Exhibit 99.1
[CIT Logo]
CIT ANNOUNCES DILUTED EPS OF $0.95 FOR THE QUARTER, UP 32% FROM LAST YEAR
DILUTED EPS OF $0.91 EXCLUDING CERTAIN ITEMS
o New business volume up 32% from prior year
o Managed assets up $3.7 billion, or 8%, from previous year
o Credit quality trends remain favorable
o Return on average tangible equity improves further
NEW YORK, January 19, 2005 - CIT Group Inc. (NYSE: CIT) today reported net
income of $203.8 million for the fourth quarter, an increase from $155.2 million
last year. Diluted earnings per share were $0.95 for the quarter, up 32% from
last year. Return on average tangible equity for the quarter increased to 15.2%
from 12.6% last year. Net income for the year totaled $753.6 million (diluted
EPS $3.50), up from $566.9 million (diluted EPS $2.66) last year, a 33%
increase.
Results for the current quarter include the following pre-tax items, which
collectively increased net income by $0.04 EPS:
o Loss on accelerated liquidation/sale of manufactured housing assets
($15.7 million),
o Loss on accelerated liquidation/sale of venture capital fund
investments ($14.0 million), and
o Reduction of specific telecommunications credit loss reserve ($43.3
million)
Commenting on the company's performance, Jeffrey M. Peek,Chairman, and
Chief Executive Officer said: "This was another positive quarter for CIT,
continuing our forward momentum across the organization, and completing a strong
year of results for our shareholders. In the quarter, we generated higher new
business volume across all segments and particularly strong asset growth in
Specialty Finance and Capital Finance.
"Now, we continue to build our platform for growth with three primary
strategic objectives: furthering capital discipline, building our sales and
growth culture and improving operational efficiency. In these areas during the
quarter, we continued to reposition our capital for higher returns, selling our
venture capital fund portfolio as well as the majority of our manufactured
housing portfolio. We made progress in building a sales culture through internal
initiatives that are resulting in greater collaboration across business units
and more cross-selling success stories. We established a framework for CIT's
vertical industry focus beginning with healthcare and media, communications &
entertainment. With this sector approach, we see tremendous opportunities to
strengthen our expertise especially with the middle market - where we already
have a clear, competitive advantage. We strengthened our prospects for
continuing international growth through the acquisition of CitiCapital's vendor
leasing business in Western Europe and through the approval of a UK banking
license that enables us to engage in lending and leasing activities across
Continental Europe. And, while making progress in realizing some internal
efficiencies, we have targeted improving operational efficiency as a critical
area of focus going forward."
"In all, with the backdrop of a strong economy and the groundwork we have
laid, CIT is ready to take the next step as a world-class finance and leasing
organization, adding even greater value to our employees, customers and
shareholders in the future."
1
Financial Highlights:
Portfolio and Managed Assets
o Managed assets were $53.5 billion at December 31, 2004, up 2.0% from
September 30, 2004 and up 7.5% from last year, reflecting financing and
leasing asset portfolio growth offset in part by securitized receivable
runoff for the year.
o Total financing and leasing portfolio assets grew to $45.2 billion at
December 31, 2004, up 1.7% from September 30, 2004 and up 12.7% from last
year. The growth for the quarter included $900 million increase in the
home equity portfolio, which was in part offset by seasonal declines in
factoring ($560 million) and asset-backed lending in Business Credit ($123
million).
o Securitized receivables (receivables we have previously securitized with
servicing retained) declined to $8.3 billion from $9.7 billion last year,
principally due to our strategy of funding home equity receivables on
balance sheet.
o Liquidating portfolios were approximately $608 million, versus
approximately $675 million at September 30, 2004. During the quarter, we
executed a sales agreement for over $300 million of manufactured housing
assets with an expected closing in the first quarter of 2005. Liquidating
portfolios were approximately $923 million at December 31, 2003.
o Origination volume for the quarter and the year, excluding factoring
volume, increased 31.9% (to $7.0 billion) and 16.4% (to $23.6 billion)
from the prior year. Volume for both the quarter and year was strong in
the home equity program of Specialty Finance and in the Equipment Finance
segment.
Net Finance and Risk Adjusted Margin
o Net finance margin was 4.05% of average earning assets ("AEA"), an
improvement of 17 basis points from the prior year quarter, principally
driven by lower borrowing costs, as interest expense declined to 3.35% of
AEA from 3.53%.
o Operating lease margins, at 6.49% of average operating leases, were up
from 5.72% last year, reflecting improved Capital Finance margins in both
aerospace and rail.
o Excluding the specific telecommunications reserve reduction discussed in
the credit quality section that follows, risk-adjusted margin (net finance
margin after provision for credit losses) was 3.60%, up 82 basis points
from the prior year quarter, as lower charge-offs added to the margin
improvement.
Credit Quality
o Credit quality remained strong, as past due and non-performing assets
remained well below prior year levels, and charge-off levels benefited
from higher recoveries.
o Charge-offs for the quarter fell to 0.52% (0.82% before recoveries) of
average finance receivables from 2.69% last year and 0.88% last quarter,
as the current period benefited from strong recoveries in the liquidating
franchise finance portfolio and in the Business Credit unit of Commercial
Finance. The 2003 period included a significant charge-off relating to the
Argentine portfolio. Excluding liquidating, telecommunications and
Argentine charge-offs, charge-offs were 0.53% for the quarter compared to
0.72% last quarter and 1.20% last year. There were no telecommunications
charge-offs during the fourth quarter of 2004.
o Total net charge-offs on a managed asset basis for the quarter were 0.63%
compared to 0.96% last quarter and 2.40% last year.
o Total 60+ day owned delinquencies were $608 million (1.73% of finance
receivables) at December 31, 2004, compared to $573 million (1.66%) last
quarter and $676 million (2.16%) last
2
year. Improvements were most notable in Equipment Finance, which was
offset in part by higher delinquency in the factoring operation in
Commercial Finance.
o Total 60+ day delinquencies on a managed asset basis ended the quarter at
$878 million (1.95% of managed financial assets), compared to $850 million
(1.92%) last quarter and $1.022 billion (2.44%) a year ago.
o Non-performing assets (non-accrual loans plus repossessed assets) were
$540 million (1.54% of finance receivables) versus $529 million (1.53%)
last quarter and $676 million (2.16%) last year. Consistent with the
delinquency changes, improvement in Equipment Finance was in part offset
by an increase in factoring.
o The reserve for credit losses declined in both amount and percentage
during the quarter reflecting the improvement in our portfolio and the
telecommunications industry in general. Total reserves declined to $617.2
million (1.76% of finance receivables), compared to $637.9 million (1.85%)
at September 30, 2004 and $643.7 million (2.06%) at December 31, 2003.
o Telecommunications total outstandings and non-performing accounts were
$335.2 million and $21.0 million, compared to $347.6 million and $24.5
million last quarter. Comparable amounts at December 31, 2003 were $579.0
million and $57.2 million.
Other Revenue
o Other revenue totaled $214.2 million for the 2004 quarter, down from
$246.0 million for the prior year.
o Servicing fees and income from securitization retained interests declined,
reflecting the aforementioned lower level of securitized assets. The
strategy of funding mortgage receivables on-balance sheet results in a
shift of securitization-related revenues to both net finance margin and
charge-offs.
o Securitization gains dropped to $15.9 million, 4.7% of pretax income for
the 2004 quarter, from $18.1 million, 7.2% in 2003. Securitization gains
as a percentage of volume securitized declined from the prior year due to
a higher proportion of, and tighter spreads on, vendor assets sold.
o Factoring commissions increased 17% over the prior year.
Salaries and General Operating Expenses
o Total operating expenses were $282.1 million, up from $256.7 million last
quarter and $236.5 million a year ago. The increase reflected the European
acquisition that closed in late September, higher incentive-based
compensation due to improved volumes, fees and profitability, increased
business development expenses, operating lease asset enhancements, and
higher credit and collection expenditures.
o The efficiency ratio was 45.4% compared to 41.5% last quarter and 43.8%
last year. Excluding losses from the accelerated liquidation of the
manufactured housing and venture capital portfolios, the ratio was 43.3%
for the 2004 quarter.
o Expenses as a percentage of average managed assets were 2.28%, versus
2.18% and 2.04% for the prior quarter and prior year.
o Employee headcount totaled approximately 5,860, versus 5,700 at September
30, 2004 and 5,800 at December 31, 2003. The increase from September was
due to the acquisition of a European vendor leasing business.
Capitalization and Leverage
o Internal capital generation remained strong, with the ratio of tangible
equity to managed assets increasing to 10.72%, compared to 10.57% at
September 30, 2004 and 10.44% last year.
3
o Treasury stock, while up significantly from last year due to the
previously announced share repurchase program, declined $16.8 million
during the quarter due to employee stock option exercises.
Profitability
o The return on average tangible equity was 15.2% for the 2004 quarter and
14.5% year to date, compared to 12.6% and 11.8% for the prior year
periods. Excluding the previously mentioned losses on accelerated
liquidations and telecommunications specific reserve reduction, the return
on average tangible equity was 14.5% for the 2004 quarter and 13.9% year
to date.
o Return on average earning assets improved to 1.97% for the 2004 quarter
from 1.70% last year and to 1.93% for the year from 1.58% in 2003.
Excluding the previously mentioned items, the return on average earning
assets was 1.89% for the quarter and 1.85% for the year.
o The return on average managed assets improved to 1.65% for the quarter
from 1.34% last year and to 1.59% for the year from 1.24% in 2003.
Excluding the previously mentioned items, the return on average managed
assets was 1.58% for the quarter and 1.52% for the year.
Specialty Finance
o Owned assets increased $4.2 billion for the year, highlighted by home
equity growth ($2.4 billion) and strategic acquisitions, including the
$700 million European vendor finance business and $520 million technology
equipment leasing business.
o Specialty Finance net income for the quarter was flat with the prior year
as the current period included the $15.7 million pre-tax write-down
relating to the accelerated liquidation of a significant portion of
manufactured housing assets.
o Major vendor volume was flat with prior year for the quarter, but improved
9% for the year. Higher operating lease margins and an 11% increase in
earning assets from the fourth quarter of last year lead to improved
profitability.
o Small & mid-ticket volume improved approximately 11% from the fourth
quarter of 2003. Profitability in this unit was down slightly from the
prior year due to continued charge-offs relating to customers of
NorVergence, Inc., a bankrupt vendor currently under regulatory
investigation.
o The small business lending unit had a good volume quarter, while earnings
were down from last year due to lower gains on sale of assets.
o We recently announced the agreement to acquire Educational Lending Group,
Inc., which is expected to close in the first quarter of 2005. This will
provide Specialty Finance with approximately $4 billion in assets and an
entry platform into the education finance market.
Commercial Finance
Business Credit and Commercial Services (Commercial Finance Segment)
o Assets declined during the quarter, primarily due to seasonality, but
ended above last year levels.
o Profitability improved considerably from the fourth quarter of 2003 in
both Business Credit (strong risk-adjusted margins) and factoring
(improved commission and net finance margin).
4
Equipment Finance
o Equipment Finance continues to improve profitability, as fourth quarter
earnings included stronger margins, franchise finance recoveries and
higher equipment gains.
o The liquidating franchise finance portfolio decreased to $25 million from
$59 million last quarter.
o New business volume increased primarily in the U.S., reflecting
improvement in the specialized industry unit.
Capital Finance
o Earnings improved from the prior year, benefiting from stronger operating
lease margins in both aerospace and rail and higher fee income.
o New business volume increased over prior year activity primarily due to
higher project finance transactions.
o Seven new aircraft deliveries were funded during the quarter. Total
scheduled deliveries for 2005 are 18, of which 14 have been placed.
o At December 31, 2004, 2 commercial aircraft (1 of which is covered by a
signed letter of intent) were off lease.
Controls and Procedures
Management has previously identified deficiencies in certain internal
controls related to accounting for income taxes as a "reportable condition"
under standards established by the American Institute of Certified Public
Accountants. Under Sarbanes-Oxley Section 404 and PCAOB standards effective for
2004 year-end reporting, this internal control deficiency will likely be
classified as a "material weakness", defined as a deficiency that could result
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements could occur (i.e. greater than three percent of net
income in any reporting period).
Management has performed detailed analyses and reconciliations of the
income tax accounts and based thereon, believes that the 2004 income tax
provision is appropriate and that the remediation will not result in a material
adjustment to the Company's reported net income for the year ended December 31,
2004. We have made significant progress with respect to the income tax
accounting internal controls and expect remediation to be completed during 2005.
Conference Call and Webcast:
We will discuss this quarter's results, as well as ongoing 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 706-645-9291 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 shortly after the conclusion of the call until 11:59 pm
(EST) January 25, 2005, by dialing 800-642-1687 for U.S. and Canadian callers or
706-645-9291 for international callers with the pass-code 3102269, or at the
following website: http://ir.cit.com.
5
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 approximately $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 and a component of the S&P 500 Index, holds leading
positions in vendor financing, factoring, equipment and transportation
financing, Small Business Administration loans, and asset-based 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.
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 Annual Report on Form 10-K for
the year ended December 31, 2003. 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 and on our website at http://ir.cit.com.
###
For Information: Valerie L. Gerard - Senior Vice President - Investor Relations
(973) 422-3284
or
Chris Hardwick - Vice President - Director, External
(973) 597-2095 Communications
6
CIT GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INCOME STATEMENTS
For the Quarters and Years Ended December 31, 2004 and 2003
(dollars in millions, except per share data)
Quarters Ended Years Ended
-------------------------------------------- ----------------------------
December 31, September 30, December 31, December 31, December 31,
2004 2004 2003 2004 2003
------------ ------------- ------------ ------------ ------------
Finance income $ 1,004.5 $ 963.1 $ 925.9 $ 3,785.7 $ 3,729.5
Interest expense 346.7 315.4 322.5 1,260.1 1,348.7
----------- ----------- ----------- ----------- -----------
Net finance income 657.8 647.7 603.4 2,525.6 2,380.8
Depreciation on operating lease equipment 239.5 245.7 248.9 956.0 1,053.0
----------- ----------- ----------- ----------- -----------
Net finance margin 418.3 402.0 354.5 1,569.6 1,327.8
Provision for credit losses 2.7 60.2 100.8 214.2 387.3
----------- ----------- ----------- ----------- -----------
Net finance margin after provision
for credit losses 415.6 341.8 253.7 1,355.4 940.5
Other revenue(1) 214.2 212.5 246.0 890.6 947.6
Gain (loss) on venture capital investments (11.4) 4.2 (60.5) (3.5) (88.3)
----------- ----------- ----------- ----------- -----------
Operating margin 618.4 558.5 439.2 2,242.5 1,799.8
Salaries and general operating expenses 282.1 256.7 236.5 1,046.4 912.9
Gain on redemption of debt -- -- 50.4 41.8 50.4
----------- ----------- ----------- ----------- -----------
Income before provision for income taxes 336.3 301.8 253.1 1,237.9 937.3
Provision for income taxes (131.6) (117.7) (98.2) (483.2) (365.0)
Minority interest, after tax (0.9) (0.2) 0.3 (1.1) --
Dividends on preferred capital
securities, after tax -- -- -- -- (5.4)
----------- ----------- ----------- ----------- -----------
Net income $ 203.8 $ 183.9 $ 155.2 $ 753.6 $ 566.9
=========== =========== =========== =========== ===========
Earnings per share
Basic earnings per share $ 0.97 $ 0.87 $ 0.73 $ 3.57 $ 2.68
Diluted earnings per share $ 0.95 $ 0.86 $ 0.72 $ 3.50 $ 2.66
Number of shares -basic (thousands) 210,208 210,489 211,828 211,017 211,681
Number of shares -diluted (thousands) 214,860 214,179 215,078 215,054 213,143
Certain prior period balances have been reclassified to conform to current period presentation; debt related costs totaling
$7.5 million and $29.4 million for the three months and year ended December 31, 2003, have been reclassified to interest expense
from operating expenses.
Quarters Ended Years Ended
-------------------------------------------- ----------------------------
December 31, September 30, December 31, December 31, December 31,
(1)Other Revenue 2004 2004 2003 2004 2003
------------ ------------- ------------ ------------ ------------
Fees and other income $ 115.6 $ 119.6 $ 155.4 $ 502.9 $ 586.2
Factoring commissions 59.0 59.5 50.5 227.0 189.8
Gains on sales of leasing equipment 23.7 23.5 22.0 101.6 70.7
Gains on securitizations 15.9 9.9 18.1 59.1 100.9
----------- ----------- ----------- ----------- -----------
Total other revenue $ 214.2 $ 212.5 $ 246.0 $ 890.6 $ 947.6
=========== =========== =========== =========== ===========
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 gains and losses
separately.
7
CIT GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
December 31, December 31,
2004 2003
------------ ------------
ASSETS
Financing and leasing assets:
Finance receivables $35,048.2 $31,300.2
Reserve for credit losses (617.2) (643.7)
--------- ---------
Net finance receivables 34,431.0 30,656.5
Operating lease equipment, net 8,290.9 7,615.5
Finance receivables held for sale 1,640.8 918.3
Cash and cash equivalents 2,210.2 1,973.7
Retained interests in securitizations
and other investments 1,230.0 1,380.8
Goodwill and intangible assets 596.5 487.7
Other assets(1) 2,711.9 3,310.3
--------- ---------
Total Assets $51,111.3 $46,342.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Commercial paper $ 4,210.9 $ 4,173.9
Variable-rate senior notes 11,545.0 9,408.4
Fixed-rate senior notes 21,715.1 19,830.8
Preferred capital securities 253.8 255.5
--------- ---------
Total debt 37,724.8 33,668.6
Credit balances of factoring clients 3,847.3 3,894.6
Accrued liabilities and payables 3,443.7 3,346.4
--------- ---------
Total Liabilities 45,015.8 40,909.6
Minority interest 40.4 39.0
Stockholders' Equity:
Common stock 2.1 2.1
Paid-in capital 10,674.3 10,677.0
Accumulated deficit (4,499.1) (5,141.8)
Accumulated other comprehensive loss (58.4) (141.6)
Less: Treasury stock, at cost (63.8) (1.5)
--------- ---------
Total Stockholders' Equity 6,055.1 5,394.2
--------- ---------
Total Liabilities and Stockholders' Equity $51,111.3 $46,342.8
========= =========
(1) Other Assets primarily include the following at December 31, 2004: $0.7
billion of investments in and receivables from joint ventures and
non-consolidated subsidiaries, $0.4 billion of accrued interest and
receivables from derivative counterparties, $0.3 billion of deposits on
flight equipment, $0.2 billion of equity investments, $0.1 billion of
repossessed and off-lease equipment and $0.1 billion of prepaid expenses.
The remaining balance includes furniture and fixtures, miscellaneous
receivables and other assets.
8
CIT GROUP INC. AND SUBSIDIARIES
OWNED AND MANAGED ASSET COMPOSITION
(dollars in millions)
December 31, September 30, December 31,
2004 2004 2003
------------ ------------- ------------
Specialty Finance Segment
Commercial
Finance receivables $ 8,546.4 $ 8,166.3 $ 7,150.0
Operating lease equipment, net 1,078.7 1,057.0 959.5
Finance receivables held for sale 960.5 1,447.9 548.1
--------- --------- ---------
Owned assets 10,585.6 10,671.2 8,657.6
Finance receivables securitized and managed by CIT 3,734.8 3,251.1 3,915.4
--------- --------- ---------
Managed assets 14,320.4 13,922.3 12,573.0
--------- --------- ---------
Consumer
Finance receivables - home equity 4,896.8 3,996.4 2,513.1
Finance receivables - other 495.3 840.2 997.7
Finance receivables held for sale 569.6 209.0 150.0
--------- --------- ---------
Owned assets 5,961.7 5,045.6 3,660.8
Home equity finance receivables securitized and managed by CIT 1,228.7 1,352.6 1,867.6
Other finance receivables securitized and managed by CIT 430.7 466.5 642.5
--------- --------- ---------
Managed assets 7,621.1 6,864.7 6,170.9
--------- --------- ---------
Commercial Finance Segment
Commercial Services
Finance receivables 6,204.1 6,764.0 6,325.8
Business Credit
Finance receivables 5,576.3 5,699.6 5,247.1
--------- --------- ---------
Owned assets 11,780.4 12,463.6 11,572.9
--------- --------- ---------
Equipment Finance Segment
Finance receivables 6,373.1 6,343.2 6,317.9
Operating lease equipment, net 440.6 401.0 419.6
Finance receivables held for sale 110.7 100.4 220.2
--------- --------- ---------
Owned assets 6,924.4 6,844.6 6,957.7
Finance receivables securitized and managed by CIT 2,915.5 2,924.7 3,226.2
--------- --------- ---------
Managed assets 9,839.9 9,769.3 10,183.9
--------- --------- ---------
Capital Finance Segment
Finance receivables 2,956.2 2,733.1 2,748.6
Operating lease equipment, net 6,771.6 6,474.9 6,236.4
--------- --------- ---------
Owned assets 9,727.8 9,208.0 8,985.0
--------- --------- ---------
Other - Equity Investments 181.0 186.2 249.9
--------- --------- ---------
Total
Finance receivables $35,048.2 $34,542.8 $31,300.2
Operating lease equipment, net 8,290.9 7,932.9 7,615.5
Finance receivables held for sale 1,640.8 1,757.3 918.3
--------- --------- ---------
Financing and leasing assets excl. equity investments 44,979.9 44,233.0 39,834.0
Equity investments (included in other assets) 181.0 186.2 249.9
--------- --------- ---------
Owned assets 45,160.9 44,419.2 40,083.9
Finance receivables securitized and managed by CIT 8,309.7 7,994.9 9,651.7
--------- --------- ---------
Managed assets $53,470.6 $52,414.1 $49,735.6
========= ========= =========
During the June 2004 quarter, assets of the former Structured Finance segment
were transferred to Capital Finance and Business Credit. All historical balances
have been restated to reflect this realignment.
9
CIT GROUP INC. AND SUBSIDIARIES
SEGMENT DATA
(dollars in millions)
Quarters Ended Years Ended December 31,
------------------------------------------- ---------------------------
December 31, September 30, December 31,
2004 2004 2003 2004 2003
----------- ------------- ------------ ---------- ----------
Specialty Finance
- --------------------------------------
Operating margin $ 242.9 $ 238.7 $ 228.9 $ 940.0 $ 842.5
Income before provision for income tax 125.2 136.5 121.6 509.2 427.7
Income taxes 51.1 52.0 47.5 190.7 166.8
Net income (loss) 73.2 84.1 74.1 317.2 260.9
Return on AEA 1.79% 2.31% 2.38% 2.21% 2.13%
New business volume $ 4,166.4 $ 3,823.4 $ 2,974.3 $ 14,844.0 $ 12,429.6
====================================================================================================================================
Commercial Finance
- --------------------------------------
Operating margin $ 178.9 $ 173.4 $ 149.7 $ 673.8 $ 578.8
Income before provision for income tax 128.7 126.1 104.7 478.9 401.8
Income taxes 50.8 47.8 41.0 183.4 156.8
Net income (loss) 77.9 78.3 63.7 295.5 245.0
Return on AEA 3.70% 3.74% 3.18% 3.58% 3.15%
New business volume $ 658.1 $ 671.8 $ 809.4 $ 2,775.5 $ 2,921.2
Equipment Finance
- --------------------------------------
Operating margin $ 64.8 $ 54.6 $ 36.2 $ 219.4 $ 148.0
Income before provision for income tax 40.9 31.3 17.8 127.2 63.1
Income taxes 15.8 12.2 6.9 49.5 24.6
Net income (loss) 25.1 19.1 10.9 77.7 38.5
Return on AEA 1.44% 1.11% 0.64% 1.12% 0.56%
New business volume $ 1,496.0 $ 1,115.1 $ 1,239.7 $ 4,582.4 $ 3,824.1
Capital Finance
- --------------------------------------
Operating margin $ 76.3 $ 71.1 $ 56.3 $ 287.6 $ 214.4
Income before provision for income tax 40.0 39.0 28.0 162.7 119.0
Income taxes 13.5 13.5 11.0 57.9 46.4
Net income (loss) 26.4 25.8 17.3 105.0 72.6
Return on AEA 1.12% 1.12% 0.77% 1.14% 0.85%
New business volume $ 783.8 $ 357.2 $ 398.1 $ 1,791.1 $ 1,498.1
Total Commercial Finance Segments
- --------------------------------------
Operating margin $ 320.0 $ 299.1 $ 242.2 $ 1,180.8 $ 941.2
Income before provision for income tax 209.6 196.4 150.5 768.8 583.9
Income taxes 80.1 73.5 58.9 290.8 227.8
Net income (loss) 129.4 123.2 91.9 478.2 356.1
Return on AEA 2.08% 2.02% 1.55% 1.96% 1.53%
New business volume $ 2,937.9 $ 2,144.1 $ 2,447.2 $ 9,149.0 $ 8,243.4
====================================================================================================================================
Total Business Segments
- --------------------------------------
Operating margin $ 562.9 $ 537.8 $ 471.1 $ 2,120.8 $ 1,783.7
Income before provision for income tax 334.8 332.9 272.1 1,278.0 1,011.6
Income taxes 131.2 125.5 106.4 481.5 394.6
Net income (loss) 202.6 207.3 166.0 795.4 617.0
Return on AEA 1.97% 2.13% 1.83% 2.05% 1.74%
New business volume $ 7,104.3 $ 5,967.5 $ 5,421.5 $ 23,993.0 $ 20,673.0
Corporate and Other
- --------------------------------------
Operating margin $ 55.5 $ 20.7 $ (31.9) $ 121.7 $ 16.1
Income before provision for income tax 1.5 (31.1) (19.0) (40.1) (74.3)
Income taxes 0.4 (7.8) (8.2) 1.7 (29.6)
Net income (loss) 1.2 (23.4) (10.8) (41.8) (50.1)
Return on AEA 0.00% (0.25)% (0.13)% (0.12)% (0.16)%
Consolidated
- --------------------------------------
Operating margin $ 618.4 $ 558.5 $ 439.2 $ 2,242.5 $ 1,799.8
Income before provision for income tax 336.3 301.8 253.1 1,237.9 937.3
Income taxes 131.6 117.7 98.2 483.2 365.0
Net income (loss) 203.8 183.9 155.2 753.6 566.9
Return on AEA 1.97% 1.88% 1.70% 1.93% 1.58%
New business volume $ 7,104.3 $ 5,967.5 $ 5,421.5 $ 23,993.0 $ 20,673.0
Net income for Capital Finance includes the results of the former Structured
Finance except for the results relating to the communications and media
portfolio, which are reflected in Commercial Finance.
10
CIT GROUP INC. AND SUBSIDIARIES
CREDIT METRICS
(dollars in millions)
Quarters Ended
-----------------------------------------------------------------
December 31, 2004 September 30, 2004 December 31, 2003
$ % $ % $ %
------------------- ------------------- ------------------
Net Credit Losses - Owned as a Percentage of
Average Finance Receivables
Specialty Finance - Commercial $ 21.6 1.02% $ 28.1 1.49% $ 30.0 1.73%
Specialty Finance - Commercial (Argentine) -- -- 101.0
-------- -------- --------
Total Specialty Finance - Commercial 21.6 1.02% 28.1 1.49% 131.0 7.46%
Commercial Finance(1) 6.0 0.19% 21.6 0.72% 24.0 0.83%
Equipment Finance 3.6 0.23% 7.8 0.49% 25.9 1.68%
Capital Finance(1) (1.0) (0.14)% 0.4 0.05% 14.2 2.02%
-------- -------- --------
Total Commercial 30.2 0.40% 57.9 0.81% 195.1 2.83%
Specialty Finance - Consumer 15.8 1.20% 14.4 1.30% 13.5 1.56%
-------- -------- --------
Total $ 46.0 0.52% $ 72.3 0.88% $ 208.6 2.69%
======== ======== ========
Total Before Liquidating, Telecommunications
and Argentine $ 46.0 0.53% $ 57.6 0.72% $ 87.8 1.20%
======== ======== ========
Net Credit Losses - Managed as a Percentage of
Average Managed Finance Receivables $ 68.6 0.63% $ 98.6 0.96% $ 245.0 2.40%
======== ======== ========
Years Ended
-------------------------------------------
December 31, 2004 December 31, 2003
$ % $ %
------------------- -------------------
Specialty Finance - Commercial $ 84.9 1.11% $ 110.5 1.59%
Specialty Finance - Commercial (Argentine) -- 101.0
-------- --------
Total Specialty Finance - Commercial 84.9 1.11% 211.5 2.98%
Commercial Finance(1) 82.2 0.69% 107.9 1.02%
Equipment Finance 53.2 0.84% 125.7 2.03%
Capital Finance(1) 13.8 0.50% 21.3 0.75%
-------- --------
Total Commercial 234.1 0.82% 466.4 1.75%
Specialty Finance - Consumer 67.1 1.52% 55.5 2.01%
-------- --------
Total $ 301.2 0.91% $ 521.9 1.77%
======== ========
Total Before Liquidating, Telecommunications
and Argentine $ 232.3 0.73% $ 319.2 1.17%
======== ========
Net Credit Losses - Managed as a Percentage of Average
Managed Finance Receivables $ 409.9 0.99% $ 680.1 1.72%
======== ========
December 31, 2004 September 30, 2004 December 31, 2003
$ % $ % $ %
------------------- ------------------ ------------------
Finance Receivables Past Due 60 days or more -
Owned as a Percentage of Finance Receivables
Specialty Finance - Commercial $ 224.7 2.63% $ 212.3 2.60% $ 226.4 3.17%
Commercial Finance(1) 124.7 1.06% 106.0 0.85% 131.9 1.14%
Equipment Finance 50.1 0.79% 66.6 1.05% 137.9 2.18%
Capital Finance(1) 33.5 1.13% 28.4 1.04% 30.5 1.11%
--------- --------- ---------
Total Commercial 433.0 1.46% 413.3 1.39% 526.7 1.90%
Specialty Finance - Consumer 175.0 3.25% 159.9 3.31% 149.6 4.26%
--------- --------- ---------
Total $ 608.0 1.73% $ 573.2 1.66% $ 676.3 2.16%
========= ========= =========
Non-performing Assets - Owned as a Percentage of
Finance Receivables(2)
Specialty Finance - Commercial $ 108.0 1.26% $ 87.8 1.08% $ 119.8 1.68%
Commercial Finance(1) 112.1 0.95% 96.9 0.78% 132.5 1.15%
Equipment Finance 131.2 2.06% 164.9 2.60% 218.3 3.46%
Capital Finance(1) 11.1 0.38% 11.5 0.42% 49.7 1.81%
--------- --------- ---------
Total Commercial 362.4 1.22% 361.1 1.22% 520.3 1.87%
Specialty Finance - Consumer 177.2 3.29% 167.6 3.47% 156.2 4.45%
--------- --------- ---------
Total $ 539.6 1.54% $ 528.7 1.53% $ 676.5 2.16%
========= ========= =========
Finance Receivables Past Due 60 days or more - Managed
as a Percentage of Managed Financial Assets(3)
Specialty Finance - Commercial $ 313.1 2.36% $ 294.8 2.29% $ 321.2 2.77%
Commercial Finance(1) 124.7 1.06% 106.0 0.85% 131.9 1.14%
Equipment Finance 90.3 0.96% 116.2 1.24% 243.6 2.49%
Capital Finance(1) 33.5 1.13% 28.4 1.04% 30.5 1.11%
--------- --------- ---------
Total Commercial 561.6 1.50% 545.4 1.46% 727.2 2.04%
Specialty Finance - Consumer 316.8 4.16% 304.9 4.44% 294.8 4.78%
--------- --------- ---------
Total $ 878.4 1.95% $ 850.3 1.92% $ 1,022.0 2.44%
========= ========= =========
Reserve for Credit Losses
Reserve for credit losses as a percentage
of finance receivables $ 617.2 1.76% $ 637.9 1.85% $ 643.7 2.06%
Reserve for credit losses as a percentage
of finance receivables before Telecommunications
and Argentina $ 594.0 1.71% $ 572.2 1.67% $ 524.6 1.71%
Reserve for credit losses as a percentage
of finance receivables past due 60 days or more 101.5% 111.3% 95.2%
Reserve for credit losses as a percentage
of non-performing assets 114.4% 120.7% 95.2%
(1) The data for Capital Finance includes the former Structured Finance except
for the communications and media portfolios, which are reflected in
Commercial Finance.
(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.
11
CIT GROUP INC. AND SUBSIDIARIES
SELECTED DATA AND OWNED PORTFOLIO INFORMATION
(dollars in millions, except per share data)
Quarters Ended Years Ended
----------------------------------------- ---------------------------
Selected Data December 31, September 30, December 31, December 31, December 31,
Profitability 2004 2004 2003 2004 2003
------------ ------------- ------------ ------------ ------------
Net finance margin as a percentage of AEA(1) 4.05% 4.10% 3.88% 4.02% 3.71%
Net finance margin after provision as
a percentage of AEA 4.02% 3.49% 2.78% 3.47% 2.63%
Salaries and general operating expenses as
a percentage of AMA(2) 2.28% 2.18% 2.04% 2.20% 1.99%
Efficiency ratio 45.4% 41.5% 43.8% 42.6% 41.7%
Return on average tangible stockholders' equity 15.2% 14.1% 12.6% 14.5% 11.8%
Return on AMA(2) 1.65% 1.56% 1.34% 1.59% 1.24%
See "Non-GAAP Disclosures" for additional information regarding profitability ratio and metric comparisons
Securitization Volume
Specialty Finance - Commercial $ 1,256.6 $ 458.4 $ 869.9 $ 3,153.8 $ 3,416.2
Equipment Finance 310.5 325.4 242.9 1,280.7 1,414.8
Specialty Finance - Consumer -- -- -- -- 489.2
---------- ---------- ---------- ---------- ----------
Total $ 1,567.1 $ 783.8 $ 1,112.8 $ 4,434.5 $ 5,320.2
========== ========== ========== ========== ==========
Average Assets
Average Finance Receivables (AFR) $ 35,438.2 $ 32,957.8 $ 31,051.8 $ 33,095.4 $ 29,448.0
Average Earning Assets (AEA) 41,358.6 39,195.6 36,523.2 39,011.3 35,813.4
Average Managed Assets (AMA)(2) 49,466.5 47,166.8 46,322.4 47,519.3 45,809.3
Average Operating Leases (AOL) 8,099.9 7,873.2 7,529.1 7,821.2 7,241.1
Note: These averages are based on an ending 4 and 13 month average.
December 31, September 30, December 31,
2004 2004 2003
------------ ------------- ------------
Capital and Leverage(3),(4)
Tangible stockholders' equity to managed assets 10.72% 10.57% 10.44%
Debt (net of overnight deposits) to tangible
stockholders' equity(5) 6.28x 6.38x 6.14x
Tangible book value per share $ 26.03 $ 25.20 $ 23.16
Owned Portfolio Information
Liquidating Portfolios:
Balance(6) $ 608.1 $ 675.2 $ 923.3
Non-performing accounts $ 73.4 $ 79.7 $ 108.4
Past due 60+ days $ 70.5 $ 70.1 $ 92.3
Telecommunications(7):
Financing and leasing assets $ 335.2 $ 347.6 $ 579.0
Number of accounts 26 29 44
Largest customer account balance $ 29.7 $ 29.3 $ 31.0
Non-performing accounts $ 21.0 $ 24.5 $ 57.2
Number of accounts 5 5 6
Past due 60+ days $ 2.1 $ 4.8 $ 25.7
CLEC exposure $ 112.7 $ 117.4 $ 197.8
Equity and Venture Capital Investments:
Total investment balance $ 181.1 $ 186.2 $ 249.9
Direct investments $ 30.1 $ 31.9 $ 101.1
Number of companies 8 10 47
Private equity funds $ 151.0 $ 154.3 $ 148.8
Number of funds 52 52 52
Remaining fund and equity commitments $ 79.8 $ 97.0 $ 124.2
(1) As a result of adopting SFAS 150, dividends on preferred capital
securities are reflected in interest expense (quarterly 5 basis points
impact) for the 2004 periods and the final two quarters of 2003. The
dividends for the first two quarters of 2003 are shown after-tax on the
consolidated statement of income.
(2) "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.
(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.
(6) The balances are prior to planned sales.
(7) Telecommunications portfolio data consists of lending and leasing directly
to the telecommunications sector, and does not include lending and leasing
for telecom related equipment to non-telecom companies.
12
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 2004 2004 2003
------------ ------------- ------------
Commercial $5,125.6 $4,905.2 $4,716.1
Regional $ 302.6 $ 351.9 $ 291.6
Number of planes:
Commercial 212 205 209
Regional 121 127 119
December 31, 2004 September 30, 2004 December 31, 2003
---------------------- ---------------------- ----------------------
Commercial Aerospace Portfolio: Net Net Net
By Region: Investment Number Investment Number Investment Number
---------- ------ ---------- ------ ---------- ------
Europe $2,160.0 72 $2,175.1 72 $1,991.0 65
North America (1) 1,057.7 66 926.9 62 1,029.7 72
Asia Pacific 1,242.4 46 1,129.3 43 1,013.6 40
Latin America 611.3 25 618.8 25 612.7 28
Africa / Middle East 54.2 3 55.1 3 69.1 4
-------- ------ -------- ------ -------- ------
Total $5,125.6 212 $4,905.2 205 $4,716.1 209
======== ====== ======== ====== ======== ======
By Manufacturer:
Boeing $2,558.8 133 $2,540.4 132 $2,581.7 140
Airbus 2,536.9 70 2,329.5 64 2,114.6 57
Other 29.9 9 35.3 9 19.8 12
-------- ------ -------- ------ -------- ------
Total $5,125.6 212 $4,905.2 205 $4,716.1 209
======== ====== ======== ====== ======== ======
By Body Type (2):
Narrow body $3,894.9 168 $3,657.1 161 $3,415.7 159
Intermediate 842.7 18 848.8 18 877.0 18
Wide body 358.1 17 364.0 17 403.6 20
Other 29.9 9 35.3 9 19.8 12
-------- ------ -------- ------ -------- ------
Total $5,125.6 212 $4,905.2 205 $4,716.1 209
======== ====== ======== ====== ======== ======
By Product:
Operating lease $4,324.6 167 $4,113.6 160 $4,011.7 159
Leverage lease (other) (3) 336.6 12 333.3 12 232.5 12
Leverage lease (tax optimized)(3) 221.0 9 219.9 9 217.9 9
Capital lease 137.4 6 142.0 6 135.6 7
Loan 106.0 18 96.4 18 118.4 22
-------- ------ -------- ------ -------- ------
Total $5,125.6 212 $4,905.2 205 $4,716.1 209
======== ====== ======== ====== ======== ======
Number of accounts 92 89 84
Weighted average age of fleet (years) 6 6 6
Largest customer net investment $ 286.4 $ 288.4 $268.6
New Aircraft Delivery Order Book
(dollars in billions)
For the Years Ending December 31,
2004 (Remaining 2004) $ 0.3 7 $ 0.6 15
2005 $ 0.9 18 0.9 18 0.9 20
2006 1.0 20 1.0 20 1.1 21
2007 0.3 5 0.3 5 0.3 5
-------- ------ -------- ------ -------- ------
Total $ 2.2 43 $ 2.5 50 $ 2.9 61
======== ====== ======== ====== ======== ======
The order amounts 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,
2004, 14 of the 2005 deliveries were placed.
(1) Comprised of net investments in the U.S. and Canada of $877.0 million (60
aircraft) and $180.7 million (6 aircraft) at December 31, 2004, $744.2
million (56 aircraft) and $182.7 million (6 aircraft) at September 30,
2004 and $822.7 million (66 aircraft) and $207.0 million (6 aircraft) at
December 31, 2003, 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.
(3) In general, the use of leverage increases the risk of a loss in the event
of a default, with the greatest risk incurred in tax-optimization
leveraged leases.
13
CIT GROUP INC. AND SUBSIDIARIES
Non-GAAP Disclosures
(dollars in millions)
December 31, September 30, December 31,
2004 2004 2003
------------ ------------- ------------
Managed assets (1):
Finance receivables $ 35,048.2 $ 34,542.8 $ 31,300.2
Operating lease equipment, net 8,290.9 7,932.9 7,615.5
Finance receivables held for sale 1,640.8 1,757.3 918.3
Equity and venture capital investments
(included in other assets) 181.0 186.2 249.9
---------- ---------- ----------
Total financing and leasing portfolio assets 45,160.9 44,419.2 40,083.9
Securitized assets 8,309.7 7,994.9 9,651.7
---------- ---------- ----------
Managed assets $ 53,470.6 $ 52,414.1 $ 49,735.6
========== ========== ==========
Earning assets (2):
Total financing and leasing portfolio assets $ 45,160.9 $ 44,419.2 $ 40,083.9
Credit balances of factoring clients (3,847.3) (3,929.9) (3,894.6)
---------- ---------- ----------
Earning assets $ 41,313.6 $ 40,489.3 $ 36,189.3
========== ========== ==========
Tangible equity (3):
Total equity $ 6,055.1 $ 5,837.0 $ 5,394.2
Other comprehensive loss relating to derivative
financial instruments 27.1 52.5 41.3
Unrealized gain on securitization investments (8.5) (7.2) (7.7)
Goodwill and intangible assets (596.5) (594.4) (487.7)
---------- ---------- ----------
Tangible common equity 5,477.2 5,287.9 4,940.1
Preferred capital securities 253.8 254.2 255.5
---------- ---------- ----------
Tangible equity $ 5,731.0 $ 5,542.1 $ 5,195.6
========== ========== ==========
Debt, net of overnight deposits (4):
Total debt $ 37,724.8 $ 37,280.6 $ 33,668.6
Overnight deposits (1,507.3) (1,651.7) (1,529.4)
Preferred capital securities (253.8) (254.2) (255.5)
---------- ---------- ----------
Debt, net of overnight deposits $ 35,963.7 $ 35,374.7 $ 31,883.7
========== ========== ==========
Earnings per share, excluding certain items(5)
GAAP earnings per share $ 0.95 $ 0.86 $ 0.72
Loss on accelerated liquidations - manufactured housing 0.04 -- --
Loss on accelerated liquidations - venture capital
investments 0.04 -- 0.18
Reduction of specific credit loss reserves (0.12) -- --
Gain on debt redemption -- -- (0.14)
---------- ---------- ----------
Adjusted earnings per share $ 0.91 $ 0.86 $ 0.76
========== ========== ==========
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 diluted EPS related to the items listed are shown separately, as the
items are not indicative of our on-going operations.
14