American Express 2009 Annual Report Download - page 123

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
NOTE 24
COMMITMENTS AND
CONTINGENCIES
The Company and its subsidiaries are involved in a number of
legal and arbitration proceedings, including class actions,
concerning matters arising in connection with the conduct of
their respective business activities. The Company believes it
has meritorious defenses to each of these actions and intends
to defend them vigorously. In the course of its business, the
Company and its subsidiaries are also subject to governmental
examinations, information gathering requests, subpoenas,
inquiries, and investigations. The Company believes it is not a
party to, nor are any of its properties the subject of, any
pending legal, arbitration, regulatory, tax or investigative
proceedings that would have a material adverse effect on the
Company’s consolidated financial condition or liquidity.
However, it is possible that the outcome of any such
proceedings could have a material impact on results of
operations in any particular reporting period as the
proceedings are resolved.
VISA AND MASTERCARD SETTLEMENTS
As previously disclosed the Company reached settlement
agreements with Visa and MasterCard. Under the terms of the
settlement agreements, the Company will receive aggregate
maximum payments of $4.05 billion. The settlement with
Visa comprised an initial payment of $1.13 billion ($700
million after-tax) that was recorded as a gain in 2007. Having
met quarterly performance criteria, the Company recognized
$280 million ($172 million after-tax) from Visa in 2009 and
2008, and $600 million ($372 million after-tax) and $300
million ($186 million after-tax) from MasterCard in 2009 and
2008, respectively. The remaining Visa and MasterCard
quarterly payments, subject to the Company achieving certain
quarterly performance criteria, continue through the fourth
and second quarters of 2011, respectively, and are included in
other, net expenses within the Corporate & Other segment.
The Company also has 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 $6.0 billion as
of December 31, 2009.
The Company leases certain facilities and equipment
under noncancelable and cancelable agreements. The total
rental expense amounted to $362 million in 2009 including
lease termination penalties of $36 million. Rent expense was
$337 million and $300 million in 2008 and 2007, respectively.
As of December 31, 2009, the minimum aggregate rental
commitment under all noncancelable operating leases (net of
subleases of $5 million) was:
(Millions)
2010 $ 254
2011 228
2012 194
2013 181
2014 164
Thereafter 1,316
Total $2,337
As of December 31, 2009, the Company’s future minimum
lease payments under capital leases or other similar
arrangements is approximately $12 million per annum from
2010 through 2013, $14 million in 2014 and $40 million
thereafter. Refer to Note 22 for a discussion of the Company’s
customer commitments, related to unused lines-of-credit, as
of December 31, 2009 and 2008.
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