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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, 1995
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 July 17, 1995: 1,000 shares.
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<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, 1995 and
December 31, 1994. 2-3
Consolidated Income Statements for the three and six
month periods ended June 30, 1995 and 1994. 4
Consolidated Statements of Changes in Stockholders'
Equity for the six month periods ended June 30, 1995
and 1994. 5
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1995 and 1994. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 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, 1994 Annual Report on Form 10-K and
the March 31, 1995 quarterly report on Form 10-Q 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 1994 have been reclassified, where necessary, to conform to 1995
presentations.
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
June 30, December 31,
Assets 1995 1994
------------ ------------
Financing and leasing assets
Capital Equipment Financing $ 4,406,207 $ 4,493,531
Business Credit 1,678,241 1,442,049
Credit Finance 761,635 719,642
------------ ------------
Corporate Finance 6,846,083 6,655,222
Commercial Services 1,559,047 1,896,233
Industrial Financing 4,535,344 4,269,693
Sales Financing 1,435,963 1,402,443
------------ ------------
Dealer and Manufacturer Financing 5,971,307 5,672,136
Consumer Finance 788,317 570,772
------------ ------------
Total finance receivables 15,164,754 14,794,363
Reserve for credit losses (200,345) (192,421)
------------ ------------
Net finance receivables 14,964,409 14,601,942
Operating lease equipment 926,959 867,914
------------ ------------
Net financing and leasing assets 15,891,368 15,469,856
Cash and cash equivalents 25,428 6,558
Other assets 521,297 487,076
------------ ------------
Total assets $ 16,438,093 $ 15,963,490
============ ============
-2-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
June 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
----------- -----------
Debt
Commercial paper $ 5,544,930 $ 5,660,194
Variable rate notes 3,977,500 3,812,500
Fixed rate notes 3,208,109 2,623,150
Subordinated fixed rate notes 300,000 300,000
----------- -----------
Total debt 13,030,539 12,395,844
Credit balances of factoring clients 698,331 993,394
Accrued liabilities and payables 421,108 354,714
Deferred Federal income taxes 440,548 426,511
----------- -----------
Total liabilities 14,590,526 14,170,463
Stockholders' equity
Common stock - authorized, issued and
outstanding - 1,000 shares 250,000 250,000
Paid-in capital 408,320 408,320
Retained earnings 1,189,247 1,134,707
----------- -----------
Total stockholders' equity 1,847,567 1,793,027
----------- -----------
Total liabilities and stockholders' equity $16,438,093 $15,963,490
=========== ===========
-3-
<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,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Finance income $380,520 $315,538 $744,263 $601,506
Interest expense 208,988 147,255 408,186 276,095
-------- -------- -------- --------
Net finance income 171,532 168,283 336,077 325,411
Fees and other income 41,871 44,925 85,215 84,782
-------- -------- -------- --------
Operating revenue 213,403 213,208 421,292 410,193
-------- -------- -------- --------
Salaries and general
operating expenses 82,264 86,446 167,101 166,995
Provision for credit losses 22,258 27,411 43,184 52,292
Depreciation on operating
lease equipment 17,176 16,588 34,815 30,878
-------- -------- -------- --------
Operating expenses 121,698 130,445 245,100 250,165
-------- -------- -------- --------
Income before provision
for income taxes 91,705 82,763 176,192 160,028
Provision for income taxes 35,192 31,792 66,867 61,022
-------- -------- -------- --------
Net income $ 56,513 $ 50,971 $109,325 $ 99,006
======== ======== ======== ========
Ratio of earnings to
fixed charges -- -- 1.43 1.57
-4-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in Thousands)
Six Months Ended
June 30,
--------------------------------
1995 1994
----------- -----------
Balance, January 1 $ 1,793,027 $ 1,692,235
Net income 109,325 99,006
Dividends paid (54,785) (49,476)
----------- -----------
Balance, June 30 $ 1,847,567 $ 1,741,765
=========== ===========
-5-
<PAGE>
THE CIT GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $ 109,325 $ 99,006
Adjustments to reconcile net income to net cash
flows from operations:
Provision for credit losses 43,184 52,292
Depreciation and amortization 38,664 36,691
Provision for deferred Federal income taxes 13,774 4,427
Gains on asset sales (13,399) (10,996)
Increase in accrued liabilities and payables 66,394 23,028
Increase in other assets (35) (4,160)
Other (11,151) (9,846)
------------ ------------
Net cash flows provided by operations 246,756 190,442
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (15,119,500) (10,784,884)
Collections on loans 14,067,734 10,477,918
Purchases of assets to be leased (351,994) (306,685)
Collections on lease receivables 370,730 262,956
Net (increase) decrease in short-term factoring receivables 26,180 (138,216)
Proceeds from asset sales 309,118 227,831
Proceeds from sales of assets received in
satisfaction of loans 15,556 28,074
Purchases of finance receivables portfolios (22,767) (39,002)
Acquisition of Barclays Commercial Corp. -- (435,630)
Other (31,322) (15,605)
------------ ------------
Net cash flows used for investing activities (736,265) (723,243)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of variable and
fixed rate notes 1,250,000 1,606,000
Repayments of variable and fixed rate notes (500,041) (713,823)
Net decrease in commercial paper (115,264) (289,051)
Proceeds from nonrecourse leveraged lease debt 2,133 5,853
Repayments of nonrecourse leveraged lease debt (73,664) (54,243)
Cash dividends paid (54,785) (49,476)
------------ ------------
Net cash flows from financing activities 508,379 505,260
------------ ------------
Net increase (decrease) in cash and cash equivalents 18,870 (27,541)
Cash and cash equivalents, beginning of period 6,558 101,554
------------ ------------
Cash and cash equivalents, end of period $ 25,428 $ 74,013
============ ============
Supplemental disclosures
Interest paid $ 443,168 $ 291,408
Federal and State and local taxes paid $ 48,746 $ 57,787
Noncash transfer of receivables to other assets $ 259,050 48,270
Noncash transfers of financing and leasing assets to
assets received in satisfaction of loans $ 14,365 $ 29,359
</TABLE>
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET INCOME
Net income for the 1995 second quarter totaled a record $56.5 million, an
increase of $5.5 million (10.9%) from $51.0 million in 1994. For the six months
ended June 30, 1995, net income totaled a record $109.3 million, an increase of
$10.3 million (10.4%) from the comparable 1994 period. The improvements in both
1995 periods were principally due to continued growth in financing and leasing
assets, lower credit losses and operating expense efficiencies offset, in part,
by increased borrowing costs due to higher market interest rates.
FINANCING AND LEASING ASSETS
Changes in financing and leasing assets (finance receivables plus operating
lease equipment) from year-end 1994 are presented in the following table.
Change
June 30, December 31, ------------------
1995 1994 Amount Percent
---- ---- ------ -------
(Dollar Amounts in Millions)
Finance receivables
Capital Equipment Financing $ 4,406.2 $ 4,493.5 $ (87.3) (1.9)%
Business Credit 1,678.2 1,442.1 236.1 16.4
Credit Finance 761.6 719.6 42.0 5.8
Commercial Services 1,559.1 1,896.2 (337.1) (17.8)
Industrial Financing 4,535.3 4,269.7 265.6 6.2
Sales Financing 1,436.0 1,402.5 33.5 2.4
Consumer Finance 788.3 570.8 217.5 38.1
--------- --------- ------- ----
Total finance receivables 15,164.7 14,794.4 370.3 2.5
--------- --------- ------- ----
Operating lease equipment
Capital Equipment Financing 702.7 648.7 54.0 8.3
Industrial Financing 224.3 219.2 5.1 2.3
--------- --------- ------- ----
Total operating lease equipment 927.0 867.9 59.1 6.8
--------- --------- ------- ----
Total financing and leasing assets $16,091.7 $15,662.3 $ 429.4 2.7%
========= ========= ======= ====
-7-
<PAGE>
The changes from December 31, 1994, with respect to finance receivables, are
discussed below for each business unit.
o Capital Equipment Financing - Customized secured equipment financing and
leasing of major capital equipment for medium and larger-sized companies.
New business volume totaled $456 million in 1995, 12.9% higher than the
comparable 1994 period. However, finance receivables declined by $87.3
million (1.9%), principally due to higher liquidations and asset sales for
risk management purposes.
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 increased $236.1 million (16.4%) reflecting strong 1995
new business volume of $268 million and the first quarter 1995 transfer
from Commercial Services of approximately $75 million of revolving and term
loans, secured by accounts receivable and inventory, originally acquired as
part of the Barclays Commercial Corporation ("BCC") purchase.
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 rose $42.0 million (5.8%) on new business volume of
$84 million.
o Commercial Services - Factoring of accounts receivable, including credit
protection, bookkeeping and collection activities.
The decrease of $337.1 million (17.8%) in finance receivables from year-end
1994 reflects a decline in factored receivable volume due to seasonal
influences and weak retail apparel sales. Factored receivable volume
totaled $6.17 billion in 1995 compared with $5.78 billion in 1994. The 1994
amount includes BCC volume generated after the February 28, 1994
acquisition date.
-8-
<PAGE>
o Industrial Financing - Secured equipment financing and leasing for
medium-sized companies, including dealer and manufacturer financing.
The increase in finance receivables of $265.6 million (6.2%) is due to
record 1995 new business volume of $1.15 billion resulting from strong
demand across most geographic and industry markets served.
o Sales Financing - Retail secured financing of recreational vehicles,
manufactured housing and recreational boats through dealers and
manufacturers.
Finance receivables grew $33.5 million (2.4%) from December 1994 reflecting
record new business volume of $445 million (up 56% from 1994 on a
broad-based increase in volume, principally due to strong manufactured
housing volume) offset, in part, by securitizations totaling $280.0
million. At June 30, 1995, Sales Financing was providing servicing on $946
million of finance receivables owned by other financial institutions and
securitization trusts which are not reflected on the preceding table.
o Consumer Finance - Loans secured by first or second mortgages on
residential real estate.
Finance receivables increased $217.5 million (38.1%) as this unit continues
to build momentum through a combination of direct consumer originations and
purchases of loans originated by others. New business volume increased to
$272 million in 1995, compared with $145 million in 1994.
Operating lease equipment of $927.0 million increased $59.1 million (6.8%) from
December 31, 1994, principally due to an increase in railroad equipment and
commercial aircraft. (See the discussion in the "Commercial Airline Industry"
section which follows.)
-9-
<PAGE>
Commercial Airline Industry
Commercial airline finance receivables and operating lease equipment totaled
$1.87 billion (11.6% of total financing and leasing assets) at June 30, 1995,
compared with $1.90 billion (12.1%) at December 31, 1994. The portfolio is
secured by commercial aircraft and related equipment. Management continues to
monitor the size of this portfolio relative to total financing and leasing
assets.
The following table presents information about the commercial airline industry
portfolio.
--------------------------------------------------------------------------------
June 30, December 31,
1995 1994
-------- --------
(Dollar Amounts in Millions)
Finance Receivables
Amount outstanding(a) $1,360.8 $1,417.0
Number of obligors 46 46
Operating Leases
Net carrying value $512.0 $482.3
Number of obligors 25 21
-------- --------
Total $1,872.8 $1,899.3
-------- --------
Number of obligors(b) 68 62
-------- --------
Number of aircraft(c) 260 282
-------- --------
(a) Includes accrued rents on operating leases of $0.5 million at June 30, 1995
and $1.1 million at December 31, 1994, which were classified as finance
receivables in the Consolidated Balance Sheets.
(b) Certain obligors have both finance receivable and operating lease
transactions.
(c) The decline in the number of aircraft from December 1994 principally
reflects the maturity of loans with one obligor collateralized by 17
aircraft.
--------------------------------------------------------------------------------
During the 1995 first quarter, the Corporation converted its outstanding loans
with Trans World Airlines, Inc. (TWA) to operating leases. On July 5, 1995, TWA
filed a "prepackaged bankruptcy" under Chapter 11 of the Bankruptcy Reform Act
of 1978 (Chapter 11), at which time, all of the Corporation's operating leases
were affirmed by TWA. As a result of an investigation by the Federal Aviation
Administration, Express One International, a Dallas based cargo and
-10-
<PAGE>
passenger airline, grounded its fleet on June 6, 1995 and filed for protection
under Chapter 11. After the filing, the Corporation cancelled all its operating
leases with Express One and took possession of the four related aircraft, which
management is in the process of remarketing. The above transactions did not have
a significant effect on the Corporation's consolidated financial position or
results of operations.
Highly Leveraged Transactions
Highly leveraged transactions ("HLTs") totaled $432.3 million (2.7% of financing
and leasing assets before the reserve for credit losses) at June 30, 1995,
compared with $436.1 million (2.8%) at December 31, 1994. Unfunded HLT
commitments to lend were $219.4 million at June 30, 1995, compared with $202.1
million at December 31, 1994.
At June 30, 1995, the portfolio consisted of 33 obligors in 11 industry groups
located throughout the United States, with the largest regional concentrations
in the Southeast (30.8%) and the West (29.1%). Total HLT outstandings classified
as nonaccrual totaled $37.4 million (3 accounts) at June 30, 1995 compared with
$57.7 million (4 accounts) at December 31, 1994.
-11-
<PAGE>
FINANCE INCOME
An analysis of 1995 and 1994 net finance income is set forth below:
--------------------------------------------------------------------------------
Three Months Ended
---------------------------------------
June 30
------------------------
(Dollar Amounts in Millions) 1995 1994 Increase
------------------------ ---------
Finance income $ 380.5 $ 315.5 $ 65.0
Interest expense 209.0 147.3 61.7
--------- --------- --------
Net finance income $ 171.5 $ 168.2 $ 3.3
========= ========= ========
Average financing and
leasing assets (AEA) $15,224.3 $13,437.7 $1,786.6
========= ========= ========
Net finance income
as a % of AEA 4.51% 5.01%
========= =========
Six Months Ended
---------------------------------------
June 30
------------------------
1995 1994 Increase
------------------------ ---------
Finance income $ 744.3 $ 601.5 $ 142.8
Interest expense 408.2 276.1 132.1
--------- --------- --------
Net finance income $ 336.1 $ 325.4 $ 10.7
========= ========= ========
Average financing and
leasing assets (AEA) $15,028.3 $13,246.9 $1,781.4
========= ========= ========
Net finance income
as a % of AEA 4.48% 4.92%
========= =========
--------------------------------------------------------------------------------
The increases in net finance income reflect the growth in average financing and
leasing assets, offset in part by increased market interest rates on funds
borrowed by the Corporation. Net finance income, as a percentage of AEA,
decreased in 1995 due to competitive pricing pressures and the aforementioned
increase in funding costs.
-12-
<PAGE>
A comparative analysis of the weighted average interest rates paid on the
Corporation's debt, before and after giving effect to interest rate swaps, is
set forth below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------- -------------------------------------------
1995 1994 1995 1994
-------------------- -------------------- -------------------- --------------------
Before After Before After Before After Before After
Swaps Swaps Swaps Swaps Swaps Swaps Swaps Swaps
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate debt 6.20% 6.19% 4.08% 4.04% 6.17% 6.14% 3.77% 3.76%
Fixed rate debt 7.13% 6.76% 7.28% 6.69% 7.11% 6.76% 7.33% 6.69%
Composite rate 6.42% 6.43% 4.81% 5.11% 6.39% 6.40% 4.57% 4.91%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation's interest rate swaps principally convert floating rate debt to
a fixed rate. Although interest rate swaps effectively lower both the variable
and fixed rates, the weighted average composite rate increases, after giving
effect to interest rate swaps, because a larger proportion of the Corporation's
debt, after giving effect to interest rate swaps, is subject to a fixed rate.
The Corporation enters into interest rate swaps as hedges against market
interest rate fluctuations and not for trading or speculative purposes.
-13-
<PAGE>
FEES AND OTHER INCOME
Fees and other income totaled $41.9 million in the 1995 second quarter, compared
with $44.9 million in 1994, as lower factoring commissions and other income more
than offset higher gains on asset sales and securitizations ($6.9 million in
1995 and $3.4 million in 1994). For the six months ended June 30, 1995, fees and
other income totaled $85.2 million, compared with $84.8 million in 1994,
including gains on asset sales and securitizations of $13.4 million in 1995 and
$11.0 million in 1994.
SALARIES AND GENERAL OPERATING EXPENSES
The following table sets forth the components of salaries and general operating
expenses.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
June 30, Increase/(Decrease)
---------------------- -----------------------
(Dollar Amounts in Thousands) 1995 1994 Amount Percent
------- ------- ------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits $47,733 $49,057 $(1,324) (2.7)%
General operating expenses 34,531 37,389 (2,858) (7.6)%
------- ------- ------- ----
Salaries and general operating expenses $82,264 $86,446 $(4,182) (4.8)%
======= ======= ======= ====
Percent to AEA 2.16% 2.57%
======= ====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------------------
June 30, Increase/(Decrease)
----------------------- ------------------------
1995 1994 Amount Percent
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 95,835 $ 92,307 $ 3,528 3.8 %
General operating expenses 71,266 74,688 (3,422) (4.6)%
-------- -------- -------- -----
Salaries and general operating expenses $167,101 $166,995 $ 106 0.1 %
======== ======== ======== =====
Percent to AEA 2.22% 2.52%
======== ========
</TABLE>
--------------------------------------------------------------------------------
-14-
<PAGE>
The improvements in the ratios of salaries and general operating expenses to AEA
reflect the realization of benefits from various expense control initiatives,
including the integration of Commercial Services and BCC, the 1994 consolidation
of Sales Financing's business acquisition centers, and savings from systems
development in Industrial Financing. Also contributing to the improved ratios is
the continued growth in financing and leasing assets, particularly in Industrial
Financing and Consumer Finance, and the ability to originate and service the
higher asset levels within the existing structure.
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES
AND ASSETS RECEIVED IN SATISFACTION OF LOANS
Finance receivables past due 60 days or more totaled $194.9 million (1.28% of
total finance receivables) at June 30, 1995, compared with $176.9 million
(1.20%) at December 31, 1994 and $187.8 million (1.36%) at June 30, 1994.
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 1.13% at June 30, 1995, compared with 1.03% at December 31,
1994 and 1.12% at June 30, 1994.
Finance receivables on nonaccrual status, included in past due finance
receivables, declined to $93.3 million (0.62% of total finance receivables) at
June 30, 1995 compared with $110.2 million (0.75%) at December 31, 1994 and
$117.0 million (0.85%) at June 30, 1994.
Assets received in satisfaction of loans were $84.8 million at June 30, 1995,
down slightly from $86.5 million at December 31, 1994 but up from $67.6
million at June 30, 1994.
-15-
<PAGE>
PROVISION AND RESERVE FOR CREDIT LOSSES
The following table summarizes the activity in the reserve for credit losses.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- --------------------
June 30, June 30,
------------------- --------------------
(Dollar Amounts in Millions) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net credit losses $17.3 $23.1 $34.7 $48.9
Provision for finance receivables change 5.0 4.3 8.5 3.4
----- ----- ----- -----
Total provision for credit losses $22.3 $27.4 $43.2 $52.3
===== ===== ===== =====
Net credit losses as a percent (annualized)
of average finance receivables 0.46% 0.67% 0.46% 0.74%
===== ===== ===== =====
</TABLE>
--------------------------------------------------------------------------------
The decrease in net credit losses as a percent of average finance receivables
during 1995 reflects the continued decrease in nonaccrual finance receivables
and the relatively low levels of past due balances. The reserve for credit
losses at June 30, 1995 was $200.3 million (1.32% of total finance receivables),
compared with $192.4 million (1.30%) at year-end 1994.
INCOME TAXES
The effective income tax rate for the 1995 second quarter was 38.4%, unchanged
from the prior year period. For the first six months of 1995, the effective tax
rate was 38.0% compared with 38.1% in 1994.
-16-
<PAGE>
STATISTICAL DATA
The following table presents components of net income as a percentage of AEA,
along with other selected financial data:
Six Months Ended
June 30,
--------------------------
1995 1994
----------- -----------
Finance income* 9.86% 8.98%
Interest expense* 5.38 4.06
----------- -----------
Net finance income 4.48 4.92
Fees and other income 1.13 1.28
----------- -----------
Operating revenue 5.61 6.20
----------- -----------
Salaries and general operating expenses 2.22 2.52
Net credit losses** 0.46 0.74
Provision for finance receivables change 0.11 0.05
----------- -----------
Total provision for credit losses 0.58 0.79
Depreciation on operating lease equipment 0.46 0.47
----------- -----------
Operating expenses 3.26 3.78
----------- -----------
Income before provision for income taxes 2.35 2.42
Provision for income taxes 0.89 0.92
----------- -----------
Net income 1.46% 1.50%
=========== ===========
Average Financing and Leasing Assets (AEA) $15,028,270 $13,246,944
=========== ===========
Average Finance Receivables $14,904,367 $13,247,293
=========== ===========
* Excludes interest income and interest expense relating to short-term
interest-bearing deposits.
** Percentage to average finance receivables.
-17-
<PAGE>
LIQUIDITY AND CAPITALIZATION
The Corporation manages liquidity by monitoring the relative maturities of
assets and liabilities and by borrowing funds, primarily in the United States
money and capital markets. Such cash is used to fund asset growth (including the
bulk purchase of finance receivables and the acquisition of other
finance-related businesses) and to meet debt obligations and other commitments
on a timely and cost-effective basis.
The following table presents information regarding the Corporation's capital
structure.
--------------------------------------------------------------------------------
June 30, December 31,
1995 1994
----------- -----------
(Dollar Amounts in Thousands)
Commercial Paper $ 5,544,930 $ 5,660,194
Term Debt 7,485,609 6,735,650
Stockholders' Equity 1,847,567 1,793,027
----------- -----------
Total Capitalization $14,878,106 $14,188,871
=========== ===========
Ratios:
Debt-to-equity 7.05 to 1 6.91 to 1
Debt-to-equity plus reserve for credit losses 6.36 to 1 6.24 to 1
--------------------------------------------------------------------------------
During the first half of 1995, commercial paper borrowings decreased $115.3
million, and the Corporation issued $600.0 million of variable rate and $650.0
million of fixed rate term debt. Repayments of term debt totaled $500.0 million
during the first six months of 1995. At June 30, 1995, $7.71 billion of unissued
debt securities remained available under shelf registration statements.
At June 30, 1995, commercial paper borrowings were supported by $4.62 billion of
committed credit line facilities, representing 83% of commercial paper
outstanding. No borrowings have been made under credit lines since 1970.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 13, 1995, The Dai-Ichi Kangyo Bank, Limited and MHC Holdings
(Delaware), Inc., by unanimous written consent, re-elected the following
ten persons to the Board of Directors to serve until April 30, 1996 or
until their successors shall have been elected and qualified:
Messrs. Hisao Kobayashi (Chairman)
Albert R. Gamper, Jr.
Hideo Kitahara
Michio Murata
Joseph A. Pollicino
Paul N. Roth
Peter J. Tobin
Toshiji Tokiwa
Keiji Torii
William H. Turner
On June 29, 1995, Mr. Hideo Kitahara and Mr. Toshiji Tokiwa resigned
from the Board and the stockholders, by unanimous written consent,
elected Mr. Takasuke Kaneko and Mr. Kenji Nakamura for the balance of
Mr. Kitahara's and Mr. Tokiwa's terms as Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges.
(b) Exhibit 27 - Financial Data Schedule
(c) A Form 8-K report dated April 11, 1995 was filed with the Commission
reporting the Corporation's announcement of results for the quarter
ended March 31, 1995.
-19-
<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. M. Leone
----------------------------------
J. M. Leone
Executive Vice President and
Chief Financial Officer
(duly authorized and principal
accounting officer)
DATE: August 8, 1995
-20-
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,
----------------------
1995 1994
-------- --------
Net Income $109,325 $ 99,006
Provision for income taxes 66,867 61,022
-------- --------
Earnings before provision for income taxes 176,192 160,028
-------- --------
Fixed charges:
Interest and debt expense on indebtedness 408,186 276,095
Interest factor - one third of rentals on
real and personal properties 3,578 3,893
-------- --------
Total fixed charges 411,764 279,988
-------- --------
Total earnings before provision for income
taxes and fixed charges $587,956 $440,016
======== ========
Ratio of earnings to fixed charges 1.43 1.57
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-END> JUN-30-1994 JUN-30-1995
<CASH> 74,013 25,428
<SECURITIES> 0 0
<RECEIVABLES> 13,779,233 15,164,754
<ALLOWANCES> 183,112 200,345
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 14,840,404 16,438,093
<CURRENT-LIABILITIES> 0 0
<BONDS> 5,171,177 7,485,609
<COMMON> 250,000 250,000
0 0
0 0
<OTHER-SE> 1,491,765 1,597,567
<TOTAL-LIABILITY-AND-EQUITY> 14,840,404 16,438,093
<SALES> 0 0
<TOTAL-REVENUES> 686,288 829,478
<CGS> 0 0
<TOTAL-COSTS> 166,995 167,101
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 52,292 43,184
<INTEREST-EXPENSE> 276,095 408,186
<INCOME-PRETAX> 160,028 176,192
<INCOME-TAX> 61,022 66,867
<INCOME-CONTINUING> 99,006 109,325
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 99,006 109,325
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
