Exhibit 99.2
For Information: Valerie L. Gerard - Senior Vice President - Investor Relations
(973) 422-3284
or
Yvette K. Rudich - Director - Corporate Communications
(973) 597-2095
CIT ANNOUNCES DILUTED EPS OF $0.72, UP 7.5% FROM THE PRIOR YEAR QUARTER
o Non-performing and delinquency lowest since 1999
o Completed HSBC factoring acquisition
o Gain realized on debt redemption
o Write-down taken for accelerated venture capital disposition
NEW YORK, January 22, 2004 - CIT Group Inc. (NYSE: CIT) today reported net
income of $155.2 million (diluted EPS of $0.72) for the fourth quarter, up from
$147.8 million ($0.69) for the prior quarter, and $141.3 million ($0.67) for the
prior year quarter. The results for the quarter included two significant
transactions. First, during the quarter we recognized a pre-tax gain of $50.4
million, or an after-tax benefit of $0.14 per diluted share, related to the call
of $735 million in term debt. Second, a determination to accelerate the
liquidation of our direct investment venture capital portfolio, resulted in a
pre-tax fair value write-down of $63.0 million, or an after-tax charge of $0.18
per diluted share. Net income, excluding the gain on the debt call and venture
capital losses, was $161.4 million, or $0.75 diluted EPS. Full year earnings per
diluted share totaled $2.66.
"CIT made excellent progress in 2003, culminating in a very strong fourth
quarter," commented Albert R. Gamper, Jr., Chairman and CEO. "The economy showed
signs of recovery, and we demonstrated improvements in credit quality and levels
of new business volume," continued Gamper. "It's gratifying to see that our
accomplishments and capabilities are being positively recognized by the
marketplace."
"The challenge ahead for 2004 is to grow our balance sheet in a focused
and prudent manner. We start 2004 with a strong balance sheet and an invigorated
market focus, and I am confident we will meet our objectives," said Jeffrey M.
Peek, President and COO.
1
Financial Highlights:
Portfolio and Managed Assets
Total financing and leasing portfolio assets grew to $40.1 billion at
December 31, 2003, up from $35.9 billion at December 31, 2002 and $39.2 billion
at September 30, 2003. Growth for the quarter included a $1.0 billion
acquisition of factoring assets as well as modest growth in the Equipment
Finance portfolio, offset in part by seasonal factoring runoff. The increase
from the prior year was primarily in the home equity portfolio, factoring assets
and the Capital Finance operating lease portfolio, reflecting a rail acquisition
and new aircraft deliveries.
Managed assets increased to $49.7 billion, up from $46.4 billion at
December 31, 2002 and $49.3 billion last quarter.
Origination volume, excluding factoring, was flat with last quarter and 4%
above the prior year quarter. For the year, volume increased 10%, largely due to
home equity and vendor programs in Specialty Finance and asset based lending in
Commercial Finance.
Net Finance and Risk Adjusted Margin
Net finance margin was 3.96% of average earning assets, an improvement of
16 basis points from last quarter. Improved funding rates drove the improvement,
as finance yield was flat with last quarter and rental income net of
depreciation was slightly below last quarter due to continued aerospace rental
compression.
Risk adjusted margin (net finance margin after provision for credit
losses), while up $1.8 million from last quarter, was down 2 basis points (to
2.86%), as higher charge-offs offset the improvement in net finance margin.
Credit Quality
Though charge-offs were up from last quarter, credit performance was
strong as evidenced by sharp declines in delinquencies and non-performing assets
to their lowest levels since 1999. Owned and managed 60+ day delinquencies
improved for the fifth consecutive quarter. Total 60+ day owned delinquencies
declined to $676 million (2.16% of finance receivables) at December 31, 2003,
from $863 million (2.85%) at September 30, 2003 and $1.001 billion (3.63%) at
December 31, 2002. Managed 60+
2
day delinquencies decreased to $1.022 billion (2.44%) at December 31, 2003 from
$1.222 billion (2.95%) at September 30, 2003, and $1.396 billion (3.55%) at
December 31, 2002. The improvements from the prior quarter were across all
segments, with the most significant reductions in Equipment Finance.
Non-performing assets also declined for the fifth consecutive quarter.
Non-performing assets were $677 million (2.16% of finance receivables), down
significantly from $867 million (2.86%) at September 30, 2003 and $1.086 billion
(3.93%) at December 31, 2002. The continued improvement from last quarter was
most notable in Equipment Finance due to cash received on several larger loans
and a reduction in repossessed assets due to sales. The improvement in
non-performing assets in Capital Finance reflected one large transaction
previously on non-accrual status described further below.
Total charge-offs for the quarter were $208.6 million (2.69% of average
finance receivables), compared to $90.6 million (1.23%) for the prior quarter.
The current quarter included $101.0 million in Argentine charge-offs taken
against the previously established specific Argentine reserve of $135.0 million,
reflecting the substantial progress of collection and workout efforts in the
Argentine portfolio. In addition, a charge-off of approximately $11 million in
Capital Finance was recorded to write down the value of a waste-to-energy
project to approximately $39 million. Contracts have been renegotiated, and the
underlying asset was returned to earning status. Absent these items, overall
charge-offs were consistent with the prior quarter. The tables that follow
detail charge-offs for the current and prior quarters by segment, both in amount
and as a percentage of average finance receivables, with supplemental disclosure
of charge-offs relating to the liquidating, Argentine and telecommunications
portfolios.
Charge-offs: ($ in millions) Quarter Ended December 31, 2003
------------------------------------------------------------------------
Before Argentine, Argentine,
Total Liquidating/Telecom Liquidating/Telecom
--------------------- --------------------- ---------------------
Specialty Finance - commercial .......... $ 30.0 1.73% $29.1 1.68% $ 0.9 NM
Specialty Finance - Argentina ........... 101.0 NM -- -- 101.0 NM
------ ----- ------
Total Specialty Finance - commercial .. 131.0 7.46% 29.1 1.68% 101.9 NM
Equipment Finance ....................... 25.9 1.68% 20.9 1.41% 5.0 8.31%
Capital Finance ......................... 11.3 3.76% 11.3 3.76% -- --
Commercial Finance ...................... 16.5 0.64% 16.5 0.64% -- --
Structured Finance ...................... 10.4 1.42% 2.9 0.49% 7.5 5.19%
------ ----- ------
Total Commercial Segments ............. 195.1 2.83% 80.7 1.21% 114.4 49.56%
Specialty Finance - consumer ............ 13.5 1.56% 7.1 1.06% 6.4 3.30%
------ ----- ------
Total ................................. $208.6 2.69% $87.8 1.20% $120.8 28.44%
====== ===== ======
3
Charge-offs: ($ millions) Quarter Ended September 30, 2003
------------------------------------------------------------------------
Before Argentine, Argentine,
Total Liquidating/Telecom Liquidating/Telecom
--------------------- --------------------- ---------------------
Specialty Finance - commercial ............. $25.6 1.47% $25.2 1.45% $ 0.4 NM
Equipment Finance .......................... 23.1 1.52% 18.1 1.26% 5.0 6.53%
Capital Finance ............................ -- -- -- -- -- --
Commercial Finance ......................... 19.7 0.84% 17.7 0.75% 2.0 66.12%
Structured Finance ......................... 9.2 1.28% -- -- 9.2 6.01%
----- ----- -----
Total Commercial Segments ................ 77.6 1.17% 61.0 0.95% 16.6 7.13%
Specialty Finance - consumer ............... 13.0 1.80% 6.6 1.26% 6.4 3.22%
----- ----- -----
Total .................................... $90.6 1.23% $67.6 0.98% $23.0 5.33%
===== ===== =====
NM - the resulting annualized data % is not meaningful.
Telecommunication portfolio net charge-offs of $7.5 million, taken against
the previously established specific reserve, were down from last quarter. Before
Argentine, liquidating portfolios and telecommunication charge-offs, charge-offs
were $87.8 million (1.20% of average finance receivables) for the current
quarter, up from $67.6 million (0.98%) last quarter. The increase from last
quarter reflects the previously mentioned project finance charge-off in the
Capital Finance segment and slightly higher charge-offs in Specialty Finance and
Equipment Finance.
Our total reserve for credit losses was $643.7 million (2.06% of finance
receivables) at December 31, 2003, compared to $752.5 million (2.48%) at
September 30, 2003 and $760.8 million (2.75%) at December 31, 2002. The decline
in the reserve, both in amount and percentage, reflects the Argentine and
telecommunication charge-offs taken against the respective specific reserves as
well improving credit metrics. At December 31, 2003, the reserve for credit
losses, before the telecommunication ($106.6 million) and remaining Argentine
($12.5 million) reserves, was $524.6 million (1.71% of finance receivables),
versus $500.9 million (1.69%) at September 30, 2003 and $472.2 million (1.77%)
at December 31, 2002.
The total telecommunications portfolio and the portion comprising the
competitive local exchange carrier ("CLEC") exposure was $579.0 million and
$197.8 million at December 31, 2003, versus $623.6 million and $216.7 million at
September 30, 2003. Total telecommunication non-performing accounts were $57.2
million, compared to $88.5 million last quarter. CLEC non-performing accounts
were $31.4 million, down from the comparative September 30, 2003 balance of
$50.4 million. Total specific telecommunication reserves were $106.6 million at
December 31, 2003, down from $116.6 million at September 30, 2003, reflecting
primarily current quarter net charge-offs. The Argentine financing and leasing
asset portfolio was $22.7 million, before reserves, at December 31, 2003.
4
Other Revenue
For the quarter, other revenue totaled $246.0 million, compared to $232.0
million for the quarter ended September 30, 2003, reflecting increased gains on
sales of equipment due to improved equipment values. Securitization gains during
the current quarter totaled $18.1 million, 7.2% of pretax income, compared to
$18.3 million, 7.5% of pretax income, during the prior quarter.
Venture Capital Investments
Losses on venture capital investments totaled $60.5 million for the
quarter compared to $11.3 million in the prior quarter. The quarterly loss
consisted of the previously discussed write-down of $63.0 million taken on our
direct equity investment portfolio and $2.5 million in realized gains on venture
capital fund investments.
Salaries and General Operating Expenses
Salaries and general operating expenses were $244.0 million for the
quarter, up from $237.5 million for the September 2003 quarter. The increase
from last quarter was primarily the result of higher incentive-based
compensation and other employee related expenses. Salaries and general operating
expenses were 2.11% of average managed assets during the quarter, versus 2.06%
for the prior quarter.
Headcount of 5,800 at December 31, 2003 compared to 5,780 at September 30,
2003 and 5,835 at December 31, 2002.
Debt Calls
CIT had $1.25 billion of debt securities outstanding, which were
originally issued by the former AT&T Capital Corporation and were callable at
par in December 2003 and January 2004. The December call of $735 million
resulted in the previously discussed pre-tax gain of $50.4 million. The call of
the remaining $512 million on January 15, 2004 resulted in an additional pretax
gain of $41.8 million, which will be reflected in the first quarter of 2004
results.
Results by Business Segment
Total return on average earning assets improved to 1.70% for the quarter
ended December 31, 2003 from 1.64% for the prior quarter. The following tables
provide individual segment data for the current quarter compared to the third
quarter of 2003. ($ in millions)
5
Specialty Finance
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ 228.9 $ 218.7
Income before provision for income tax $ 121.6 $ 117.3
New business volume $ 2,974.0 $ 3,445.0
Specialty Finance operating margin improved, reflecting higher asset
levels and gains on equipment sales, partially offset by slightly higher
charge-offs. New business volume decreased from the prior quarter primarily due
to lower home equity volume, as the prior quarter included bulk portfolio
purchases.
Equipment Finance
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ 36.2 $ 35.8
Income before provision for income tax $ 17.8 $ 14.8
New business volume $ 1,239.0 $ 898.0
Equipment Finance operating margin remained stable as equipment gains
increased, offset by slightly higher charge-offs. Expenses were well controlled.
The new business volume increase was primarily in the U.S., reflecting strength
in the corporate aircraft sector and a bulk purchase of healthcare equipment
receivables.
Capital Finance
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ 33.4 $ 37.7
Income before provision for income tax $ 11.0 $ 20.4
New business volume $ 317.0 $ 192.0
Capital Finance operating margin and pre-tax income declined, reflecting
the $11.3 million net charge-off relating to the write down in the value of a
waste-to-energy project. New business volume increased due to aircraft fundings
(7 versus 4 last quarter). Twelve of the fifteen scheduled 2004 aircraft have
been placed. At December 31, 2003, five commercial aircraft (three of which have
a letter of intent signed) were off lease, compared to three at September 30,
2003.
6
Commercial Finance
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ 137.2 $ 131.0
Income before provision for income tax $ 95.0 $ 88.1
New business volume (including factoring) $ 637.0 $ 559.0
Commercial Finance operating margin increased due to lower net charge-offs
and increased commissions from higher factoring activity. During the quarter,
the factoring business acquired substantially all of the U.S. factoring assets
and liabilities of HSBC Bank USA. The acquired assets approximated $1 billion
before assumed factoring related liabilities with net assets acquired of
approximately $270 million. There was minimal impact on our profit due to the
timing of the transaction. Asset based lending business volume increased from
the prior quarter.
Structured Finance
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ 35.4 $ 36.3
Income before provision for income tax $ 26.7 $ 28.2
New business volume $ 254.0 $ 309.0
Income before provision for income taxes was down from the last quarter,
primarily due to increased charge-offs. Operating margin continued to benefit
from significant syndication fees, particularly in the media and project finance
sectors.
Corporate and Other
For the Quarter Ended
December 31, 2003 September 30, 2003
----------------- ------------------
Operating margin $ (24.4) $ 20.6
Loss before benefit for income tax $ (19.0) $ (26.2)
Corporate and Other reflects certain interest and other operating expenses
not allocated to business segments, as well as the gain on debt call and venture
capital write-down discussed earlier.
7
Funding and Liquidity
Commercial paper was $4.2 billion, down from $4.9 billion at September 30,
2003. Term-debt issued during the quarter totaled $4.4 billion, consisting of
$2.8 billion in variable-rate medium-term notes and $1.6 billion in fixed-rate
notes. As part of our strategy to further diversify our funding sources, $0.3
billion fixed-rate foreign currency denominated debt was issued during the
quarter. Securitization volume was $1.1 billion down from $1.3 billion in the
prior quarter.
We ended the year with $2.0 billion of cash and cash equivalents, compared
to $2.3 billion at September 30, 2003. We pre-funded the January 2004 debt call
and a portion of 2004 debt maturities.
Capitalization and Leverage
The ratio of tangible equity to managed assets remained strong at 10.44%
as of December 31, 2003, compared to 10.34% at September 30, 2003 and 10.41% at
December 31, 2002.
Conference Call and Webcast:
We will discuss this quarter's results, as well as on-going strategy, on a
conference call today at 11:00 am (EST). Interested parties may access the
conference call live today by dialing 877-558-5219 for U.S. and Canadian callers
or 706-634-5438 for international callers, and reference "CIT earnings call," or
at the following website: http://ir.cit.com. An audio replay of the call will be
available beginning no later than three hours after the conclusion of the call
until 11:59 pm (EST) January 28, 2004, by dialing 800-642-1687 for U.S. and
Canadian callers or 706-645-9291 for international callers with the pass-code
4718542, or at the following website: http://ir.cit.com.
8
Forward-Looking Statements:
This release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All forward-looking
statements (including statements regarding future financial and operating
results) involve risks, uncertainties and contingencies, many of which are
beyond CIT's control, which may cause actual results, performance, or
achievements to differ materially from anticipated results, performance, or
achievements. All statements contained in this release that are not clearly
historical in nature are forward-looking, and the words "anticipate," "believe,"
"expect," "estimate," "plan," and similar expressions are generally intended to
identify forward-looking statements. Economic, business, funding market,
competitive and/or regulatory factors, among others, affecting CIT's businesses
are examples of factors that could cause actual results to differ materially
from those described in the forward-looking statements. More detailed
information about these factors are described in CIT's filings with the
Securities and Exchange Commission, including its Transitional Report on Form
10-K for the period from October 1, 2002 to December 31, 2002. CIT is under no
obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements, whether as a result of new information, future
events or otherwise. This release includes certain non-GAAP financial measures
as defined under SEC rules. As required by SEC rules, we have provided a
reconciliation of those measures to the most directly comparable GAAP measures,
which is available with this release on our website at http://ir.cit.com.
About CIT:
CIT Group Inc. (NYSE: CIT), a leading commercial and consumer finance
company, provides clients with financing and leasing products and advisory
services. Founded in 1908, CIT has nearly $50 billion in assets under management
and applies its financial resources, industry expertise and product knowledge to
serve the needs of clients across approximately 30 industries. CIT, a Fortune
500 company, holds leading positions in vendor financing, U.S. factoring,
equipment and transportation financing, Small Business Administration loans, and
asset-based and credit-secured lending. CIT, with its principal offices in
Livingston, New Jersey and New York City, has approximately 6,000 employees in
locations throughout North America, Europe, Latin and South America, and the
Pacific Rim. For more information, visit www.cit.com.
###
9
CIT GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INCOME STATEMENTS
For the Three and Twelve Month Periods Ended December 31, 2003
and December 31, 2002
(dollars in millions, except per share data)
Three Months Ended Year Ended
------------------------------------------- ---------------------------------------------------
December 31, September 30, December 31, December 31, December 31,
2003 2003 2002 2003 2002 (1)
------------ ------------- ------------ ------------ ------------------------------------
CIT TCH Consolidated
Finance income $ 925.9 $ 921.2 $ 971.7 $3,729.5 $ 4,115.5 $ -- $ 4,115.5
Interest expense 315.0 326.5 340.0 1,319.3 1,406.3 -- 1,406.3
-------- -------- -------- -------- --------- ------- ---------
Net finance income 610.9 594.7 631.7 2,410.2 2,709.2 -- 2,709.2
Depreciation on operating
lease equipment 248.9 252.4 277.3 1,053.0 1,179.8 -- 1,179.8
-------- -------- -------- -------- --------- ------- ---------
Net finance margin 362.0 342.3 354.4 1,357.2 1,529.4 -- 1,529.4
Provision for credit losses 100.8 82.9 133.4 387.3 808.8 -- 808.8
-------- -------- -------- -------- --------- ------- ---------
Net finance margin
after provision
for credit losses 261.2 259.4 221.0 969.9 720.6 -- 720.6
Other revenue(2) 246.0 232.0 263.5 947.6 993.6 -- 993.6
Loss on venture capital
investments (60.5) (11.3) (6.4) (88.3) (49.3) -- (49.3)
-------- -------- -------- -------- --------- ------- ---------
Operating margin 446.7 480.1 478.1 1,829.2 1,664.9 -- 1,664.9
-------- -------- -------- -------- --------- ------- ---------
Salaries and general
operating expenses 244.0 237.5 242.1 942.3 935.0 14.8 949.8
Goodwill impairment -- -- -- -- 6,511.7 -- 6,511.7
Interest expense - TCH -- -- -- -- -- 586.3 586.3
-------- -------- -------- -------- --------- ------- ---------
Operating expenses 244.0 237.5 242.1 942.3 7,446.7 601.1 8,047.8
-------- -------- -------- -------- --------- ------- ---------
Gain on call of debt 50.4 -- -- 50.4 -- -- --
-------- -------- -------- -------- --------- ------- ---------
Income (loss) before
provision for
income taxes 253.1 242.6 236.0 937.3 (5,781.8) (601.1) (6,382.9)
Provision for income taxes (98.2) (94.6) (92.0) (365.0) (280.3) (67.5) (347.8)
Minority interest 0.3 (0.2) -- -- -- -- --
Dividends on preferred
capital securities,
after tax -- -- (2.7) (5.4) (10.8) -- (10.8)
-------- -------- -------- -------- --------- ------- ---------
Net income (loss) (3) $ 155.2 $ 147.8 $ 141.3 $ 566.9 $(6,072.9) $(668.6) $(6,741.5)
======== ======== ======== ======== ========= ======= =========
Earnings per share
Basic earnings per share $ 0.73 $ 0.70 $ 0.67 $ 2.68
Diluted earnings per share $ 0.72 $ 0.69 $ 0.67 $ 2.66
Number of shares
- basic (thousands) 211,828 211,735 211,573 211,681
Number of shares
- diluted (thousands) 215,078 213,529 211,826 213,143
(1) TCH was a wholly-owned subsidiary of a Tyco affiliate domiciled in Bermuda
and was the holding company for the acquisition of CIT by Tyco. Prior to the
completion of the IPO of CIT on July 8, 2002, the cumulative activity of TCH
(net deficit) was offset via a capital contribution from Tyco. The consolidated
financial statements of CIT were not impacted by TCH subsequent to June 30,
2002. Data for the year ended December 31, 2002 reflects the combination of
results for the transition period ended December 31, 2002 and the nine months
ended September 30, 2002.
Three Months Ended Year Ended
------------------------------------------ ---------------------------
December 31, September 30, December 31, December 31, December 31,
(2) Other Revenue 2003 2003 2002 2003 2002
------------ ------------- ------------ ------------ ------------
Fees and other income $155.4 $151.5 $169.2 $586.2 $640.2
Factoring commissions 50.5 47.6 55.1 189.8 182.3
Gains on securitization 18.1 18.3 30.5 100.9 151.5
Gains on sales of leasing equipment 22.0 14.6 8.7 70.7 19.6
------ ------ ------ ------ ------
Total other revenue $246.0 $232.0 $263.5 $947.6 $993.6
====== ====== ====== ====== ======
Fees and other income include: servicing fees, structuring and advisory fees,
syndication fees and gains from other asset and receivable sales. Prior period
balances have been conformed to current year presentation to show venture
capital losses seperately.
Three Months Ended Year Ended
------------------------------------------ ---------------------------
December 31, September 30, December 31, December 31, December 31,
(3) Net income (loss) by segment 2003 2003 2002 2003 2002
------------ ------------- ------------ ------------ ------------
Specialty Finance $ 74.1 $ 71.6 $ 73.7 $260.9 $ 326.4
Equipment Finance 10.9 9.0 13.5 38.5 92.7
Capital Finance 6.9 12.3 22.7 36.0 81.1
Commercial Finance 57.8 53.8 63.4 221.3 209.7
Structured Finance 16.3 17.1 13.9 60.3 62.2
------ ------ ------ ------ ---------
Total Segments 166.0 163.8 187.2 617.0 772.1
Corporate, including certain charges (10.8) (16.0) (45.9) (50.1) (7,513.6)
------ ------ ------ ------ ---------
Total $155.2 $147.8 $141.3 $566.9 $(6,741.5)
====== ====== ====== ====== =========
10
CIT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
December 31, December 31,
2003 2002
----------- ------------
(unaudited)
ASSETS
Financing and leasing assets:
Finance receivables $31,300.2 $27,621.3
Reserve for credit losses (643.7) (760.8)
--------- ---------
Net finance receivables 30,656.5 26,860.5
Operating lease equipment, net 7,615.5 6,704.6
Finance receivables held for sale 918.3 1,213.4
Cash and cash equivalents 1,973.7 2,036.6
Goodwill and intangible assets 487.7 400.9
Other assets (1) 4,691.1 4,716.4
--------- ---------
Total Assets $46,342.8 $41,932.4
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Commercial paper $ 4,173.9 $ 4,974.6
Variable-rate bank credit facilities -- 2,118.0
Variable-rate senior notes 9,408.4 4,906.9
Fixed-rate senior notes 19,830.8 19,681.8
Preferred capital securities 252.0 --
--------- ---------
Total debt 33,665.1 31,681.3
Credit balances of factoring clients 3,894.6 2,270.0
Accrued liabilities and payables 3,349.9 2,853.2
--------- ---------
Total Liabilities 40,909.6 36,804.5
Minority interest 39.0 --
Preferred capital securities -- 257.2
Stockholders' Equity:
Common stock 2.1 2.1
Paid-in capital 10,677.0 10,676.2
Accumulated deficit (5,141.8) (5,606.9)
Accumulated other comprehensive loss (141.6) (200.7)
Less: Treasury stock, at cost (1.5) --
--------- ---------
Total Stockholders' Equity 5,394.2 4,870.7
--------- ---------
Total Liabilities and Stockholders' Equity $46,342.8 $41,932.4
========= =========
(1) Other Assets primarily include the following at December 31, 2003: $1.4
billion of securitization assets, $0.9 billion of accrued interest and
receivables from derivative counterparties, $0.6 billion of investments in and
receivables from joint ventures and non-consolidated subsidiaries, $0.3 billion
of deposits on flight equipment, $0.2 billion of equity investments, $0.2
billion of prepaid expenses, $0.1 billion of repossessed and off-lease
equipment, and $0.1 billion of investments in aerospace securities. The
remaining balance includes furniture and fixtures, miscellaneous receivables and
other assets.
11
CIT GROUP INC. AND SUBSIDIARIES
OWNED AND MANAGED ASSET COMPOSITION
(dollars in millions)
December 31, September 30, December 31,
2003 2003 2002
------------ ------------- ------------
Specialty Finance Segment
Commercial
Finance receivables (1) $ 7,150.0 $ 6,839.1 $ 5,958.1
Operating lease equipment, net 959.5 1,043.4 1,257.3
Finance receivables held for sale 548.1 754.5 764.3
--------- --------- ---------
Owned assets 8,657.6 8,637.0 7,979.7
Finance receivables securitized and managed by CIT 3,915.4 3,876.8 3,377.4
--------- --------- ---------
Managed assets 12,573.0 12,513.8 11,357.1
--------- --------- ---------
Consumer
Finance receivables - home equity 2,664.3 2,443.1 962.7
Finance receivables - other 846.5 896.8 1,044.4
Finance receivables held for sale 150.0 150.0 330.0
--------- --------- ---------
Owned assets 3,660.8 3,489.9 2,337.1
Home equity finance receivables securitized and managed by CIT 1,867.6 2,064.9 2,213.6
Other finance receivables securitized and managed by CIT 642.5 694.8 955.2
--------- --------- ---------
Managed assets 6,170.9 6,249.6 5,505.9
--------- --------- ---------
Equipment Finance Segment
Finance receivables (1) 6,317.9 6,157.5 7,357.8
Operating lease equipment, net 419.6 461.7 668.3
Finance receivables held for sale 220.2 113.4 119.1
--------- --------- ---------
Owned assets 6,957.7 6,732.6 8,145.2
Finance receivables securitized and managed by CIT 3,226.2 3,504.5 3,936.2
--------- --------- ---------
Managed assets 10,183.9 10,237.1 12,081.4
--------- --------- ---------
Capital Finance Segment
Finance receivables 1,097.4 1,208.9 1,335.8
Operating lease equipment, net 6,103.8 5,859.4 4,719.9
--------- --------- ---------
Owned assets 7,201.2 7,068.3 6,055.7
--------- --------- ---------
Commercial Finance Segment
Commercial Services
Finance receivables 6,325.8 5,697.8 4,392.5
Business Credit
Finance receivables 3,936.1 4,173.3 3,649.1
--------- --------- ---------
Owned assets 10,261.9 9,871.1 8,041.6
--------- --------- ---------
Structured Finance Segment
Finance receivables 2,962.2 2,926.1 2,920.9
Operating lease equipment, net 132.6 120.8 59.1
--------- --------- ---------
Owned assets 3,094.8 3,046.9 2,980.0
--------- --------- ---------
Other - Equity Investments 249.9 313.9 335.4
--------- --------- ---------
Total
Finance receivables $31,300.2 $30,342.6 $27,621.3
Operating lease equipment, net 7,615.5 7,485.3 6,704.6
Finance receivables held for sale 918.3 1,017.9 1,213.4
--------- --------- ---------
Financing and leasing assets excl. equity investments 39,834.0 38,845.8 35,539.3
Equity investments (included in other assets) 249.9 313.9 335.4
--------- --------- ---------
Owned assets 40,083.9 39,159.7 35,874.7
Finance receivables securitized and managed by CIT 9,651.7 10,141.0 10,482.4
--------- --------- ---------
Managed assets $49,735.6 $49,300.7 $46,357.1
========= ========= =========
(1) During the March 31, 2003 quarter, certain owned finance receivables
totaling $1,078.6 million at March 31, 2003 were transferred from Equipment
Finance to Specialty Finance - Commercial, principally representing small
business loans and leases. Prior period data has not been restated to conform to
present period presentation.
12
CIT GROUP INC. AND SUBSIDIARIES
CREDIT METRICS
(dollars in millions)
For the Quarters Ended
----------------------------------------------------------------
December 31, 2003 September 30, 2003 December 31, 2002
$ % $ % $ %
----------------------------------------------------------------
Net Credit Losses - Owned as a Percentage
of Average Finance Receivables
Specialty Finance - Commercial(1) $ 30.0 1.73% $25.6 1.47% $ 23.2 1.55%
Specialty Finance - Commercial: Argentine 101.0 NM -- -- -- --
------ ----- ------
Total Specialty Finance - Commercial 131.0 7.46% 25.6 1.47% 23.2 1.55%
Equipment Finance(1) 25.9 1.68% 23.1 1.52% 69.8 3.78%
Capital Finance 11.3 3.76% -- -- 1.3 0.37%
Commercial Finance 16.5 0.64% 19.7 0.84% 33.5 1.92%
Structured Finance 10.4 1.42% 9.2 1.28% 15.5 2.24%
------ ----- ------
Total Commercial 195.1 2.83% 77.6 1.17% 143.3 2.33%
Specialty Finance - Consumer 13.5 1.56% 13.0 1.80% 11.2 2.24%
------ ----- ------
Total $208.6 2.69% $90.6 1.23% $154.5 2.32%
====== ===== ======
NM - Resulting annualized data % is not meaningful
For the Year Ended
-----------------------------------------
December 31, 2003 December 31, 2002
$ % $ %
-----------------------------------------
Net Credit Losses - Owned as a Percentage
of Average Finance Receivables
Specialty Finance - Commercial(1) $110.5 1.59% $ 82.8 1.34%
Specialty Finance - Commercial: Argentine 101.0 75.07% -- --
------ ------
Total Specialty Finance - Commercial 211.5 2.98% 82.8 1.34%
Equipment Finance(1) 125.7 2.03% 266.5 3.23%
Capital Finance 13.1 1.06% 1.4 0.09%
Commercial Finance 74.1 0.80% 105.1 1.46%
Structured Finance 42.0 1.44% 34.0 1.31%
------ ------
Total Commercial 466.4 1.75% 489.8 1.90%
Specialty Finance - Consumer 55.5 2.01% 44.1 2.05%
------ ------
Total $521.9 1.77% $533.9 1.92%
====== ======
----------------------------------------------------------------
December 31, 2003 September 30, 2003 December 31, 2002
$ % $ % $ %
----------------------------------------------------------------
Finance Receivables Past Due 60 days or more -
Owned as a Percentage of Finance Receivables
Specialty Finance - Commercial(1) $ 226.4 3.17% $ 245.9 3.60% $ 182.9 3.07%
Equipment Finance(1) 137.9 2.18% 206.3 3.35% 359.3 4.88%
Capital Finance 9.5 0.87% 60.5 5.00% 85.5 6.40%
Commercial Finance 105.9 1.03% 130.2 1.32% 172.3 2.14%
Structured Finance 47.0 1.59% 82.8 2.83% 67.6 2.31%
-------- -------- --------
Total Commercial 526.7 1.90% 725.7 2.69% 867.6 3.39%
Specialty Finance - Consumer 149.6 4.26% 137.7 4.12% 133.7 6.66%
-------- -------- --------
Total $ 676.3 2.16% $ 863.4 2.85% $1,001.3 3.63%
======== ======== ========
Non-performing Assets - Owned as a Percentage
of Finance Receivables(2)
Specialty Finance - Commercial(1) $ 119.8 1.68% $ 132.7 1.94% $ 98.2 1.65%
Equipment Finance(1) 218.3 3.46% 283.7 4.61% 403.5 5.48%
Capital Finance 3.6 0.33% 54.7 4.52% 154.9 11.60%
Commercial Finance 75.6 0.74% 108.0 1.09% 136.2 1.69%
Structured Finance 103.0 3.48% 141.6 4.84% 151.6 5.19%
-------- -------- --------
Total Commercial 520.3 1.87% 720.7 2.67% 944.4 3.69%
Specialty Finance - Consumer 156.2 4.45% 146.1 4.37% 141.4 7.04%
-------- -------- --------
Total $ 676.5 2.16% $ 866.8 2.86% $1,085.8 3.93%
======== ======== ========
Finance Receivables Past Due 60 days or more -
Managed as a Percentage of Managed Financial Assets(3)
Specialty Finance - Commercial(1) $ 321.2 2.77% $ 332.4 2.90% $ 265.1 2.62%
Equipment Finance(1) 243.6 2.49% 332.7 3.40% 545.7 4.78%
Capital Finance 9.5 0.87% 60.5 5.00% 85.5 6.40%
Commercial Finance 105.9 1.03% 130.1 1.32% 172.3 2.14%
Structured Finance 47.0 1.59% 82.8 2.83% 67.6 2.31%
-------- -------- --------
Total Commercial 727.2 2.04% 938.5 2.66% 1,136.2 3.36%
Specialty Finance - Consumer 294.8 4.78% 283.9 4.54% 259.4 4.71%
-------- -------- --------
Total $1,022.0 2.44% $1,222.4 2.95% $1,395.6 3.55%
======== ======== ========
Reserve for Credit Losses
Reserve for credit losses as a percentage
of finance receivables $ 643.7 2.06% $ 752.5 2.48% $ 760.8 2.75%
Reserve for credit losses as a percentage
of finance receivables past due 60 days or more 95.2% 87.2% 76.0%
(1) During the quarter ended March 31, 2003, certain portfolios were
tranferred from Equipment Finance to Specialty Finance - Commercial.
Charge-offs for the quarter ending December 31, 2003 relating to these
portfolios totaled approximately $5 million. At December 31, 2003
approximately $66 million past due 60+ accounts (both owned and managed)
and $68 million non-performing accounts related to the transferred
portfolios, versus $79 million and $73 million at December 31, 2002,
respectively. Prior period balances have not been restated to conform to
current period presentation.
(2) Total non-performing assets reflect both commercial and consumer finance
receivables on non-accrual status and assets received in satisfaction of
loans.
(3) Managed financial assets exclude operating leases and certain equity
investments.
13
CIT GROUP INC. AND SUBSIDIARIES
SELECTED DATA OWNED PORTFOLIO INFORMATION
(dollars in millions, except per share data)
Selected Data For the Three Months Ended For the Year Ended
------------------------------------------ ----------------------------
December 31, September 30, December 31, December 31, December 31,
Profitability 2003 2003 2002 2003 2002
------------------------------------------ ----------------------------
Net finance margin as a percentage
of AEA (see note below) 3.96% 3.80% 4.34% 3.79% 4.51%
Net finance margin after provision
as a percentage of AEA 2.86% 2.88% 2.70% 2.71% 2.12%
Salaries & general operating expenses
as a percentage of AMA(1) 2.11% 2.06% 2.18% 2.06% 2.05%
Efficiency ratio 44.6% 42.2% 39.6% 42.5% 37.8%
Return on tangible stockholders' equity 12.6% 12.2% 12.5% 11.8% (141.8)%
Return on AMA(1) 1.34% 1.28% 1.27% 1.24% (13.32)%
Return on AEA (by segment)
Specialty Finance 2.38% 2.34% 2.86% 2.13% 3.00%
Equipment Finance 0.64% 0.53% 0.65% 0.56% 1.00%
Capital Finance 0.38% 0.69% 1.50% 0.53% 1.43%
Commercial Finance 3.46% 3.22% 5.18% 3.42% 4.12%
Structured Finance 2.13% 2.29% 1.96% 2.00% 2.31%
Total Segments 1.83% 1.83% 2.32% 1.74% 2.30%
Corporate, including certain charges (0.13)% (0.19)% (0.59)% (0.16)% (22.17)%
Total 1.70% 1.64% 1.73% 1.58% (19.87)%
Note 1: For the three months ended December 31 and September 30, 2003,
dividends on preferred capital securities are reflected in interest
expense (5 basis points impact per quarter) as a result of adopting FAS
150. Similarly, for the year ended December 31, 2003, dividends on
preferred securities are reflected in interest expense for the second half
of the year.
Note 2: The above data for the year ended December 31, 2002 reflects the
activity for CIT only and excludes the consolidating TCH expenses.
Securitization Volume(2)
Specialty Finance - Commercial $ 869.9 $ 936.0 $ 590.6 $ 3,416.2 $ 2,351.7
Equipment Finance 242.9 381.5 310.6 1,414.8 2,255.6
Specialty Finance - Consumer -- -- 288.1 489.2 3,026.6
----------------------------------------- -------------------------
Total $ 1,112.8 $ 1,317.5 $ 1,189.3 $ 5,320.2 $ 7,633.9
========================================= =========================
Average Assets
Average Finance Receivables (AFR) $31,051.8 $29,431.3 $26,586.6 $29,448.0 $27,853.5
Average Earning Assets (AEA) 36,523.2 36,072.4 32,693.2 35,813.4 33,928.8
Average Managed Assets (AMA)(1) 46,322.4 46,052.0 44,361.8 45,809.3 45,609.3
Average Operating Leases (AOL) 7,529.1 7,458.9 6,605.0 7,241.1 6,602.0
Note: These averages are based on an ending 4 or 13 month average.
December 31, September 30, December 31,
2003 2003 2002
--------------------------------------------
Capital & Leverage(3),(4)
Tangible stockholders' equity
to managed assets 10.44% 10.34% 10.41%
Debt (net of overnight deposits)
to tangible stockholders' equity(5) 6.14x 6.28x 6.24x
Tangible book value per share $23.16 $22.70 $21.59
(1) "AMA" or "Average Managed Assets" represents the sum of average earning
assets, which are net of credit balances of factoring clients, and the
average of finance receivables previously securitized and still managed by
CIT.
(2) Year to date 2002 excludes trade receivables securitization activity due
to the short-term nature of the receivables and facilities.
(3) Tangible stockholders' equity excludes goodwill and intangible assets.
Prior period balances have been conformed to current period presentation.
(4) Tangible stockholders' equity excludes the impact of accounting changes
for derivative financial instruments and unrealized gains and includes
Preferred Capital Securities.
(5) Total debt excludes, and stockholders' equity includes, Preferred Capital
Securities.
Owned Portfolio Information December 31, September 30, December 31,
2003 2003 2002
Liquidating Portfolios: -----------------------------------------------------
Balance $923.3 $1,030.5 $1,339.0
Non-performing accounts $108.4 $ 121.0 $ 160.9
Past due 60+ days $ 92.3 $ 105.4 $ 131.0
Telecommunications(6):
Financing and leasing assets $579.0 $ 623.6 $ 710.1
Number of accounts 44 49 52
Largest customer account balance $ 31.0 $ 32.5 $ 32.9
Non-performing accounts $ 57.2 $ 88.5 $ 120.2
Number of accounts 6 9 13
Past due 60+ days $ 25.7 $ 54.9 $ 37.3
CLEC exposure $197.8 $ 216.7 $ 262.3
Equity and Venture Capital Investments:
Total investment balance $249.9 $ 313.9 $ 335.4
Direct investments $101.1 $ 161.5 $ 188.8
Number of companies 47 47 57
Private equity funds $148.8 $ 152.4 $ 146.6
Number of funds 52 52 52
Remaining fund and equity commitments $124.2 $ 140.7 $ 164.9
(6) Telecommunication portfolio data consists of lending and leasing directly to
the telecommunication sector, and does not include lending and leasing for
telecom related equipment to non-telecom companies.
14
CIT GROUP INC. AND SUBSIDIARIES
Aerospace Portfolio Data
(dollars in millions unless specified)
Total Aerospace Portfolio: December 31, September 30, December 31,
Financing and leasing assets 2003 2003 2002
------------ ------------- ------------
Commercial $4,716.1 $4,575.7 $4,072.8
Regional $ 291.6 $ 310.0 $ 344.0
Investment in aerospace assets
(EETC's) including accrued interest $ 71.5 $ 100.4 $ 95.5
Number of planes:
Commercial 209 204 194
Regional 119 116 117
December 31, 2003 September 30, 2003 December 31, 2002
----------------- ------------------ -----------------
Commercial Aerospace Portfolio:
By Region: Net Investment Number Net Investment Number Net Investment Number
-------------- ------ -------------- ------ -------------- ------
Europe $1,991.0 65 $1,980.9 64 $1,506.5 51
North America (1) 1,029.7 72 1,065.8 73 1,042.2 75
Asia Pacific 1,013.6 40 875.1 36 853.6 35
Latin America 612.7 28 529.1 25 595.9 29
Africa / Middle East 69.1 4 124.8 6 74.6 4
-------- --- -------- --- -------- ---
Total $4,716.1 209 $4,575.7 204 $4,072.8 194
======== === ======== === ======== ===
By Manufacturer: Net Investment Number Net Investment Number Net Investment Number
-------------- ------ -------------- ------ -------------- ------
Boeing $2,581.7 140 $2,626.5 141 $2,388.1 135
Airbus 2,114.6 57 1,928.2 51 1,647.9 42
Other 19.8 12 21.0 12 36.8 17
-------- --- -------- --- -------- ---
Total $4,716.1 209 $4,575.7 204 $4,072.8 194
======== === ======== === ======== ===
By Body Type (2): Net Investment Number Net Investment Number Net Investment Number
-------------- ------ -------------- ------ -------------- ------
Narrow body $3,415.7 159 $3,285.9 155 $2,799.4 142
Intermediate 877.0 18 881.0 18 859.2 17
Wide body 403.6 20 387.8 19 377.4 18
Other 19.8 12 21.0 12 36.8 17
-------- --- -------- --- -------- ---
Total $4,716.1 209 $4,575.7 204 $4,072.8 194
======== === ======== === ======== ===
Largest customer net investment $ 268.6 $ 289.7 $ 193.0
Number of accounts 84 84 78
Weighted average age of fleet (years) 6 7 7
December 31, 2003 September 30, 2003 December 31, 2002
----------------- ------------------ -----------------
New Aircraft Delivery Order Book Amount Number Amount Number Amount Number
(dollars in billions) ------ ------ ------ ------ ------ ------
For the Years Ending December 31,
2003 (Remaining 2003) $ -- -- $0.2 5 $0.8 19
2004 0.6 15 0.6 14 1.0 22
2005 0.9 20 1.1 24 1.3 27
2006 1.1 21 1.0 19 0.6 10
2007 0.3 5 0.3 5 0.1 1
---- -- ---- -- ---- --
Total $2.9 61 $3.2 67 $3.8 79
==== == ==== == ==== ==
The order amounts are based on current appraised values in 2002 base dollars and
exclude CIT's option to purchase additional planes. Contractual maturities,
sales and other dispositions, as well as depreciation expense, are expected to
largely offset the new deliveries. At December 31, 2003, 12 of the 2004
deliveries were placed.
(1) Comprised of net investments in the U.S. and Canada of $822.7 million (66
aircraft) and $207.0 million (6 aircraft) at December 31, 2003, $856.3 million
(67 aircraft) and $209.5 million (6 aircraft) at September 30, 2003, and $832.7
million (69 aircraft) and $209.5 million (6 aircraft) at December 31, 2002,
respectively.
(2) Narrow body are single aisle design and consist primarily of Boeing 737 and
757 series and Airbus A320 series aircraft. Intermediate body are smaller twin
aisle design and consist primarily of Boeing 767 series and Airbus A330 series
aircraft. Wide body are large twin aisle design and consist primarily of Boeing
747 and 777 series and McDonnell Douglas DC10 series aircraft.
15
CIT GROUP INC. AND SUBSIDIARIES
Non-GAAP Disclosures
(dollars in millions)
December 31, 2003 September 30, 2003 December 31, 2002
----------------- ------------------ -----------------
Managed assets (1):
Finance receivables $31,300.2 $30,342.6 $27,621.3
Operating lease equipment, net 7,615.5 7,485.3 6,704.6
Finance receivables held for sale 918.3 1,017.9 1,213.4
Equity and venture capital investments
(included in other assets) 249.9 313.9 335.4
--------- --------- ---------
Total financing and leasing portfolio assets 40,083.9 39,159.7 35,874.7
Securitized assets 9,651.7 10,141.0 10,482.4
--------- --------- ---------
Managed Assets $49,735.6 $49,300.7 $46,357.1
========= ========= =========
Earning assets (2):
Total financing and leasing portfolio assets $40,083.9 $39,159.7 $35,874.7
Credit balances of factoring clients (3,894.6) (3,103.0) (2,270.0)
--------- --------- ---------
Earning assets $36,189.3 $36,056.7 $33,604.7
========= ========= =========
Tangible equity (3):
Total equity $ 5,394.2 $ 5,180.9 $ 4,870.7
Other comprehensive loss relating to
derivative financial instruments 41.3 106.9 118.3
Unrealized gain on securitization investments (7.7) (8.0) (20.5)
Goodwill and intangible assets (487.7) (437.9) (400.9)
--------- --------- ---------
Tangible common equity 4,940.1 4,841.9 4,567.6
Preferred capital securities 252.0 255.9 257.2
--------- --------- ---------
Tangible equity $ 5,192.1 $ 5,097.8 $ 4,824.8
========= ========= =========
Debt, net of overnight deposits (4):
Total Debt $33,665.1 $34,012.1 $31,681.3
Overnight deposits (1,529.4) (1,722.9) (1,578.7)
Preferred capital securities (252.0) (255.9) --
--------- --------- ---------
Debt, net of overnight deposits $31,883.7 $32,033.3 $30,102.6
========= ========= =========
Earnings per share, excluding certain items(5)
GAAP Earnings per share $ 0.72 $ 0.69 $ 0.67
Gain on debt redemption (0.14) -- --
Loss on venture capital investments 0.17 0.03 0.02
--------- --------- ---------
Adjusted earnings per share $ 0.75 $ 0.72 $ 0.69
========= ========= =========
Non-GAAP financial measures disclosed by management are meant to provide
additional information and insight relative to trends in the business to
investors and, in certain cases, to present financial information as measured by
rating agencies and other users of financial information. These measures are not
in accordance with, or a substitute for, GAAP and may be different from, or
inconsistent with, non-GAAP financial measures used by other companies.
1) Managed assets are utilized in certain credit and expense ratios. Securitized
assets are included in managed assets because CIT retains certain credit risk
and the servicing related to assets that are funded through securitizations.
2) Earning assets are utilized in certain revenue and earnings ratios. Earning
assets are net of credit balances of factoring clients. This net amount, which
corresponds to amounts funded, is a basis for revenues earned.
3)Tangible equity is utilized in leverage ratios, and is consistent with certain
rating agency measurements. Other comprehensive losses and unrealized gains on
securitization investments (both included in the separate component of equity)
are excluded from the calculation, as these amounts are not necessarily
indicative of amounts which will be realized.
4) Debt, net of overnight deposits is utilized in certain leverage ratios.
Overnight deposits are excluded from these calculations, as these amounts are
retained by the Company to repay debt. Overnight deposits are reflected in both
debt and cash and cash equivalents.
5) The EPS related to the items listed are shown seperately, as the items are
not indicative of our on-going operations.
16