10-KPeriod: FY2007

AMERICAN EXPRESS CO Annual Report, Year Ended Dec 31, 2007

Filed February 28, 2008For Securities:AXP

Summary

In 2007, American Express Company (AXP) demonstrated strong revenue and income growth, with revenues reaching $27.7 billion and income from continuing operations at $4.0 billion. Diluted EPS also saw a significant increase. The company's "spend-centric" business model, focusing on driving spending on its cards, continued to be a key competitive advantage, supported by its strong brand reputation and a growing network of merchants and cardholders. However, the end of 2007 saw the emerging impact of a weakening U.S. economy, leading to slower cardmember spending and an increase in past-due and write-off rates in the U.S. Card Services segment. This prompted American Express to increase its credit-related reserves and adopt a more cautious outlook for 2008. The company also made strategic divestitures, including the agreement to sell its international banking subsidiary, AEBL, to Standard Chartered PLC for approximately $1.1 billion.

Financial Highlights

27 data points
Beta

Net Income

$4.01B

EPS (Diluted)

$3.34

Cash & Equivalents

$15.27B

Free Cash Flow

$7.56B

Financial Statements
Beta
Operating Income$5.69B
Interest Expense$3.98B
Net Income$4.01B
EPS (Basic)$3.40
EPS (Diluted)$3.34
Shares Outstanding (Basic)1.17B
Shares Outstanding (Diluted)1.19B

Key Highlights

  • 1Revenue increased by 10% to $27.7 billion in 2007, with income from continuing operations up 12% to $4.0 billion.
  • 2Diluted EPS for continuing operations rose by 16% to $3.39.
  • 3The company's "spend-centric" model remains a core competitive advantage, with total worldwide billed business reaching $647.3 billion.
  • 4Global Network Services (GNS) continues to expand, with 20 million Cards-in-force issued by GNS partners by year-end 2007, representing a significant portion of new card issuances outside the U.S.
  • 5The company is experiencing increased credit-related reserves and rising past-due and write-off rates in its U.S. Card Services segment due to a weakening U.S. economy.
  • 6American Express entered into an agreement to sell its international banking subsidiary, AEBL, for approximately $1.1 billion.
  • 7The company is actively involved in significant legal proceedings, including a major lawsuit against Visa and MasterCard regarding alleged anti-competitive practices.

Frequently Asked Questions

In 2007, American Express reported revenues net of interest expense of $27.7 billion, an increase of 10% from the previous year. Income from continuing operations was $4.0 billion, up 12%. Diluted earnings per share based on continuing operations were $3.39, a 16% increase, and return on average equity stood at 37%.

The company noted that by the end of 2007, it began to feel the effects of a weakening U.S. economy, which led to slower cardmember spending and increased past-due and write-off rates in its U.S. Card Services segment. This trend prompted an increase in credit-related reserves and led to a more cautious outlook for 2008.

American Express entered into an agreement to sell its international banking subsidiary, American Express Bank Ltd. (AEBL), and its related entity AEIDC, to Standard Chartered PLC for approximately $1.1 billion. Additionally, the company announced an agreement to remove Visa as a defendant in its lawsuit against MasterCard and its member banks, with Visa agreeing to a payment of up to $2.25 billion.

The company believes its 'spend-centric' model, which focuses on generating revenues primarily from card spending rather than just finance charges, provides significant competitive advantages. This model allows American Express to earn premium discount rates from merchants due to higher average spending per card, which in turn enables investments in enhanced rewards and services for cardmembers, further driving spending.