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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 MARCH 31, 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 April 15, 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 - March 31, 1996 and
December 31, 1995. 2
Consolidated Income Statements for the three
month periods ended March 31, 1996 and 1995. 3
Consolidated Statements of Changes in
Stockholders' Equity for the three month
periods ended March 31, 1996 and 1995. 4
Consolidated Statements of Cash Flows for the three
month periods ended March 31, 1996 and 1995. 5
Note to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
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 for The CIT Group Holdings, Inc. (the
"Corporation"). The discussions of the adoption of Statements of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", No. 122, "Accounting for
Mortgage Servicing Rights" and No. 123, "Accounting for Stock-Based
Compensation" as of January 1, 1996 are included in Item 1. Financial
Statements.
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)
March 31, December 31,
1996 1995
--------- ------------
Assets
Financing and leasing assets
Loans
Commercial $10,382.2 $10,356.3
Consumer 2,471.0 2,344.0
Lease receivables 3,057.3 3,095.2
--------- ---------
Finance receivables 15,910.5 15,795.5
Reserve for credit losses (208.6) (206.0)
--------- ---------
Net finance receivables 15,701.9 15,589.5
Operating lease equipment 1,122.7 1,113.0
Cash and cash equivalents 104.2 161.5
Other assets 554.2 556.3
--------- ---------
Total assets $17,483.0 $17,420.3
========= =========
Liabilities and Stockholders' Equity
Debt
Commercial paper $ 5,947.4 $ 6,105.6
Variable rate senior notes 4,127.5 3,827.5
Fixed rate senior notes 3,221.5 3,337.0
Subordinated fixed rate notes 300.0 300.0
--------- ---------
Total debt 13,596.4 13,570.1
Credit balances of factoring clients 985.8 980.9
Accrued liabilities and payables 498.8 485.9
Deferred Federal income taxes 465.9 469.2
--------- ---------
Total liabilities 15,546.9 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 1,277.8 1,255.9
--------- ---------
Total stockholders' equity 1,936.1 1,914.2
--------- ---------
Total liabilities and stockholders' equity $17,483.0 $17,420.3
========= =========
See accompanying note to condensed consolidated financial statements.
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<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollar Amounts in Millions)
Three Months Ended
March 31,
---------------------
1996 1995
------ -----
Finance income $402.6 $363.7
Interest expense 207.2 199.2
------ ------
Net finance income 195.4 164.5
Fees and other income 52.7 43.4
------ ------
Operating revenue 248.1 207.9
------ ------
Salaries and general operating expenses 95.9 84.8
Provision for credit losses 27.8 21.0
Depreciation on operating lease equipment 27.5 17.6
------ ------
Operating expenses 151.2 123.4
------ ------
Income before provision for income taxes 96.9 84.5
Provision for income taxes 37.1 31.7
------ ------
Net income $ 59.8 $ 52.8
====== ======
Ratio of earnings to fixed charges 1.46 1.42
See accompanying note to condensed consolidated financial statements.
-3-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in Millions)
Three Months Ended
March 31,
--------------------
1996 1995
---- ----
Balance, January 1 $1,914.2 $1,793.0
Net income 59.8 52.8
Dividends paid (37.9) (26.1)
-------- --------
Balance, March 31 $1,936.1 $1,819.7
======== ========
See accompanying note to condensed consolidated financial statements.
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<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $ 59.8 $ 52.8
Adjustments to reconcile net income to net cash
flows from operations:
Provision for credit losses 27.8 21.0
Depreciation and amortization 31.6 19.2
Provision (benefit) for deferred Federal income taxes (3.3) 2.1
Gains on asset sales (12.5) (6.5)
Increase in accrued liabilities and payables 12.9 83.9
Increase in other assets (16.8) (13.1)
Other (15.0) (5.8)
--------- ---------
Net cash flows provided by operations 84.5 153.6
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (6,927.7) (7,201.8)
Collections on loans 6,519.3 6,754.8
Purchases of assets to be leased (45.8) (146.6)
Collections on lease receivables 208.6 220.3
Net increase in short-term factoring receivables (97.6) (157.1)
Proceeds from asset sales 256.5 130.6
Proceeds from sales of assets received in
satisfaction of loans 10.5 9.6
Other (6.9) (14.6)
--------- ---------
Net cash flows used for investing activities (83.1) (404.8)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of variable and
fixed rate notes 950.0 450.0
Repayments of variable and fixed rate notes (765.5) (375.0)
Net increase (decrease) in commercial paper (158.2) 357.6
Repayments of nonrecourse leveraged lease debt (47.1) (41.6)
Cash dividends paid (37.9) (26.1)
--------- ---------
Net cash flows (used for) provided by financing activities (58.7) 364.9
--------- ---------
Net increase (decrease) in cash and cash equivalents (57.3) 113.7
Cash and cash equivalents, beginning of period 161.5 6.5
--------- ---------
Cash and cash equivalents, end of period $ 104.2 $ 120.2
========= =========
Supplemental disclosures
Interest paid $ 279.4 $ 191.9
Federal and State and local taxes paid $ 2.2 $ 1.6
Noncash transfer of finance receivables to other assets $ 146.7 $ 80.6
Noncash transfers of finance receivables to assets received
in satisfaction of loans $ 62.1 $ 8.7
</TABLE>
See accompanying note to condensed consolidated financial statements.
-5-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of 1996, the Corporation adopted Statements of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS 122") and No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 121 requires that a review for impairment be performed whenever events or
changes in circumstances indicate that the carrying amount of long-lived assets
may not be recoverable. In performing the review for the recoverability, the
entity should estimate the future undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. SFAS 121 applies
primarily to certain leasing assets, including operating leases. The adoption of
SFAS 121 on January 1, 1996 did not require any impairment to be recognized
during the current period.
SFAS 122 requires an enterprise that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and then sells or
securitizes those loans with servicing rights retained to allocate the total
cost between the mortgage servicing rights and the loans based on their relative
fair values. This Statement applies to the sale or securitization of home equity
or manufactured housing finance receivables when servicing is retained. The
Statement also requires that the enterprise assess its capitalized mortgage
servicing rights for impairment based on the fair value of those rights. The
adoption of SFAS 122 on January 1, 1996 did not significantly affect the
Corporation's consolidated financial position or results of operations for the
three months ended March 31, 1996.
-6-
<PAGE>
SFAS 123 requires either the application of fair value based method of
accounting or additional proforma disclosures for stock-based compensation
plans. Under The CIT Group Holdings, Inc. Career Incentive Plan, awards are
granted to key executives in the form of phantom shares of stock, and are
expensed currently. Therefore, the adoption of SFAS 123 on January 1, 1996 had
no effect on the Corporation's consolidated financial position or results of
operations for the three months ended March 31, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCING AND LEASING ASSETS
Financing and leasing assets (finance receivables plus operating lease
equipment) increased $124.7 million from December 31, 1995. The changes in
financing and leasing assets by business unit are presented in the following
table.
<TABLE>
<CAPTION>
March 31, December 31, Change
--------------------
1996 1995 Amount Percent
------ ------ ------ -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance receivables
Business Credit $ 1,468.3 $ 1,471.0 $ (2.7) (0.2)%
Capital Equipment Financing 4,391.0 4,548.7 (157.7) (3.5)
Credit Finance 754.5 758.7 (4.2) (0.6)
Industrial Financing 4,993.7 4,929.9 63.8 1.3
Commercial Services 1,832.1 1,743.3 88.8 5.1
Consumer Finance 1,148.7 1,039.0 109.7 10.6
Sales Financing 1,322.2 1,304.9 17.3 1.3
----------- ----------- ------- -----
Total finance receivables 15,910.5 15,795.5 115.0 0.7
----------- ----------- ------- -----
Operating lease equipment
Capital Equipment Financing 766.4 750.0 16.4 2.2
Industrial Financing 356.3 363.0 (6.7) (1.8)
----------- ------------ --------- -----
Total operating lease equipment 1,122.7 1,113.0 9.7 0.9
----------- ------------ -------- -----
Total financing and leasing assets $ 17,033.2 $ 16,908.5 $ 124.7 0.7%
=========== ============ ======== =====
</TABLE>
-7-
<PAGE>
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 $2.7 million (0.2%) despite strong first
quarter new business originations of $207 million, due to syndications
of $50.2 million and to increased liquidations resulting from the
highly competitive financing marketplace.
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 $157.7 million (3.5%) reflects
new business originations of $168 million, offset by liquidations and
by the transfer of an aggregate of $59.1 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 $4.2 million (0.6%) from December 31,
1995, reflecting new business originations of $30 million for the first
quarter of 1996, offset by a higher level of liquidations.
o Industrial Financing - Secured equipment financing and leasing for
medium-sized companies, including dealer and manufacturer financing.
Finance receivables increased by $63.8 million (1.3%) from December 31,
1995, reflecting strong new business originations for the first quarter
of 1996 of $639 million, partially offset by higher liquidations.
-8-
<PAGE>
o Commercial Services - Factoring of accounts receivable, including
credit protection, bookkeeping and collection activities, and revolving
and term loans.
The increase of $88.8 million in finance receivables during the first
quarter of 1996 reflects seasonal trends. Factoring volume was down by
4.7% for the first quarter of 1996, compared to the same period last
year, due to the 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 $109.7 million (10.6%) reflecting the
continuing emphasis on this business unit. New business originations
during the quarter totaled $189 million, an increase of 54.4% over the
same prior year period.
o Sales Financing - Retail secured financing of recreational vehicles,
recreational boats, and manufactured housing through dealers and
manufacturers.
New business volume totaled $230 million versus $150 million for the
same period last year, principally due to growth in recreational
vehicle and recreational boat volume. Finance receivables increased
only $17.3 million (1.3%) from December 31, 1995 due to securitization
of $211.1 million of recreational vehicle finance receivables during
the first quarter. At March 31, 1996, Sales Financing was servicing
finance receivables of $1.07 billion owned by securitization trusts and
$710 million owned by other financial institutions, which are not
included in the preceding table.
-9-
<PAGE>
Concentrations
Commercial Airline Industry
Commercial airline finance receivables and operating lease equipment totaled
$1.87 billion or 11.0% of total financing and leasing assets at March 31, 1996,
compared with $1.91 billion (11.3%) at December 31, 1995. 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.
The following table presents information about the commercial airline industry
portfolio.
- --------------------------------------------------------------------------------
March 31, December 31,
1996 1995
--------- ------------
(Dollar Amounts in Millions)
Finance Receivables
Amount outstanding(a) $ 1,355.0 $ 1,412.2
Number of obligors 55 51
Operating Leases
Net carrying value $ 513.8 $ 499.4
Number of obligors 24 24
Total $ 1,868.8 $ 1,911.6
Number of obligors(b) 69 68
Number of aircraft 252 266
(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.
- --------------------------------------------------------------------------------
-10-
<PAGE>
Highly Leveraged Transactions
Highly leveraged transactions ("HLTs") totaled $451.4 million (2.6% of financing
and leasing assets) at March 31, 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 $193.3 million at
March 31, 1996, compared with $220.4 million at December 31, 1995.
At March 31, 1996, the portfolio consisted of 32 obligors in 11 industry groups
located throughout the United States, with the largest regional concentrations
in the Southeast (30.2%) and the Northeast (27.4%). One account totaling $19.5
million was classified as nonaccrual at March 31, 1996 compared with $20.1
million (one account) at December 31, 1995.
NET INCOME
Net income for the 1996 first quarter totaled a record $59.8 million, an
increase of $7.0 million (13.3%) from $52.8 million in 1995. The improvement was
principally due to growth in average financing and leasing assets and increased
fees and other income, partially offset by higher operating expenses.
-11-
<PAGE>
FINANCE INCOME
A comparison of 1996 and 1995 first quarter net finance income is set forth
below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------
March 31, Increase
---------------------- ----------------------
1996 1995 Amount Percent
------ ------ ------- -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance income $ 402.6 $ 363.7 $ 38.9 10.7%
Interest expense 207.2 199.2 8.0 4.0%
--------- --------- ---------- ----
Net finance income $ 195.4 $ 164.5 $ 30.9 18.8%
========= ========= ========= ====
Average financing and leasing assets (AEA) $16,065.6 $14,808.3 $ 1,257.3 8.5%
========= ========= ========= ====
Net finance income as a % of AEA 4.86% 4.45%
==== ====
</TABLE>
- --------------------------------------------------------------------------------
The increase in net finance income was attributable to the 8.5% growth in AEA, a
higher proportion of consumer finance receivables, and lower cost of funds.
A comparative analysis of the weighted average principal outstanding and
interest rates paid on the Corporation's debt, before and after giving effect to
interest rate swaps, is shown in the following tables.
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1996
--------------------------------------------------
Before Swaps After Swaps
--------------------- --------------------
(Dollar Amounts in Millions)
Variable rate debt $10,060.7 5.54% $ 7,155.8 5.52%
Fixed rate debt 3,409.4 7.01% 6,314.3 6.79%
-------- --------
Composite interest rate $13,470.1 5.92% $13,470.1 6.11%
======== ========
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1995
---------------------------------------------------
Before Swaps After Swaps
------------------ ---------------------
(Dollar Amounts in Millions)
Variable rate debt $ 9,647.3 6.13% $ 7,252.2 6.09%
Fixed rate debt 2,855.8 7.10% 5,250.9 6.76%
-------- --------
Composite interest rate $12,503.1 6.35% $12,503.1 6.37%
======== ========
- --------------------------------------------------------------------------------
-12-
<PAGE>
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
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 $52.7 million in the 1996 first quarter, compared
to $43.4 million in 1995. The increase reflects gains on sales of receivables
and equipment, and 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
------------------------------------------
March 31, Increase
------------------ -------------------
1996 1995 Amount Percent
---- ---- -------- --------
(Dollar Amounts in Millions)
Salaries and employee benefits $56.1 $48.1 $8.0 16.6%
General operating expenses 39.8 36.7 3.1 8.4%
----- ----- ----- ----
$95.9 $84.8 $11.1 3.1%
===== ===== ===== ====
Percent to AEA 2.39% 2.29%
==== ====
Percent to average managed assets 2.16% 2.19%
==== ====
- --------------------------------------------------------------------------------
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<PAGE>
The increase in salaries and general operating expenses is generally
attributable to the growth in the consumer related business units, as well as to
the higher managed asset portfolio. As a percentage of managed assets, which is
comprised of both owned assets and receivables serviced for others, including
those that have been securitized by the Corporation, these expenses improved to
2.16% for the first quarter of 1996 compared to 2.19% for the same period in
1995.
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES
AND ASSETS RECEIVED IN SATISFACTION OF LOANS
Finance receivables past due 60 days or more were $242.5 million (1.52% of
finance receivables) at March 31, 1996, compared with $263.9 million (1.67%) at
December 31, 1995. Finance receivables on nonaccrual status, included in past
due finance receivables, were $84.8 million (0.53% of finance receivables) at
March 31, 1996 compared with $139.5 million (0.88%) at December 31, 1995
reflecting transfers of cruise line vessels and approximately one-half of the
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 were $90.3 million at March 31, 1996
compared to $42.0 million at December 31, 1995. The increase is attributable to
the aforementioned transfers.
-14-
<PAGE>
Total nonperforming assets, comprised of past due finance receivables on
nonaccrual status and assets received in satisfaction of loans were $175.1
million at March 31, 1996 down from $181.5 million at year end. As a percentage
of finance receivables, total nonperforming assets declined to 1.10% at March
31, 1996 from 1.15% at December 31, 1995.
PROVISION AND RESERVE FOR CREDIT LOSSES
The following table summarizes the activity in the reserve for credit losses.
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
-----------------------
1996 1995
------- --------
(Dollar Amounts in Millions)
Net credit losses $25.4 $17.5
Provision for finance receivables increase 2.4 3.5
----- -----
Total provision for credit losses $27.8 $21.0
===== =====
Net credit losses as a percent (annualized)
of average finance receivables 0.64% 0.47%
===== =====
- --------------------------------------------------------------------------------
Net credit losses, as a percent of average finance receivables, increased during
the first quarter of 1996 compared to the first quarter of 1995, reflecting
provisions associated with certain nonaccrual shipping and cruise line vessels.
The reserve for credit losses at March 31, 1996 was $208.6 million (1.31% 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 first quarter of 1996 was
$27.5 million, up from $17.6 million for the same period in 1995, as the
operating lease portfolio grew 32% from March 31, 1995.
-15-
<PAGE>
INCOME TAXES
The effective income tax rate for the 1996 first quarter was 38.3%, compared to
37.5% in the prior year period.
STATISTICAL DATA
The following table presents components of net income as a percentage of AEA,
along with other selected financial data:
Three Months Ended
March 31,
------------------
1996 1995
---- ----
Finance income* 9.97% 9.78%
Interest expense* 5.11 5.33
---- ----
Net finance income 4.86 4.45
Fees and other income 1.31 1.17
---- ----
Operating revenue 6.17 5.62
---- ----
Salaries and general operating expenses 2.39 2.29
Net credit losses** 0.64 0.47
Provision for finance receivables increase 0.06 0.09
---- ----
Net credit losses 0.69 0.57
Depreciation on operating lease equipment 0.68 0.47
---- ----
Operating expenses 3.76 3.33
---- ----
Income before provision for income taxes 2.41 2.29
Provision for income taxes 0.92 0.86
---- ----
Net income 1.49% 1.43%
==== ====
Average Financing and Leasing Assets (in millions) $16,065.6 $14,808.3
========= =========
Average Finance Receivables (in millions) $15,788.7 $14,884.3
========= =========
*Excludes interest income and interest expense relating to short-term
interest-bearing deposits.
**Percentage to average finance receivables.
-16-
<PAGE>
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.
During the first quarter of 1996, commercial paper borrowings decreased $158.2
million, and the Corporation issued $550.0 million of prime based variable rate
and $400.0 million of fixed rate debt. Repayments of term debt totaled $765.5
million. At March 31, 1996, $4.31 billion of registered but unissued debt
securities remained available under shelf registration statements.
At March 31, 1996, commercial paper borrowings were supported by $4.64 billion
of committed revolving credit line facilities, representing 78% of operating
commercial paper outstanding (commercial paper outstanding less interest-bearing
deposits). No borrowings have been made under credit lines since 1970.
The Corporation has consolidated approximately $4.3 billion of existing
committed revolving credit line facilities into one facility of approximately
$4.8 billion. The new facility becomes effective during the second quarter of
1996 with maturities ranging from May of 1997 to May of 2001. The Corporation's
committed credit line facilities will total approximately $5.2 billion,
including the new facility.
-17-
<PAGE>
The Corporation also has accessed the asset backed securitization markets as an
additional liquidity source. The Corporation securitized recreational vehicle
finance receivables of $211.1 million in the first quarter of 1996.
CAPITALIZATION
The following table presents information regarding the Corporation's capital
structure.
- --------------------------------------------------------------------------------
March 31, December 31,
1996 1995
---- ----
(Dollars in Millions)
Commercial Paper $ 5,947.4 $ 6,105.6
Term Debt 7,649.0 7,464.5
Stockholders' Equity 1,936.1 1,914.2
--------- ---------
Total Capitalization $15,532.5 $15,484.3
========= =========
Debt-to-equity ratio 7.02 to 1 7.09 to 1
- --------------------------------------------------------------------------------
Through the first quarter of 1996, the Corporation operated under a dividend
policy requiring the payment of dividends by the Corporation, equal to and not
exceeding 50% of net operating earnings on a quarterly basis. As a result of a
20% increase in the ownership interest of the Corporation by The Dai-Ichi Kangyo
Bank, Limited (DKB) on December 15, 1995, the fourth quarter 1995 dividend was
paid on the basis of operating earnings for October and November only. During
the first quarter of 1996, the Corporation declared and paid a dividend of $8.9
million based on operating earnings for December. The Corporation is owned 80%
by DKB and 20% by The Chase Manhattan Corporation.
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.
-18-
<PAGE>
PART II. OTHER INFORMATION
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 January 18, 1996 was filed with the Commission
reporting the Corporation's announcement of results for the year ended
December 31, 1995.
(d) 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.
(e) A Form 8-K report dated April 12, 1996 was filed with the Commission
reporting a change in the Corporation's dividend policy.
-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: May 3, 1996
-20-
EXHIBIT 12
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts In Millions)
Three Months Ended
March 31,
----------------------
1996 1995
---- ----
Net income $ 59.8 $ 52.8
Provision for income taxes 37.1 31.7
------- ------
Earnings before provision for income taxes 96.9 84.5
------- ------
Fixed charges:
Interest and debt expense on indebtedness 207.2 199.2
Interest factor - one third of rentals on
real and personal properties 1.9 1.8
------- ------
Total fixed charges 209.1 201.0
------- -----
Total earnings before provision for income
taxes and fixed charges $ 306.0 $ 285.5
======= =======
Ratio of earnings to fixed charges 1.46 1.42
==== ====
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> MAR-31-1995 MAR-31-1996
<CASH> 120 104
<SECURITIES> 0 0
<RECEIVABLES> 15,001 15,911
<ALLOWANCES> 195 209
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 16,349 17,483
<CURRENT-LIABILITIES> 0 0
<BONDS> 6,811 7,649
0 0
0 0
<COMMON> 250 250
<OTHER-SE> 1,570 1,686
<TOTAL-LIABILITY-AND-EQUITY> 16,349 17,483
<SALES> 0 0
<TOTAL-REVENUES> 407 455
<CGS> 0 0
<TOTAL-COSTS> 85 96
<OTHER-EXPENSES> 18 28
<LOSS-PROVISION> 21 28
<INTEREST-EXPENSE> 199 207
<INCOME-PRETAX> 85 97
<INCOME-TAX> 32 37
<INCOME-CONTINUING> 53 60
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 53 60
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
