CIT Reports Third Quarter Results
Results Reflect Strong Earnings, Revenue And Origination Growth
Financial Highlights
- EPS of $1.44, up from $1.02 in the prior year
- Record new business volume of $11 billion, up 40%
- Double digit growth in revenues, led by strong other revenues
NEW YORK, Oct. 18 /PRNewswire-FirstCall/ -- CIT Group Inc. (NYSE: CIT),
a leading global provider of commercial and consumer finance solutions,
today reported diluted earnings per share (EPS) of $1.44 for the quarter,
up from $1.02 for the 2005 quarter. Net income available to common
shareholders was $290.8 million and $211.4 million for the current and
prior year quarters. For the nine months ended September 30, 2006, diluted
earnings per share was $3.72 ($756.5 million), compared to $3.24 ($688.1
million) last year.
Earnings improved on record loan and lease origination volume,
broad-based asset growth, coupled with increased other revenue on strong
syndication fees and lower taxes. These improvements were tempered by lower
margins, higher credit provisioning and higher operating expenses.
Additionally, the quarter included noteworthy items as follows:
* Transportation Finance tax expense was reduced by $55.6 million,
primarily due to the relocation and funding of aircraft assets to lower
tax jurisdictions, resulting in a release of deferred income tax
liabilities ($0.28 diluted EPS increase).
* In conjunction with the relocation of the Transportation Finance
aerospace assets, we incurred $3.6 million in after-tax debt prepayment
charges ($0.02 diluted EPS decrease) on related higher cost debt.
* We initiated a program in Transportation Finance to sell our remaining
engines used to power older vintage, out-of-production aircraft totaling
$20 million, along with certain types of non-strategic rail cars
totaling $40 million. These assets were reclassified to held for sale
and reduced to estimated fair value, resulting in an after-tax loss of
approximately $9.2 million ($0.04 diluted EPS decrease).
* In conjunction with certain Transportation Finance and Corporate Finance
activities to consolidate operations and improve efficiency, we recorded
a $5.5 million after-tax charge ($0.03 diluted EPS decrease).
Excluding these items, total net revenue (net finance revenue after
depreciation on operating lease equipment and other revenue) was $791.7
million, up 19% and 6% from last year and last quarter. Accordingly, EPS
was $1.25, up 17% from comparable results in the prior year and 8% from the
prior quarter. On the same basis, return on average common equity was 14.7%
for the quarter, versus 14.7% last year and 14.1% last quarter.
"I am very pleased with our third quarter results, as we delivered
double-digit earnings and revenue growth," said Jeffrey M. Peek, Chairman
and Chief Executive Officer of CIT.
"We continued to leverage our origination platforms driving new
business volume up 40% to a record $11 billion. Our broad-based revenue
growth reflects a client-focused approach to sales and increased fee
income, including record syndication fees. We are investing in building
more scale globally as represented by our recent European acquisition
announcement. Our focus on operational excellence is yielding results and
I'm confident that our solid momentum will support continued growth of our
global franchise."
Consolidated Financial Highlights:
Total Net Revenue
* Total net revenue was $770.9 million for the quarter ($791.7 million
excluding noteworthy items), versus $655.2 million last year ($667.9
million) and $748.9 million last quarter, principally reflecting
improved other revenue, including strong fee and other income, as well
as higher syndication and participation fees.
Net Finance Revenue
* Net finance revenue was up $1.1 million and $44.4 million from last
quarter and last year due to asset growth.
* Net finance revenue as a percentage of average earning assets was 2.99%,
down from 3.16% last quarter and 3.41% last year, as yields on loans and
operating leases improved but were offset by increased borrowing costs.
The decline from last quarter was primarily due to the previously
mentioned debt prepayment, lower yield related fees, along with a
decline due to business mix and higher short-term interest rates. Year-
to-date, net finance revenue was 3.17% for 2006 and 3.41% for 2005.
* Operating lease net revenue was 6.53% of average operating leases,
compared to 6.48% last quarter and 6.04% last year. The increasing trend
reflects higher rents on aerospace and rail equipment. Through September
30, operating lease net revenues were 6.53% for 2006 and 5.95% for 2005.
Other Revenue
* Other revenue increased to $324.7 million ($339.7 million excluding
charges on certain transportation assets transferred to held for sale)
from $303.5 million last quarter, and $239.5 million last year ($252.1
million excluding losses on derivatives that were terminated, gain on
real estate investment sale, charges on transportation assets and
manufactured housing assets held for sale and hurricane-related
impairment on securitization retained interests). The revenue increases
included strong fee and other income, higher syndication and
participation fees in Corporate Finance, merger and advisory fees, and
higher revenue in small business lending and home lending. For the nine
months of 2006, other revenue totaled $888.3 million ($903.3 million
excluding charges on transportation assets transferred to held for sale)
compared to $848.6 million last year ($760.5 million excluding items
noted above).
Credit Quality
* Net charge-offs were 0.47% of average finance receivables, up from 0.35%
last quarter and essentially flat with last year. Year-to-date net
charge-offs were 0.40%, down from 0.50% last year. In four of our five
segments, net charge-offs were down or relatively flat. Net charge-offs
in Trade Finance were higher, as we charged off an account that was
classified as non-performing last quarter. Overall, net charge-offs
continue to benefit from strong recoveries.
* Total 60+ day owned delinquencies were 2.21% of finance receivables
(1.86% excluding student lending) at September 30, 2006, up from 1.99%
(1.78%) last quarter and 1.76% (1.62%) last year. Commercial loan
delinquency was relatively stable, while the consumer delinquency
increases reflect continued seasoning of the home and student lending
portfolios. However, student loan delinquencies are not indicative of
potential loss due to the underlying U.S. government guarantee.
* Non-performing assets (non-accrual loans plus repossessed assets) were
1.44% of finance receivables (1.69% excluding student lending), compared
to 1.39% (1.62%) last quarter and 1.28% (1.43%) last year. Non-
performing asset levels reflect changes consistent with those discussed
in the delinquency discussion above. Transportation Finance levels were
lower as the prior year included bankrupt air carrier exposures that
were subsequently charged-off.
* The provision for credit losses was $72.5 million, versus $48.2 million
last quarter and $69.9 million in the prior year quarter, which included
a provision of $34.6 million for estimated hurricane losses.
* The credit loss provision in excess of charge-offs was $12.6 million and
$9.1 million for the quarter and nine months ended September 30, 2006,
reflecting asset growth and higher delinquencies. These amounts compare
to reserve reductions of $12.7 million and $23.2 million for the prior
year periods (excluding specific prior year hurricane reserves).
* The reserve for credit losses was 1.45% of finance receivables excluding
student loans, compared to 1.51% last quarter, and 1.70% last year. The
decline from last quarter reflects the seasonal growth in short-term
factoring receivables and lower reserves required for impaired loans.
Salaries and General Operating Expenses
* The efficiency ratio was 44.4% excluding the noteworthy items outlined
previously (46.7% including items), compared to 46.0% last quarter and
42.9% last year. The ratio improved from last quarter as revenue gains
outpaced expense growth. The deterioration versus prior year reflects
the build out of our sales force, where incremental revenues typically
lag the initial expense.
* Total salaries and general operating expenses for the quarter were
$351.7 million excluding the severance charge ($360.2 million including
it) versus $344.8 million last quarter and $281.1 million a year ago.
The September and June 2006 quarters include charges of $7.8 million and
$6.6 million, respectively, relating to the expensing of stock options.
The sequential increase is due to higher salary expense, partially
offset by lower marketing, advertising and origination expense
capitalization. Year-to-date increases over last year reflect higher
investments made in sales and marketing, including incentive based
compensation, and increases in occupancy, legal and professional fees.
* Employee headcount totaled approximately 7,200 at September 30, 2006 up
from 7,015 at June 30, 2006 and 6,165 at September 30, 2005. The
increase from last quarter is due to additional sales personnel, as well
as operational personnel to bring servicing in-house in student lending,
growth of our international operations and general support personnel.
The increase over last year is due to additions to our sales force and
infrastructure, as well as acquisitions.
Effective Tax Rate
* The effective tax rate was 28.9%, compared to 31.4% last quarter and
34.6% last year. The rate reduction from last year reflects the
continued relocation and funding of certain aerospace assets offshore,
improved international earnings and lower state and local taxes. For the
nine months, the effective tax rate was 30.7% compared to 35.0% last
year. (The effective tax rates above exclude deferred tax liability
releases and the other noteworthy items discussed previously). On this
basis, we expect the on-going rate to approximate 31%.
Volume and Assets
* Origination volume for the quarter, excluding factoring, increased 39.8%
to a record $11.0 billion, due to strong originations across most
businesses. Year-to-date origination volumes were up 37.7%.
* Managed assets were $71.9 billion at September 30, 2006, up 6% from
June 30, 2006 and 17% from last year. Commercial Finance grew 8% and 15%
from last quarter and last year, reflecting broad-based growth in
Corporate Finance, while Specialty Finance growth (4% and 21%) was
driven by the consumer businesses.
* The increase in held for sale assets reflects our on-going capital
optimization initiatives.
Segment Results:
Certain expenses are not allocated to the operating segments. These
non- allocated expenses, which are reported in Corporate and Other, consist
primarily of the following: (1) provisions for credit losses in excess of
net- charge-offs; (2) equity-based compensation; and (3) certain funding
costs, as the segment results reflect debt transfer pricing that matches
assets and liabilities from an interest rate and maturity perspective.
Corporate and other
* Corporate and other includes third quarter expenses not allocated to
segments such as: stock option expense of $7.8 million, $7.5 million in
dividends on preferred securities, a $20 million provision for credit
losses, and the previously mentioned severance charge.
* The higher Corporate and other losses in 2006 reflect higher unallocated
operating expenses, as well as a $115 million pre-tax gain on a sale of
a real estate investment in 2005.
* Corporate and other expenses reduced return on equity by approximately
4% for the third quarter and 5% for the prior quarter. The decrease from
last quarter was due to lower unallocated expenses, principally staff
costs. The dampening of return on equity related to corporate expenses
was significantly lower in 2005 due to last year's gain on sale of a
real estate investment and lower unallocated funding costs.
Specialty Finance Group
Vendor Finance
* Total net revenues increased to $221.6 million from $188.0 million
($208.0 million excluding a charge related to receivables transferred to
held for sale) last year, but declined from $226.0 million last quarter.
* Net finance revenue after depreciation was essentially flat to last
quarter and down 15 basis points ("bps") from last year, which included
revenues related to non-strategic assets with high margins that were
sold in the fourth quarter. Net finance revenue declined to $124.9
million from $127.1 million last quarter and $139.1 million last year.
* Other revenue increased 40% from last year, reflecting strong asset sale
and syndication activity in our global operations.
* Credit metrics remained strong. Net charge-offs improved from last year
in the U.S., offset by higher international charge-offs. Both
delinquencies and non-performings were relatively flat to prior quarter
and down from last year.
* New business volume, excluding Dell in the U.S., grew 7% over last year
on the addition of new vendors and increased penetration of existing
relationships around the world. Dell volumes declined due to lower
overall Dell financed sales volumes. Volume from the international
operations grew 18%.
* Return on risk-adjusted capital was 23.5% versus 19.9% (23.9% excluding
the item above) in 2005.
Consumer and Small Business Lending
* Total net revenues increased to $144.7 million from $103.7 million last
year and $127.1 million last quarter.
* Net finance revenue was down 12 bps from prior quarter and 23 bps from
last year primarily due to higher growth in Student Loan Xpress. Net
finance revenue increased to $86.1 million from $84.7 million last
quarter and $64.2 million last year.
* Other revenue was up 48% on gains from loan sales and syndications.
* Net charge-offs as a percentage of average finance receivables were down
from last year. Delinquencies and non-performing assets increased due to
portfolio seasoning.
* New business volume increased 60% over last year on strong originations
at Student Loan Xpress. Student Loan Xpress is the preferred lender at
approximately 1,200 schools, up from 817 last year.
* Return on risk-adjusted capital was 16.7% versus 11.4% in 2005.
Commercial Finance Group
Corporate Finance
* Total net revenues increased to $232.4 million from $162.9 million last
year and $194.1 million last quarter.
* Net finance revenue after depreciation decreased 29 bps from prior
quarter as yield related and prepayment fees were lower. The net finance
revenue percentage was essentially flat with the prior year. Net finance
revenue increased to $136.0 million from $135.7 million last quarter and
$106.5 million last year.
* Other revenue increased $38.0 million, 65%, over last quarter and $40.0
million, 71%, over prior year on higher fee income, including
syndication and participation fees in communications, media and
entertainment and healthcare, along with higher advisory fees.
* Net charge-offs remained low, as recoveries mostly offset charge-offs.
Delinquencies and non-performing assets trended up slightly.
* Volume was up over 100% from last year and up across all businesses, led
by healthcare.
* Return on risk adjusted capital was 17.6% up from 16.4% last year.
Transportation Finance
* Total net revenues were $61.8 million ($82.6 million excluding loss on
assets transferred to held for sale and the debt prepayment charge)
versus $73.3 million last year (excluding loss on out of production
aircraft), and $96.5 million last quarter.
* Net finance revenue after depreciation increased 5 bps from last
quarter, excluding the charge to prepay debt associated with
transferring planes into our international operations. Net finance
revenue decreased 9 bps from last year, which included a large
prepayment fee. Rental rates continue to improve on aerospace and rail
leases and our fleet remains nearly fully utilized. Net finance revenue
declined to $59.8 million from $63.3 million last quarter and $62.1
million last year. Net finance revenue increased to $65.6 million
(excluding the prepayment charge) from $63.3 million last quarter but
was down from $62.1 million last year, which included a large
prepayment fee.
* Other revenue was down $31 million from last quarter as insurance
proceeds were included in last quarter and the current quarter includes
a $15 million write down on assets transferred to held for sale.
Excluding the write down, other revenue was up 50% over prior year.
* Credit metrics remained strong. There were no charge-offs for the
quarter, while delinquencies and non-performing accounts were down from
last quarter and last year. Last year included two large bankrupt
aerospace carriers.
* Aircraft demand remains solid as all aircraft are on contract. During
the quarter we announced the purchase of five additional aircraft.
* Return on risk-adjusted capital improved to 15.4% (excluding the
noteworthy items) from 12.0% last year, reflecting improved aerospace
profitability.
Trade Finance
* Total net revenues increased to $117.1 million from $113.1 million last
year and $106.9 million last quarter.
* Net finance revenue decreased 28 bps from the prior quarter reflecting
seasonality in receivable balances and cash collections, but was up 56
bps from the prior year. Net finance revenue increased to $39.8 million
from approximately $37 million last quarter and last year.
* Other revenue was up $8 million over prior quarter on seasonal volume
growth and flat to prior year, as volume growth was offset by lower
commission rates.
* Net charge-offs were up from last quarter, as we wrote down an account
that was classified as non-performing last quarter. Delinquencies and
non-performing accounts were down from last quarter.
* The prior quarter European acquisition helped increase factored volumes
versus last quarter and last year.
* Return on risk adjusted capital declined to 24.8% from 27.2% last year.
Conference Call and Webcast:
We will discuss this quarter's results, as well as ongoing strategy, on
a conference call and audio web cast today at 11:00 am (ET). Interested
parties may access the conference call live today by dialing 866-831-6272
for U.S. and Canadian callers or 617-213-8859 for international callers,
and reference access code 96298972 or access the audio web cast 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
(ET) October 25, 2006, by dialing 888-286-8010 for U.S. and Canadian
callers or 617-801-6888 for international callers with the access code
45039064, or at the following website: 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 more than $70 billion in managed assets
and possesses the financial resources, industry expertise and product
knowledge to serve the needs of clients across approximately 30 industries
worldwide. CIT, a Fortune 500 company and a member of the S&P 500 Index,
holds leading positions in cash flow lending, vendor financing, factoring,
equipment and transportation financing, Small Business Administration
loans, and asset-based lending. With its global headquarters in New York
City, CIT has more than 7,000 employees in locations throughout North
America, Europe, Latin America, and Asia Pacific. http://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," "target," 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, 2005. 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/.
Contact:
Investor
Relations Steven Klimas Vice President (973) 535-3769
Media
Relations C. Curtis Ritter Director of External (212) 461-7711
Communications & Curt.Ritter@CIT.com
Media Relations
Mary Flynn Director of Media (212) 461-7860
Relations Mary.Flynn@CIT.com
CIT GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INCOME STATEMENTS
(dollars in millions, except per share data)
Quarters Ended Nine Months Ended
September June September September September
30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
Finance revenue $1,471.5 $1,379.3 $1,153.7 $4,145.4 $3,282.4
Interest expense 768.8 677.7 495.4 2,044.8 1,354.7
Net finance revenue 702.7 701.6 658.3 2,100.6 1,927.7
Depreciation on
operating lease
equipment 256.5 256.2 242.6 762.1 721.4
Net finance revenue
after depreciation
on operating lease
equipment 446.2 445.4 415.7 1,338.5 1,206.3
Provision for credit
losses 72.5 48.2 69.9 154.0 162.4
Finance revenue, net
of interest expense,
depreciation, and
credit provision 373.7 397.2 345.8 1,184.5 1,043.9
Other revenue 324.7 303.5 239.5 888.3 848.6
Total revenue, net
of interest expense,
depreciation and
credit provision 698.4 700.7 585.3 2,072.8 1,892.5
Salaries and general
operating expenses 351.7 344.8 281.1 1,019.6 813.9
Provision for
restructuring 8.5 - - 19.6 25.2
Income before
provision for
income taxes 338.2 355.9 304.2 1,033.6 1,053.4
Provision for income
taxes (39.7) (111.9) (86.8) (252.9) (357.3)
Minority interest,
after tax (0.2) (0.5) (0.8) (1.5) (2.8)
Net income before
preferred stock
dividends 298.3 243.5 216.6 779.2 693.3
Preferred stock
dividends (7.5) (7.5) (5.2) (22.7) (5.2)
Net income available
to common
stockholders $ 290.8 $ 236.0 $ 211.4 $ 756.5 $ 688.1
Per common share
data
Basic earnings per
share $ 1.46 $ 1.18 $ 1.04 $ 3.80 $ 3.31
Diluted earnings
per share $ 1.44 $ 1.16 $ 1.02 $ 3.72 $ 3.24
Number of shares -
basic (thousands) 198,724 199,189 203,103 199,113 208,088
Number of shares -
diluted (thousands) 202,151 203,923 207,952 203,498 212,580
Other Revenue
Fees and other
income $ 140.1 $ 144.6 $ 110.3 $ 412.9 $ 336.6
Factoring
commissions 61.3 55.9 63.5 173.0 174.6
Gains on
receivable sales
and syndication
fees 88.8 63.1 39.3 192.5 130.4
Gains on sales of
leasing equipment 36.1 33.2 20.7 90.7 64.2
Gains on
securitizations 13.6 6.5 11.3 33.7 34.2
Gain on sale of
real estate
investment - - 115.0 - 115.0
Charges related to
transportation
assets transferred
to held for sale (15.0) - (86.6) (15.0) (86.6)
Charge related to
manufactured
housing assets
held for sale - - (20.0) - (20.0)
(Loss)/gain on
derivatives - - (14.3) - 65.8
Gain on sale of
business aircraft
portfolio - - - - 22.0
(Loss)/gain on
venture capital
investments (0.2) 0.2 0.3 0.5 12.4
Total other revenue $ 324.7 $ 303.5 $ 239.5 $ 888.3 $ 848.6
Fees and other income primarily includes servicing fees and structuring
and advisory fees.
CIT GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
September 30, December 31,
2006 2005
ASSETS
Financing and leasing assets:
Finance receivables $53,161.0 $44,294.5
Reserve for credit losses (658.8) (621.7)
Net finance receivables 52,502.2 43,672.8
Operating lease equipment, net 10,472.5 9,635.7
Financing and leasing assets held
for sale 1,768.5 1,620.3
Cash and cash equivalents 3,344.3 3,658.6
Retained interests in securitizations
and other investments 1,146.1 1,152.7
Goodwill and intangible assets, net 1,028.0 1,011.5
Other assets 2,928.0 2,635.0
Total Assets $73,189.6 $63,386.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Commercial paper $ 4,662.5 $ 5,225.0
Deposits 2,210.3 261.9
Variable-rate senior unsecured notes 18,376.0 15,485.1
Fixed-rate senior unsecured notes 26,802.1 22,591.7
Non-recourse secured borrowings -
student lending 4,182.9 4,048.8
Preferred capital securities 250.7 252.0
Total debt 56,484.5 47,864.5
Credit balances of factoring clients 4,318.7 4,187.8
Accrued liabilities and payables 4,788.8 4,321.8
Total Liabilities 65,592.0 56,374.1
Minority interest 38.4 49.8
Stockholders' Equity:
Preferred stock 500.0 500.0
Common stock 2.1 2.1
Paid-in capital 10,656.4 10,632.9
Accumulated deficit (3,057.2) (3,691.4)
Accumulated other comprehensive income 165.5 115.2
Less: Treasury stock, at cost (707.6) (596.1)
Total Common Stockholders' Equity 7,059.2 6,462.7
Total Stockholders' Equity 7,559.2 6,962.7
Total Liabilities and Stockholders' Equity $73,189.6 $63,386.6
Other Assets
Investments in and receivables from
non-consolidated subsidiaries $ 523.2 $ 549.8
Accrued interest and receivables from
derivative counterparties 566.0 350.2
Deposits on commercial aerospace
flight equipment 474.1 317.4
Prepaid expenses 142.2 145.9
Repossessed assets and off-lease equipment 110.3 80.7
Furniture and fixtures, miscellaneous
receivables and other assets 1,112.2 1,191.0
$ 2,928.0 $ 2,635.0
CIT GROUP INC. AND SUBSIDIARIES
OWNED AND MANAGED ASSET COMPOSITION
(dollars in millions)
September 30, June 30, September 30,
2006 2006 2005
Specialty Finance Group
Vendor Finance(2)
Finance receivables $ 7,199.3 $ 7,322.3 $ 7,395.2
Operating lease equipment,
net 979.4 1,038.4 1,116.7
Financing and leasing assets
held for sale 627.3 527.2 912.8
Owned assets 8,806.0 8,887.9 9,424.7
Finance receivables
securitized and managed
by CIT 3,830.4 3,840.8 3,996.2
Managed assets 12,636.4 12,728.7 13,420.9
Consumer and Small Business
Lending(2)
Finance receivables - home
lending 9,800.4 9,263.2 6,447.5
Finance receivables -
education lending 7,772.1 6,929.3 4,396.1
Finance receivables -
small business lending 1,112.7 1,262.4 1,209.9
Finance receivables -
other 490.4 436.4 289.9
Financing and leasing
assets held for sale 570.3 505.0 724.4
Owned assets 19,745.9 18,396.3 13,067.8
Home lending finance
receivables securitized
and managed by CIT 675.2 723.8 911.4
Managed assets 20,421.1 19,120.1 13,979.2
Commercial Finance Group
Corporate Finance(1)
Finance receivables 17,774.1 16,178.6 13,439.2
Operating lease equipment,
net 170.4 167.3 185.2
Financing and leasing
assets held for sale 422.3 211.8 105.9
Owned assets 18,366.8 16,557.7 13,730.3
Finance receivables
securitized and
managed by CIT 2,005.0 2,121.3 2,631.8
Managed assets 20,371.8 18,679.0 16,362.1
Transportation Finance
Finance receivables 1,527.1 1,474.4 2,118.5
Operating lease
equipment, net 9,322.7 9,377.9 7,882.5
Financing and leasing
assets held for sale 148.6 67.6 105.3
Owned assets 10,998.4 10,919.9 10,106.3
Trade Finance
Finance receivables 7,484.9 6,439.5 7,388.9
Financing and leasing
assets held for sale - 29.0 -
Owned assets 7,484.9 6,468.5 7,388.9
Other - Equity Investments 28.0 27.8 31.1
Total
Finance receivables $53,161.0 $49,306.1 $42,685.2
Operating lease
equipment, net 10,472.5 10,583.6 9,184.4
Financing and leasing
assets held for sale 1,768.5 1,340.6 1,848.4
Financing and leasing
assets excl. equity
investments 65,402.0 61,230.3 53,718.0
Equity investments
(included in other assets) 28.0 27.8 31.1
Owned assets 65,430.0 61,258.1 53,749.1
Finance receivables
securitized and
managed by CIT 6,510.6 6,685.9 7,539.4
Managed assets $71,940.6 $67,944.0 $61,288.5
(1) During the first quarter of 2006, the assets of Equipment Finance
were transferred to Corporate Finance. At the same time, a portfolio
of approximately $350 million of vendor related assets that were part
of Equipment Finance, were transferred to Vendor Finance. Prior year
data has been conformed for the transfer to Corporate Finance, but not
the portfolio asset transfer to Vendor Finance.
(2) During the first quarter of 2006, Small Business Lending was
transferred from Vendor Finance to Consumer. Prior periods have been
conformed to this presentation.
CIT GROUP INC. AND SUBSIDIARIES
SEGMENT DATA
(dollars in millions)
Quarters Ended Nine Months Ended
September June September September September
30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
Specialty Finance
Group
Vendor Finance
Net finance
revenue $ 261.0 $ 264.5 $ 282.1 $ 791.9 $ 838.2
Depreciation on
operating lease
equipment 136.1 137.4 143.0 410.0 426.5
Provision for
credit losses 14.6 15.7 17.6 43.2 49.7
Other revenue 96.7 98.8 48.9 280.3 192.9
Total revenue,
net of
interest expense,
depreciation
and credit
provision 207.0 210.2 170.4 619.0 554.9
Provision for
income taxes (50.3) (42.9) (32.0) (137.3) (114.3)
Net income 66.1 81.2 59.5 221.7 193.7
Return on risk-
adjusted capital 23.5% 28.3% 19.9% 25.8% 21.1%
New business
volume $2,039.0 $2,063.9 $2,622.3 $6,052.0 $ 7,224.5
Consumer and
Small Business
Lending
Net finance
revenue $ 86.1 $ 84.7 $ 64.2 $ 251.5 $ 176.6
Provision for
credit losses 20.2 17.4 15.3 53.1 44.8
Other revenue 58.6 42.4 39.5 140.1 111.4
Total revenue,
net of interest
expense,
depreciation and
credit provision 124.5 109.7 88.4 338.5 243.2
Provision for
income taxes (28.9) (18.7) (16.1) (66.2) (47.9)
Net income 48.3 31.7 25.4 110.4 73.2
Return on risk-
adjusted capital 16.7% 11.6% 11.4% 13.4% 12.3%
New business
volume $4,251.0 $3,486.7 $2,656.3 $11,569.2 $ 6,745.6
Total Specialty
Finance Group
Net finance
revenue $ 347.1 $ 349.2 $ 346.3 $ 1,043.4 $ 1,014.8
Depreciation on
operating lease
equipment 136.1 137.4 143.0 410.0 426.5
Provision for
credit losses 34.8 33.1 32.9 96.3 94.5
Other revenue 155.3 141.2 88.4 420.4 304.3
Total revenue,
net of interest
expense,
depreciation and
credit provision 331.5 319.9 258.8 957.5 798.1
Provision for
income taxes (79.2) (61.6) (48.1) (203.5) (162.2)
Net income 114.4 112.9 84.9 332.1 266.9
Return on risk-
adjusted capital 20.0% 19.9% 16.1% 19.5% 17.6%
New business
volume $6,290.0 5,550.6 $5,278.6 $17,621.2 $13,970.1
Corporate and Other
Net finance
revenue $ (0.4) $ (2.6) $ 6.8 $ (1.0) $ 37.8
Provision for
credit losses 20.0 12.2 28.2 32.2 25.6
Other revenue (6.3) 1.0 94.1 (4.8) 203.4
Total revenue,
net of interest
expense,
depreciation and
credit provision (26.7) (13.8) 72.7 (38.0) 215.7
Provision for
income taxes 58.2 23.7 (12.1) 115.5 (20.4)
Net income (loss) (60.1) (66.4) 4.0 (170.0) 12.7
CIT GROUP INC. AND SUBSIDIARIES
SEGMENT DATA
(dollars in millions)
Quarters Ended Nine Months Ended
September June September September September
30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
Commercial
Finance Group
Corporate Finance
Net finance
revenue $ 143.5 $ 143.6 $ 116.1 $ 412.4 $ 355.3
Depreciation on
operating lease
equipment 7.5 7.9 9.6 24.0 37.1
Provision for
credit losses 1.4 (3.6) 0.2 (3.9) 21.2
Other revenue 96.4 58.4 56.4 214.8 190.0
Total revenue,
net of interest
expense,
depreciation and
credit provision 231.0 197.7 162.7 607.1 487.0
Provision for
income taxes (53.6) (42.1) (41.9) (136.9) (127.3)
Net income 93.3 80.0 68.3 240.5 208.9
Return on risk-
adjusted capital 17.6% 16.2% 16.4% 16.2% 16.4%
New business
volume $4,261.1 $3,654.7 $1,926.7 $10,353.8 $6,045.4
Transportation
Finance
Net finance
revenue $ 172.7 $ 174.2 $ 152.1 $ 531.8 $ 421.1
Depreciation on
operating lease
equipment 112.9 110.9 90.0 328.1 257.9
Provision for
credit losses - 1.4 2.3 1.4 2.7
Other revenue 2.0 33.2 (75.4) 41.2 (61.5)
Total revenue,
net of interest
expense,
depreciation and
credit provision 61.8 95.1 (15.6) 243.5 99.0
Provision for
income taxes 60.8 (6.0) 44.6 49.9 30.3
Net income 100.6 66.7 5.8 225.2 71.3
Return on risk-
adjusted capital 26.8% 18.1% 1.7% 20.4% 7.4%
New business
volume $ 458.9 $ 785.7 $ 669.9 $1,741.7 $1,562.8
Trade Finance
Net finance
revenue $ 39.8 $ 37.2 $ 37.0 $ 114.0 $ 98.7
Provision for
credit losses 16.3 5.1 6.3 28.0 18.4
Other revenue 77.3 69.7 76.0 216.7 212.4
Total revenue,
net of interest
expense,
depreciation and
credit provision 100.8 101.8 106.7 302.7 292.7
Provision for
income taxes (25.9) (25.9) (29.3) (77.9) (77.7)
Net income 42.6 42.8 48.4 128.7 128.3
Return on risk-
adjusted capital 24.8% 26.5% 27.2% 26.0% 25.8%
New business
volume $ 171.7 $ 127.5 $ 108.2 $ 428.8 $ 216.5
Total Commercial
Finance Group
Net finance
revenue $ 356.0 $ 355.0 $ 305.2 $1,058.2 $ 875.1
Depreciation on
operating lease
equipment 120.4 118.8 99.6 352.1 295.0
Provision for
credit losses 17.7 2.9 8.8 25.5 42.3
Other revenue 175.7 161.3 57.0 472.7 340.9
Total revenue,
net of interest
expense,
depreciation and
credit provision 393.6 394.6 253.8 1,153.3 878.7
Provision for
income taxes (18.7) (74.0) (26.6) (164.9) (174.7)
Net income 236.5 189.5 122.5 594.4 408.5
Return on risk-
adjusted capital 22.0% 18.5% 13.0% 19.3% 14.9%
New business
volume $4,891.7 $4,567.9 2,704.8 $12,524.3 7,824.7
Quarters Ended
September 30, June 30, September 30,
2006 2006 2005
Net Credit Losses - Owned as
a Percentage of Average
Finance Receivables
Vendor Finance $15.3 0.84% $16.7 0.89% $18.0 0.95%
Consumer and Small
Business Lending 26.9 0.58% 24.1 0.56% 21.2 0.70%
Total Specialty Finance
Group 42.2 0.65% 40.8 0.66% 39.2 0.79%
Corporate Finance 1.4 0.03% (5.4) -0.14% 0.2 0.01%
Transportation Finance - - 1.4 0.36% 2.3 0.39%
Trade Finance 16.3 0.95% 5.8 0.35% 6.3 0.36%
Total Commercial Finance
Group 17.7 0.28% 1.8 0.03% 8.8 0.16%
Total $59.9 0.47% $42.6 0.35% $48.0 0.46%
Net Credit Losses - Managed
as a Percentage of Average
Managed Finance
Receivables
Vendor Finance $22.9 0.83% $25.6 0.91% $27.7 0.98%
Consumer and Small
Business Lending 31.1 0.64% 31.1 0.70% 29.4 0.89%
Total Specialty Finance
Group 54.0 0.71% 56.7 0.78% 57.1 0.93%
Corporate Finance 3.2 0.07% (2.9) -0.06% 2.8 0.07%
Transportation Finance - - 1.4 0.36% 2.3 0.39%
Trade Finance 16.3 0.95% 5.8 0.35% 6.3 0.36%
Total Commercial
Finance Group 19.5 0.28% 4.3 0.07% 11.4 0.18%
Total $73.5 0.51% $61.0 0.44% $68.5 0.56%
Nine Months Ended
September 30, 2006 September 30, 2005
Net Credit Losses - Owned as a
Percentage of Average Finance
Receivables
Vendor Finance $ 45.8 0.82% $ 51.4 0.88%
Consumer and Small Business
Lending 72.6 0.56% 57.8 0.73%
Total Specialty Finance Group 118.4 0.64% 109.2 0.79%
Corporate Finance (3.7) -0.02% 20.7 0.21%
Transportation Finance 1.4 0.11% 2.7 0.15%
Trade Finance 28.8 0.58% 18.4 0.37%
Total Commercial Finance
Group 26.5 0.16% 41.8 0.25%
Total $144.9 0.40% $151.0 0.50%
Net Credit Losses - Managed as
a Percentage of Average Managed
Finance Receivables
Vendor Finance $ 70.2 0.83% $ 80.9 0.94%
Consumer and Small Business
Lending 90.4 0.67% 78.1 0.89%
Total Specialty Finance Group 160.6 0.73% 159.0 0.92%
Corporate Finance 1.6 0.03% 32.2 0.27%
Transportation Finance 1.4 0.11% 2.7 0.15%
Trade Finance 28.8 0.58% 18.4 0.37%
Total Commercial Finance
Group 31.8 0.17% 53.3 0.29%
Total $192.4 0.46% $212.3 0.59%
Finance Receivables Past
Due 60 days or more -
Owned as a Percentage September 30, June 30, September 30,
of Finance Receivables 2006 2006 2005
Vendor Finance $ 210.5 2.92% $213.3 2.91% $260.9 3.53%
Consumer and Small Business
Lending 723.8 3.77% 546.2 3.05% 325.5 2.64%
Total Specialty Finance
Group 934.3 3.54% 759.5 3.01% 586.4 2.97%
Corporate Finance 117.0 0.66% 87.0 0.54% 106.0 0.79%
Transportation Finance 16.0 1.04% 18.7 1.27% 21.6 1.02%
Trade Finance 105.5 1.41% 117.5 1.82% 36.6 0.50%
Total Commercial Finance
Group 238.5 0.89% 223.2 0.93% 164.2 0.72%
Total $1,172.8 2.21% $982.7 1.99% $750.6 1.76%
Non-performing Assets -
Owned as a Percentage of
Finance Receivables
Vendor Finance $ 87.2 1.21% $101.2 1.38% $119.2 1.61%
Consumer and Small Business
Lending 379.4 1.98% 297.5 1.66% 190.0 1.54%
Total Specialty Finance
Group 466.6 1.77% 398.7 1.58% 309.2 1.57%
Corporate Finance 221.0 1.24% 196.9 1.22% 134.3 1.00%
Transportation Finance 8.3 0.54% 10.5 0.71% 96.7 4.56%
Trade Finance 69.8 0.93% 79.5 1.23% 6.4 0.09%
Total Commercial Finance
Group 299.1 1.12% 286.9 1.19% 237.4 1.03%
Total $765.7 1.44% $685.6 1.39% $546.6 1.28%
Finance Receivables Past
Due 60 days or more -
Managed as a Percentage
of Managed Financial Assets
Vendor Finance $ 337.9 2.90% $ 309.1 2.64% $357.3 2.90%
Consumer and Small Business
Lending 783.9 3.84% 611.3 3.20% 411.3 2.94%
Total Specialty Finance
Group 1,121.8 3.50% 920.4 2.99% 768.6 2.92%
Corporate Finance 137.6 0.68% 90.6 0.49% 125.5 0.78%
Transportation Finance 16.0 0.95% 18.7 1.21% 21.6 0.97%
Trade Finance 105.5 1.41% 117.5 1.82% 36.6 0.50%
Total Commercial Finance
Group 259.1 0.88% 226.8 0.86% 183.7 0.71%
Total $1,380.9 2.25% $1,147.2 2.00% $952.3 1.83%
CIT GROUP INC. AND SUBSIDIARIES
RATIOS AND OTHER DATA
(dollars in millions, except per share data)
Quarters Ended Nine Months Ended
September June September September September
Profitability 30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
Net finance revenue
as a percentage
of AEA 2.99% 3.16% 3.41% 3.17% 3.41%
Net finance revenue
after provision as
a percentage of
AEA 2.51% 2.82% 2.84% 2.80% 2.95%
Salaries and
general operating
expenses as a
percentage of AMA 2.18% 2.19% 2.01% 2.20% 2.05%
Efficiency ratio(1) 44.4% 46.0% 42.0% 45.4% 41.4%
Return on average
common stockholders'
equity 16.9% 14.1% 13.8% 15.1% 14.8%
Return on average
tangible common
stockholders'
equity 19.9% 16.6% 16.4% 17.8% 17.1%
Return on AEA 1.95% 1.68% 1.73% 1.79% 1.95%
Return on AMA 1.76% 1.50% 1.51% 1.60% 1.68%
See "Non-GAAP Disclosures" for additional information regarding
profitability ratio and metric comparisons.
(1) Including the restructuring charge, debt termination charges and
charges on assets transferred to held for sale, the efficiency ratio
was 46.7% for the quarter ended September 30, 2006.
Average Assets
Average Finance
Receivables
(AFR) $51,503.3 $48,393.8 $42,086.4 $48,514.6 $40,547.2
Average Earning
Assets (AEA) 59,616.2 56,296.3 48,781.2 56,331.0 47,091.0
Average Managed
Assets (AMA) 66,109.3 63,032.6 56,011.0 63,098.3 54,466.8
Average Operating
Leases (AOL) 10,619.5 10,481.9 8,878.7 10,312.7 8,597.2
Average Common
Stockholders'
Equity 6,881.0 6,715.9 6,125.0 6,691.6 6,184.2
Average Tangible
Common
Stockholders'
Equity 5,849.5 5,691.7 5,166.0 5,665.6 5,350.7
September 30, June 30, September 30,
2006 2006 2005
Capital and Leverage
Total tangible stockholders'
equity to managed assets 9.36% 9.59% 9.50%
Tangible book value per
common share $30.07 $29.04 $25.33
Reserve for Credit Losses
Reserve for credit losses as
a percentage of finance
receivables 1.24% 1.29% 1.53%
Reserve for credit losses as
a percentage of finance
receivables, excluding
student loans 1.45% 1.51% 1.70%
Reserve for credit losses as
a percentage of finance
receivables past due 60
days or more 56.2% 64.9% 87.0%
Reserve for credit losses as
a percentage of
non-performing assets 86.0% 93.1% 119.4%
CIT GROUP INC. AND SUBSIDIARIES
Aerospace Portfolio Data
(dollars in millions unless specified)
Total Aerospace Portfolio: September 30, June 30, September 30,
Financing and leasing assets 2006(2) 2006(2) 2005(2)
Commercial $6,357.2 $6,350.0 $5,533.5
Regional $ 173.4 $ 178.3 $ 291.4
Number of planes:
Commercial 210 214 208
Regional 69 72 117
September 30, June 30, September 30,
2006 2006 2005
Commercial Aerospace
Portfolio: Net Net Net
By Region: Investment Number Investment Number Investment Number
Europe $2,762.1 87 $2,708.8 86 $2,217.2 72
U.S. and Canada 887.3 36 905.5 41 1,061.4 59
Asia Pacific 1,494.3 50 1,509.0 50 1,467.6 50
Latin America 849.9 28 859.6 28 531.7 21
Africa / Middle East 363.6 9 367.1 9 255.6 6
Total $6,357.2 210 $6,350.0 214 $5,533.5 208
By Manufacturer:
Boeing $2,832.3 114 $2,750.0 114 $2,603.7 124
Airbus 3,507.3 93 3,571.7 94 2,886.6 76
Other 17.6 3 28.3 6 43.2 8
Total $6,357.2 210 $6,350.0 214 $5,533.5 208
By Body Type (1):
Narrow body $4,918.6 171 $4,896.9 172 $4,091.6 163
Intermediate 1,243.0 26 1,244.2 26 1,101.8 21
Wide body 178.0 10 180.6 10 296.8 16
Other 17.6 3 28.3 6 43.2 8
Total $6,357.2 210 $6,350.0 214 $5,533.5 208
By Product:
Operating lease $5,883.0 189 $5,968.0 190 $4,799.2 168
Leverage lease
(other) 148.2 5 148.5 5 342.6 12
Leverage lease
(tax optimized) 68.2 2 90.2 5 182.5 8
Capital lease 155.6 6 69.3 3 126.3 6
Loan 102.2 8 74.0 11 82.9 14
Total $6,357.2 210 $6,350.0 214 $5,533.5 208
Off-lease
aircraft - 1 2
Number of
accounts 94 97 97
Weighted average
age of fleet
(years) 6 6 6
Largest customer
net investment $ 291.6 $ 294.7 $ 279.3
New Aircraft
Delivery Order
Book (dollars
in billions)
For the Years
Ending December
31,
2005 (Remaining
2005) $ - - $ - - $ 0.2 6
2006 (Remaining
2006) 0.4 8 0.4 8 0.9 19
2007 1.3 26 1.2 26 0.6 14
2008 1.4 24 1.1 21 0.7 18
Thereafter 1.7 21 0.6 5 0.5 5
Total $ 4.9 79 $ 3.3 60 $ 2.9 62
(1) 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.
(2) Balances include aircraft held for sale.
CIT GROUP INC. AND SUBSIDIARIES
Non-GAAP Disclosures
(dollars in millions)
September 30, June 30, September 30,
2006 2006 2005
Managed assets (1):
Finance receivables $53,161.0 $49,306.1 $42,685.2
Operating lease equipment, net 10,472.5 10,583.6 9,184.4
Financing and leasing assets
held for sale 1,768.5 1,340.6 1,848.4
Equity and venture capital
investments (included
in other assets) 28.0 27.8 31.1
Total financing and leasing
portfolio assets 65,430.0 61,258.1 53,749.1
Securitized assets 6,510.6 6,685.9 7,539.4
Managed assets $71,940.6 $67,944.0 $61,288.5
Earning assets (2):
Total financing and leasing
portfolio assets $65,430.0 $61,258.1 $53,749.1
Credit balances of
factoring clients (4,318.7) (3,702.8) (4,267.1)
Earning assets $61,111.3 $57,555.3 $49,482.0
Tangible equity (3):
Total equity $ 7,059.2 $ 6,910.9 $ 6,111.8
Other comprehensive income
relating to derivative
financial instruments (30.1) (99.9) (15.5)
Unrealized gain on
securitization investments (15.2) (12.0) (20.5)
Goodwill and intangible assets (1,028.0) (1,033.6) (1,003.8)
Tangible common equity 5,985.9 5,765.4 5,072.0
Preferred stock 500.0 500.0 500.0
Preferred capital securities 250.7 251.2 252.5
Tangible equity $ 6,736.6 $ 6,516.6 $ 5,824.5
Debt, net of overnight deposits(4):
Total debt $56,484.5 $52,235.4 $44,899.3
Overnight deposits (2,349.7) (1,439.2) (962.0)
Preferred capital securities (250.7) (251.2) (252.5)
Debt, net of overnight deposits $53,884.1 $50,545.0 $43,684.8
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.
SOURCE CIT Group Inc.