American Express 2008 Annual Report Download - page 117

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notes to consolidated financial statements
american express company
115
The following table summarizes the Company’s restructuring reserves activity for the years ended December 31, 2008, 2007,
and 2006:
(Millions) Severance(a) Other(b) Total
Liability balance at December 31, 2005 $ 86 $ 8 $ 94
Restructuring charges, net of $20 in reversals(c) 89 11 100
Payments (84) (9) (93)
Other non-cash (2) (6) (8)
Liability balance at December 31, 2006 89 4 93
Restructuring charges, net of $17 in reversals(c) 34 15 49
Payments (61) (6) (67)
Other non-cash (2) (4) (6)
Liability balance at December 31, 2007 60 9 69
Restructuring charges, net of $10 in reversals(d) 366 68 434
Payments (63) (13) (76)
Other non-cash 2 (2) —
Liability balance at December 31, 2008(e) $365 $ 62 $427
(a) Accounted for in accordance with SFAS No. 112, “Employer’s Accounting for Post Employment Benefits” and SFAS No. 146, “Accounting for Costs Associated
with Exit or Disposal Activities.”
(b) Other primarily includes facility exit and contract termination costs.
(c) Reversals primarily relate to higher employee redeployments to other positions within the Company.
(d) Reversals of $10 million ($3 million in ICS, $2 million in GCS, $1 million in GNMS, and $4 million in Corporate & Other), primarily relate to higher employee
redeployments to other positions within the Company.
(e) The majority of cash payments related to the remaining restructuring liabilities are expected to be completed in 2009, with the exception of certain smaller amounts
related to contractual long-term severance arrangements which are expected to be completed in 2011, and certain lease obligations which will continue until their
expiration in 2018.
note 25
restructuring charges
During 2008, the Company recorded restructuring charges
of $434 million. While the Company’s restructuring activity
in the first and third quarters of 2008 primarily related to
exiting certain international banking businesses, the Company
recorded $410 million of restructuring charges in the fourth
quarter of 2008 in order to further reduce the Company’s
cost structure. This restructuring is expected to result in the
elimination of approximately 7,000 positions or approximately
10 percent of its total worldwide workforce. These reductions
will primarily occur across business units, markets and staff
groups focusing on management and other positions that
do not interact directly with customers. These restructuring
activities primarily related to reorganizing or automating
certain internal processes; outsourcing certain operations to
third parties; and discontinuing or relocating business activities
to other geographies.
During 2007 and 2006, the Company recorded restructuring
charges of $49 million and $100 million, respectively, primarily
related to the reorganizations within the Company’s business
travel, operations, finance, and technology areas.
Restructuring charges are comprised of severance obligations
and other exit costs. The charges and any subsequent adjustments
related to severance obligations are included in salaries and
employee benefits and discontinued operations in the Company’s
Consolidated Statements of Income, while other exit costs are
included in occupancy and equipment, professional services,
other net expenses and discontinued operations.