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Investments in Affiliated Companies
12 Months Ended
Dec. 31, 2016
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Affiliated Companies

Investments in affiliated companies represent investments in and loans to domestic and foreign affiliates, and primarily include companies offering lease financing and related services for customers operating rail and marine assets, as well as entities that lease aircraft spare engines. Loan amounts included in investments in affiliated companies were $9.7 million as of December 31, 2016 and $11.2 million as of December 31, 2015.

In 2015, as a result of our decision to exit the majority of our marine investments within our Portfolio Management segment, we recorded a $19.0 million impairment loss and then sold our 50% interest in the Cardinal Marine joint venture. We received aggregate cash proceeds of $24.7 million from this sale. In 2016, we recognized a gain of $1.0 million resulting from contingent proceeds received as part of the sale.

In 2014, we sold our investments in the Intermodal Investment Fund V and Intermodal Investment Fund VII affiliates for aggregate cash proceeds of $18.3 million.

The following table presents our most significant investments in affiliated companies and our ownership percentage in those companies by segment as of December 31, 2016 (in millions):
 
Segment
 
Investment
 
Percentage
Ownership
Rolls-Royce & Partners Finance (1)
Portfolio Management
 
$
375.3

 
50.0
%
Adler Funding LLC
Rail North America
 
10.2

 
12.5
%
Other affiliates
Various
 
1.5

 
Various

Investments in Affiliated Companies
 
 
$
387.0

 
 
__________
(1) Combined investment balances of fifteen separate joint ventures (collectively, the "RRPF affiliates").

The following table shows our share of affiliates’ earnings by segment for the years ending December 31 (in millions):
 
2016
 
2015
 
2014
Rail North America
$
0.5

 
$
0.5

 
$
7.9

Rail International
(0.2
)
 
(0.3
)
 
(0.3
)
Portfolio Management (1)
52.8

 
45.2

 
60.2

Share of affiliates' earnings (pretax)
53.1

 
45.4

 
67.8

Income taxes
(5.7
)
 
0.5

 
(18.3
)
Share of Affiliates' Earnings
$
47.4

 
$
45.9

 
$
49.5


__________
(1) Amount for 2015 is net of impairment losses of $19.0 million.

The following table shows our cash investments in and distributions and loan payments from our affiliates by segment for the years ended December 31 (in millions):
 
Cash Investments
 
Cash Distributions (1)
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Rail North America
$

 
$

 
$

 
$
1.5

 
$
5.1

 
$
20.0

Portfolio Management
25.0

 
15.5

 
15.3

 
35.2

 
32.2

 
34.2

 
$
25.0

 
$
15.5

 
$
15.3

 
$
36.7

 
$
37.3

 
$
54.2


__________
(1)
Cash distributions exclude proceeds from sales of affiliates of $1.0 million in 2016, $24.7 million in 2015, and $19.4 million in 2014.

Summarized Financial Data of Affiliates

The following table shows the aggregated operating results for the years ended December 31 for the affiliated companies we held at December 31 (in millions):
 
2016
 
2015
 
2014
Revenues
$
333.7

 
$
339.3

 
$
339.0

Net gains on sales of assets
23.6

 
37.6

 
33.7

Net income
99.3

 
121.4

 
99.6



The following table shows aggregated summarized balance sheet data for our affiliated companies as of December 31 (in millions):
 
2016
 
2015
Current assets
$
254.1

 
$
185.0

Noncurrent assets
3,363.6

 
3,254.1

Total assets
$
3,617.7

 
$
3,439.1

 
 
 
 
Current liabilities
$
551.0

 
$
285.5

Noncurrent liabilities
2,341.4

 
2,512.2

Shareholders’ equity
725.3

 
641.4

Total liabilities and shareholders' equity
$
3,617.7

 
$
3,439.1



Summarized Financial Data for the RRPF Affiliates

As noted above, our affiliate investments include 50% interests in each of the RRPF affiliates, a group of fifteen domestic and foreign joint ventures with Rolls-Royce plc (or affiliates thereof, collectively “Rolls-Royce”), a leading manufacturer of commercial aircraft jet engines. The RRPF affiliates are primarily engaged in two business activities: lease financing of aircraft spare engines to a diverse group of commercial aircraft operators worldwide and lease financing of aircraft spare engines to Rolls-Royce for use in their engine maintenance programs. In aggregate, the RRPF affiliates own 407 aircraft engines at December 31, 2016, of which 211 were on lease to Rolls-Royce. Aircraft engines are generally depreciated over a useful life of 25 years to an estimated residual value. Lease terms vary but typically range from 3 to 12 years. Rolls-Royce manages each of the RRPF affiliates and also performs substantially all required maintenance activities. Our share of affiliates' earnings (after-tax) from the RRPF affiliates was $46.6 million in 2016, $58.4 million in 2015, and $42.2 million in 2014.

We derived the following financial information from the combined financial statements of the RRPF affiliates.

The following table shows condensed income statements of the RRPF affiliates for the years ending December 31 (in millions):
 
2016
 
2015
 
2014
Lease revenue from third parties
$
173.7

 
$
191.4

 
$
176.9

Lease revenue from Rolls-Royce
150.2

 
138.7

 
124.7

Depreciation expense
(171.6
)
 
(166.1
)
 
(140.7
)
Interest expense
(59.2
)
 
(56.7
)
 
(59.5
)
Other expenses
(8.0
)
 
(8.8
)
 
(11.8
)
Net gains on sales of assets
19.1

 
33.1

 
22.7

Income before income taxes
104.2

 
131.6

 
112.3

Income tax benefits (provision) (1)
(6.9
)
 
(9.0
)
 
(17.3
)
Net income
$
97.3

 
$
122.6

 
$
95.0

_________
(1)
Represents income taxes directly attributable to the RRPF affiliates in the United Kingdom. Several of the RRPF affiliates are flow through entities and income taxes are incurred at the owner level. Amounts shown for 2016 and 2015 include deferred income tax benefits of approximately $7.8 million and $15.4 million, attributable to statutory rate decreases enacted in the United Kingdom.

The following table shows the condensed balance sheets of the RRPF affiliates as of December 31 (in millions):
  
2016
 
2015
Current assets
$
241.3

 
$
173.4

Noncurrent assets, including operating assets, net of accumulated depreciation of $1,007.4 and $993.6 (a)
3,281.9

 
3,161.4

Total assets
$
3,523.2

 
$
3,334.8

 
 
 
 
Current liabilities, excluding debt
$
127.3

 
$
85.1

Debt obligations, net of adjustments for hedges
2,452.9

 
2,391.1

Other liabilities
233.8

 
231.4

Shareholders’ equity
709.2

 
627.2

Total liabilities and shareholders' equity
$
3,523.2

 
$
3,334.8

_________
(a) All operating assets were pledged as collateral for long-term debt obligations.

The following table shows contractual future lease receipts from noncancelable leases of the RRPF affiliates as of December 31, 2016 (in millions):
 
Rolls-Royce
 
Third Parties
 
Total
2017
$
165.6

 
$
158.9

 
$
324.5

2018
159.7

 
143.4

 
303.1

2019
156.2

 
107.3

 
263.5

2020
136.6

 
93.7

 
230.3

2021
107.1

 
82.4

 
189.5

Thereafter
388.5

 
215.1

 
603.6

 
$
1,113.7

 
$
800.8

 
$
1,914.5



The following table shows maturities of debt obligations of the RRPF affiliates as of December 31, 2016 (in millions):
2017 (1)
$
618.1

2018
96.9

2019
54.4

2020
470.7

2021
265.7

Thereafter
943.9

Total debt principal (2)
$
2,449.7

_______
(1)
For principal payment amounts shown as due in 2017, new debt agreements have been executed that extend the maturity date for approximately $335 million of debt to 2026.
(2)
All debt obligations are nonrecourse to the shareholders.