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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, 1996
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, 1996: 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, 1996 and
December 31, 1995. 2
Consolidated Income Statements for the three and six
month periods ended June 30, 1996 and 1995. 3
Consolidated Statements of Changes in Stockholders' Equity for
the six month periods ended June 30, 1996 and 1995. 4
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1996 and 1995. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
PART I. FINANCIAL INFORMATION
Certain information and footnote disclosures normally included in the
consolidated 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 consolidated financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in the December
31, 1995 Annual Report on Form 10-K and the March 31, 1996 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.
-1-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
June 30, December 31,
1996 1995
----------- -----------
Assets
Financing and leasing assets
Loans
Commercial $ 10,105.4 $ 10,356.3
Consumer 2,698.6 2,344.0
Lease receivables 3,142.5 3,095.2
----------- -----------
Finance receivables 15,946.5 15,795.5
Reserve for credit losses (211.9) (206.0)
----------- -----------
Net finance receivables 15,734.6 15,589.5
Operating lease equipment 1,237.6 1,113.0
Cash and cash equivalents 110.1 161.5
Other assets 709.2 556.3
----------- -----------
Total assets $ 17,791.5 $ 17,420.3
=========== ===========
Liabilities and Stockholders' Equity
Debt
Commercial paper $ 5,573.3 $ 6,105.6
Variable rate senior notes 4,197.5 3,827.5
Fixed rate senior notes 3,798.1 3,337.0
Subordinated fixed rate notes 300.0 300.0
----------- -----------
Total debt 13,868.9 13,570.1
Credit balances of factoring clients 969.6 980.9
Accrued liabilities and payables 487.5 485.9
Deferred Federal income taxes 479.5 469.2
----------- -----------
Total liabilities 15,805.5 15,506.1
Stockholders' equity
Common stock - authorized, issued
and outstanding - 1,000 shares 250.0 250.0
Paid-in capital 408.3 408.3
Retained earnings 1,327.7 1,255.9
----------- -----------
Total stockholders' equity 1,986.0 1,914.2
----------- -----------
Total liabilities and stockholders' equity $ 17,791.5 $ 17,420.3
=========== ===========
-2-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollar Amounts in Millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1996 1995 1996 1995
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Finance income $ 403.9 $ 380.5 $ 806.5 $ 744.2
Interest expense 206.6 209.0 413.8 408.2
-------- --------- -------- --------
Net finance income 197.3 171.5 392.7 336.0
Fees and other income 73.2 41.9 125.9 85.3
-------- --------- -------- --------
Operating revenue 270.5 213.4 518.6 421.3
-------- --------- -------- --------
Salaries and general operating expenses 97.6 82.3 193.5 167.1
Provision for credit losses 26.6 22.2 54.4 43.2
Depreciation on operating lease equipment 28.8 17.2 56.3 34.8
-------- --------- -------- --------
Operating expenses 153.0 121.7 304.2 245.1
-------- --------- -------- --------
Income before provision for income taxes 117.5 91.7 214.4 176.2
Provision for income taxes 45.1 35.2 82.2 66.9
-------- --------- -------- --------
Net income $ 72.4 $ 56.5 $ 132.2 $ 109.3
======== ========= ======== ========
Ratio of earnings to fixed charges -- -- 1.51 1.43
</TABLE>
-3-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in Millions)
Six Months Ended
June 30,
------------------------
1996 1995
----------- -----------
Balance, January 1 $ 1,914.2 $ 1,793.0
Net income 132.2 109.3
Dividends paid (60.4) (54.8)
----------- -----------
Balance, June 30 $ 1,986.0 $ 1,847.5
=========== ===========
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<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
Six Months Ended
June 30,
------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATIONS
Net income $ 132.2 $ 109.3
Adjustments to reconcile net income to net cash
flows from operations:
Provision for credit losses 54.4 43.2
Depreciation and amortization 64.9 38.7
Provision for deferred Federal income taxes 10.3 13.8
Gains on asset and receivable sales (43.2) (13.4)
Increase in accrued liabilities and payables 1.6 66.4
Increase in other assets (17.1) --
Other (19.2) (11.2)
----------- -----------
Net cash flows provided by operations 183.9 246.8
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (14,936.5) (15,119.5)
Collections on loans 14,141.3 14,067.7
Purchases of assets to be leased (194.4) (352.0)
Collections on lease receivables 371.1 370.7
Net (increase) decrease in short-term
factoring receivables (60.7) 26.2
Proceeds from asset and receivable sales 371.0 309.1
Proceeds from sales of assets received in
satisfaction of loans 17.5 15.6
Purchases of finance receivables portfolios (81.9) (22.8)
Purchases of investment securities (14.2) (6.2)
Other (16.3) (25.1)
----------- -----------
Net cash flows used for investing activities (403.1) (736.3)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of variable and
fixed rate notes 1,977.1 1,250.0
Repayments of variable and fixed rate notes (1,146.0) (500.0)
Net decrease in commercial paper (532.3) (115.3)
Proceeds from nonrecourse leveraged lease debt 9.2 2.1
Repayments of nonrecourse leveraged lease debt (79.8) (73.6)
Cash dividends paid (60.4) (54.8)
----------- -----------
Net cash flows provided by financing activities 167.8 508.4
----------- -----------
Net (decrease) increase in cash and cash equivalents (51.4) 18.9
Cash and cash equivalents, beginning of period 161.5 6.5
----------- -----------
Cash and cash equivalents, end of period $ 110.1 $ 25.4
=========== ===========
Supplemental disclosures
Interest paid $ 432.2 $ 443.2
Federal and State and local taxes paid $ 59.5 $ 48.7
Noncash transfer of finance receivables
to other assets $ 318.3 $ 259.1
Noncash transfers of finance receivables to
assets received in satisfaction of loans $ 70.9 $ 14.4
-5-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET INCOME
Net income for the 1996 second quarter totaled a record $72.4 million, an
increase of $15.9 million (28.1%) from $56.5 million in 1995. For the six months
ended June 30, 1996, net income totaled a record $132.2 million compared to
$109.3 million in 1995, an increase of 21.0%. Return on average financing and
leasing assets for the quarter and six months increased to 1.79% and 1.64%,
respectively, compared to 1.49% and 1.46% for the same periods in 1995. The
improvements resulted from strong operating revenues due to gains from venture
capital investments and equipment sales as well as increased portfolio spreads,
partially offset by higher operating expenses.
FINANCE INCOME
A comparison of 1996 and 1995 net finance income is set forth below.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
June 30, Increase
------------------------ ------------------
1996 1995 Amount Percent
---------- ---------- -------- -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance income $ 403.9 $ 380.5 $ 23.4 6.1%
Interest expense 206.6 209.0 (2.4) (1.1)%
---------- ---------- -------- ------
Net finance income $ 197.3 $ 171.5 $ 25.8 15.0%
========== ========== ======== ======
Average financing and leasing assets (AEA) $ 16,192.3 $ 15,224.3 $ 968.0 6.4%
========== ========== ======== ======
Net finance income as a % of AEA 4.87% 4.51%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------------
June 30, Increase
------------------------ ------------------
1996 1995 Amount Percent
---------- ---------- -------- -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance income $ 806.5 $ 744.2 $ 62.3 8.4%
Interest expense 413.8 408.2 5.6 1.4%
---------- ---------- -------- ------
Net finance income $ 392.7 $ 336.0 $ 56.7 16.9%
========== ========== ======== ======
Average financing and leasing assets (AEA) $ 16,146.3 $ 15,028.3 $1,118.0 7.4%
========== ========== ======== ======
Net finance income as a % of AEA 4.87% 4.48%
====== ======
</TABLE>
-6-
<PAGE>
The improvements in net finance income reflect an increase in average financing
and leasing assets, a change in portfolio mix toward higher yielding consumer
finance receivables, higher fees on account terminations and lower borrowing
costs.
A comparative analysis of the weighted average principal outstanding and
interest rates paid on the Corporation's debt for the three and six month
periods ended June 30, 1996 and 1995, before and after giving effect to interest
rate swaps, is shown in the following tables.
- --------------------------------------------------------------------------------
Three Months Ended June 30, 1996
---------------------------------------------
Before Swaps After Swaps
---------------------- ---------------------
(Dollar Amounts in Millions)
Variable rate debt $ 10,028.1 5.43% $ 6,990.9 5.36%
Fixed rate debt 3,602.0 6.88% 6,639.2 6.71%
----------- -----------
Composite interest rate $ 13,630.1 5.81% $ 13,630.1 6.01%
=========== ===========
Three Months Ended June 30, 1995
---------------------------------------------
Before Swaps After Swaps
---------------------- ---------------------
(Dollar Amounts in Millions)
Variable rate debt $ 9,832.2 6.20% $ 7,341.0 6.19%
Fixed rate debt 3,061.7 7.13% 5,552.9 6.76%
----------- -----------
Composite interest rate $ 12,893.9 6.42% $ 12,893.9 6.43%
=========== ===========
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996
---------------------------------------------
Before Swaps After Swaps
---------------------- ---------------------
(Dollar Amounts in Millions)
Variable rate debt $ 10,044.4 5.49% $ 7,073.3 5.44%
Fixed rate debt 3,505.7 6.94% 6,476.8 6.75%
----------- -----------
Composite interest rate $ 13,550.1 5.86% $ 13,550.1 6.06%
=========== ===========
Six Months Ended June 30, 1995
---------------------------------------------
Before Swaps After Swaps
---------------------- ---------------------
(Dollar Amounts in Millions)
Variable rate debt $ 9,740.2 6.17% $ 7,296.8 6.14%
Fixed rate debt 2,959.4 7.11% 5,402.8 6.76%
----------- -----------
Composite interest rate $ 12,699.6 6.39% $ 12,699.6 6.40%
=========== ===========
- --------------------------------------------------------------------------------
The Corporation's interest rate swaps principally convert floating rate debt to
fixed rate debt and effectively lower both the variable and fixed rates. The
weighted average composite rate increases, however, because a larger proportion
of the Corporation's debt, after giving effect to interest rate swaps, is
-7-
<PAGE>
subject to a fixed rate. The Corporation does not enter into derivative
financial instruments for trading or speculative purposes.
FEES AND OTHER INCOME
Fees and other income totaled $73.2 million in the 1996 second quarter compared
to $41.9 million in 1995, primarily the result of a $16.2 million pretax gain
($10.3 million after tax) in the Equity Investments portfolio, as well as higher
gains on equipment sales from leasing activities. For the six months ended June
30, 1996, fees and other income totaled $125.9 million, an increase of $40.6
million over the comparable 1995 period. The increase for the six months
includes the higher level of gains noted above as well as higher fee income
associated with the servicing of third party receivables, including those that
have been securitized by the Corporation.
SALARIES AND GENERAL OPERATING EXPENSES
The following table sets forth the components of salaries and general operating
expenses.
Three Months Ended
--------------------------------------
June 30, Increase
------------------- ----------------
1996 1995 Amount Percent
-------- -------- ------- -------
(Dollar Amounts in Millions)
Salaries and employee benefits $ 53.0 $ 47.8 $ 5.2 10.9%
General operating expenses 44.6 34.5 10.1 29.3%
-------- -------- ------- ----
$ 97.6 $ 82.3 $ 15.3 18.6%
======== ======== ======= ====
Percent to AEA 2.41% 2.16%
==== ====
Percent to average managed assets 2.18% 2.05%
==== ====
Six Months Ended
--------------------------------------
June 30, Increase
------------------- ----------------
1996 1995 Amount Percent
-------- -------- ------- -------
(Dollar Amounts in Millions)
Salaries and employee benefits $ 109.1 $ 95.9 $ 13.2 13.8%
General operating expenses 84.4 71.2 13.2 18.5%
-------- -------- ------- ----
$ 193.5 $ 167.1 $ 26.4 15.8%
======== ======== ======= ====
Percent to AEA 2.40% 2.22%
==== ====
Percent to average managed assets 2.17% 2.11%
==== ====
-8-
<PAGE>
The increases in salaries and general operating expenses are primarily
attributable to portfolio growth in Consumer Finance, servicing of a higher
managed asset portfolio in Sales Financing and expenses associated with
Industrial Financing's restructuring which will result in operating efficiencies
and improved market alignment.
PROVISION AND RESERVE FOR CREDIT LOSSES
The following table compares 1996 and 1995 provision for credit losses.
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------- ---------------
1996 1995 1996 1995
------ ------ ------ ------
(Dollar Amounts in Millions)
Net credit losses $ 23.7 $ 17.2 $ 49.1 $ 34.7
Provision for finance receivables increase 2.9 5.0 5.3 8.5
------ ------ ------ ------
Total provision for credit losses $ 26.6 $ 22.2 $ 54.4 43.2
====== ====== ====== ======
Net credit losses as a percent (annualized)
of average finance receivables 0.59% 0.46% 0.62% 0.46%
====== ====== ====== ======
Net credit losses, as a percent of average finance receivables, increased during
the second quarter and six months of 1996 compared to the same periods of 1995,
reflecting provisions related to certain nonaccrual loans secured by shipping
and cruise line vessels. The reserve for credit losses at June 30, 1996 was
$211.9 million (1.33% of finance receivables) compared to $206.0 million (1.30%)
at year-end 1995.
DEPRECIATION ON OPERATING LEASE EQUIPMENT
Depreciation on operating lease equipment for the second quarter and six months
of 1996 was $28.8 million and $56.3 million, respectively, up from $17.2 million
and $34.8 million for the same periods in 1995, primarily due to growth in the
operating lease portfolio.
-9-
<PAGE>
INCOME TAXES
The effective income tax rate for both the 1996 and 1995 second quarters was
38.4%. For the first six months of 1996, the effective tax rate was 38.3%
compared with 38.0% in 1995.
FINANCING AND LEASING ASSETS
Financing and leasing assets (finance receivables plus operating lease
equipment) of $17.18 billion increased $275.6 million from December 31, 1995.
The changes in financing and leasing assets by business unit are presented in
the following table.
- --------------------------------------------------------------------------------
Change
June 30, December 31, ----------------
1996 1995 Amount Percent
--------- --------- ------- -------
(Dollar Amounts in Millions)
Finance receivables
Business Credit $1,432.2 $ 1,471.0 $ (38.8) (2.6)%
Capital Equipment Financing 4,264.7 4,548.7 (284.0) (6.2)
Credit Finance 744.3 758.7 (14.4) (1.9)
Industrial Financing 5,090.8 4,929.9 160.9 3.3
Commercial Services 1,715.9 1,743.3 (27.4) (1.6)
Consumer Finance 1,350.3 1,039.0 311.3 30.0
Sales Financing 1,348.3 1,304.9 43.4 3.3
--------- --------- ------- ---
Total finance receivables 15,946.5 15,795.5 151.0 1.0
--------- --------- ------- ---
Operating lease equipment
Capital Equipment Financing 873.3 750.0 123.3 16.4
Industrial Financing 364.3 363.0 1.3 0.4
--------- --------- ------- ---
Total operating lease equipment 1,237.6 1,113.0 124.6 11.2
--------- --------- ------- ---
Total financing and leasing assets $17,184.1 $16,908.5 $ 275.6 1.6%
========= ========= ======= ===
A discussion of the changes in finance receivables from December 31, 1995 is
presented below.
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 decreased $38.8 million (2.6%). Strong new business
originations of $311 million were offset by syndications of $50.2 million
and increased liquidations resulting from a highly competitive financing
marketplace.
-10-
<PAGE>
o Capital Equipment Financing - Customized secured equipment financing and
leasing of major capital equipment for medium and larger-sized companies.
The decline in finance receivables of $284.0 million (6.2%) reflects new
business originations of $321 million, offset by liquidations and the
transfer of $66.0 million of finance receivables to assets received in
satisfaction of loans.
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 decreased $14.4 million (1.9%) from December 31, 1995,
reflecting new business originations of $94 million, offset by
liquidations.
o Industrial Financing - Secured equipment financing and leasing for
medium-sized companies, including dealer and manufacturer financing.
Finance receivables increased by $160.9 million (3.3%) from December 31,
1995, reflecting strong new business originations of $1.3 billion,
partially offset by liquidations.
o Commercial Services - Factoring of accounts receivable, including credit
protection, bookkeeping and collection activities, and revolving and term
loans.
The decrease of $27.4 million (1.6%) in finance receivables during 1996
reflects seasonal trends. Factoring volume was relatively unchanged for
1996 compared to the prior year, due to continued weakness in both the
retail environment and the wholesale textile industry.
o Consumer Finance - Loans secured by first or second mortgages on
residential real estate and home equity lines of credit generated through
brokers and direct marketing.
Finance receivables increased $311.3 million (30.0%) from December 31,
1995. Strong loan originations during the first half of 1996 totaled $480
million, an increase of 76% from the first six months of 1995. The increase
reflects continuing emphasis on this business unit.
-11-
<PAGE>
o Sales Financing - Retail secured financing of recreational vehicles,
recreational boats, and manufactured housing through dealers and
manufacturers.
Finance receivables increased $43.4 million (3.3%) from December 31, 1995.
New business volume totaled $509 million, principally due to growth in
recreational vehicle and recreational boat volume. During the first six
months of 1996, $250 million of recreational vehicle finance receivables
were securitized. Additionally, $172 million of recreational vehicle and
recreational boat volume was classified as assets held for sale for future
securitizations. At June 30, 1996, Sales Financing was servicing finance
receivables of $1.04 billion owned by securitization trusts and $654
million owned by other financial institutions, which are not included in
the preceding table.
Operating lease equipment grew $124.6 million (11.2%) principally due to an
increase in the commercial aircraft and rail segments. (See discussion in the
"Commercial Airline Industry" section which follows.)
Concentrations
Commercial Airline Industry
Commercial airline financing and leasing assets totaled $1.95 billion or 11.3%
of total financing and leasing assets at June 30, 1996, relatively unchanged
from the December 31, 1995 balance of $1.91 billion. The portfolio is secured by
commercial aircraft and related equipment. Management continues to limit the
growth in this portfolio relative to total financing and leasing assets.
-12-
<PAGE>
The following table presents information about the commercial airline industry
portfolio.
- --------------------------------------------------------------------------------
June 30, December 31,
1996 1995
--------- -----------
Finance Receivables (Dollar Amounts in Millions)
Amount outstanding(a) $1,340.7 $1,412.2
Number of obligors 54 51
Operating Leases
Net carrying value $605.7 $499.4
Number of obligors 29 24
Total $1,946.4 $1,911.6
Number of obligors(b) 73 68
Number of aircraft 254 266
(a) Includes accrued rents which were classified as finance receivables in the
Consolidated Balance Sheets.
(b) Certain obligors have both finance receivable and operating lease
transactions.
- --------------------------------------------------------------------------------
Highly Leveraged Transactions
Highly leveraged transactions ("HLTs") totaled $438.0 million (2.5% of financing
and leasing assets) at June 30, 1996 compared with $412.6 million (2.4%) at
December 31, 1995. 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 HLTs were $153.4 million at
June 30, 1996 compared with $220.4 million at December 31, 1995.
At June 30, 1996, the HLT portfolio consisted of 27 obligors in 11 industry
groups located throughout the United States, with the largest regional
concentrations in the Southeast (30.3%) and the Northeast (26.3%). One account
with a balance of $18.6 million and $20.1 million was classified as nonaccrual
at June 30, 1996 and December 31, 1995, respectively.
-13-
<PAGE>
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES
AND ASSETS RECEIVED IN SATISFACTION OF LOANS
Finance receivables past due 60 days or more declined to $252.1 million (1.58%
of finance receivables) at June 30, 1996 from $263.9 million (1.67%) at December
31, 1995. Past due finance receivables on nonaccrual status decreased to $105.0
million (0.66% of finance receivables) at June 30, 1996 from $139.5 million
(0.88%) at December 31, 1995. The decrease reflects transfers of cruise line
vessels and oceangoing carriers to assets received in satisfaction of loans. The
Corporation is in the process of remarketing the cruise line vessels and
repossessing and remarketing the remaining oceangoing carriers.
Assets received in satisfaction of loans increased to $97.8 million at June 30,
1996 from $42.0 million at December 31, 1995, due to the previously mentioned
transfers.
Total nonperforming assets, comprised of past due finance receivables on
nonaccrual status and assets received in satisfaction of loans were $202.8
million at June 30, 1996 up from $181.5 million at year end. As a percentage of
finance receivables, total nonperforming assets were 1.27% at June 30, 1996
compared to 1.15% at December 31, 1995.
LIQUIDITY
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. The proceeds of such borrowings are 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 primary source
of funding is commercial paper issuances, proceeds from the sales of medium-term
notes and other debt securities, and securitizations.
-14-
<PAGE>
During the first six months of 1996, commercial paper borrowings decreased
$532.3 million, and the Corporation issued $850 million of variable rate term
debt and $1.13 billion of fixed rate term debt. Repayments of term debt totaled
$1.15 billion. At June 30, 1996, $6.31 billion of registered but unissued debt
securities remained available under shelf registration statements.
The Corporation also has accessed the asset backed securitization markets as an
additional liquidity source. The Corporation securitized recreational vehicle
finance receivables of $250.0 million in the first six months of 1996.
During the second quarter of 1996, the Corporation consolidated approximately
$4.3 billion of existing committed revolving credit line facilities into one
facility of approximately $4.8 billion with maturities ranging from May 1997 to
May 2001.
At June 30, 1996, commercial paper borrowings were supported by $5.18 billion of
committed revolving credit line facilities, including the new facility,
representing 94% of operating commercial paper outstanding (commercial paper
outstanding less interest-bearing deposits). No borrowings have been made under
credit lines supporting commercial paper since 1970.
CAPITALIZATION
The following table presents information regarding the Corporation's capital
structure.
- --------------------------------------------------------------------------------
June 30, December 31,
1996 1995
--------- ---------
(Dollars in Millions)
Commercial Paper $ 5,573.3 $ 6,105.6
Term Debt 8,295.6 7,464.5
Stockholders' Equity 1,986.0 1,914.2
--------- ---------
Total Capitalization $15,854.9 $15,484.3
========= =========
Debt-to-equity ratio 6.98 to 1 7.09 to 1
-15-
<PAGE>
Commencing with the 1996 second quarter dividend, the dividend policy of the
Corporation was changed to require the payment of dividends by the Corporation
of 30% of net operating earnings on a quarterly basis. Previously, the
Corporation's dividend policy required the payment of dividends by the
Corporation of 50% of net operating earnings on a quarterly basis.
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,
----------------
1996 1995
---- ----
Finance income* 9.94% 9.86%
Interest expense* 5.07 5.38
---- ----
Net finance income 4.87 4.48
Fees and other income 1.56 1.13
---- ----
Operating revenue 6.43 5.61
---- ----
Salaries and general operating expenses 2.40 2.22
Net credit losses** 0.62 0.46
Provision for finance receivables increase 0.07 0.11
---- ----
Provision for credit losses 0.67 0.58
Depreciation on operating lease equipment 0.70 0.46
---- ----
Operating expenses 3.77 3.26
---- ----
Income before provision for income taxes 2.66 2.35
Provision for income taxes 1.02 0.89
---- ----
Net income 1.64% 1.46%
==== ====
Average Financing and Leasing Assets (in millions) $ 16,146.3 $ 15,028.3
========== ==========
Average Finance Receivables (in millions) $ 15,915.6 $ 14,904.4
========== ==========
* Excludes interest income and interest expense relating to short-term
interest-bearing deposits.
** Percentage to average finance receivables.
-16-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 12, 1996, The Dai-Ichi Kangyo Bank, Limited and CBC Holdings
(Delaware), Inc., by unanimous written consent, re-elected the following
ten persons to the Board of Directors to serve until April 30, 1997 or
until their successors shall have been elected and qualified:
Messrs. Hisao Kobayashi (Chairman)
Albert R. Gamper, Jr.
Takasuke Kaneko
Kenji Nakamura
Joseph A. Pollicino
Paul N. Roth
Peter J. Tobin
Keiji Torii
Yasuo Tsunemi
Yukiharu Uno
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, 1996 was filed with the Commission
reporting the Corporation's announcement of results for the quarter
ended March 31, 1996.
(d) A Form 8-K report dated April 12, 1996 was filed with the Commission
reporting a change in the Corporation's dividend policy.
(e) A Form 8-K report dated July 16, 1996 was filed with the Commission
reporting the Corporation's announcement of results for the quarter
ended June 30, 1996.
-17-
<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 2, 1996
-18-
EXHIBIT 12
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts In Millions)
Six Months Ended
June 30,
--------------------
1996 1995
------- -------
Net income $ 132.2 $ 109.3
Provision for income taxes 82.2 66.9
------- -------
Earnings before provision for income taxes 214.4 176.2
------- -------
Fixed charges:
Interest and debt expense on indebtedness 413.8 408.2
Interest factor - one third of rentals on
real and personal properties 3.9 3.6
------- -------
Total fixed charges 417.7 411.8
------- -------
Total earnings before provision for income
taxes and fixed charges $ 632.1 $ 588.0
======= =======
Ratio of earnings to fixed charges 1.51 1.43
======= =======
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> JUN-10-1995 JUN-10-1996
<CASH> 25 110
<SECURITIES> 0 0
<RECEIVABLES> 15,165 15,947
<ALLOWANCES> 200 212
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 16,438 17,792
<CURRENT-LIABILITIES> 0 0
<BONDS> 7,486 8,296
0 0
0 0
<COMMON> 250 250
<OTHER-SE> 1,598 1,736
<TOTAL-LIABILITY-AND-EQUITY> 16,438 17,792
<SALES> 0 0
<TOTAL-REVENUES> 829 932
<CGS> 0 0
<TOTAL-COSTS> 167 194
<OTHER-EXPENSES> 35 56
<LOSS-PROVISION> 43 54
<INTEREST-EXPENSE> 408 414
<INCOME-PRETAX> 176 214
<INCOME-TAX> 67 82
<INCOME-CONTINUING> 109 132
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 109 132
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
