American Express 2011 Annual Report Download - page 49

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AMERICAN EXPRESS COMPANY
2011 FINANCIAL REVIEW
Salaries and employee benefits and other operating expenses
increased $233 million or 12 percent to $2.1 billion in 2011
compared to 2010, primarily due to increases in salary and other
benefit costs, greater third-party merchant sales force
commissions and legal costs. Salaries and employee benefits and
other operating expenses increased $241 million or 15 percent to
$1.9 billion in 2010 compared to 2009, primarily due to greater
third-party merchant sales force commissions, higher technology
development expenditures and other business building
investments.
Income Taxes
The effective tax rate was 35 percent in 2011, 2010 and 2009.
CORPORATE & OTHER
Corporate & Other had net after-tax expense of $535 million and
$180 million, and net income of $133 million, in 2011, 2010 and
2009, respectively. Results in 2011, 2010 and 2009 reflected $186
million, $372 million and $372 million of after-tax income
related to the MasterCard litigation settlement, respectively, and
$172 million of after-tax income for all three years related to the
Visa litigation settlement. Reengineering costs after-tax of $49
million, $2 million and $35 million, for 2011, 2010 and 2009,
respectively, primarily related to the Company’s reengineering
initiatives.
Net after-tax expense in 2011 reflected various investments in
Enterprise Growth initiatives and expenses related to legal
exposures, partially offset by higher global prepaid income.
Net after-tax expense in 2010 reflected higher incentive
compensation and benefit reinstatement-related expenses, and
various investments in the Global Prepaid business and
Enterprise Growth initiatives.
Net income in 2009 reflected $135 million of after-tax income
related to the ICBC sale, a $135 million benefit representing the
correction of an error related to the accounting for cumulative
translation adjustments associated with a net investment in
foreign subsidiaries and a $45 million benefit resulting from the
change in fair value of certain forward exchange contracts.
47