONTINUED OPERATIONS
On September 18, 2007, the Company entered into an
agreement to sell AEB. The transaction is expected to close in
the first quarter of 2008.
Following the completion of the sale, the Company will have
continuing obligations for certain on-going costs related to the
remediation of regulatory and legal matters that arose prior to
the sale. Further discussion on the details of this transaction are
included in Note 1.
On June 30, 2006, the Company completed 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 exited in Brazil. These
banking activities previously were reflected in the Corporate &
Other segment. Financial results for these operations, prior to
the second quarter of 2006, were not reclassified as discontinued
operations because such results are not material. Refer to Note
1 for a discussion of the impact of the sale of the Brazilian
card and merchant-related activities, which are included in
continuing operations.
On September 30, 2005, the Company completed the
distribution of Ameriprise common stock to the Company’s
shareholders in a tax-free transaction for U.S. federal income tax
purposes. The Ameriprise distribution was treated as a non-cash
dividend to shareholders and, as such, reduced the Company’s
shareholders’ equity by $7.7 billion as of December 31, 2005.
Also during 2005, the Company completed certain
dispositions including the sale of TBS for cash proceeds of
approximately $190 million. These dispositions resulted in
a net after-tax gain of approximately $63 million during the
third quarter of 2005. During 2007, the net after-tax gain was
reduced by $14 million upon settlement of certain matters
in accordance with the TBS purchase agreement and other
adjustments.
The operating results, assets and liabilities, and cash flows
of discontinued operations are presented separately in the
Company’s Consolidated Financial Statements. Summary
operating results of the discontinued operations included AEB
(except for certain components of AEB that are not being
sold), as further described in Note 1, as well as Ameriprise
and businesses disposed of in previous years. Results from
discontinued operations for the years ended December 31, were
as follows:
(Millions) 2007 2006 2005
Revenues net of interest expense $759 $770 $6,571
Pretax (loss) income from
discontinued operations $ (34) $121 $ 885
Income tax provision 2 25 213
(Loss) Income from discontinued
operations, net of tax $ (36) $ 96 $ 672
Assets and liabilities of the discontinued operations related to
AEB, at December 31, were as follows:
(Millions) 2007 2006
Assets:
Cash and cash equivalents $ 3,531 $ 2,940
Investments 3,080 3,036
Loans, net of reserves 8,283 7,319
Other assets 1,853 1,117
Total assets 16,747 14,412
Liabilities:
Customers’ deposits 15,079 12,935
Other liabilities 1,149 1,010
Total liabilities 16,228 13,945
Net assets $ 519 $ 467
Accumulated other comprehensive loss, net of tax, associated
with discontinued operations at December 31, was as follows:
(Millions) 2007 2006
Accumulated other comprehensive loss,
net of tax:
Net unrealized securities losses $(15) $(10)
Foreign currency translation adjustments (28) (25)
Net unrealized pension and other
postretirement benefit costs 2(2)
Total accumulated other comprehensive loss $(41) $(37)
Goodwill of approximately $27 million was included in AEB’s
assets as of December 31, 2007 and 2006.
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