UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
1-1861
THE CIT GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2994534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1211 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036
(Address of principal executive offices) (Zip Code)
(212) 536-1950
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 1994: 1,000 shares.
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
(UNAUDITED)
TABLE OF CONTENTS PAGE
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets - June 30, 1994 and
December 31, 1993. 2-3
Consolidated Income Statements for the three and six
month periods ended June 30, 1994 and 1993. 4
Consolidated Statements of Stockholders' Equity for
the six month periods ended June 30, 1994 and 1993. 5
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1994 and 1993. 6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-18
PART II. OTHER INFORMATION
Item 2.Changes in Securities 19
4.Submission of Matters to a Vote of Security Holders 19
6.Exhibits and Reports on Form 8-K 19
PART I. FINANCIAL INFORMATION
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the December 31, 1993 Annual Report on Form 10-K for
The CIT Group Holdings, Inc. (the "Corporation").
The Corporation considers that all adjustments (all of which are normal
recurring accruals) necessary for a fair statement of the financial position and
results of operations for these periods have been made; however, results for
such interim periods are subject to year-end audit adjustments. Results for
such interim periods are not necessarily indicative of results for a full year.
Amounts for 1993 have been reclassified, where necessary, to conform to 1994
presentations.
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31,
ASSETS 1994 1993
- -------- ---------------------------
FINANCING AND LEASING ASSETS
Finance receivables (net of unearned finance
income of $1,541,365 and $1,482,069)
CORPORATE FINANCE
Capital Equipment Financing $4,322,804 $4,394,528
Business Credit 1,330,403 1,282,133
Credit Finance 709,059 645,642
---------- ----------
6,362,266 6,322,303
DEALER AND MANUFACTURER FINANCING
Industrial Financing 3,960,577 3,880,991
Sales Financing and Consumer Finance 1,604,720 1,438,865
---------- ----------
5,565,297 5,319,856
FACTORING
Commercial Services 1,851,670 981,935
---------- ----------
Finance receivables 13,779,233 12,624,094
Reserve for credit losses (183,112) (169,378)
---------- ----------
Net finance receivables 13,596,121 12,454,716
Equipment under operating lease, net 736,717 751,901
---------- ----------
Net financing and leasing assets 14,332,838 13,206,617
CASH AND CASH EQUIVALENTS
Cash 50,013 101,554
Interest-bearing deposits 24,000 -
---------- ----------
Cash and cash equivalents 74,013 101,554
OTHER ASSETS 433,553 420,310
---------- ----------
TOTAL ASSETS $14,840,404 $13,728,481
========== ==========
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
- ------------------------------------ --------- -----------
DEBT
Commercial paper $ 6,227,088 $ 6,516,139
Variable rate notes 2,462,500 1,686,500
Fixed rate notes 2,408,677 2,392,500
Subordinated fixed rate notes 300,000 200,000
---------- ----------
Total debt 11,398,265 10,795,139
Credit balances of factoring clients 953,484 521,728
Accrued liabilities and payables 343,604 324,520
Deferred Federal income taxes
and investment tax credits 403,286 394,859
---------- ----------
Total liabilities 13,098,639 12,036,246
STOCKHOLDERS' EQUITY
Common stock - authorized, issued and
outstanding - 1,000 shares 250,000 250,000
Paid-in capital 408,320 408,320
Retained earnings 1,083,445 1,033,915
---------- ---------
Total stockholders' equity 1,741,765 1,692,235
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,840,404 $13,728,481
========== ==========
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ---------------
1994 1993 1994 1993
---- ---- ---- ----
Interest and fees earned $340,504 $295,190 $644,414 $582,871
Interest expense 147,255 126,733 276,095 251,419
-------- -------- -------- --------
Net interest and fees 193,249 168,457 368,319 331,452
-------- -------- -------- --------
Gains on asset sales 3,371 2,906 10,996 4,178
-------- -------- -------- --------
Salaries and employee
benefits 49,057 36,909 92,307 74,683
Other operating expenses 37,389 31,949 74,688 61,845
-------- -------- -------- --------
Operating expenses before
provision for credit
losses 86,446 68,858 166,995 136,528
Provision for credit losses 27,411 26,892 52,292 51,193
-------- -------- -------- --------
Total operating expenses 113,857 95,750 219,287 187,721
-------- -------- -------- --------
Income before provision for
income taxes 82,763 75,613 160,028 147,909
Provision for income taxes 31,792 29,010 61,022 57,774
-------- -------- -------- --------
Net income $ 50,971 $ 46,603 $ 99,006 $ 90,135
======= ======= ======= =======
Ratio of earnings to
fixed charges - - 1.57 1.58
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30
------------------
1994 1993
---- ----
Balance, January 1 $1,692,235 $1,601,091
Net income 99,006 90,135
Dividends paid (49,476) (45,152)
---------- ----------
Balance, June 30 $1,741,765 $1,646,074
========== =========
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS) SIX MONTHS ENDED
JUNE 30
----------------
1994 1993
---- ----
CASH FLOWS FROM OPERATIONS
Net income $ 99,006 $90,135
Adjustments to reconcile net income to net cash
flows from operations:
Provision for credit losses 52,292 51,193
Depreciation and amortization 36,691 21,862
Provision for deferred Federal income taxes 4,427 2,827
Gains on asset sales (10,996) (4,178)
Increase in accrued liabilities and payables 23,028 3,652
(Increase) decrease in other assets (4,160) 20,948
Other (9,846) (11,115)
---------- ----------
Net cash flows provided by operations 190,442 175,324
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (10,784,884) (9,493,136)
Collections on loans 10,477,918 8,988,939
Purchases of assets to be leased (306,685) (458,519)
Collections on lease receivables 262,956 237,126
Net (increase) decrease in short-term
factoring receivables (138,216) 16,320
Acquisition of Barclays Commercial Corp. (435,630) -
Proceeds from asset sales 227,831 28,176
Purchases of loan portfolios (39,002) (112,915)
Proceeds from sales of assets received in
satisfaction of loans 28,074 24,227
Other (15,605) (12,384)
---------- ----------
Net cash flows used for investing activities (723,243) (782,166)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of variable rate notes 1,306,000 550,000
Proceeds from the issuance of fixed rate notes 300,000 415,000
Repayments of variable and fixed rate term debt (713,823) (541,830)
Net (decrease) in commercial paper (289,051) (142,021)
Proceeds from nonrecourse leveraged lease debt 5,853 106,424
Repayments of nonrecourse leveraged lease debt (54,243) (35,335)
Cash dividends paid (49,476) (45,152)
---------- ----------
Net cash flows from financing activities 505,260 307,086
---------- ----------
Net (decrease) in cash and cash equivalents (27,541) (299,756)
Cash and cash equivalents, beginning of year 101,554 699,793
---------- ----------
Cash and cash equivalents, end of quarter $ 74,013 $ 400,037
========== ==========
Supplemental disclosures
Interest paid $ 291,408 $ 264,233
Federal and State and local taxes paid $ 57,787 $ 44,926
Noncash transfer of receivables to other assets $ 48,381 $ 155,038
Noncash transfers of financing and leasing assets to
assets received in satisfaction of loans $ 29,359 $ 109,217
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET INCOME
Net income for the 1994 second quarter totaled $51.0 million, an increase of
$4.4 million (9.4%) from $46.6 million reported in the second quarter of 1993.
For the six months ended June 30, 1994, net income was $99.0 million, an $8.9
million (9.8%) increase from $90.1 million for the same period of 1993. The
results for both 1994 periods were records, principally due to improved fees and
other revenue, and increased net interest and fees from higher financing and
leasing assets. These improvements benefited from the acquisition of Barclays
Commercial Corporation (BCC) on February 28, 1994.
FINANCING AND LEASING ASSETS
Financing and leasing assets increased from both March 31, 1994 and year-end
1993 as presented in the following table.
- ----------------------------------------------------------------------------
June 30, March 31, December 31,
1994 1994 1993
-------- --------- ---------
(Amounts In Millions)
Finance receivables $13,779.2 $13,590.1 $12,624.1
Equipment under operating lease 736.7 738.7 751.9
-------- --------- ---------
Financing and leasing assets $14,515.9 $14,328.8 $13,376.0
======== ======== ========
- --------------------------------------------------------------------------------
The increase of $1.14 billion (8.5%) in financing and leasing assets from
December 31, 1993 to June 30, 1994 is largely due to the acquisition of BCC in
the first quarter of 1994. Excluding BCC, financing and leasing assets grew
approximately $456 million (3.4%) in 1994. Increased competition, particularly
from banks, was evident in underwriting standards (risk) and pricing (reward)
throughout the markets served by the Corporation, as new business spreads
tightened somewhat. Second quarter growth in financing and leasing assets was
relatively modest due to a seasonal decline in sales to retail factoring
customers of Commercial Services.
<PAGE>
Financing and leasing assets at June 30, 1994 and the changes from December 31,
1993 are discussed below for each business unit.
Corporate Finance
o Capital Equipment Financing - Customized secured equipment financing and
leasing for major capital equipment.
Finance receivables totaled $4.32 billion at June 30, 1994, down $71.7
million (1.6%) from $4.39 billion at December 31, 1993. Equipment under
operating lease totaled $553.1 million, down $12.6 million (2.2%) from
$565.7 million. In spite of new business volume improving $41.2 million
(11.4%) to $403.9 million in the first half of 1994, prepayments resulted
in a decline in financing and leasing assets.
o Business Credit - Revolving and term loans, including debtor-in-possession
and workout financing, for medium and larger-sized companies secured by
accounts receivable, inventory and fixed assets.
Finance receivables totaled $1.33 billion, an increase of $48.3 million
(3.8%) from $1.28 billion, as the pace of customer paydowns slowed during
the second quarter.
o Credit Finance - Revolving and term loans, including restructurings, for
small and medium-sized companies secured by accounts receivable, inventory
and fixed assets.
Finance receivables totaled $709.1 million, an increase of $63.4 million
(9.8%), from $645.6 million, as steady demand for fundings by middle-market
companies continued.
Dealer and Manufacturer Financing
o Industrial Financing - Secured equipment financing and leasing for medium-
sized companies, including dealer and manufacturer financing.
Finance receivables were $3.96 billion, an increase of $79.6 million
(2.1%), from $3.88 billion, as funding volume, primarily with middle-market
companies, remained at record levels. Equipment under operating lease
totaled $183.6 million, down $2.6 million (1.4%) from $186.2 million.
<PAGE>
o Sales Financing - Retail secured financing of recreational vehicles,
recreational boats, and manufactured housing through dealers and
manufacturers.
Finance receivables totaled $1.35 billion, an increase of $40.2 million
(3.1%) from $1.31 billion after the reclassification of approximately
$48.0 million of manufactured housing receivables to other assets at
June 30, 1994, in connection with an asset securitization completed in July
1994.
o Consumer Finance - Loans secured by first or second mortgages on
residential real estate, generated primarily through direct marketing.
Finance receivables totaled $257.0 million, an increase of $125.7 million
(95.7%), from $131.3 million, as this de novo operation continued to grow,
primarily through the origination of new loans.
Factoring
o Commercial Services - Factoring of accounts receivables, including credit
protection, bookkeeping and collection activities.
Finance receivables totaled $1.85 billion, an increase of $869.7 million
(88.6%) from $981.9 million at year-end. The increase reflects the
acquisition of BCC and record new client signings in the first half of the
year.
Commercial Airline Industry
Commercial airline finance receivables and equipment under operating lease
totaled $1.88 billion or 13.0% of total financing and leasing assets (before the
reserve for credit losses) at June 30, 1994, compared with $1.89 billion (14.2%)
at December 31, 1993.
<PAGE>
The portfolio is secured by commercial aircraft and related equipment and is
further described in the following table.
- ------------------------------------------------------------------------------
June 30, December 31,
1994 1993
--------- ----------
(Dollar Amounts In Millions)
Finance Receivables
Amount outstanding(a) $1,436.2 $1,437.3
Number of obligors 45 43
Operating Leases
Net carrying value $ 442.6 $ 457.6
Number of obligors 20 21
- -------------------------------------------------------------------------------
Total $1,878.8 $1,894.9
- -------------------------------------------------------------------------------
Number of obligors(b) 59 58
- ------------------------------------------------------------------------------
Number of aircraft 274 276
- --------------------------------------------------------------------------------
(a) Includes accrued rents on operating leases of $0.6 million at June 30, 1994
and $1.0 million at December 31, 1993, which were classified in finance
receivables in the Consolidated Balance Sheets.
(b) Certain obligors have both finance receivable and operating lease
transactions.
The modest $16.1 million decrease in outstandings reflects paydowns and
maturities, partially offset by the funding of three transactions during the
second quarter. Management continues to monitor closely the investment in this
portfolio relative to total financing and leasing assets.
A commercial airline obligor, with outstandings of $77.0 million at June 30,
1994 ($64.2 million at December 31, 1993) was subject to proceedings under
Chapter 11 of the Bankruptcy Reform Act of 1978, as amended. During the
quarter, one aircraft with a net carrying value of $14.0 million (which came off
lease from another airline) was re-leased to this obligor. All contractual
obligations between this obligor and the Corporation were current at June 30,
1994.
<PAGE>
Highly Leveraged Transactions
Highly leveraged transactions ("HLTs") totaled $459.3 million (3.2% of financing
and leasing assets before the reserve for credit losses) at June 30, 1994,
compared with $476.6 million (3.6%) at December 31, 1993. The Corporation's HLT
outstandings are generally secured by collateral, as distinguished from HLTs
that rely primarily on cash flow from operations. Unfunded commitments to lend
in secured HLT situations were $164.5 million at June 30, 1994, compared with
$123.1 million at December 31, 1993.
At June 30, 1994, the portfolio consisted of 30 obligors in 13 industry groups
located throughout the United States, with the largest regional concentrations
in the West (31.3%) and Southeast (25.9%). Total outstandings to HLT accounts
classified as nonaccrual increased to $69.7 million (4 accounts) at June 30,
1994 from $34.7 million (3 accounts) at December 31, 1993 as one additional
account was placed on nonaccrual.
NET INTEREST AND FEES
Net interest and fees includes interest and rents earned on financing and
leasing assets, net of interest expense, as well as noninterest revenues
reflecting commissions generated from processing factored accounts receivable
invoices in Commercial Services, syndication and other fees earned principally
through Business Credit, and various other sources of revenue, including fees
not dependent upon the advancement of funds.
<PAGE>
Changes in interest and fees earned and interest expense are set forth below:
- --------------------------------------------------------------------------------
Three Months Ended June 30,
----------------------------------------
(Dollar Amounts in Millions)
1994 1993 Increase
---------- --------- ------------------
Interest and fees earned $ 340.5 $ 295.2 $ 45.3 15.4%
Interest expense 147.3 126.7 20.5 16.2%
--------- ---------- -------- -----
Net interest and fees $ 193.2 $ 168.5 $ 24.8 14.7%
========= ========== ======== ======
AEA $13,437.7 $12,290.6 $1,147.1 9.3%
========= ========== ======== =====
Net interest and fees
as a % of AEA 5.75% 5.48%
===== =====
Six Months Ended June 30,
----------------------------------------
1994 1993 Increase
--------- --------- -----------------
Interest and fees earned $ 644.4 $ 582.9 $ 61.5 10.6%
Interest expense 276.1 251.4 24.7 9.8%
--------- --------- ------- -----
Net interest and fees $ 368.3 $ 331.5 $ 36.9 11.1%
========= ========= ======= =====
AEA $13,246.9 $12,069.1 $1,777.8 9.8%
========= ========= ======= =====
Net interest and fees
as a % of AEA 5.56% 5.49%
===== =====
- --------------------------------------------------------------------------------
The increases in net interest and fees were attributable to growth in financing
and leasing assets and to higher noninterest revenue. For the first six months
of 1994, average earning assets (AEA) were $13.25 billion, up 9.8% from $12.07
billion in 1993. The improvements in noninterest revenue included four months
of incremental BCC factoring commissions and a distribution, in excess of
carrying value, from an equity investment of the Corporation's venture capital
operation. The improvements in noninterest revenue more than offset the
negative impact of increased pricing competition and rising market interest
rates.
<PAGE>
A comparative analysis of the weighted average interest rates paid on the
Corporation's debt, after giving effect to interest rate swaps, is set forth
below.
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
-------------------- ---------------------
Floating rate debt 4.04% 3.29% 3.76% 3.35%
Fixed rate debt 6.69% 7.50% 6.69% 7.53%
Composite interest rate 5.11% 4.82% 4.91% 4.87%
- -------------------------------------------------------------------------------
Derivative transactions are generally entered into by the Corporation as a hedge
against market interest rate fluctuations and are not entered into for trading
or speculative purposes.
GAINS ON ASSET SALES
Gains on asset sales for the second quarter of 1994 were $3.4 million, compared
with $2.9 million in the comparable 1993 quarter. For the six months ended June
30, 1994, gains on asset sales were $11.0 million, compared to $4.2 million in
the 1993 period, primarily due to securitizing $150 million of recreational
vehicle receivables in January 1994.
OPERATING EXPENSES
Operating expenses before the provision for credit losses totaled $86.4 million
for the 1994 second quarter, an increase of $17.6 million (25.5%) from
$68.9 million for the 1993 second quarter. For the six months ended June 30,
1994, operating expenses before the provision for credit losses totaled $167.0
million, an increase of $30.5 million (22.3%), compared with $136.5 million for
the comparable 1993 period.
<PAGE>
The increases are largely incremental expenses, salaries and benefits of BCC
(involving order and invoice processing, bookkeeping and collection of factored
receivables for which the Corporation earns a commission) and the expanded
Consumer Finance operation, as well as a nonrecurring first quarter charge
associated with consolidating Sales Financing's 12 business acquisition centers
into five regional business centers. Commercial Services has an integration
plan in progress designed to maintain business momentum, provide uninterrupted
levels of quality services and generate economies of scale. Management believes
that these efforts will, over time, reduce the Corporation's operating expense
ratios to levels more comparable with recent periods.
As a percentage of AEA, operating expenses were 2.57% for the 1994 second
quarter, compared with 2.24% for 1993, and 2.52% for the current six month
period versus 2.26% a year ago.
<PAGE>
The following table presents components of net income as a percentage of AEA,
along with other selected financial data:
- --------------------------------------------------------------------------------
Six Months Ended
June 30,
----------------------------
(Dollar Amounts In Thousands) 1994 1993
----------------------------
Interest and fees earned* 9.62% 9.51%
Interest expense* 4.06 4.02
----- -----
Net interest and fees 5.56 5.49
Gains on asset sales 0.17 0.07
Operating expenses before
provision for credit losses 2.52 2.26
Net charge-offs** 0.74 0.74
Loss reserve increase 0.05 0.11
Income before provision for income taxes 2.42 2.45
Provision for income taxes 0.92 0.96
----- -----
Net income 1.50% 1.49%
===== =====
AEA $13,246,944 $12,069,068
=========== ===========
Average finance receivables $13,247,293 $12,077,141
=========== ============
Ratio of earnings to fixed charges 1.57 1.58
* Percentage calculated excluding interest income and interest expense relating
to short-term interest-bearing deposits.
** Percentage of average finance receivables.
- -------------------------------------------------------------------------------
<PAGE>
PROVISION AND RESERVE FOR CREDIT LOSSES
The following table summarizes the activity in the reserve for credit losses.
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
(Dollar Amounts in Millions) 1994 1993 1994 1993
------ ------ ----- -----
Net charge-offs $23.1 $22.2 $48.9 $44.6
Reserve change 4.3 4.7 3.4 6.6
----- ----- ----- -----
Provision for credit losses $27.4 $26.9 $52.3 $51.2
===== ===== ===== =====
Net charge-offs as a percent (annualized)
of average finance receivables 0.67% 0.72% 0.74% 0.74%
- --------------------------------------------------------------------------------
The reserve for credit losses at June 30, 1994 was $183.1 million (1.33% of
finance receivables), compared with $169.4 million (1.34%) at year-end 1993.
The increased balance from year-end 1993 is largely attributable to acquired
credit loss reserves, principally BCC's.
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES
Finance receivables past due 60 days or more declined to $187.8 million (1.36%
of finance receivables before the reserve for credit losses) at June 30, 1994,
from $198.2 million (1.46%) at March 31, 1994 and $216.1 million (1.71%) at
year-end 1993. Excluding past due loans in Industrial Financing that have
dealer or manufacturer recourse provisions, the percentage of finance
receivables past due 60 days or more was 1.12% at June 30, 1994 down from 1.16%
at March 31, 1994 and 1.47% at December 31, 1993.
Past due finance receivables on nonaccrual status were $117.0 million (0.85% of
finance receivables before the reserve for credit losses) at June 30, 1994, up
from $105.6 million (0.78%) at March 31, 1994 but improved from $139.9 million
(1.11%) at December 31, 1993.
<PAGE>
ASSETS RECEIVED IN SATISFACTION OF LOANS
Assets received in satisfaction of loans were $67.6 million at June 30, 1994,
down from $79.5 million at March 31, 1994 and $87.0 million at year-end 1993.
INCOME TAXES
The effective income tax rate for the 1994 second quarter was 38.4%, unchanged
from the prior year period. For the first six months of 1994, the effective tax
rate was 38.1%, compared to 39.1% for the first half of 1993.
LIQUIDITY AND CAPITALIZATION
The Corporation manages liquidity through: (1) principal repayments of existing
finance receivables and the generation of cash flow from operations and (2) the
borrowing of funds, primarily in the United States money and capital markets.
Such cash is used to fund asset growth (including the bulk purchase of
receivables and the acquisition of other finance-related businesses) and to meet
debt obligations and other commitments on a timely and cost-effective basis.
<PAGE>
The following table presents information regarding the Corporation's capital
structure.
- --------------------------------------------------------------------------------
June 30, March 31, December 31,
1994 1994 1993
----------- ----------- -----------
(Dollars In Thousands)
Commercial Paper $ 6,227,088 $ 6,202,936 $ 6,516,139
Term Debt 5,171,177 4,872,500 4,279,000
Stockholders' equity 1,741,765 1,715,674 1,692,235
----------- ------------ -----------
Total Capitalization $13,140,030 $12,791,110 $12,487,374
=========== ============ ===========
Ratios:
Debt-to-equity 6.54 to 1 6.45 to 1 6.38 to 1
Debt-to-equity plus reserve
for credit losses 5.92 to 1 5.84 to 1 5.80 to 1
- --------------------------------------------------------------------------------
Commercial paper borrowings declined by $289.1 million from year-end, as the
Corporation issued $505.0 million of variable rate term debt. Repayments of
term debt totaled $206.3 million in the 1994 second quarter, largely variable
rate term debt.
At June 30, 1994, commercial paper borrowings were supported by $4.68 billion of
credit line facilities, representing 75% of operating commercial paper
(commercial paper outstanding less the amount funding short-term interest-
bearing deposits). No borrowings have been made under credit lines since 1970.
At June 30, 1994, $5.3 billion of registered but unissued debt securities
remained available under shelf registration statements.
<PAGE>
PART II. OTHER INFORMATION
-----------------------------
ITEM 2. CHANGES IN SECURITIES
Under the most restrictive provisions of agreements relating to outstanding term
debt, the Corporation may not, without the consent of the holders of such term
debt, permit stockholders' equity to be less than $300,000,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 14, 1994, DKB and MHC Holdings, by unanimous written consent, re-
elected the following ten persons to the Board of Directors to serve until April
30, 1995 or until their successors shall have been elected and qualified:
Messrs. Hisao Kobayashi (Chairman)
Albert R. Gamper, Jr.
Michio Murata
Joseph A. Pollicino
Paul N. Roth
Tomoaki Tanaka
Peter J. Tobin
Toshiji Tokiwa
Keiji Torii
William H. Turner
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges.
(b) A Form 8-K report dated April 12, 1994 was filed with the Commission
reporting the Corporation's announcement of results for the quarter ended
March 31, 1994.
(c) A Form 8-K report dated July 14, 1994 was filed with the Commission
reporting the Corporation's announcement of results for the quarter ended
June 30,1994.
<PAGE>
EXHIBIT 12
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
1994 1993
------- -------
Net Income $ 99,006 $ 90,135
Provision for income taxes 61,022 57,774
------- -------
Earnings before provision for income taxes 160,028 147,909
------- -------
Fixed charges:
Interest and debt expense on indebtedness 276,095 251,419
Interest factor - one third of rentals on
real and personal properties 3,893 3,939
------- -------
Total fixed charges 279,988 255,358
-------- --------
Total earnings before provision for income
taxes and fixed charges $440,016 $403,267
======== ========
Ratio of earnings to fixed charges 1.57 1.58
<PAGE>
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The CIT Group Holdings, Inc.
----------------------------
(Registrant)
BY /s/ J. J. Carroll
----------------------------
J. J. Carroll
Executive Vice President and
Chief Financial Officer
(duly authorized and principal
accounting officer)
DATE: August 2, 1994
