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Section 1: 10-Q (FORM 10-Q OF AMERICAN EXPRESS COMPANY)

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission file number 1-7657
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York13-4922250
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
200 Vesey Street, New York, New York
10285
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code                                          (212) 640-2000        
None
Former name, former address and former fiscal year, if changed since last report.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares (par value $0.20 per share)AXPNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ      No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ      No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
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.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at October 14, 2019
Common Shares (par value $0.20 per share)818,270,818  Shares  




Table of Contents

AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Page No.
Throughout this report the terms “American Express,” “we,” “our” or “us,” refer to American Express Company and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise. Refer to the “MD&A― Glossary of Selected Terminology” for the definitions of other key terms used in this report.



Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30 (Millions, except per share amounts)20192018
Revenues
Non-interest revenues
Discount revenue$6,566  $6,181  
Net card fees1,033  870  
Other fees and commissions825  798  
Other362  334  
Total non-interest revenues8,786  8,183  
Interest income
Interest on loans2,885  2,554  
Interest and dividends on investment securities53  35  
Deposits with banks and other142  149  
Total interest income3,080  2,738  
Interest expense
Deposits401  340  
Long-term debt and other476  437  
Total interest expense877  777  
Net interest income2,203  1,961  
Total revenues net of interest expense10,989  10,144  
Provisions for losses
Charge card238  214  
Card Member loans604  560  
Other37  43  
Total provisions for losses879  817  
Total revenues net of interest expense after provisions for losses10,110  9,327  
Expenses
Marketing and business development1,818  1,642  
Card Member rewards2,614  2,400  
Card Member services558  457  
Salaries and employee benefits1,499  1,350  
Other, net1,355  1,360  
Total expenses7,844  7,209  
Pretax income2,266  2,118  
Income tax provision511  464  
Net income$1,755  $1,654  
Earnings per Common Share (Note 14):(a)
Basic$2.09  $1.89  
Diluted$2.08  $1.88  
Average common shares outstanding for earnings per common share:
Basic825  858  
Diluted827  860  
(a)Represents net income less (i) earnings allocated to participating share awards of $11 million and $13 million for the three months ended September 30, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $21 million and $20 million for the three months ended September 30, 2019 and 2018, respectively.
See Notes to Consolidated Financial Statements.
1


Table of Contents

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended September 30 (Millions, except per share amounts)20192018
Revenues
Non-interest revenues
Discount revenue$19,338  $18,264  
Net card fees2,965  2,544  
Other fees and commissions2,465  2,365  
Other1,087  1,060  
Total non-interest revenues25,855  24,233  
Interest income
Interest on loans8,374  7,267  
Interest and dividends on investment securities138  83  
Deposits with banks and other487  390  
Total interest income8,999  7,740  
Interest expense
Deposits1,206  910  
Long-term debt and other1,457  1,199  
Total interest expense2,663  2,109  
Net interest income6,336  5,631  
Total revenues net of interest expense32,191  29,864  
Provisions for losses
Charge card715  701  
Card Member loans1,732  1,587  
Other102  110  
Total provisions for losses2,549  2,398  
Total revenues net of interest expense after provisions for losses29,642  27,466  
Expenses
Marketing and business development5,164  4,650  
Card Member rewards7,717  7,180  
Card Member services1,671  1,282  
Salaries and employee benefits4,288  3,956  
Other, net4,359  4,107  
Total expenses23,199  21,175  
Pretax income6,443  6,291  
Income tax provision1,377  1,380  
Net income$5,066  $4,911  
Earnings per Common Share (Note 14):(a)
Basic$5.97  $5.60  
Diluted$5.95  $5.59  
Average common shares outstanding for earnings per common share:
Basic833  859  
Diluted835  861  
(a)Represents net income less (i) earnings allocated to participating share awards of $35 million and $38 million for the nine months ended September 30, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $61 million for both the nine months ended September 30, 2019 and 2018.
See Notes to Consolidated Financial Statements.
2


Table of Contents

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Millions)2019201820192018
Net income$1,755  $1,654  $5,066  $4,911  
Other comprehensive loss:
Net unrealized debt securities gains (losses), net of tax3  (11) 46  (29) 
Foreign currency translation adjustments, net of tax(59) (19) (87) (85) 
Net unrealized pension and other postretirement benefits, net of tax1  9  (23) 38  
Other comprehensive loss(55) (21) (64) (76) 
Comprehensive income$1,700  $1,633  $5,002  $4,835  
See Notes to Consolidated Financial Statements.
3


Table of Contents

AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions, except share data)September 30,
2019
December 31,
2018
Assets
Cash and cash equivalents
Cash and due from banks$3,169  $3,253  
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2019, $31; 2018, $64)
21,081  24,026  
Short-term investment securities16  166  
Total cash and cash equivalents24,266  27,445  
Accounts receivable
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2019, $7,492; 2018, $8,539), less reserves: 2019, $615; 2018, $573
56,010  55,320  
Other receivables, less reserves: 2019, $22; 2018, $25
2,846  2,907  
  Loans
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2019, $31,144; 2018, $33,194), less reserves: 2019, $2,232; 2018, $2,134
81,423  79,720  
Other loans, less reserves: 2019, $140; 2018, $124
4,340  3,676  
Investment securities8,445  4,647  
Premises and equipment, less accumulated depreciation and amortization: 2019, $6,681; 2018, $6,015
4,715  4,416  
Other assets (includes restricted cash of consolidated variable interest entities: 2019, $708; 2018, $70)
12,139  10,471  
Total assets$194,184  $188,602  
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits$73,298  $69,960  
Travelers Cheques and other prepaid products1,864  2,295  
Accounts payable12,866  12,255  
Short-term borrowings2,818  3,100  
Long-term debt (includes debt issued by consolidated variable interest entities: 2019, $20,235; 2018, $19,509)
58,474  58,423  
Other liabilities21,839  20,279  
Total liabilities$171,159  $166,312  
Contingencies (Note 7)
Shareholders’ Equity
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of September 30, 2019 and December 31, 2018
    
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 821 million shares as of September 30, 2019 and 847 million shares as of December 31, 2018
165  170  
Additional paid-in capital11,869  12,218  
Retained earnings13,652  12,499  
Accumulated other comprehensive loss
Net unrealized debt securities gains (losses), net of tax of: 2019, $13; 2018, $(1)
38  (8) 
Foreign currency translation adjustments, net of tax of: 2019, $(266); 2018, $(300)
(2,220) (2,133) 
Net unrealized pension and other postretirement benefits, net of tax of: 2019, $(175); 2018, $(170)
(479) (456) 
Total accumulated other comprehensive loss(2,661) (2,597) 
Total shareholders’ equity23,025  22,290  
Total liabilities and shareholders’ equity$194,184  $188,602  
See Notes to Consolidated Financial Statements.
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AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30 (Millions)20192018
Cash Flows from Operating Activities
Net income$5,066  $4,911  
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for losses2,549  2,398  
Depreciation and amortization883  1,007  
Deferred taxes and other619  (347) 
Stock-based compensation217  230  
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other receivables21  (88) 
Other assets(64) 418  
Accounts payable and other liabilities1,578  2,133  
Travelers Cheques and other prepaid products(433) (480) 
Net cash provided by operating activities10,436  10,182  
Cash Flows from Investing Activities
Maturities and redemptions of investment securities5,072  1,871  
Purchases of investments(8,917) (5,198) 
Net increase in Card Member loans and receivables, and other loans(6,071) (9,461) 
Purchase of premises and equipment, net of sales: 2019, $41; 2018, $1
(1,214) (871) 
Acquisitions/dispositions, net of cash acquired(270) (512) 
Other investing activities148    
Net cash used in investing activities(11,252) (14,171) 
Cash Flows from Financing Activities
Net increase in customer deposits3,346  4,876  
Net decrease in short-term borrowings(285) (969) 
Proceeds from long-term borrowings12,710  17,035  
Payments of long-term borrowings(13,279) (17,262) 
Issuance of American Express common shares77  68  
Repurchase of American Express common shares and other(3,463) (917) 
Dividends paid(1,048) (970) 
Net cash (used in) provided by financing activities(1,942) 1,861  
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash304  127  
Net decrease in cash, cash equivalents and restricted cash(2,454) (2,001) 
Cash, cash equivalents and restricted cash at beginning of period27,808  33,263  
Cash, cash equivalents and restricted cash at end of period$25,354  $31,262  

Supplemental cash flow information
Cash, cash equivalents and restricted cash reconciliationSept-19Dec-18Sept-18Dec-17
Cash and cash equivalents per Consolidated Balance Sheets$24,266  $27,445  $30,231  $32,927  
Restricted cash included in Other assets per Consolidated Balance Sheets1,088  363  1,031  336  
Total cash, cash equivalents and restricted cash$25,354  $27,808  $31,262  $33,263  
See Notes to Consolidated Financial Statements.
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AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
Three months ended September 30, 2019 (Millions, except per share amounts)TotalPreferred
Shares
Common
Shares
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Balances as of June 30, 2019$23,092  $  $167  $11,980  $(2,606) $13,551  
Net income1,755  —  —  —  —  1,755  
Other comprehensive loss(55) —  —  —  (55)   
Repurchase of common shares(1,450) —  (2) (170) —  (1,278) 
Other changes, primarily employee plans58  —    59  —  (1) 
Cash dividends declared preferred Series C, $24.50 per share
(21) —  —  —  —  (21) 
Cash dividends declared common, $0.43 per share
(354) —  —  —  —  (354) 
Balances as of September 30, 2019$23,025  $  $165  $11,869  $(2,661) $13,652  

Nine months ended September 30, 2019 (Millions, except per share amounts)TotalPreferred
Shares
Common
Shares
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Balances as of December 31, 2018$22,290  $  $170  $12,218  $(2,597) $12,499  
Net income5,066  —  —  —  —  5,066  
Other comprehensive loss(64) —  —  —  (64)   
Repurchase of common shares(3,325) —  (6) (517) —  (2,802) 
Other changes, primarily employee plans127  —  1  168  —  (42) 
Cash dividends declared preferred Series B, $26.00 per share
(19) —  —  —  —  (19) 
Cash dividends declared preferred Series C, $49.00 per share
(42) —  —  —  —  (42) 
Cash dividends declared common, $1.21 per share
(1,008) —  —  —  —  (1,008) 
Balances as of September 30, 2019$23,025  $  $165  $11,869  $(2,661) $13,652  
See Notes to Consolidated Financial Statements.

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AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
Three months ended September 30, 2018 (Millions, except per share amounts)TotalPreferred SharesCommon SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained Earnings
Balances as of June 30, 2018$20,892  $  $173  $12,306  $(2,483) $10,896  
Net income1,654  —  —  —  —  1,654  
Other comprehensive loss(21) —  —  —  (21)   
Repurchase of common shares(780) —  (2) (105) —  (673) 
Other changes, primarily employee plans70  —    71  —  (1) 
Cash dividends declared preferred Series C, $24.50 per share
(20) —  —  —  —  (20) 
Cash dividends declared common, $0.39 per share
(335) —  —  —  —  (335) 
Balances as of September 30, 2018$21,460  $  $171  $12,272  $(2,504) $11,521  

Nine months ended September 30, 2018 (Millions, except per share amounts)TotalPreferred SharesCommon SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained Earnings
Balances as of December 31, 2017$18,261  $  $172  $12,210  $(2,428) $8,307  
Net income4,911  —  —  —  —  4,911  
Other comprehensive loss(76) —  —  —  (76)   
Repurchase of common shares(780) —  (2) (105) —  (673) 
Other changes, primarily employee plans145  —