SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 22, 1998
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The CIT Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-1861 13-2994534
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1211 Avenue of the Americas
New York, New York 10036
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Registrant's telephone number, including area code (212) 536-1390
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
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See the attached press release regarding 1998 second quarter
and six month earnings, filed as Exhibit 99.1. See also the attached press
release regarding the declaration of a dividend for the quarter ending June 30,
1998 of $.10 per share, payable on August 31, 1998 to holders of record at the
close of business on August 12, 1998, filed as Exhibit 99.2.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
99.1 Press Release, dated July 22, 1998, Regarding 1998
Second Quarter and Six Month Earnings.
99.2 Press Release, dated July 22, 1998, Regarding
Declaration of a Dividend for the Quarter Ending June
30, 1998.
<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 hereunto duly authorized.
THE CIT GROUP, INC.
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(Registrant)
By: /s/ JOSEPH M. LEONE
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Joseph M. Leone
Executive Vice President and
Chief Financial Officer
Dated: July 22, 1998
<PAGE>
Exhibit 99.1
[The CIT Group, Inc. Logo]
Contact: Jeffrey Simon
Senior Vice President
Investor Relations
(973) 535-5911
FROM: THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
FOR IMMEDIATE RELEASE
THE CIT GROUP ANNOUNCES SECOND QUARTER NET INCOME OF
$83.7 MILLION, $.51 PER DILUTED SHARE AND RECORD SIX MONTH NET
INCOME OF $165.4 MILLION, $1.01 PER DILUTED SHARE
NEW YORK, NEW YORK, JULY 22, 1998 --- The CIT Group, Inc. (NYSE: CIT)
today announced second quarter net income of $83.7 million and record six month
earnings of $165.4 million. For the second quarter and first six months of 1997,
net income was $93.7 million and $163.8 million, including a one-time
$58 million pretax gain on the sale of an equity interest acquired in a loan
workout and certain nonrecurring expenses. Excluding these special items, 1997
net income was $65.0 million for the second quarter and $135.1 million for the
first six months.
On a per share basis, excluding the 1997 special items, earnings
improved strongly in 1998. Earnings per diluted share for the second quarter of
1998 were $.51, up 24.4% from $.41 for the second quarter of last year, with six
month earnings per diluted share increasing 18.8% to $1.01 from $.85. The strong
1998 earnings reflect continued growth in all strategic business units, sharply
lower commercial credit losses, and continued improvements in operating
efficiency.
"I am pleased with the improvements in each of our business
fundamentals. Our diverse origination platforms provided us with good internal
loan and leasing growth as managed assets approached $24 billion at the end of
<PAGE>
June. We continue to expand products and services offered to our customers and
invest in sales and operations, while maintaining focus on credit quality," said
Albert R. Gamper, Jr., president and chief executive officer. "Our consistent
growth and solid financial performance in this competitive environment further
demonstrates the strength of our franchises."
Financial highlights:
Total managed assets increased to $23.9 billion at June 30, 1998, up 14.9%
from $20.8 billion a year ago, and up 7.2% from $22.3 billion at December 31,
1997. Commercial financing and leasing assets grew to $16.8 billion, up
approximately $1.5 billion or 9.5% from June 30, 1997 and an increase of 4.8%
from year-end 1997. Consumer managed assets increased to $7.1 billion, up
approximately $1.6 billion or 30.5% from $5.5 billion a year ago and 12.6% from
December 31, 1997.
Net finance income improved to $240.4 million in the second quarter of 1998
as a result of the higher earning asset level, compared with $218.3 million in
the second quarter of 1997. Net finance income as a percentage of average
earning assets was 4.79%, essentially unchanged from 4.81% a year ago.
Fees and other income for the second quarter of 1998 were $60.7 million, up
22.9% from $49.4 million for the second quarter of 1997, as a result of
increases in servicing fees and gains on the sale of equipment coming off lease,
as well as a gain from the securitization of $400.1 million of recreational
vehicle receivables.
Salaries and general operating expenses for the second quarter of 1998
totaled $104.0 million compared with $110.6 million for the second quarter of
1997. Reflecting ongoing productivity initiatives, the efficiency ratio improved
to 40.6% in the 1998 second quarter from 43.9%, excluding the 1997 special
items.
<PAGE>
The provision for credit losses was $21.9 million in the second quarter, a
decrease of $7.1 million from the second quarter of 1997 due to lower
chargeoffs, offset by a higher provision related to portfolio growth. Credit
quality remained strong during the 1998 second quarter as net chargeoffs of
$16.4 million, 0.36% of average finance receivables, declined from
$29.9 million, 0.68%, for the second quarter of 1997. At June 30, 1998, the
reserve for credit losses increased to $245.8 million (1.34% of finance
receivables) up $5.6 million from $240.2 million at March 31, 1998, (1.33%) and
up $10.2 million from $235.6 million (1.33%) at year-end 1997.
The CIT Group, Inc., one of the nation's largest commercial and consumer
lending organizations, is an affiliate of and majority-owned by The Dai-Ichi
Kangyo Bank, Limited, one of the largest banks in the world.
(SEE ATTACHED TABLES FOR ADDITIONAL FINANCIAL DATA).
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollars in Millions, except Net Income per Share)
For the Quarter For the Six Months
Ended June 30, Ended June 30,
----------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Finance income 498.2 $451.9 $970.8 $889.0
Interest expense 257.8 233.6 502.4 456.7
------ ------ ------ -------
Net finance income 240.4 218.3 468.4 432.3
Fees and other income 60.7 49.4 127.1 107.1
Gain on sale of equity
interest acquired
in loan workout - 58.0 - 58.0
------ ------ ------ -------
Operating revenue 301.1 325.7 595.5 597.4
------ ------ ------ -------
Salaries and general
operating expenses 104.0 110.6 205.7 210.5
Provision for credit
losses 21.9 29.0 44.4 56.0
Depreciation on
operating lease
equipment 40.4 33.9 78.7 66.0
Minority interest in
subsidiary trust holding
solely debentures of the
Company 4.8 4.8 9.6 6.7
------ ------ ------ -------
Operating expenses 171.1 178.3 338.4 339.2
------ ------ ------ -------
Income before provision for
income taxes 130.0 147.4 257.1 258.2
Provision for income taxes 46.3 53.7 91.7 94.4
------ ------ ------ -------
Net income $ 83.7 $ 93.7 $165.4 $ 163.8
====== ====== ====== =======
Basic net income per share $ 0.52 $0.59 $1.02 $1.04
Weighted average shares
outstanding 162,225,000 157,500,000 162,225,000 157,500,000
Diluted net income per
share $0.51 $0.59 $1.01 $1.03
Weighted average shares
outstanding 163,655,210 158,448,527 163,579,696 158,448,527
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
June 30, December 31,
1998 1997
---- ----
(unaudited)
Assets
Financing and leasing assets
Loans
Commercial $10,327.8 $ 9,922.5
Consumer 3,828.5 3,664.8
Commercial lease receivables 4,249.1 4,132.4
--------- ---------
Finance receivables 18,405.4 17,719.7
Reserve for credit losses (245.8) (235.6)
--------- ---------
Net finance receivables 18,159.6 17,484.1
Operating lease equipment, net 2,147.0 1,905.6
Consumer finance receivables held for sale 846.0 268.2
Cash and cash equivalents 169.4 140.4
Other assets 726.8 665.8
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Total assets $22,048.8 $20,464.1
========= =========
Liabilities and Stockholders' Equity
Debt
Commercial paper $ 6,197.0 $ 5,559.6
Variable rate senior notes 3,050.0 2,861.5
Fixed rate senior notes 7,253.3 6,593.8
Subordinated fixed rate notes 200.0 300.0
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Total debt 16,700.3 15,314.9
Credit balances of factoring clients 1,193.9 1,202.6
Accrued liabilities and payables 677.9 660.1
Deferred federal income taxes 642.0 603.6
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Total liabilities 19,214.1 17,781.2
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely debentures of the Company 250.0 250.0
Stockholders' equity
Class A common stock, par value $0.01 per share,
700,000,000 shares authorized and 37,166,070 and
37,173,527 issued and outstanding at June 30, 1998
and December 31, 1997, respectively 0.4 0.4
Class B common stock, par value $0.01 per share,
510,000,000 shares authorized and 126,000,000 issued
and outstanding 1.3 1.3
Paid-in capital 951.0 948.3
Retained earnings 1,632.0 1,482.9
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Total stockholders' 2,584.7 2,432.9
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Total liabilities and stockholders' equity $22,048.8 $20,464.1
========= =========
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For the Quarter Ended For the Six
June 30, Months
Ended June 30,
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Dollars in Millions 1998 1997 1998 1997
Selected Data and Ratios
Profitability
Net income per diluted share $0.51 $0.59 $1.01 $1.03
Return on average common
stockholders' equity 13.16% 17.36% 13.19% 15.36%
Return on AEA 1.67% 2.07% 1.69% 1.83%
Ratios Excluding Nonrecurring Items(4)
Net Income per diluted share $0.51 $0.41 $1.01 $0.85
Return on average stockholder's equity 13.16% 12.09% 13.19% 12.69%
Return on AEA 1.67% 1.43% 1.69% 1.51%
Efficiency ratio 40.6% 43.9% 40.6% 43.0%
Other
Net interest margin as a percentage of AEA 4.79% 4.81% 4.78% 4.84%
Salaries and general operating expenses
as a percentage of average
managed assets(1) 1.86% 2.27% 1.88% 2.18%
Net credit losses as a percentage of
average finance receivables 0.36% 0.68% 0.41% 0.67%
Credit Quality At June 30, At December 31, At June 30,
----------- --------------- -----------
60+ days contractual delinquency 1998 1997 1997
as a percentage of finance
receivables
Commercial 1.43% 1.20% 1.40%
Consumer 3.37% 3.48% 2.95%
Total 1.83% 1.67% 1.69%
Total nonperforming assets as a
percentage of finance receivables (2) 1.48% 1.17% 1.26%
Reserve for credit losses as a
percentage of finance receivables 1.34% 1.33% 1.32%
Ratio of reserve for credit losses to
trailing twelve-month net credit losses 3.00x 2.33x 2.06x
Capital and Leverage
Total debt to stockholders' equity
and Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
debentures of the Company 5.89x 5.71x 6.27x
Total debt to stockholders' equity (3) 6.56x 6.40x 7.10x
Total common stockholders' equity $ 2,584.7 $ 2,432.9 $ 2,190.6
Managed Assets
Commercial:
Finance receivables $14,576.9 $14,054.9 $13,714.6
Operating lease equipment, net 2,147.0 1,905.6 1,573.0
Other 75.5 65.8 53.1
--------- --------- ---------
Total Commercial 16,799.4 16,026.3 15,340.7
--------- --------- ---------
Consumer:
Finance receivables 3,828.5 3,664.8 3,100.1
Finance receivables held for sale 846.0 268.2 950.1
Finance receivables previously
securitized 2,446.0 2,385.6 1,403.2
--------- --------- ---------
Total Consumer 7,120.5 6,318.6 5,453.4
--------- --------- ---------
Total managed assets $23,919.9 $22,344.9 $20,794.1
========= ========= =========
(1) Average managed assets reflect average earning assets plus the average of
consumer finance receivables previously securitized and currently managed
by the Company.
(2) Total nonperforming assets reflect both commercial and consumer finance
receivables on nonaccrual status and assets received in satisfaction of
loans.
(3) Total debt includes, and stockholders' equity excludes, $250.0 million of
Company-obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely debentures of the Company.
(4) Earnings for the second quarter and six months of 1997 exclude $.18 per
diluted share related to the net effect of a gain on the sale of an equity
interest acquired in a loan workout and certain nonrecurring expenses.
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
(Amounts in Millions)
MANAGED ASSETS BY BUSINESS UNIT
June 30, December 31, June 30,
1998 1997 1997
---- ---- ----
Equipment Financing
Finance Receivables $ 7,649.2 $ 7,403.4 $ 7,121.2
Operating lease equipment, net 641.0 623.8 471.7
--------- --------- ---------
Total Equipment Financing 8,290.2 8,027.2 7,592.9
--------- --------- ---------
Capital Finance
Finance Receivables $ 1,679.4 $ 1,755.5 $ 1,764.3
Operating lease equipment, net 1,476.1 1,251.8 1,041.4
--------- --------- ---------
3,155.5 3,007.3 2,805.7
Liquidating Portfolio** 568.9 675.2 825.1
--------- --------- ---------
Total Capital Finance 3,724.4 3,682.5 3,630.8
--------- --------- ---------
Commercial Services 2,295.3 2,113.1 1,894.4
Business Credit* 1,448.1 1,247.9 1,357.2
Credit Finance* 965.9 889.8 812.3
Equity Investments 75.5 65.8 53.1
--------- --------- ---------
Total Commercial 16,799.4 16,026.3 15,340.7
--------- --------- ---------
Consumer Finance 2,397.3 1,992.3 2,202.2
Sales Financing 2,277.2 1,940.7 1,848.0
--------- --------- ---------
Total Consumer 4,674.5 3,933.0 4,050.2
--------- --------- ---------
Finance receivables previously
securitized:
Consumer Finance 374.6 453.8 -
Sales Financing 2,071.4 1,931.8 1,403.2
--------- --------- ---------
2,446.0 2,385.6 1,403.2
--------- --------- ---------
Total managed assets $23,919.9 $22,344.9 $20,794.1
========= ========= =========
Sales Financing managed assets
by product line:
Recreation vehicles $ 1,710.5 $ 1,596.5 $ 1,343.7
Manufactured housing 1,487.6 1,471.9 1,344.6
Recreational boat 966.5 682.5 503.1
Wholesale inventory financing 184.0 121.6 59.8
--------- --------- ---------
$ 4,348.6 $ 3,872.5 $ 3,251.2
========= ========= =========
* In October 1997, $95.0 million of finance receivables were transferred from
Business Credit to Credit Finance.
** Consists primarily of oceangoing maritime and project finance.
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FEES AND OTHER INCOME Three Months Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
---- ---- ---- ----
Factoring commissions $22.6 $22.1 $ 45.6 $ 43.3
Fees and other 21.9 18.2 44.0 35.2
Gains on sales of leasing equipment 8.9 5.7 23.7 17.1
Gains on sales of equity investments 1.9 2.3 8.4 10.0
Gains on securitizations and sales
of finance receivables 5.4 1.1 5.4 1.5
----- ----- ------ ------
$60.7 $49.4 $127.1 $107.1
===== ===== ====== ======
<PAGE>
Exhibit 99.2
[The CIT Group, Inc. Logo]
Contact: Jeffrey Simon
Senior Vice President
Investor Relations
(973) 535-5911
[email protected]
FROM: THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
FOR IMMEDIATE RELEASE
THE CIT GROUP, INC. DECLARES REGULAR QUARTERLY DIVIDEND
NEW YORK, NEW YORK, July, 22, 1998 --- The Board of Directors of The
CIT Group, Inc. (NYSE:CIT) today declared a regular quarterly cash dividend of
$.10 per common share for shareholders of record on August 12, 1998.
The cash dividend is payable on August 31, 1998.
With more than $23 billion in managed assets, The CIT Group, Inc.
(http://www.citgroup.com) is one of the nation's largest commercial and consumer
financing companies. Founded in 1908, the Company provides diversified financing
products and services to a broad range of customers through strategically
focused business units.
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