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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, 1997
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) 536-1390
(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 1, 1997: 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, 1997 and
December 31, 1996. 3
Consolidated Income Statements for the three
month periods ended March 31, 1997 and 1996. 4
Consolidated Statements of Changes in Stockholders' Equity
for the three month periods ended March 31, 1997 and 1996. 5
Consolidated Statements of Cash Flows for the three
month periods ended March 31, 1997 and 1996. 6
Note to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
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, 1996 Annual Report on Form 10-K for The CIT Group Holdings, Inc. (the
"Corporation"). The discussion of the adoption of Statements of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" as amended by Statement of
Financial Accounting Standards No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125" (collectively referred to
hereafter as "SFAS 125") as of January 1, 1997 is 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.
-2-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
March 31, December 31,
1997 1996
--------- ---------
Assets
Financing and leasing assets
Loans
Commercial $ 9,996.4 $10,195.6
Consumer 3,186.0 3,239.0
Lease receivables 3,834.0 3,562.0
--------- ---------
Finance receivables 17,016.4 16,996.6
Reserve for credit losses (222.0) (220.8)
--------- ---------
Net finance receivables 16,794.4 16,775.8
Operating lease equipment, net 1,501.9 1,402.1
Consumer finance receivables
held for sale 539.8 116.3
Cash and cash equivalents 176.9 103.1
Other assets 571.7 535.2
--------- ---------
Total assets $19,584.7 $18,932.5
========= =========
Liabilities and Stockholders' Equity
Debt
Commercial paper $ 6,143.1 $ 5,827.0
Variable rate senior notes 3,611.5 3,717.5
Fixed rate senior notes 4,829.9 4,761.2
Subordinated fixed rate notes 300.0 300.0
--------- ---------
Total debt 14,884.5 14,605.7
Credit balances of factoring clients 1,193.8 1,134.1
Accrued liabilities and payables 598.8 594.0
Deferred Federal income taxes 524.6 523.3
--------- ---------
Total liabilities 17,201.7 16,857.1
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the company 250.0 --
Stockholders' equity
Common stock - authorized, issued
and outstanding - 1,000 shares 250.0 250.0
Paid-in capital 573.3 573.3
Unrealized gain on investment securities,
net of taxes 8.5 --
Retained earnings 1,301.2 1,252.1
--------- ---------
Total stockholders' equity 2,133.0 2,075.4
--------- ---------
Total liabilities and stockholders' equity $19,584.7 $18,932.5
========= =========
See accompanying note to condensed consolidated financial statements.
-3-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollar Amounts in Millions)
Three Months Ended
March 31,
-------------------
1997 1996
------ ------
Finance income $437.1 $402.6
Interest expense 223.1 207.2
------ ------
Net finance income 214.0 195.4
Fees and other income 57.7 52.7
------ ------
Operating revenue 271.7 248.1
------ ------
Salaries and general operating expenses 99.9 95.9
Provision for credit losses 27.0 27.8
Depreciation on operating lease equipment 32.1 27.5
Minority interest in subsidiary trust
holding solely debentures of the company 1.9 --
------ ------
Operating expenses 160.9 151.2
------ ------
Income before provision for income taxes 110.8 96.9
Provision for income taxes 40.7 37.1
------ ------
Net income $ 70.1 $ 59.8
====== ======
See accompanying note to condensed consolidated financial statements.
-4-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in Millions)
Three Months Ended
March 31,
-------------------------
1997 1996
------ ------
Balance, January 1 $2,075.4 $1,914.2
Net income 70.1 59.8
Unrealized gain on investment
securities, net of taxes 8.5 --
Dividends paid (21.0) (37.9)
-------- --------
Balance, March 31 $2,133.0 $1,936.1
======== ========
See accompanying note to condensed consolidated financial statements.
-5-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
Three Months Ended
March 31,
-------------------
1997 1996
------ ------
CASH FLOWS FROM OPERATIONS
Net income $ 70.1 $ 59.8
Adjustments to reconcile net
income to net cash flows from
operations:
Provision for credit losses 27.0 27.8
Depreciation and amortization 37.3 31.6
Benefit for deferred Federal income taxes (2.1) (3.3)
Gains on asset sales (20.0) (12.5)
Increase in accrued liabilities and payables 3.3 12.9
Increase in other assets (24.4) (16.8)
Other (0.5) (15.0)
-------- --------
Net cash flows provided by operations 90.7 84.5
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (7,300.7) (6,927.7)
Collections on loans 7,052.2 6,727.9
Net increase in short-term factoring receivables (149.2) (97.6)
Purchases of assets to be leased (133.5) (45.8)
Proceeds from asset and receivable sales 67.3 256.5
Purchases of investment securities (9.2) (3.5)
Proceeds from sales of assets received
in satisfaction of loans 6.6 10.5
Other (5.0) (3.4)
-------- --------
Net cash flows used for investing activities (471.5) (83.1)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of variable and fixed rate notes (1,036.3) (765.5)
Proceeds from the issuance of variable and
fixed rate notes 999.0 950.0
Net increase (decrease) in commercial paper 316.1 (158.2)
Proceeds from the issuance of company-obligated
mandatorily redeemable preferred securities of
subsidiary trust holding solely debentures of
the company 250.0 --
Repayments of nonrecourse leveraged lease debt (53.2) (47.1)
Cash dividends paid (21.0) (37.9)
-------- --------
Net cash flows provided by (used for) financing
activities 454.6 (58.7)
-------- --------
Net increase (decrease) in cash and cash equivalents 73.8 (57.3)
Cash and cash equivalents, beginning of period 103.1 161.5
-------- --------
Cash and cash equivalents, end of period $ 176.9 $ 104.2
======== ========
Supplemental disclosures
Interest paid $ 208.8 $ 279.4
Federal and State and local taxes paid $ 2.0 $ 2.2
Noncash transfer of finance receivables to
finance receivables held for sale $ 464.8 $ 146.7
Noncash transfers of finance receivables to
assets received in satisfaction of loans $ 7.3 $ 62.1
Noncash transfer of assets received in
satisfaction of loans to finance receivables $ 4.6 $ --
See accompanying note to condensed consolidated financial statements.
-6-
<PAGE>
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Corporation adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS 125") as amended by Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125" (collectively referred to hereafter as "SFAS 125") on January
1, 1997. SFAS 125 uses a "financial components" approach that focuses on control
to determine the proper accounting for financial asset transfers and addresses
the accounting for servicing rights on financial assets in addition to mortgage
loans. Securitizations of finance receivables are accounted for as sales when
legal and effective control over the related receivables is surrendered.
Servicing assets or liabilities are recognized when the servicing rights are
retained by the seller.
In accordance with the transition rules set forth in SFAS 125, the Corporation,
on January 1, 1997, reclassified the portion of previously recognized excess
servicing assets that did not exceed contractually specified servicing fees to
servicing assets which are included in other assets in the Consolidated Balance
Sheets. The remaining balances of previously recognized excess servicing assets
are included in other assets in the Consolidated Balance Sheets and are
classified as available-for-sale investment securities subject to the provisions
of Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Unrealized gains and losses,
representing the difference between amortized cost and current fair market value
of such assets, are shown as a separate component of stockholders' equity, net
of tax, in the Consolidated Balance Sheets.
The Corporation recognized an $8.5 million unrealized gain on investment
securities, net of taxes, upon the adoption of SFAS 125 which did not have a
significant impact on the Corporation's financial position, results of
operations, or liquidity.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NET INCOME
Net income for the 1997 first quarter totaled $70.1 million, an increase of
$10.3 million (17.4%) from $59.8 million in 1996. The improvement was
principally due to an increase in average financing and leasing assets and
corresponding growth in net finance income as well as higher fees and other
income.
NET FINANCE INCOME
A comparison of 1997 and 1996 first quarter net finance income is set forth
below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Three Months Ended
-----------------------------------------------
March 31, Increase
---------------------- -------------------
1997 1996 Amount Percent
-------- -------- --------- -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance income $ 437.1 $ 402.6 $ 34.5 8.6%
Interest expense 223.1 207.2 15.9 7.7%
---------- ---------- ---------- ----
Net finance income $ 214.0 $ 195.4 $ 18.6 9.5%
========== ========== ========== ====
Average financing and leasing assets (AEA) $ 17,590.1 $ 16,065.6 $ 1,524.5 9.5%
========== ========== ========== ====
Net finance income as a % of AEA 4.87% 4.86%
========== ==========
- ---------------------------------------------------------------------------------------------
</TABLE>
The increase in net finance income was attributable to a 9.5% growth in average
financing and leasing assets (primarily comprised of finance receivables,
operating lease equipment and consumer finance receivables held for sale less
credit balances of factoring clients) and lower cost of funds offset by slightly
lower yields.
-8-
<PAGE>
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, 1997
---------------------------------
Before Swaps After Swaps
------------ -----------
(Dollar Amounts in Millions)
Commercial paper and variable
rate senior notes $ 9,776.2 5.46% $ 6,258.9 5.38%
Fixed rate senior and
subordinated notes 4,914.4 6.55% 8,431.7 6.50%
--------- ---------
Composite $14,690.6 5.82% $14,690.6 6.02%
========= =========
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1996
---------------------------------
Before Swaps After Swaps
------------ -----------
(Dollar Amounts in Millions)
Commercial paper and variable
rate senior notes $10,060.7 5.54% $ 7,155.8 5.52%
Fixed rate senior and
subordinated notes 3,409.4 7.01% 6,314.3 6.79%
--------- ---------
Composite $13,470.1 5.92% $13,470.1 6.11%
========= =========
- --------------------------------------------------------------------------------
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.
-9-
<PAGE>
FEES AND OTHER INCOME
Fees and other income totaled $57.7 million in the 1997 first quarter, compared
to $52.7 million in 1996. The increase reflects gains on sales of equipment and
investments offset by reduced securitization activity ($41.2 million of finance
receivables securitized in the first quarter of 1997 as compared to $211.1
million in the first quarter of 1996).
SALARIES AND GENERAL OPERATING EXPENSES
The following table sets forth the components of salaries and general operating
expenses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Three Months Ended
---------------------------------------------
March 31, Increase
------------------- -------------------
1997 1996 Amount Percent
------- ------- --------- -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 59.3 $ 56.1 $ 3.2 5.7%
General operating expenses 40.6 39.8 0.8 0.2%
------ ------ ------ ----
$ 99.9 $ 95.9 $ 4.0 4.2%
====== ====== ====== ====
Percent to AEA 2.27% 2.39%
====== ======
Percent to average serviced assets 2.05% 2.16%
====== ======
- -------------------------------------------------------------------------------------------
</TABLE>
The 4.2% increase in salaries and general operating expenses is attributable to
the growth in the consumer related business units, as well as to the higher
serviced asset portfolio. Management monitors productivity via the relationship
of these expenses to both AEA and average serviced assets. As a percentage of
AEA, salaries and general operating expenses decreased to 2.27% for the first
quarter of 1997 from 2.39% in 1996. As a percentage of average serviced assets,
which is comprised of financing and leasing assets, off-balance sheet
securitized finance receivables and other consumer
-10-
<PAGE>
receivables serviced for third parties, these expenses improved to 2.05% for the
first quarter of 1997 compared to 2.16% for the same period of 1996.
PROVISION AND RESERVE FOR CREDIT LOSSES
The following table summarizes the activity in the reserve for credit losses:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
-----------------------------
1997 1996
---- ----
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Net credit losses (percent, annualized,
of average finance receivables) $ 25.7 0.60% $ 25.4 0.64%
======= ==== ======== ====
Provision for credit losses (percent,
annualized, of AEA) $ 27.0 0.61% $ 27.8 0.69%
======= ==== ======== ====
- ---------------------------------------------------------------------------------------------------------
At March 31, At December 31,
------------ ---------------
1997 1996
---- ----
Reserve for credit losses (percent of finance
receivables) $222.0 1.30% $220.8 1.30%
====== ==== ====== ====
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Net credit losses increased slightly during the first quarter of 1997 compared
to the first quarter of 1996. The increase was the result of higher consumer net
credit losses due to a more seasoned portfolio offset by lower levels of
commercial net credit losses.
DEPRECIATION ON OPERATING LEASE EQUIPMENT
Depreciation on operating lease equipment for the first quarter of 1997 was
$32.1 million, up from $27.5 million for the same period in 1996, due to
additions to the portfolio.
-11-
<PAGE>
INCOME TAXES
The effective income tax rate for the 1997 first quarter decreased to 36.7%,
from 38.3% in the prior year period due to lower state and local taxes.
FINANCING AND LEASING ASSETS
The changes in financing and leasing assets by business unit are presented in
the following table:
<TABLE>
<CAPTION>
March 31, December 31, Change
1997 1996 Amount Percent
---------- ------------ ------ -------
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C>
Finance receivables and consumer
finance receivables held for sale
Commercial
Business Credit $ 1,351.4 $ 1,235.6 $ 115.8 9.4%
Capital Finance (formerly
Capital Equipment Financing)(1) 2,576.9 4,302.7 (1,725.8) (40.1)
Commercial Services, net(2) 815.6 670.6 145.0 21.6
Credit Finance 799.0 797.8 1.2 0.1
Equipment Financing (formerly
Industrial Financing)(1) 7,093.7 5,616.8 1,476.9 26.3
--------- --------- --------- -----
12,636.6 12,623.5 13.1 0.1
--------- --------- --------- -----
Consumer
Consumer Finance 2,143.8 2,005.5 138.3 6.9
Sales Financing 1,582.0 1,349.8 232.2 17.2
--------- --------- --------- -----
3,725.8 3,355.3 370.5 11.0
--------- --------- --------- -----
16,362.4 15,978.8 383.6 2.4
--------- --------- --------- -----
Operating lease equipment, net
Capital Finance 1,027.0 975.5 51.5 5.3
Equipment Financing 474.9 426.6 48.3 11.4
--------- --------- --------- -----
1,501.9 1,402.1 99.8 7.1
--------- --------- --------- -----
Total financing and leasing assets $17,864.3 $17,380.9 $ 483.4 2.8%
========= ========= ========= =====
</TABLE>
(1) On January 1, 1997, $1.5 billion of financing and leasing assets were
transferred from Capital Finance to Equipment Financing.
(2) Net of credit balances of factoring clients of $1,193.8 million and
$1,134.1 million at March 31, 1997 and December 31, 1996, respectively.
-12-
<PAGE>
Commercial finance receivables increased slightly from December 31, 1996 due to
a seasonal rise in factored receivables offset by paydowns and a competitive
origination environment. The 11.0% increase in consumer finance receivables is a
result of growth in retail new business originations of 39.8% for Consumer
Finance and 30.2% for Sales Financing. The growth in operating lease equipment
of 7.1% was primarily in commercial aircraft and manufacturing equipment.
Concentrations
Commercial Airline Industry
Commercial airline finance receivables and operating lease equipment totaled
$1.9 billion or 10.5% of financing receivables and operating lease equipment at
March 31, 1997, essentially unchanged from December 31, 1996. 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,
1997 1996
-------- -----------
(Dollar Amounts in Millions)
Finance Receivables
Amount outstanding(a) $ 1,258.3 $ 1,286.0
Number of obligors 51 54
Operating Leases
Net carrying value $ 685.5 $ 624.0
Number of obligors 33 32
Total $ 1,943.8 $ 1,910.0
Number of obligors(b) 72 72
Number of aircraft 236 239
(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.
- --------------------------------------------------------------------------------
-13-
<PAGE>
From time to time, certain commercial aircraft related obligors may experience
financial or operational difficulties which may affect their ability to meet
their contractual obligations with the Corporation. At March 31, 1997, three
lessees of operating lease equipment totaling $84.1 million were experiencing
financial or operational difficulties which the Corporation believes will not
have a significant effect on its consolidated financial position, results of
operations or liquidity.
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES
AND ASSETS RECEIVED IN SATISFACTION OF LOANS
Finance receivables past due 60 days or more declined to $289.2 million (1.70%
of finance receivables) at March 31, 1997, from $292.3 million (1.72%) at
December 31, 1996. Finance receivables on nonaccrual status decreased to $97.8
million (0.57% of finance receivables) at March 31, 1997 from $119.6 million
(0.70%) at December 31, 1996.
Assets received in satisfaction of loans decreased to $46.9 million at March 31,
1997 from $47.9 million at December 31, 1996.
Total nonperforming assets, comprised of finance receivables on nonaccrual
status and assets received in satisfaction of loans, as a percentage of finance
receivables, fell to 0.85% at March 31, 1997 from 0.99% at December 31, 1996.
-14-
<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. 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 primary sources of funding are
commercial paper borrowings, proceeds from the sales of medium-term notes and
other debt securities and securitizations.
During the first quarter of 1997, commercial paper borrowings increased $316.1
million, and the Corporation issued $600.0 million of prime based variable rate
debt and $399.0 million of fixed rate debt. Repayments of term debt totaled $1.0
billion. At March 31, 1997, $2.51 billion of registered but unissued term debt
securities remained available under shelf registration statements.
At March 31, 1997, commercial paper borrowings were supported by $5.04 billion
of committed revolving credit line facilities, representing 84% 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.
-15-
<PAGE>
As part of the Corporation's continuing program of accessing the public and
private asset backed securitization markets as an additional liquidity source,
recreational marine finance receivables of $41.2 million were securitized by the
Corporation during the first quarter of 1997. At March 31, 1997, $211.8 million
of registered but unissued securities relating to the Corporation's asset backed
securitization program remained available under shelf registration statements.
In February 1997, CIT Capital Trust I, a wholly owned subsidiary of the
Corporation, issued $250.0 million of 7.70% Preferred Capital Securities and
subsequently invested the offering proceeds in Junior Subordinated Debentures of
the Corporation having identical rates and payment dates.
CAPITALIZATION
The following table presents information regarding the Corporation's capital
structure.
- --------------------------------------------------------------------------------
March 31, December 31,
1997 1996
--------- -----------
(Dollars in Millions)
Commercial paper $ 6,143.1 $ 5,827.0
Term debt 8,741.4 8,778.7
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
debentures of the company 250.0 --
Stockholders' equity 2,133.0 2,075.4
--------- ---------
Total capitalization $17,267.5 $16,681.1
========= =========
Ratio of total debt to stockholders'
equity and company- obligated
mandatorily redeemable preferred
securities of subsidiary trust holding
solely debentures of the company 6.25 to 1 7.04 to 1
- --------------------------------------------------------------------------------
The Corporation operates under a dividend policy requiring the payment of
dividends by the Corporation, equal to and not exceeding 30% of net operating
earnings on a quarterly basis.
-16-
<PAGE>
STATISTICAL DATA
The following table presents components of net income as a percentage of AEA.
Three Months Ended
March 31,
------------------------
1997 1996
---------- ----------
Finance income* 9.87% 9.97%
Interest expense* 5.00 5.11
---------- ----------
Net finance income 4.87 4.86
Fees and other income 1.31 1.31
---------- ----------
Operating revenue 6.18 6.17
---------- ----------
Salaries and general operating expenses 2.27 2.39
Provision for credit losses 0.61 0.69
Depreciation on operating lease equipment 0.73 0.68
Minority interest in subsidiary trust holding
solely debentures of the company 0.04 --
---------- ----------
Operating expenses 3.65 3.76
---------- ----------
Income before provision for income taxes 2.53 2.41
Provision for income taxes 0.93 0.92
---------- ----------
Net income 1.60% 1.49%
========== ==========
Average financing and leasing assets (in millions) $ 17,590.1 $ 16,065.6
========== ==========
* Excludes interest income and interest expense relating to short-term
interest-bearing deposits.
-17-
<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 23, 1997, as amended by Form 8-K/A
dated February 14, 1997, was filed with the Commission reporting the
Corporation's announcement of results for the year ended December 31,
1996.
(d) A Form 8-K report dated April 17, 1997 was filed with the Commission
reporting the Corporation's announcement of results for the quarter
ended March 31, 1997.
-18-
<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 8, 1997
-19-
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,
----------------
1997 1996
------ ------
Net income $ 70.1 $ 59.8
Provision for income taxes 40.7 37.1
------ ------
Earnings before provision for income taxes 110.8 96.9
------ ------
Fixed charges:
Interest and debt expense on indebtedness 223.1 207.2
Interest factor - one third of rentals on
real and personal properties 2.1 1.9
Minority interest in subsidiary trust holding solely
debentures of the company 1.9 --
------ ------
Total fixed charges 227.1 209.1
------ ------
Total earnings before provision for income
taxes and fixed charges $337.9 $306.0
====== ======
Ratio of earnings to fixed charges 1.49x 1.46x
====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-mos 3-mos
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 177 104
<SECURITIES> 0 0
<RECEIVABLES> 17,016 15,911
<ALLOWANCES> 222 209
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 19,585 17,483
<CURRENT-LIABILITIES> 0 0
<BONDS> 8,741 7,649
250 0
0 0
<COMMON> 250 250
<OTHER-SE> 1,883 1,686
<TOTAL-LIABILITY-AND-EQUITY> 19,585 17,483
<SALES> 0 0
<TOTAL-REVENUES> 495 455
<CGS> 0 0
<TOTAL-COSTS> 100 96
<OTHER-EXPENSES> 34 28
<LOSS-PROVISION> 27 28
<INTEREST-EXPENSE> 223 207
<INCOME-PRETAX> 111 97
<INCOME-TAX> 41 37
<INCOME-CONTINUING> 70 60
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 70 60
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
