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July 19,2001 Headlines----
American Express Cuts Again--- CIT and ALSTOM Team Up for the Second Time in Less than Six Months Regions Announces Earnings and Dividend Leasing Ethics----Last Call In Defense of Certified Lease Professionals--- United Association of Equipment Leasing Conference Oct.25-28 ( funding sources who have signed up to exhibit ) ------------------------------------------------------------------------------------------------- Amex Predicts Earnings Will Fall; Sets Job Cuts By Paul Beckett, Wall Street Journal Admitting it misjudged the "riskiness"of its junk-bond investments, American Express announced a pretax write-down of $826 million that will pummel second-quarter profits. The company also unveiled plans to cut as many as 5,000 more jobs because of the weak economy. The write-down came as a particularly nasty surprise for investors because the company took a similar pretax charge of $182 million three months ago, and said then that the move would avoid potentially bigger losses down the road. Second-quarter earnings will drop about 76% from a year ago as a result of the write-down, the company said. The continuing financial woes at the travel and financial-services company, combined with the economic slowdown that the company expects to continue into next year, present a formidable challenge for Kenneth Chenault, a company veteran who became chairman and chief executive earlier this year. Analysts said if Chenault can't fix the problems within 12 months, pressure will build for him to consider selling the company, which recently has been viewed as a potential takeover target or merger partner for another big financial firm. "Ken's off to a tough start," said Mark Alpert, analyst at Deutsche Banc Alex. Brown. Indeed, analysts attributed the relatively small decline in American Express's share price Wednesday (7/18/01) in part to speculation that the company will increasingly be viewed as a takeover candidate. In 4 p.m. New York Stock Exchange composite trading Wednesday, shares of American Express, a component stock of the Dow Jones Industrial Average, were down $1.28, or 3.3%, at $37.50. So far this year, the shares have dropped 32%. The announcements "suggest they are trying to right-size the company themselves," said Joel Houck, analyst with A.G. Edwards & Co. in St. Louis. "But if they are unsuccessful by 2002 and they can't provide some level of comfort, I think pressure's going to mount" for a sale. "We don't comment on market speculation," Chenault said in an interview. But he added, "We believe we have good growth prospects for the company and we want to position the company well entering 2002, and when we see a rebound in the economy I think we will be well-poised to perform." Earnings are due to be formally announced next week. A consensus of analysts' forecasts compiled by Thomson Financial/First Call had previously pegged second-quarter earnings at 53 cents, while the company's estimates suggest earnings will now come in at about 13 cents. Excluding the write-down in the junk-bond portfolio at its American Express Financial Advisors unit, the company said it expects income of $714 million, or 53 cents a share, down from the year-earlier period, when the company earned $740 million, or 54 cents a share. Because of a "more negative view of the economy," the company also said it would eliminate 4,000 to 5,000 jobs this quarter, in addition to about 1,600 job cuts initiated in the first half of the year. As a result, the company expects to post a pretax restructuring charge of $310 million to $370 million in its third-quarter results. Taken together, the job cuts this year will represent about 7% of the total work force. "The actions we announced today are being taken to ensure that we're in a strong position to navigate through what we expect to be a longer period of economic weakness," Chenault said. The junk-bond write-down involved investments the Financial Advisors unit had made in large pools of junk bonds. About $79 million of the charge relates to losses from defaults in the second quarter. A further $403 million stems from lowering of the company's assumptions about the future value of other investments because it now expects junk-bond defaults to remain high into next year. And $344 million of the charge comes from the sale of securities to reduce the risk of the overall portfolio and to increase its credit quality. Chenault said the company "didn't fully comprehend" the risk underlying the securities that it purchased from the junk-bond pool that were rated investment-grade. He added that Wednesday's actions were designed to make the portfolio "high quality and less volatile." American Express Financial Advisors will now have 7% of its portfolio invested in junk securities, down from the 10% to 12% it has had since 1998. The write-down is expected to lead to a $307 million second-quarter loss at the Financial Advisors unit. There are other signs the business is having a tough year: Excluding junk-bond losses, the unit's earnings are expected to decline 22% from a year ago because of weak equity markets and lower investment-product sales. The slowing economy also took a toll at the company's flagship Travel Related Services unit, which includes charge cards. Earnings there are expected to increase about 3%, a much lower rate than in recent years, because of "the substantial slowdown in corporate card-member spending on travel and entertainment," the company said. ( Readers have said that Sierra Cities will go the way Rockwell went, and perhaps they are correct; however, Tom Depping is most likely in Costa Rica, enjoying the cigars from his plantation there, most glad he is out of the leasing business. Maybe that is why he referred to himself as the “gazelle” upon leaving. He got out of there fast. editor ). #### ########### #################### Regions Announces Earnings and Dividend
BIRMINGHAM, Ala.-- Regions Financial Corporation (NASDAQ/NM: RGBK) today announced earnings for the quarter and six months ended June 30, 2001. Operating income totaled $130.6 million or $.57 per diluted share for the second quarter of 2001, compared to $125.3 million or $.57 for the second quarter of 2000. Cash earnings, consistent with recent accounting pronouncements effective in 2002, totaled $.63 per diluted share, a 7% increase over the same period of the prior year. Operating income in 2001 excludes second quarter, non-recurring after-tax expenses of $17.8 million. These expenses are primarily related to the Morgan Keegan transaction and Regions' branch rationalization project. Cash earnings excludes the amortization of excess purchase price and in the second quarter of 2001, non-recurring charges. Net income totaled $112.8 million or $.49 per diluted share and $125.3 million or $.57 per diluted share for the second quarters of 2001 and 2000, respectively. Net income totaled $235.6 million or $1.05 per diluted share and $271.3 million or $1.22 per diluted share for the six months ended June 30, 2001 and 2000, respectively. Revenue for the second quarter of 2001 was favorably impacted by the addition of Morgan Keegan, which contributed $129 million to second quarter revenues. Carl E. Jones, Jr., chairman, president and chief executive officer of Regions, said, "The integration of Morgan Keegan is going very well. Their contribution to the second quarter performance is in line with our expectations. The addition to our franchise of Morgan Keegan positions us as a major provider of financial services in the South and results in a better diversified revenue stream. For the first time in our history, non-interest income exceeded 40% of total revenue." "We continue to execute our strategy of redeploying capital into more profitable products and lines of business. This strategy, coupled with a weak economy, is resulting in slower growth in earning assets and flat earnings comparisons with the prior quarter. We believe that a more profitable product mix and better diversified revenue stream positions Regions for improved performance in the future. We are pleased with the relatively low level of loan losses despite a slowing economy and continue to feel confident in the overall quality of our loan portfolio." Regions also announced that its Board of Directors has declared a quarterly cash dividend of $.28 per share, payable October 1, 2001, to stockholders of record as of September 14, 2001. This is the 121st consecutive quarter in which the company has paid cash dividends, going back to its formation in 1971. Regions Financial Corporation, with $45.1 billion in assets, ranks among the 25 largest financial services companies in the nation. Serving customers throughout the South, it provides traditional commercial and retail banking services and other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, insurance, leasing and mortgage banking. Its banking affiliate, Regions Bank, offers banking services from more than 680 banking offices in Alabama, Arkansas, Florida, Georgia, Louisiana, South Carolina, Tennessee and Texas. Regions provides investment and brokerage services from more than 54 offices of Morgan Keegan & Company, Inc., one of the South's largest investment firms. Regions ranks on both the Forbes 500 and the Fortune 500 listing of America's largest companies; its common stock is traded in the Nasdaq National Market System under the symbol RGBK. ### ############ ################ Leasing Ethics---Last Call ( in Chronological order, as received ) This rambling discourse over the issue of ethics is truly futile. No newsletter, no policing agency, and no "blacklist" could ever stop certain people from lying, cheating, and stealing. It is as old as the Bible, and probably older! If anyone truly believes that licensing stops people from lying, think "Bill Clinton", who has a license to practice law, but lied under penalty of perjury, with the entire world watching. If anyone thinks policing stops people from stealing, look at the recent rip-off at the FBI of over 100 computers and guns. Somehow I think "FBI" are slightly more powerful initials than "ELA", "UAEL", "EAEL", or "CLP". Nor is public chastisement effective. In 18th century London, pick pocketing was so prolific that the authorities decided to make it a hang able offense. At the public hangings, however, there were so many pickpocketing the law was repealed! Let's just do the stuff our parents taught us in kindergarten. Treat people with respect. Do the job, do it fairly and honestly, and do it right. Let's be smart, creative, and aggressive when necessary, but never desperate . Let's not in this "recessionary"economy yield to the temptation to do business with anyone who comes our way. We will pay in the end for, as they say, he who sleeps with the dogs awakes with fleas. As Spike Lee said "Do the Right Thing". It's all we can do. And for God sakes, let's move on to another topic. This is getting old! Ken Greene Kenneth C. Greene & Associates 300 Drakes Landing Road Suite 250 Greenbrae, CA 94904 Tel: 415 925 0700 Fax: 415 925 1293 E-Mail: kgreene100@aol.com +++ What is everyone complaining about? This "ethics" issue is getting real old. The basis of our industry has always been, and probably always will be, an uneducated consumer that we profit from. Skirting the usury laws, not disclosing interest rates, interim rent charges, automatic lease renewals, excessive residuals, etc. etc. By the way, I am well aware that some of these are contractual rights the lessor has. However, just because it is a right the lessor has by virtue of the contract doesn't make it fair or ethical. For that matter, just because a questionable practice is universally used within the industry and is considered the norm doesn't make it ethical. Nor does the passage of time. As far as I am concerned you have no room to complain until every lease you participate in (as broker or funder) clearly states the true interest rate being charged on the first page of the documents. If it doesn't and you're one of the people who are complaining about ethics in our industry, you are a hypocrite. Everyone should stop complaining and start focusing on adding value their customers would be willing to pay for. If you don't like this business or the ethics involved, get out. Just don't be a holier-than-thou hypocrite. Print this if you would like. Jeff Wetter jwetter@flexlease.com www.flexlease.com +++ WHEN YOU TELL THE TRUTH, YOU HAVE NOTHING TO REMEMBER.....Gee what a concept...maybe if the Leasing industry would start giving fair deals ,and not trying to "rip every ones head off"...we would have a better rep...There are going to be Hogs in every industry, but the concentrated numbers in this industry is unreal...SDI was a great example of HOGS. They have gone to slaughter, thank God Jesse James Vice President Vendor Services Bluedot Funding,LLC 800-850-3101 ext. 234 530-430-3018 Fax +++ I must agree with Mr. Vionnet's statement that a title does not make a person. I personally have seen the way a number of CLP's behave, and I honestly believe that each one of them would steal from their mothers if it would give them another penny. And these CLP's would then pat themselves on the back for the money they made! Mr. Julian's comment regarding the "crying foul" due to the lack of funding of one deal smacks too true. This is why I think that the listserve does a disservice to the leasing industry. Some deals will never get done - there is just too much hair. Some deals will take a lot of work. Instead of pissin' & moanin' about that fact that all of your deals are not slam-dunks, just shut-up and get to work. Julian's idea about a Bounty is interesting...but who will run it? CLP's? UAEL?, ELA?, etc... I hope not. You may quote me. Cary Sue Lavan Home State Leasing Corp. subsidiary of Home State Bank +++ Let me speak from a Funders viewpoint. I agree with Debbie regarding the issue of ethics. I have been funding Brokers for over 25 years and can say without a doubt that CLP means nothing to me as it relates to ethics. Russ has some good points. So do some of the other responders. What makes me cringe is when some of the CLP people who I would not fund because of their ethics are on the podium at EAL and other events. I too got caught with the Nor Kong fraud and with the Xerox fraud on the East Coast. Please guess whom I purchased them from? They both had CLP after their names. Neither would honor reps & warrants. Fortunately a major firm did the commodity check and my company did not suffer. Greed and wealth are the mantra for many newer Brokers. When transactions are split onto three "app only" deals which get under the radar because of the size, when transactions are double and triple brokered without notification, when Brokers get upset because of a points limitation, when signatures are altered, when reps & warrants mean nothing, when a fraud transaction occurs and the Brokers offers to "split the loss" and when Brokers get by the points limitation by keeping the first so many payments or when the Broker asks the funding source to fund the transaction for 33 months in arrears on a 36 month deal so that they can keep the first three payments and the customer wants to know why the transaction is documented for 33 months when quoted for 36, all of which happen all the time, knowledge of one who one does business with is the best economic decision. Please be advised that I have always represented a funding source, not a "Super Broker" so my comments come from someone who has "written the check" and quite possibly may have seen it all. Food for thought. Do business with people you can trust. As long as you do, ethics are not a problem. If you don't believe me, ask Citicorp and what they have done with Copelco, EAB and The Associates. There is a reason they do not buy Broker Paper. Kit: Don't not use my name as I am still funding Brokers. +++ You said last call, but the last few responses made my blood boil. They referred to the small broker that can't survive, and has to be unethical. The small broker can make a good living and be ethical. Charging 10-15 points is not a problem with ethics. If you give a client a payment and they are happy, then they are happy. 10-15 points profit in most industries is below par. America was created on the backs of the small business owners. And most of them started in the spare bedroom and worked hard to get the business going. Being a small broker, I am amazed at all the whining. Everyone should shut up, try to make the best of a tough industry and close some business. Please withhold my name. +++ To the author of: I find to quite entertaining when these small timers talk about ethic's when they buy money @ 12.00% APR, add $75.00 doc fee, 10 points of profit and call it a good deal. Charging these small business owners outrageous lease pricing is what gives the industry a bad name. Are 10 points of commission ethical? NOT! But I'm sure all of these brokers would like to get these types of yields on every transaction. It's the life of the small ticket broker but it is also ruining small businesses nationwide. I strongly advise your to keep funding deals at your margins, I could stand one less competitor. In fact, please consider a start-up program since that is where all of us brokers are really ruining the small business community. Your 11.5% start-up program could single handedly save the mom and pop. By your syntax and spelling, it is clear you may lack of higher education so please research the following three word phrase "risk versus return". Andrew S. Nere Innovative Lease Services, Inc. ils@ilslease.com (800)438-1470 Ext. 204 ++++ Let these bleeding hearts add up their mortgage payments over 30 years and see how much interest Wells Fargo is making off the "Poor Little American Homeowner". Margin is the name of game! Thank You in advance for printing these responses, I enjoy your letters! Tim Baker Vision Capital +++ "I had a customer mail me a thank you card that I received today. I booked a lease for this customer with a payment of $491.00 (our yield on this transaction was 11.49%). When I got a hold of this gentleman originally, he had docs from Republic Leasing with a payment of $688.00. Same terms (48 month,1 advance, 10%put)" Kit, I think your anonymous contributor mixed up his numbers in the heat of bashing us small brokers. The deal he describes is roughly $20,000. If we are to believe his numbers, the broker added 40 or more points to his Republic deal. I don't think that would fly over at Republic. ******************************************* John Craine, VP Sales PowerNet Financial Group Inc. Your Professional Equipment Leasing Network http://www.thePowerNet.com (800)348-2288 Fax (509)695-3091 ( We asked Anonymous for a response, and here it is: Obviously another comment from a small timer, but thank him/her for checking the numbers for me. It must of took him/her an hour to figure that out with his/her blue book of Annuity tables. After calling “MY” customer back to confirm the numbers she wrote on her thank you card, she informed me that the payment was $608.88. It was an honest mistake on her part. I was not bashing Republic Leasing, I don’t know |