American Express 2013 Annual Report Download - page 93

Download and view the complete annual report

Please find page 93 of the 2013 American Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13
GUARANTEES
The Company provides Card Member protection plans that cover
losses associated with purchased products, as well as certain other
guarantees in the ordinary course of business which are within the
scope of GAAP governing the accounting for guarantees. For the
Company, guarantees primarily consist of card and travel protection
programs, including:
폷Return Protection — refunds the price of qualifying purchases made
with the eligible cards where the merchant will not accept the return
for up to 90 days from the date of purchase; and
폷Merchant Protection — protects Card Members primarily against
non-delivery of goods and services, usually in the event of
bankruptcy or liquidation of a merchant. When this occurs, the
Card Member may dispute the transaction for which the Company
will generally credit the Card Member’s account. If the Company is
unable to collect the amount from the merchant, it will bear the loss
for the amount credited to the Card Member.
In relation to its maximum potential undiscounted future payments as
shown in the table that follows, to date, the Company has not
experienced any significant losses related to guarantees. The
Company’s initial recognition of guarantees is at fair value, which has
been determined in accordance with GAAP governing fair value
measurement. In addition, the Company establishes reserves when a
loss is probable and the amount can be reasonably estimated.
The following table provides information related to such guarantees as
of December 31:
Maximum potential
undiscounted future
payments(a)
(Billions)
Related liability(b)
(Millions)
Type of Guarantee 2013 2012 2013 2012
Card and travel operations(c) $ 44 $ 44 $ 88 $ 93
Other(d) 1173 93
Total $ 45 $ 45 $ 161 $ 186
(a) Represents the notional amounts that could be lost under the guarantees and
indemnifications if there were a total default by the guaranteed parties. The
Merchant Protection guarantee is calculated using management’s best
estimate of maximum exposure based on all eligible claims as measured
against annual billed business volumes.
(b) Included in other liabilities on the Company’s Consolidated Balance Sheets.
(c) Primarily includes Return Protection and Merchant Protection.
(d) Primarily includes guarantees related to the Company’s business dispositions
and real estate.
NOTE 14
COMMON AND PREFERRED SHARES
The following table shows authorized shares and provides a
reconciliation of common shares issued and outstanding for the years
ended December 31:
(Millions, except where indicated) 2013 2012 2011
Common shares authorized (billions)(a) 3.6 3.6 3.6
Shares issued and outstanding at
beginning of year 1,105 1,164 1,197
Repurchases of common shares (55) (69) (48)
Other, primarily stock option exercises
and restricted stock awards granted 14 10 15
Shares issued and outstanding as of
December 31 1,064 1,105 1,164
(a) Of the common shares authorized but unissued as of December 31, 2013,
approximately 63 million shares are reserved for issuance under employee
stock and employee benefit plans.
On March 25, 2013, the Board of Directors authorized the repurchase
of 150 million common shares over time, in accordance with the
Company’s capital distribution plans submitted to the Federal Reserve
and subject to market conditions. This authorization replaces all prior
repurchase authorizations. During 2013 and 2012, the Company
repurchased 55 million common shares with a cost basis of $4.0 billion
and 69 million common shares with a cost basis of $4.0 billion,
respectively. The cost basis includes commissions paid of $1.1 million
and $1.0 million in 2013 and 2012, respectively. As of December 31,
2013, the Company has 108 million common shares remaining under
the Board share repurchase authorization. Such authorization does not
have an expiration date.
Common shares are generally retired by the Company upon
repurchase (except for 3.5 million, 3.9 million and 4.2 million shares
held as treasury shares as of December 31, 2013, 2012 and 2011,
respectively); retired common shares and treasury shares are excluded
from the shares outstanding in the table above. The treasury shares,
with a cost basis of $260 million, $236 million and $217 million as of
December 31, 2013, 2012 and 2011, respectively, are included as a
reduction to additional paid-in capital in shareholders’ equity on the
Consolidated Balance Sheets.
The Board of Directors is authorized to permit the Company to
issue up to 20 million preferred shares at a par value of $1.662/3
without further shareholder approval. There were no preferred shares
or warrants issued and outstanding as of December 31, 2013, 2012 and
2011.
91