American Express 2013 Annual Report Download - page 43

AMERICAN EXPRESS COMPANY
2013 FINANCIAL REVIEW
Federal Reserve Discount Window
As insured depository institutions, the Banks may borrow from the
Federal Reserve Bank of San Francisco, subject to the amount of
qualifying collateral that they may pledge. The Federal Reserve has
indicated that both credit and charge card receivables are a form of
qualifying collateral for secured borrowings made through the
discount window. Whether specific assets will be considered
qualifying collateral and the amount that may be borrowed against the
collateral remain at the discretion of the Federal Reserve.
The Company had approximately $48.5 billion as of December 31,
2013 in U.S. credit card loans and charge card receivables that could
be sold over time through its existing securitization trusts, or pledged
in return for secured borrowings to provide further liquidity, subject
in each case to applicable market conditions and eligibility criteria.
Committed Bank Credit Facilities
In addition to the secured borrowing facilities described above, the
Company maintained committed syndicated bank credit facilities as of
December 31, 2013 of $7.0 billion, which expire as follows:
TABLE 27: EXPIRATION OF COMMITTED SYNDICATED BANK
CREDIT FACILITIES
(Billions)
2015 $ 4.8
2016 2.2
Total $ 7.0
The availability of the credit lines is subject to the Company’s
compliance with certain financial covenants, principally the
maintenance by Credco of a certain ratio of combined earnings and
fixed charges to fixed charges. As of December 31, 2013, the Company
was in compliance with each of its covenants. The drawn balance of
the committed credit facilities of $4.0 billion as of December 31, 2013
was used to fund the Company’s business activities in the normal
course. The remaining capacity of the facilities mainly served to
further enhance the Company’s contingent funding resources.
The Company’s committed bank credit facilities do not contain
material adverse change clauses, which might otherwise preclude
borrowing under the credit facilities, nor are they dependent on the
Company’s credit rating.
CASH FLOWS
Cash Flows from Operating Activities
Cash flows from operating activities primarily include net income
adjusted for (i) non-cash items included in net income, including
provisions for losses, depreciation and amortization, deferred taxes,
and stock-based compensation and (ii) changes in the balances of
operating assets and liabilities, which can vary significantly in the
normal course of business due to the amount and timing of various
payments.
For the year ended December 31, 2013, net cash provided by
operating activities of $8.5 billion increased $1.4 billion compared to
$7.1 billion in 2012, primarily due to higher net income, premium
paid on debt exchange in 2012 and smaller changes in accounts
payable and other liabilities, partially offset by a decrease in deferred
taxes and other.
For the year ended December 31, 2012, net cash provided by
operating activities of $7.1 billion decreased $2.7 billion compared to
$9.8 billion in 2011. The decrease was primarily due to a decrease in
the liabilities for accounts payable and other liabilities in 2012 as
compared to the prior year versus an increase in 2011 as compared to
the prior year.
Cash Flows from Investing Activities
The Company’s investing activities primarily include funding Card
Member loans and receivables and the Company’s available-for-sale
investment portfolio.
For the year ended December 31, 2013, net cash used in investing
activities of $7.3 billion increased $0.8 billion compared to $6.5 billion
in 2012, primarily due to higher purchases of investments.
For the year ended December 31, 2012, net cash used in investing
activities of $6.5 billion increased $6.0 billion compared to $0.5 billion
in 2011, primarily due to a reduction in maturities, redemptions and
sales of investments, and a net decrease in the cash flows related to
Card Member loans and receivables and restricted cash, partially offset
by lower purchases of investments and fewer acquisitions in 2012 as
compared to 2011.
Cash Flows from Financing Activities
The Company’s financing activities primarily include issuing and
repaying debt, taking customer deposits, issuing and repurchasing its
common shares, and paying dividends.
For the year ended December 31, 2013, net cash used in financing
activities of $3.9 billion increased $0.6 billion compared to $3.3 billion
in 2012, due to lower issuances of long-term debt, slowing growth in
customer deposits and higher principal payments on long-term debt,
partially offset by an increase in short-term borrowings and the
issuance of American Express common shares to employees.
For the year ended December 31, 2012, net cash used in financing
activities of $3.3 billion increased $2.6 billion compared to $0.7 billion
in 2011, due to a decrease in short-term borrowings, and an increase
in the repurchase of common shares in 2012, which more than offset a
decrease in principal payments on long-term debt.
OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS
The Company has identified both on and off-balance sheet
transactions, arrangements, obligations and other relationships that
may have a material current or future effect on its financial condition,
changes in financial condition, results of operations, or liquidity and
capital resources.
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