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Section 1: 8-K (8-K)

axp-20200320
0000004962false00000049622020-03-202020-03-20


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): March 20, 2020
 
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
   
New York 1-7657 13-4922250
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
200 Vesey Street,
New York, New York 10285
(Address of principal executive offices and zip code)
(212) 640-2000
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Shares (par value $0.20 per Share) AXP New York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 7.01 Regulation FD Disclosure
The following information is furnished under Item 7.01 – Regulation FD Disclosure:

As described in our Annual Report on Form 10-K for the year ended December 31, 2019, American Express Company (“American Express”, “we,” “us” or “our”) allocates discount revenue and certain other revenues among our reportable operating segments using a transfer pricing methodology. Within the Global Consumer Services Group and Global Corporate Services reportable operating segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the Global Merchant and Network Services reportable operating segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue. In addition, interest expense in our reportable operating segments represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.

During the first quarter of 2020, we made certain enhancements to 1.) our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses, and 2.) our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These enhancements resulted in certain changes to Non-interest revenues and Interest expense within Total revenues net of interest expense and Operating expenses within Total expenses across our reportable operating segments. These changes have no impact on our Consolidated Results of Operations.

The enhancements related to the allocation of certain funding costs also resulted in a change to our Net interest income divided by Average Card Member loans metric and Net Interest Yield on Average Card Member loans, a non-GAAP measure, within our reportable operating segments. The consolidated Net Interest Yield on Average Card Member loans, a non-GAAP measure, also changed for American Express Company.

All these changes have been applied beginning the first quarter of 2020 and prior period amounts have been revised to conform to the new presentation.

Certain preliminary and other information reflecting these revisions is attached to this report as Exhibit 99.1 and is incorporated herein by reference. Such information is being furnished in order to assist investors in understanding how our reportable operating segments results would historically have been presented had such results been reported. Such information does not represent a restatement of previously issued consolidated financial statements, but rather represents a reclassification among our reportable operating segments and does not impact our Net income, Earnings per share, Total assets, Stockholders’ equity or regulatory capital for any of the previously reported periods.


Item 9.01 Financial Statements and Exhibits
(d) Exhibits

ExhibitDescription
99.1
104The cover page of this Current Report on Form 8-K, formatted as inline XBRL.




-2-


SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 AMERICAN EXPRESS COMPANY
 (REGISTRANT)
   
 By:/s/ Tangela S. Richter
  Name:  Tangela S. Richter
  Title:    Corporate Secretary
 
Date: March 20, 2020
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Section 2: EX-99.1 (EX-99.1)

Document

EXHIBIT 99.1

Global Consumer Services Group (Preliminary)
Selected Income Statement Information
(Millions, except percentages)

Q4'19Q3'19Q2'19Q1'19Q4'18Q3'18Q2'18Q1'18
Non-interest revenues *$4,371  $4,226  $4,193  $3,912  $4,019  $3,850  $3,850  $3,638  
Interest income2,442  2,402  2,297  2,272  2,240  2,140  1,994  1,949  
Interest expense **412  437  446  435  413  380  347  308  
Total revenues net of interest expense6,401  6,191  6,044  5,749  5,846  5,610  5,497  5,279  
Total provisions for losses780  653  651  551  727  609  566  529  
Total revenues net of interest expense after provisions for losses5,621  5,538  5,393  5,198  5,119  5,001  4,931  4,750  
Total expenses *4,463  4,275  4,288  3,984  4,192  3,845  3,793  3,551  
Pretax segment income1,158  1,263  1,105  1,214  927  1,156  1,138  1,199  
Income tax provision177  272  224  260  72  242  233  258  
Segment income$981  $991  $881  $954  $855  $914  $905  $941  
Effective tax rate15.3 %21.5 %20.3 %21.4 %7.8 %20.9 %20.5 %21.5 %
* Reflects changes as a result of enhancements to our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses.
** Reflects changes as a result of enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.


See Appendix III for footnote references.
1


Global Commercial Services
(Preliminary)

Selected Income Statement Information
(Millions, except percentages)
Q4'19Q3'19Q2'19Q1'19Q4'18Q3'18Q2'18Q1'18
Non-interest revenues *$3,187  $3,070  $3,059  $2,926  $2,972  $2,881  $2,876  $2,752  
Interest income493  485  468  454  435  416  393  377  
Interest expense **247  262  269  256  254  237  221  186  
Total revenues net of interest expense3,433  3,293  3,258  3,124  3,153  3,060  3,048  2,943  
Total provisions for losses236  222  206  254  224  200  237  239  
Total revenues net of interest expense after provisions for losses3,197  3,071  3,052  2,870  2,929  2,860  2,811  2,704  
Total expenses *2,560  2,358  2,355  2,225  2,354  2,194  2,204  2,088  
Pretax segment income637  713  697  645  575  666  607  616  
Income tax provision87  145  136  133  44  142  126  140  
Segment income$550  $568  $561  $512  $531  $524  $481  $476  
Effective tax rate13.7 %20.3 %19.5 %20.6 %7.7 %21.3 %20.8 %22.7 %
* Reflects changes as a result of enhancements to our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses.
** Reflects changes as a result of enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.


See Appendix III for footnote references.
2


Global Merchant and Network Services (Preliminary)
Selected Income Statement Information            
(Millions, except percentages)                

Q4'19Q3'19Q2'19Q1'19Q4'18Q3'18Q2'18Q1'18
Non-interest revenues *$1,505  $1,471  $1,478  $1,449  $1,453  $1,424  $1,442  $1,471  
Interest income        
Interest expense **(62) (74) (87) (80) (74) (65) (56) (49) 
Total revenues net of interest expense1,573  1,551  1,572  1,538  1,535  1,495  1,505  1,529  
Total provisions for losses        
Total revenues net of interest expense after provisions for losses1,564  1,547  1,569  1,534  1,529  1,489  1,501  1,523  
Total expenses *998  845  812  777  988  799  832  880  
Pretax segment income566  702  757  757  541  690  669  643  
Income tax provision92  179  193  186  105  168  184  176  
Segment income $474  $523  $564  $571  $436  $522  $485  $467  
Effective tax rate16.3 %25.5 %25.5 %24.6 %19.4 %24.3 %27.5 %27.4 %
* Reflects changes as a result of enhancements to our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses.
** Reflects changes as a result of enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.


See Appendix III for footnote references.
3


American Express Company (Preliminary)
Net Interest Yield on Average Card Member Loans  
(Millions, except percentages and where indicated)  

Q4'19Q3'19Q2'19Q1'19Q4'18Q3'18Q2'18Q1'18YTD'19YTD'18
Consolidated
Net interest income$2,284  $2,203  $2,074  $2,059  $2,032  $1,961  $1,829  $1,841  $8,620  $7,663  
Exclude:
Interest expense not attributable to the Company's Card Member loan portfolio (A) *421  461  465  486  445  425  390  332  1,833  1,592  
Interest income not attributable to the Company's Card Member loan portfolio (B)(271) (308) (312) (335) (287) (274) (236) (213) (1,226) (1,010) 
Adjusted net interest income (C)$2,434  $2,356  $2,227  $2,210  $2,190  $2,112  $1,983  $1,960  $9,227  $8,245  
Average Card Member loans (billions)$85.2  $83.3  $81.9  $80.6  $79.4  $76.4  $74.1  $72.7  $82.8  $75.8  
Net interest income divided by average Card Member loans (D)10.7 %10.6 %10.1 %10.2 %10.2 %10.3 %9.9 %10.1 %10.4 %10.1 %
Net interest yield on average Card Member loans (E) *11.3 %11.2 %10.9 %11.1 %10.9 %11.0 %10.7 %10.9 %11.1 %10.9 %
Global Consumer Services Group
U.S.
Net interest income *$1,750  $1,707  $1,606  $1,596  $1,597  $1,535  $1,431  $1,422  $6,659  $5,985  
Exclude:
Interest expense not attributable to the Company's Card Member loan portfolio (A) *73  68  67  69  66  62  60  44  277  232  
Interest income not attributable to the Company's Card Member loan portfolio (B)(58) (56) (52) (53) (51) (46) (42) (39) (219) (178) 
Adjusted net interest income (C)$1,765  $1,719  $1,621  $1,612  $1,612  $1,551  $1,449  $1,427  $6,717  $6,039  
Average Card Member loans (billions)$60.6  $59.7  $58.8  $58.3  $57.8  $55.4  $53.7  $52.9  $59.4  $55.1  
Net interest income divided by average Card Member loans (D) *11.6 %11.4 %10.9 %11.0 %11.1 %11.1 %10.7 %10.8 %11.2 %10.9 %
Net interest yield on average Card Member loans (E) *11.6 %11.4 %11.1 %11.2 %11.1 %11.1 %10.8 %10.9 %11.3 %11.0 %
Outside the U.S.
Net interest income *$280  $258  $245  $241  $230  $225  $216  $219  $1,024  $890  
Exclude:
Interest expense not attributable to the Company's Card Member loan portfolio (A) *22  22  20  21  17  19  15  18  85  69  
Interest income not attributable to the Company's Card Member loan portfolio (B)(4) (4) (4) (3) —  (3) (2) (3) (15) (8) 
Adjusted net interest income (C)$298  $276  $261  $259  $247  $241  $229  $234  $1,094  $951  
Average Card Member loans (billions)$10.5  $10.0  $9.9  $9.7  $9.3  $8.9  $8.8  $8.6  $10.0  $8.9  
Net interest income divided by average Card Member loans (D) *10.7 %10.3 %9.9 %9.9 %9.9 %10.1 %9.8 %10.2 %10.2 %10.0 %
Net interest yield on average Card Member loans (E) *11.3 %11.0 %10.6 %10.9 %10.6 %10.7 %10.5 %11.0 %10.9 %10.7 %
Total
Net interest income *$2,030  $1,965  $1,851  $1,837  $1,827  $1,760  $1,647  $1,641  $7,683  $6,875  
Exclude:
Interest expense not attributable to the Company's Card Member loan portfolio (A) *95  90  87  90  83  81  76  61  362  301  
Interest income not attributable to the Company's Card Member loan portfolio (B)(62) (60) (56) (56) (51) (49) (45) (41) (234) (186) 
Adjusted net interest income (C)$2,063  $1,995  $1,882  $1,871  $1,859  $1,792  $1,678  $1,661  $7,811  $6,990  
Average Card Member loans (billions)$71.1  $69.7  $68.7  $68.0  $67.1  $64.4  $62.5  $61.6  $69.4  $64.0  
Net interest income divided by average Card Member loans (D) *11.4 %11.3 %10.8 %10.8 %10.9 %10.9 %10.5 %10.7 %11.1 %10.7 %
Net interest yield on average Card Member loans (E) *11.5 %11.4 %11.0 %11.2 %11.0 %11.0 %10.8 %10.9 %11.3 %10.9 %
Global Commercial Services
Net interest income *$246  $223  $199  $198  $181  $179  $172  $191  $866  $723  
Exclude:
Interest expense not attributable to the Company's Card Member loan portfolio (A) *184  194  201  192  194  183  $171  $145  $771  $693  
Interest income not attributable to the Company's Card Member loan portfolio (B)(59) (55) (55) (52) (44) (42) $(38) $(37) $(221) $(161) 
Adjusted net interest income (C)$371  $362  $345  $338  $331  $320  $305  $299  $1,416  $1,255  
Average Card Member loans (billions)$14.1  $13.6  $13.2  $12.6  $12.4  $12.0  $11.7  $11.2  $13.4  $11.8  
Net interest income divided by average Card Member loans (D) *7.0 %6.6 %6.0 %6.3 %5.8 %6.0 %5.9 %6.8 %6.5 %6.1 %
Net interest yield on average Card Member loans (E) *10.4 %10.5 %10.5 %10.9 %10.6 %10.6 %10.5 %10.8 %10.6 %10.7 %
* Reflects changes as a result of enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.


See Appendix III for footnote references.
4


American Express Company(Preliminary)
Appendix I
Consolidated Statements of Income *
(Millions, except percentages and per share amounts)
Q4'19Q3'19Q2'19Q1'19Q4'18Q3'18Q2'18Q1'18
Total non-interest revenues$9,081  $8,786  $8,764  $8,305  $8,442  $8,183  $8,173  $7,877  
Total interest income3,085  3,080  2,965  2,954  2,866  2,738  2,540  2,462  
Total interest expense801  877  891  895  834  777  711  621  
Total revenues net of interest expense11,365  10,989  10,838  10,364  10,474  10,144  10,002  9,718  
Total provisions for losses1,024  879  861  809  954  817  806  775