10-QPeriod: Q3 FY2001

AMERICAN EXPRESS CO Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:AXP

Summary

American Express Company (AXP) reported a significant decline in net income for the third quarter of 2001, down 60% year-over-year to $298 million ($0.22 per diluted share), primarily due to substantial restructuring and disaster recovery charges. For the nine months ended September 30, 2001, net income fell 52% to $1.014 billion ($0.76 per diluted share). The company incurred a $352 million pretax restructuring charge related to job eliminations, business unit consolidation, and scaling back certain lending activities, and a $90 million pretax disaster recovery charge stemming from the September 11th terrorist attacks. Excluding these significant items, adjusted net income decline for the three-month period was 19% and for the nine-month period was 39%. Revenues across segments showed mixed performance. Travel Related Services (TRS) saw a slight increase in managed net revenues driven by lending, while American Express Financial Advisors (AEFA) experienced a revenue decline, impacted by market volatility and a repositioning of its investment portfolio. American Express Bank (AEB) also incurred losses due to restructuring efforts. The company faces a challenging outlook for the remainder of 2001 due to a weak economic environment and ongoing uncertainty.

Key Highlights

  • 1Net income for the three months ended September 30, 2001, decreased by 60% to $298 million, or $0.22 per diluted share, compared to $737 million, or $0.54 per diluted share, in the prior year period.
  • 2Nine-month net income decreased by 52% to $1.014 billion, or $0.76 per diluted share, compared to $2.133 billion, or $1.57 per diluted share, in the prior year period.
  • 3The company recorded a $352 million pretax restructuring charge in the third quarter of 2001, impacting the Travel Related Services, American Express Financial Advisors, and American Express Bank segments.
  • 4A $90 million pretax disaster recovery charge was incurred in the third quarter of 2001 due to the September 11th terrorist attacks, primarily impacting the Travel Related Services segment.
  • 5Total assets decreased to $145.557 billion as of September 30, 2001, from $154.423 billion as of December 31, 2000, mainly due to decreases in cardmember receivables and separate account assets.
  • 6Total liabilities also decreased to $132.829 billion as of September 30, 2001, from $142.239 billion as of December 31, 2000.
  • 7The company's outlook for the remainder of 2001 anticipates continued weak business volumes and potential adverse impacts on revenues and net income due to the weak economic environment and post-September 11th uncertainties.

Frequently Asked Questions

The primary drivers were a substantial $352 million pretax restructuring charge and a $90 million pretax disaster recovery charge related to the September 11th terrorist attacks. These one-time charges significantly impacted the company's profitability for the period.

The attacks resulted in a $90 million pretax disaster recovery charge, primarily covering provisions for credit exposures to travel industry service establishments and insurance claims, as well as waived finance charges and late fees. Additionally, the company incurred other costs related to business interruption and recovery, some of which are expected to be covered by insurance.

The company anticipates a continued weak economic environment, with uncertainty stemming from the securities markets and the effects of the September 11th attacks. This is expected to lead to continued weak business volumes, potentially materially adversely impacting consolidated revenues and net income for the remainder of the year.

AEFA reported a net loss for the nine-month period and a decline in net income for the third quarter. Its performance has been impacted by weak equity markets, a repositioning of its investment portfolio, and a restructuring charge. The company expects market conditions to remain critical for AEFA's results.