American Express 2015 Annual Report Download - page 62

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (“MD&A”)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a global services company with four reportable operating segments: U.S. Card Services (USCS),
International Card Services (ICS), Global Commercial Services (GCS) and Global Network & Merchant Services
(GNMS). Refer to “Business” for a discussion of changes to our reportable operating segments, effective in the first
quarter of 2016.
We provide our customers with access to products, insights and experiences that enrich lives and build business
success. Our principal products and services are charge and credit payment card products and travel-related services
offered to consumers and businesses around the world. Business travel-related services are offered through a non-
consolidated joint venture, American Express Global Business Travel (GBT JV). Prior to July 1, 2014, these business
travel operations were wholly owned.
We compete in the global payments industry with charge, credit and debit card networks, issuers and acquirers,
as well as evolving and growing alternative payment providers. As the payments industry continues to evolve, we face
increasing competition from non-traditional players that leverage new technologies and customers’ existing accounts
and relationships to create payment or other fee-based solutions.
Our products and services are sold globally to diverse customer groups, including consumers, small businesses,
mid-sized companies and large corporations. These products and services are sold through various channels,
including direct mail, online applications, in-house and third-party sales forces and direct response advertising.
The following types of revenue are generated from our various products and services:
• Discount revenue, our largest revenue source, which represents fees generally charged to merchants when
Card Members use their cards to purchase goods and services at merchants on our network;
• Net card fees, which represent revenue earned from annual card membership fees;
• Travel commissions and fees, which are earned by charging a transaction or management fee to both
customers and suppliers for travel-related transactions (business travel commissions and fees included
through June 30, 2014);
• Other commissions and fees, which are earned on foreign exchange conversions, card-related fees, such as late
fees and assessments, loyalty coalition-related fees and other service fees;
• Other revenue, which represents revenues arising from contracts with partners of our Global Network Services
(GNS) business (including commissions and signing fees), insurance premiums earned from Card Member
travel and other insurance programs, prepaid card-related revenues, revenues related to the GBT JV transition
services agreement, earnings from equity method investments (including the GBT JV after June 30, 2014) and
other miscellaneous revenue and fees; and
• Interest on loans, which principally represents interest income earned on outstanding balances.
FINANCIAL HIGHLIGHTS
For 2015, we reported net income of $5.2 billion and diluted earnings per share of $5.05. This compared to $5.9
billion of net income and $5.56 diluted earnings per share for 2014, and $5.4 billion of net income and $4.88 diluted
earnings per share for 2013.
2015 results included:
• A $419 million ($335 million after-tax) charge in the fourth quarter, related to Enterprise Growth (EG), that was
driven primarily by the impairment of goodwill and technology, plus some restructuring costs.
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