American Express 2009 Annual Report Download - page 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
NOTE 14
COMMON AND PREFERRED
SHARES AND WARRANTS
As of December 31, 2009, the Company has 100 million
common shares remaining under share repurchase
authorizations. Such authorizations do not have an expiration
date, and at present, there is no intention to modify or
otherwise rescind the current authorizations.
Common shares are generally retired by the Company
upon repurchase (except for 5.0 million, 0.4 million and
0.5 million shares held as treasury shares at December 31,
2009, 2008 and 2007, respectively); retired common shares
and treasury shares are excluded from the shares outstanding
in the table below. The Treasury shares, with a cost basis of
$235 million, $21 million and $29 million as of December 31,
2009, 2008 and 2007, respectively, are included as a reduction
to additional paid-in capital in shareholders’ equity on the
Consolidated Balance Sheets.
The following table shows authorized shares and provides
a reconciliation of common shares issued and outstanding:
(Millions, except where indicated) 2009 2008 2007
Common shares authorized (billions)(a) 3.6 3.6 3.6
Shares issued and outstanding at beginning
of year 1,160 1,158 1,199
Issuances (Repurchases) of common shares 22 (5) (60)
Other, primarily stock option exercises and
RSAs granted 10 719
Shares issued and outstanding as of
December 31, 1,192 1,160 1,158
(a) Of the common shares authorized but unissued as of
December 31, 2009, approximately 124 million shares were
reserved for issuance under employee stock and employee benefit
plans.
The Board of Directors is authorized to permit the Company
to issue up to 20 million preferred shares at a par value of
$1.66 2/3 without further shareholder approval.
On January 9, 2009, under the United States Department
of the Treasury (Treasury Department) Capital Purchase
Program (CPP), the Company issued to the Treasury
Department as consideration for aggregate proceeds of
$3.39 billion: (1) 3.39 million shares of Fixed Rate
(5 percent) Cumulative Perpetual Preferred Shares Series A
(the Preferred Shares), and (2) a ten-year warrant
(the Warrant) for the Treasury Department to purchase up to
24 million common shares at an exercise price of $20.95 per
share. Upon issuance, $3.16 billion of the proceeds were
allocated to the Preferred Shares, and $232 million of the
proceeds were allocated to the Warrant based on their relative
fair values at the date of issuance.
As a pre-condition of the repurchase of the Preferred
Shares, the Treasury Department and the Company’s Banking
Regulator required that the Company raise capital in the
public markets. As a result, the Company issued $3.0 billion
of non-guaranteed senior debt on May 18, 2009 and
approximately 22 million common shares at $25.25 per share
in June 2009.
On June 17, 2009, the Company repurchased the Preferred
Shares at their face value of $3.39 billion. Because the
$3.39 billion cash paid exceeded the $3.18 billion amortized
carrying amount of the Preferred Shares, the $212 million
excess represented an in-substance Preferred Share dividend
that reduced earnings per share (EPS) attributable to
common shareholders by $0.18 for the year ended
December 31, 2009. Refer to Note 18.
On July 29, 2009, the Company repurchased the Warrant
for $340 million. The Warrant repurchase resulted in
reductions of cash, retained earnings and additional
paid-in-capital on the Company’s Consolidated Balance
Sheet. The Warrant repurchase had no impact on the
Consolidated Income Statement and EPS for the year ended
December 31, 2009. There were no preferred shares or
warrants issued and outstanding as of December 31, 2009.
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