American Express 2008 Annual Report Download - page 44

2008 financial review
american express company
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 2009 2010–2011 2012–2013 2014 and
thereafter
On-Balance Sheet(a):
Long-term debt $60,041 $14,948 $19,346 $16,400 $ 9,347
Interest payments on long-term debt(b) 8,996 1,642 2,468 1,492 3,394
Other long-term liabilities(c) 294 126 49 26 93
Off-Balance Sheet:
Lease obligations 2,639 265 446 340 1,588
Purchase obligations(d) 713 581 115 17 —
Total $72,683 $17,562 $22,424 $18,275 $14,422
(a) The above table excludes approximately $1.2 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, 2008, and reflects the effect of existing interest rate swaps.
Actual cash flows may differ from estimated payments.
(c) At December 31, 2008, there were no minimum required contributions, and no contributions are currently planned, for the U.S. American Express Retirement
Plan. For the U.S. American Express Supplemental Retirement Plan and non-U.S. defined benefit pension and postretirement benefit plans, contributions in 2009
are anticipated to be approximately $88 million, and this amount has been included within other long-term liabilities. Remaining obligations under defined benefit
pension and postretirement benefit plans aggregating $648 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 $4.6 billion of Membership Rewards liabilities as the Company does not consider these to be long-term
obligations.
(d) The purchase obligation amounts represent non-cancelable minimum contractual obligations by period under contracts that were in effect at December 31, 2008.
Termination fees are included in these amounts.
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 $6.1 billion as of
December 31, 2008.
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, 2008, the Company
had guarantees totaling approximately $69 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). Refer to Note 15 to
the Consolidated Financial Statements for further discussion
regarding the Company’s guarantees.
certain other off-balance sheet
arrangements
At December 31, 2008, the Company had approximately
$253 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
in unused credit available to cardmembers. As discussed in
the Consolidated Liquidity and Capital Resources section,
the Company’s securitizations of cardmember loans are also
off-balance sheet. The Company’s cardmember receivables
securitizations remain on the Consolidated Balance Sheets.
Refer to Note 16 to the Consolidated Financial Statements
for discussion regarding the Company’s other off-balance sheet
arrangements.
risk management
introduction
The key objective of risk management at American Express is to
drive profitable growth, while limiting the exposure to adverse
financial impacts. By building analytical and technological
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