CIT Reports Third Quarter Results.Quarterly Financial Highlights * Net loss per share of $0.24 * Home lending pre-tax charge of $465 million * Commercial businesses performed well * Strong asset growth * Solid commercial credit quality * Moderating expenses NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- CIT n. 1. A citizen; an inhabitant of a city; a pert townsman; - used contemptuously. Which past endurance sting the tender cit. - Emerson. Group Inc. (NYSE NYSE See: New York Stock Exchange : CIT), today reported diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net loss per share of $0.24 for the third quarter of 2007, due to the home lending charge, versus $1.44 of earnings per share for the 2006 quarter. Net loss attributable to common shareholders was $46.3 million for the current quarter, versus net income of $290.8 million last year. The Company took the following actions on its home lending liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy strategy: * Recorded a lower of cost or market lower of cost or market A method for determining an asset's value such that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. ("LOCOM LOCOM Lower of Cost or Market (inventory valuation method/rule) LOCOM Lake Oswego Communications (Oregon emergency dispatch) ") charge relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc home lending of $465.5 million, or $290.5 million after-tax (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. decrease of $1.53) * Closed the origination operations (as previously announced) and recorded a pre-tax charge of $39.6 million (EPS decrease of $0.12); * Retained $9.7 billion of the portfolio to be liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. under contractual terms A contractual term is "[a]ny provision forming part of a contract"[1] Each term gives rise to a contractual obligation, breach of which will can give rise to litigation. over time (now classified as held-for-investment), of which approximately $7.5 billion of collateral was securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. (proceeds of $4.3 billion in September and $0.8 billion in October, accounted for as on-balance sheet non-recourse, secured borrowing); * Contracted to sell approximately $875 million of non-performing and delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. loans in October at prices approximating the September 30, 2007 adjusted carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. . Continuing to market the balance of loans in held-for-sale; and * Generated $23 million of income in the home lending segment, excluding the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. charges, (EPS contribution of $0.12). Excluding the home lending segment, results were driven by improved finance revenue on higher earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin , stable net finance revenue as a percentage of average earning assets, continued strong commercial credit quality, lower expense levels and a lower effective tax rate. "We made good strategic progress this quarter in a very challenging market environment which highlights the value of our model and the resilience resilience (r  ·zilˑ·yens),n of our franchise," said Jeffrey M. Peek, Chairman and Chief Executive Officer of CIT. "CIT's commercial businesses continued to perform well with strong asset growth, increased revenues and stable credit quality. We also advanced our home lending liquidation strategy and mitigated risk through plans to sell $875 million worth of non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. , all while raising $10 billion in asset-backed financing." As required under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , the Company reduced the home lending receivables portfolio to the lower of cost or market. The aforementioned charge reflects further deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in the market value of home lending receivables during the quarter based on observable ob·serv·a·ble adj. 1. Possible to observe: observable phenomena; an observable change in demeanor. See Synonyms at noticeable. 2. market transactions and other market data. At September 30, 2007, the $11.1 billion mortgage portfolio (excluding repossessed assets) was valued at $10.0 billion, a 9.7% discount to the unpaid principal balance compared to 6.4% at June 30, 2007. Consolidated Financial Highlights: Net Finance Revenue * Net finance revenue was up 1% from last quarter and 19% from last year. Average earning assets declined from the prior quarter due to the construction sale last quarter and the LOCOM adjustment on the home lending receivables, but increased from last year on strong asset growth. * Net finance revenue as a percentage of average earning assets was 2.96% versus 2.89% last quarter and 2.99% last year. Funding costs increased over the prior quarter and last year, but were more than offset by higher home lending yields (the elimination of amortization of capitalized origination costs due to the LOCOM adjustment on that portfolio). * Operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. net revenue was 6.90% of average operating leases, down from 6.97% last quarter, due to lower railcar utilization, and up from 6.54% last year due to strength in aerospace rental rates. Other Income * Other income decreased from last quarter, primarily reflecting: (1) a significant gain on the sale of construction assets last quarter, (2) lower gains on receivable sales and syndication fees (3) higher fees and (4) higher factoring commissions. The current quarter also includes $9.5 million of post-closing income from the prior quarter's sale of the construction business. The year-over-year decline in other income was due to reduced loan sales and syndication activity. * Fees and other income improved from last quarter, largely due to higher advisory fees and other income in our healthcare unit. * Factoring commissions increased this quarter on seasonal volume increases, and were essentially flat with the prior year. * Gains on receivable sales and syndication fees were down sharply from last quarter and last year, due to the lack of liquidity and lower activity in the syndicated loan Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. markets and no home lending sales. Loan sale and syndication volume was $1.2 billion (13% of origination volume), down from $5.7 billion (52%) and $3.6 billion (33%) in the prior quarter and prior year quarter. Credit Quality * Net charge-offs as a percentage of average finance receivables were 0.46% (excluding home lending and student lending), up slightly from last quarter due to higher losses in the other consumer portfolios in the Consumer segment and flat with a year ago. * 60+ day owned delinquencies were 1.34% (excluding home lending and student lending), up from last quarter, primarily in Corporate Finance and international Vendor Finance, and flat with a year ago. * Non-performing assets were 1.03% (excluding home lending and student lending), up from last quarter and down from last year. * The percentages in the three preceding items exclude home lending and student lending, both the credit metric as well as the asset base. * Net charge-offs in the home lending portfolio were $55.5 million, up from $38.4 million last quarter and $18.5 million last year. Home lending net charge-offs were not included in third quarter 2007 net charge-offs as losses on these receivables are reflected as a change in our LOCOM adjustment for the quarter. * Reserves for credit losses increased $27 million from June 30, 2007. Excluding specific reserves, U.S. Government guaranteed student loans and home loans, the reserve was 1.20% of finance receivables, down slightly from last quarter reflecting seasonal growth in factoring and essentially flat with last year. Expenses * Salaries and general operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were down 3% from last quarter and up 5% from a year ago. Lower headcount, legal fees, advertising and variable compensation accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. were offset by higher expenses related to the acquisition of a mergers and acquisition advisory firm. The increase from last year primarily relates to costs associated with various acquisitions, partially offset by expense reduction initiatives. * The provision for severance and real estate exit activities totaled $42 million, which included provisions for the elimination of approximately 600 positions, primarily in our home lending business. Approximately 400 of these positions were eliminated in the third quarter, with the remaining scheduled to terminate in the fourth quarter. * Employee headcount totaled approximately 7,010 at September 30, 2007, down from 7,310 last quarter and 7,200 a year ago. Income Tax Provision * The third quarter results included a $95.6 million tax benefit on a $133.3 million pretax loss pretax loss A loss reported before tax benefits are considered. . * Excluding the home lending adjustment, the third quarter effective tax rate approximated 25%. On a go-forward basis, the annual effective tax rate is anticipated to approximate 27%. Volume and Assets * Origination volume for the quarter, excluding factoring and home lending, was $8.6 billion, down from $9.4 billion last quarter and $9.0 billion a year ago. Solid new business volume in Transportation Finance and Vendor Finance was offset by lower Corporate Finance originations, reflecting the sale of the construction business and softer market conditions. The decline from last year is due to the construction business sale and lower healthcare volumes. * Managed assets were up 5% from June 30, 2007 due in part to seasonal growth in Trade Finance and Student Lending and up 17% over last year (21% excluding home lending), driven by the combination of solid origination volume and acquisitions. * Excluding home lending, finance receivables held for sale increased $0.7 billion during the quarter to $3.0 billion primarily on higher Vendor Finance levels. Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , Funding and Liquidity * The ratio of total tangible equity to managed assets at September 30, 2007 was 7.69%, down from 8.27% last quarter and 9.36% last year. * During the quarter we funded our business principally in the asset-backed markets. We raised approximately $9.8 billion of proceeds through on and off balance sheet financings including: $4.3 billion secured by home loans, $2.8 billion secured by student loans, $1.5 billion secured by factoring receivables and $1.2 billion secured by equipment. * In October, we received an additional $0.8 billion of proceeds from home lending receivables securitizations. * Commercial paper outstandings declined to $3.6 billion from $6.2 billion at June 30,2007. * Alternate liquidity at September 30, 2007 included cash and equivalents approximating $5.0 billion, committed and available bank lines of $7.5 billion, and committed and available asset-backed facilities of $2.4 billion. * The Company's preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. and junior subordinated notes require the Company to satisfy dividend and interest payments with the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the sale of common stock in the event the Company's rolling four-quarter fixed charge coverage ratio is less than 1.10. Following the previously discussed home lending actions, the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the Company to issue and sell common stock in amount sufficient to allow it to pay dividends and make interest payments on the aforementioned securities. As a result of selling shares of common stock on October 16, 2007, the Company satisfied the conditions necessary to permit the declaration and payment of preferred stock dividends payable Dividends payable The declared dividend dollar amount that a company is obligated to pay. December 17, 2007. Segment Results: Our segment disclosures reflect changes in our operations relating to the former Consumer and Small Business Lending segment. The presentation of prior period data has been conformed to current period presentation. * The home lending business is being reported as a separate segment, due to changed market conditions and our outlook that such conditions will prevail for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. * The student lending business and certain small consumer loan portfolios previously in the Consumer and Small Business Lending segment, are reported in the Consumer segment. * The small business lending unit was transferred from the former Consumer and Small Business Lending segment to the Corporate Finance segment during the quarter, in line with recent management reporting changes. Corporate Finance * Total net revenues (the sum of net finance revenue and other income) decreased from the prior year as revenue from higher assets and improved advisory fee income from our recent acquisition was offset by lower gains from loan sales and syndications, due to lower market liquidity and syndication activity. We syndicated or sold approximately $850 million of receivables compared to $1.9 billion last year. * Net finance revenue as a percentage of average earning assets was essentially flat with last year. * Net charge-offs increased from last year due to lower recoveries. Delinquencies and non-performing assets increased from last quarter, but remain below last year's levels. * Volume decreased from record levels last year due to market conditions and the sale of the construction business. * Return on risk-adjusted capital was 13.9%, improved from last quarter excluding the construction sale gain, and down from the prior year on lower other income and fewer recoveries. Transportation Finance * Total net revenues were up from last year due to asset growth, improved rental rates and higher gains on equipment sales. * Net finance revenue as a percentage of average earning assets after depreciation was essentially flat with the prior year as continued strength in aerospace rentals was offset by a modest decline in railcar utilization (from nearly full utilization levels). * Credit quality continued strong with net recoveries, stable delinquencies and level non-performing assets. * Volume was strong, effectively doubling from the prior year, as we had good financing flow and took delivery of and placed four new aircraft on leases. All of the scheduled aerospace deliveries through March 2009 have been placed. * Return on risk-adjusted capital improved from last quarter to 16.8% and declined from the prior year, as the year ago period benefited from the release of deferred tax liabilities. Trade Finance * Total net revenues were down slightly from last year as increased net finance revenue on higher net receivables Net Receivables A company's accounts receivable (money owed to the company) minus bad debts. Notes: If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable. was offset by lower commission rates. * Factored volume seasonally increased in the third quarter, but was flat with the prior year. * Net finance revenue as a percentage of average earning assets decreased from the prior year on competitive pricing. * Net charge-offs, delinquencies and non-performing loans were all down from last quarter and last year. * Return on risk-adjusted capital improved to 18.6% from both last quarter and last year. Vendor Finance * Total net revenues were up modestly from last year, as higher net finance revenues driven by asset growth more than offset lower other revenue. * Net finance revenue as a percentage of average earning assets after depreciation was down from last year, primarily due to higher borrowing costs and lower international lending spreads, reflecting recent acquisition activity. * Credit losses were flat versus last quarter and up slightly from last year. Delinquencies and non-performing asset levels increased over both periods. * Total new business volume grew 13% over last year driven by international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . US volumes were essentially flat as declines in Dell volume were offset by improved volume from new vendor relationships. Excluding Dell, volumes were up 60%. * Return on risk-adjusted capital of 13.1% was down from last quarter and last year, reflecting lower joint venture earnings and recent acquisitions for which cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. have not yet been realized. Home Lending * Total net revenues were $67 million, before the LOCOM adjustment, flat with last year. * Net finance revenue as a percentage of average earning assets increased due to the fair value adjustment, which reduced the book value of the assets and eliminated amortization of previously capitalized loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. costs. * Net charge-offs of $55 million, which were applied against the LOCOM adjustment, were above forecast due to increased foreclosures. Net charge-offs included $0.6 million of non-home mortgage receivables, which include our liquidating manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected and recreation vehicle portfolios. Delinquencies and non-performing assets increased from last quarter and last year reflecting portfolio seasoning and continued deterioration in the housing sector. * New business volume was approximately $500 million. The origination platform was closed on August 28, 2007. * Pre-tax earnings were $45 million before allocated corporate overhead and the LOCOM adjustment, in-line with our estimate. Consumer * Total net revenues were up from last year, as higher net finance revenues driven by asset growth more than offset lower other revenue. * Net finance revenue as a percentage of average earning assets declined due to higher funding costs. * Net charge-offs increased in the other consumer portfolios, while delinquencies increased moderately, largely reflecting seasoning of the student lending portfolio. * New business volume improved from last quarter and was flat year-over-year, as school channel volume increased as a percentage of originations. * Return on risk-adjusted capital for the segment was 7.0%, down year over year on lower revenues. Corporate and Other * Corporate and other expenses, principally certain credit loss provisioning, preferred stock dividends and other financing costs, dampened return on equity by approximately 140 basis points this quarter and 100 basis points last year. Conference Call and Webcast: We will discuss this quarter's results, as well as ongoing strategy, on a conference call and audio webcast today at 11:00 am (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). 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 "CIT Group" or access the audio webcast 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 (EDT) October 24, 2007, by dialing 888-286-8010 for U.S. and Canadian callers or 617-801-6888 for international callers with the access code 81502007, or at the following website: http://ir.cit.com. About CIT: Founded in 1908, CIT (NYSE: CIT) is a global commercial finance company that provides financial products and advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal to more than one million customers in over 50 countries across 30 industries. A leader in middle market financing, CIT has more than $80 billion in managed assets and provides financial solutions for more than half of the Fortune 1000. A member of the S&P 500 and Fortune 500, it maintains leading positions in asset-based, cash flow and small business administration lending, equipment leasing Equipment Leasing is a financing option to lease equipment for a certain amount of time. Leasing Benefits
The lending of money by a company to one of its customers so that the customer can buy products from it. By doing this, the company increases its sales even though it is basically buying its own products. and factoring. CIT's brand, Capital Redefined, articulates its value proposition of providing its customers relationship, intellectual and financial capital. www.cit.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2006. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures, which is available with this release and on our website at http://ir.cit.com. Individuals interested in receiving future updates on CIT via e-mail can register at http://newsalerts.cit.com [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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