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) March 22, 1999
The CIT Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-1861 13-2994534
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code (212) 536-1390
_______________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet and
statement of income of The CIT Group, Inc. and Subsidiaries ("CIT" or the
"Company") are based on the historical consolidated financial statements of CIT
and Newcourt Credit Group Inc. ("Newcourt") at December 31, 1998 and for the
year then ended. The unaudited pro forma condensed consolidated balance sheet
has been prepared assuming that the pending Newcourt Acquisition, as defined
herein, had occurred on December 31, 1998 and the unaudited pro forma condensed
consolidated statement of income has been prepared assuming the pending Newcourt
Acquisition had occurred on January 1, 1998.
On March 8, 1999, the Company announced that it would acquire Newcourt in an
exchange of common stock ("Newcourt Acquisition"). Under the terms of the
acquisition agreement, 0.92 shares of CIT Class A Common Stock will be exchanged
for each outstanding share of Newcourt common stock. The Newcourt Acquisition is
subject to the satisfaction of certain conditions as set forth in the Agreement
and Plan of Reorganization, including regulatory approval and the affirmative
vote of stockholders of each of CIT and Newcourt. It is anticipated that the
acquisition will be completed in the third quarter of 1999.
The unaudited pro forma condensed consolidated financial statements reflect pro
forma estimated adjustments to Newcourt's assets and liabilities to reflect
their respective fair values and applies the purchase method of accounting. The
excess of the purchase price over the estimated fair value of the net assets
acquired has been allocated to goodwill. Allocation of the purchase price to the
fair value of the net assets acquired and goodwill is subject to change, and
will be finalized as of the Newcourt Acquisition closing date.
The following unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the accompanying notes thereto and the
Company's 1998 audited consolidated financial statements, included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, and
with the audited consolidated financial statements included in Newcourt's Form
6-K for the year ended December 31, 1998. The unaudited pro forma condensed
consolidated financial statements have been prepared based upon currently
available information and assumptions deemed appropriate by management of the
Company and Newcourt. These pro forma financial statements are not necessarily
indicative of either the financial position or the results of operations that
would have been achieved had the Newcourt Acquisition actually occurred on the
dates referred to above, nor is it necessarily indicative of the results of
future operations, because such unaudited pro forma condensed consolidated
financial statements are based on estimates of financial effects that may prove
to be inaccurate over time. The information furnished in the statements does not
reflect, among other things, management's plans to reduce the level of
securitization activity, the cost savings or the revenue enhancements that may
or may not be achieved as a result of the Newcourt Acquisition, or the post
acquisition legal and tax structure.
Certain information contained in the unaudited pro forma condensed consolidated
financial statements and the accompanying notes constitute forward-looking
statements concerning the combined companies' operations, economic performance
and financial condition. Because such statements reflect risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such risks and uncertainties include
but are not limited to risks of economic slowdown or downturn, risks inherent in
changes in prevailing interest rates, unanticipated difficulties in combining
the management, operations or cultures of CIT and Newcourt, cost savings that
are not realized or are not realizable within the time anticipated, risks
associated with the value and recoverability of leased equipment, adequacy of
credit reserves for credit losses, funding opportunities and borrowing costs,
changes in regulations governing the combined companies' business and
operations, competitive factors, issues associated with year 2000 compliance and
uncertainties associated with risk management, including credit risk management,
asset/liability management and interest rate risk management. In addition,
certain of such information is based upon preliminary estimates of fair values
and of future costs, which is subject to revision as additional information
becomes available.
1
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(Dollars in Millions)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CIT Newcourt(a) Adjustments Note Consolidated
--- ----------- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
Assets
Financing and leasing assets
Loans
Commercial $11,415.5 $ 4,936.4 $ 100.9 3a $16,452.8
Consumer 4,266.9 -- -- 4,266.9
Lease receivables 4,173.6 3,317.0 66.7 3a 7,557.3
--------- --------- --------- ---------
Finance receivables 19,856.0 8,253.4 167.6 28,277.0
Reserve for credit losses (263.7) (183.7) -- (447.4)
--------- --------- --------- ---------
Net finance receivables 19,592.3 8,069.7 167.6 27,829.6
Operating lease equipment, net 2,774.1 2,116.7 -- 4,890.8
Consumer finance receivables held for sale 987.4 -- -- 987.4
Commercial finance receivables held for sale -- 1,542.8 -- 1,542.8
Goodwill 216.5 1,222.0 1,084.3 3c 2,522.8
Cash and cash equivalents 73.6 998.8 -- 1,072.4
Other assets 659.2 1,186.0 (1.7) 3a 1,843.5
--------- --------- --------- ---------
Total assets $24,303.1 $15,136.0 $ 1,250.2 $40,689.3
========= ========= ========= =========
Liabilities and Stockholders' Equity
Debt
Commercial paper $ 6,144.1 $ 2,019.0 $ -- $ 8,163.1
Variable rate senior notes 4,275.0 1,480.4 -- 5,755.4
Fixed rate senior notes 8,032.3 8,107.8 203.5 3a 16,343.6
Subordinated fixed rate notes 200.0 -- -- 200.0
--------- --------- --------- ---------
Total debt 18,651.4 11,607.2 203.5 30,462.1
Credit balances of factoring clients 1,302.1 -- -- 1,302.1
Accrued liabilities and payables 694.3 669.4 150.0 2d 1,513.7
Deferred federal income taxes 703.7 (152.0) (71.3) 3a 480.4
--------- --------- --------- ---------
Total liabilities $21,351.5 $12,124.6 $ 282.2 $33,758.3
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely debentures of the Company 250.0 -- -- 250.0
Stockholders' equity:
Common stock 1.7 -- 1.4 2a 3.1
Paid-in capital 952.5 -- 3,978.0 2a 4,930.5
Share capital -- 2,792.8 (2,792.8) 3b --
Retained earnings 1,772.8 218.6 (218.6) 3b 1,772.8
Treasury stock at cost (25.4) -- -- (25.4)
--------- --------- --------- ---------
Total stockholders' equity 2,701.6 3,011.4 968.0 6,681.0
--------- --------- --------- ---------
Total liabilities and stockholders' equity $24,303.1 $15,136.0 $ 1,250.2 $40,689.3
========= ========= ========= =========
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
(a) Reported in U.S. $ and in accordance with U.S. GAAP - See Note 1 - Basis of
Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma
Reclassifications and Conversions.
2
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CIT Newcourt(a) Adjustments Note Consolidated
--- ----------- ----------- ---- ------------
(Dollars in Millions, except
per share amounts)
<S> <C> <C> <C> <C> <C>
Finance income $ 2,015.1 $ 1,888.4 $(56.7) 3e $ 3,846.8
Interest expense 1,040.8 657.9 (70.3) 3e 1,628.4
------------ ------------ ------ ------------
Net finance income 974.3 1,230.5 13.6 2,218.4
Fees and other income 255.4 548.7 -- 804.1
------------ ------------ ------ ------------
Operating revenue 1,229.7 1,779.2 13.6 3,022.5
Salaries and general operating expenses 407.7 698.3 -- 1,106.0
Provision for credit losses 99.4 100.5 -- 199.9
Depreciation on operating lease equipment 169.5 686.7 -- 856.2
Goodwill amortization 10.1 44.4 21.5 3d 76.0
Minority interest in subsidiary trust
holding solely debentures of the Company 19.2 -- -- 19.2
------------ ------------ ------ ------------
Operating expenses 705.9 1,529.9 21.5 2,257.3
------------ ------------ ------ ------------
Income before provision for income taxes 523.8 249.3 (7.9) 765.2
Provision for income taxes 185.0 91.5 5.2 3f 281.7
------------ ------------ ------ ------------
Net income $ 338.8 $ 157.8 $(13.1) $ 483.5
============ ============ ====== ============
Basic Earnings Per Share $ 2.09 $ 1.11 4 $ 1.65
Weighted average common shares outstanding 161,987,897 142,741,776 293,310,331
Diluted Earnings Per Share $ 2.08 $ 1.09 4 $ 1.63
Weighted average common shares outstanding 163,188,739 144,859,067 296,459,081
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
(a) Reported in U.S. $ and in accordance with U.S. GAAP - See Note 1 - Basis of
Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma
Reclassifications and Conversions.
3
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of December 31,
1998 was prepared as if the Newcourt Acquisition had been consummated on that
date. The unaudited pro forma condensed consolidated statement of income for the
year ended December 31, 1998 was prepared as if the Newcourt acquisition had
been consummated on January 1, 1998. The unaudited pro forma condensed
consolidated financial statements have been prepared using the following
information:
(a) Audited consolidated financial statements of The CIT Group, Inc.
("CIT" or the "Company") as of and for the year ended December 31,
1998, which are included in CIT's Annual Report on Form 10-K filed
with the Securities and Exchange Commission ("SEC");
(b) Audited consolidated financial statements of Newcourt Credit Group
Inc. ("Newcourt") as of and for the year ended December 31, 1998, as
filed on Form 6-K with the SEC, presented in Canadian dollars and
prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). For purposes of these unaudited pro
forma condensed consolidated financial statements, Newcourt's
balance sheet and income statement information has been: (1)
adjusted to conform to U.S. generally accepted accounting principles
("U.S. GAAP"), based upon the information contained in Newcourt's
1998 Form 6K footnote number 21 of "Notes to Consolidated Financial
Statements - Reconciliation to United States Accounting Principles",
(2) converted to a presentation in U.S. dollars using an exchange
rate of .6443 Canadian dollar to each U.S. dollar for the unaudited
pro forma condensed consolidated balance sheet and .6733 for the
unaudited pro forma condensed consolidated statement of income, and
(3) reclassified as to certain financial statement line items to
conform to CIT's presentation under U.S. GAAP - See Note 6 -
Newcourt Credit Group Inc. - Pro Forma Reclassifications and
Conversions.
2. Pro Forma Assumptions
(a) The value of CIT common stock, par value $0.01 per share, issued to
acquire Newcourt common stock is $3,979.4 million, based upon
148,374,321 outstanding shares of Newcourt common stock, per the
Agreement and Plan of Reorganization, at a price per Newcourt share
of $26.82. The price per share was determined by multiplying, by
0.92 ("the exchange ratio"), the average closing price of CIT Class
A common stock for the five day period both before and after the
date of the announcement of the Newcourt Acquisition, March 8, 1999.
(b) The acquisition of Newcourt has been accounted for using the
purchase method. The difference between the total purchase price and
the estimated fair value of the net assets acquired has been
allocated to goodwill.
4
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
(c) Estimated fair values for commercial loans, lease receivables, other
assets, fixed rate senior notes and derivative financial instruments
were obtained from Newcourt's 1998 Form 6-K - Footnote number 17 of
"Notes to Consolidated Financial Statements - Derivative Financial
Instruments" and Footnote number 18 "Fair Value of Financial
Instruments". The resulting net premium/discount on commercial loans
and lease receivables and fixed rate senior notes, for the purposes
of these unaudited condensed consolidated pro forma financial
statements, is assumed to be amortized/accreted into interest
income/expense to produce a constant yield to maturity. No fair
value adjustment has been made to operating lease equipment, and any
such adjustment is not expected to be material to the unaudited pro
forma condensed consolidated financial statements - See Note 5 -
Estimated Effect of Pro Forma Amortization and Accretion of Purchase
Accounting Adjustments.
The actual fair value of net assets acquired will be determined as
of the Newcourt Acquisition closing date and is subject to revision
as additional information becomes available.
(d) A preliminary estimate of $150.0 million has been made for costs
including transaction costs, severance, operational redundancies,
etc. associated with the acquisition of Newcourt ("restructuring
charge"). This restructuring charge is based upon information
currently available to management and is subject to change in
conjunction with the integration project that is undertaken in
connection with the acquisition.
In addition, management believes that certain other restructuring
costs may be incurred with respect to CIT in connection with
severance, premises, and other costs of integrating the two
organizations. At this time such non-recurring costs, preliminarily
estimated to range from $35-70 million, before taxes, are not
included in the accompanying pro forma financial statements, and
would be recognized as a charge to current earnings when incurred.
CIT will record the above restructuring charges and disclose their
components in accordance with the requirements of EITF 94-3
"Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring)" and EITF 95-3 "Recognition of Liabilities in
Connection with a Purchase Business Combination". CIT expects the
restructuring costs will consist principally of cash payments, and
will fund such costs from operations. The actual restructuring
charge and other restructuring costs are not expected to be
materially different from the estimates provided herein, or to
materially affect the financial condition or results of operations
of the combined entity.
3. Pro Forma Adjustments - The allocation of the purchase price has not been
finalized and the portion of the purchase price allocated to fair value
adjustments and goodwill is subject to change, because the fair value of net
assets acquired will be determined as of the closing date and is subject to
revision as additional information becomes available.
5
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
(a) Estimated pro forma purchase accounting adjustments for the Newcourt
Acquisition were as follows:
Newcourt net tangible assets - historical
at December 31, 1998 ................................... $ 1,789.4
Fair Value Adjustments:
Commercial loans........................................ 100.9
Lease receivables....................................... 66.7
Other assets............................................ (1.7)
Fixed rate senior notes................................. (203.5)*
---------
Subtotal - net fair value adjustments..................... (37.6)
Restructuring charge....................................... (150.0)
Tax effects of adjustments at 38%.......................... 71.3
---------
Total net adjustments to net assets acquired............... (116.3)
---------
Net tangible assets acquired............................... $ 1,673.1
=========
* Includes a fair value adjustment of $150.8 million related to Derivative
Financial Instruments, and excludes a portion of the fair value adjustment
relating to accrued interest payable included elsewhere in the balance
sheet at December 31, 1998.
(b) Purchase accounting adjustments were made to eliminate Newcourt
stockholders' equity accounts and to reflect the issuance of shares of CIT
common stock to purchase Newcourt common stock at a price of $26.82 per
each Newcourt share.
(c) Goodwill for the Newcourt Acquisition was calculated as follows:
Purchase price .............................................. $ 3,979.4
Net tangible assets acquired, as above ...................... 1,673.1
----------
Goodwill .................................................. $ 2,306.3
==========
(d) The goodwill related to the Newcourt Acquisition is amortized on a
straight-line basis over a period of thirty-five years.
(e) Pro forma adjustments to finance income and interest expense were
calculated for the Newcourt Acquisition as follows:
Amortization of premium on commercial loans and lease
receivables ............................................... $ (56.7)
Accretion of discount on fixed rate senior notes ............ 70.3
----------
Total net adjustment to net finance income .................. $ 13.6
==========
(f) Income tax expense was calculated at a 38% tax rate, representing the
expected tax rate of the temporary differences that are expected to be
realized. Goodwill amortization is non-deductible.
6
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
4. Earnings Per Share
Basic earnings per common share was calculated by dividing the net income
by the weighted average number of common shares outstanding for the year
ended December 31, 1998, for both CIT and Newcourt. For the unaudited pro
forma condensed consolidated financial statements, Newcourt shares were
adjusted to the equivalent number of shares of CIT stock based upon the
exchange ratio.
Diluted earnings per common share was calculated using the same method as
basic earnings per share, and includes potential dilution of common stock
equivalents.
The calculation of basic and diluted earnings per common share for
Newcourt excludes a non-recurring premium of $29.9 million on the
redemption of preferred securities. Including the premium in the
calculation of basic and diluted earnings per common share, Newcourt's
historical basic earnings per common share and diluted earnings per common
share were $0.90 and $0.88, respectively, and the unaudited condensed
consolidated financial statements basic earnings per common share and
diluted earnings per common share would have been $1.55 and $1.53,
respectively.
5. Estimated Effect of Pro Forma Amortization and Accretion of Purchase
Accounting Adjustments
The following table summarizes the prospective estimated impact of the
amortization and accretion of the pro forma purchase accounting
adjustments made in connection with the Newcourt Acquisition on CIT's
results of operations for the years indicated:
For the year ended Goodwill Lease/loans Debt Pretax
December 31, Amortization Amortization Accretion (Loss)
- ------------ ------------ ------------ --------- ------
1999 $ (65.9) $ (56.7) $ 70.3 $ (52.3)
2000 (65.9) (40.7) 47.8 (58.8)
2001 (65.9) (25.6) 27.1 (64.4)
2002 (65.9) (18.0) 7.0 (76.9)
2003 (65.9) (13.6) 11.1 (68.4)
2004 and
thereafter (1,976.8) (13.0) 40.2 (1,949.6)
--------- ------- ------ ---------
Totals $(2,306.3) $(167.6) $203.5 $(2,270.4)
========= ======= ====== =========
7
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
6. Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions
The following 1998 balance sheet and income statement schedules present Newcourt
in U.S. dollars and U.S. GAAP, and include pro forma reclassifications to
reflect Newcourt on a reporting basis consistent with CIT.
<TABLE>
<CAPTION>
Pro Newcourt
Newcourt Forma Presented on
Balance Sheet Category Presentation(j) Reclassifications Note CIT's Reporting Basis
- -------------------------------------------------------------------------------------------------------------------
(U.S. Dollars in Millions)
<S> <C> <C> <C> <C>
Assets:
Financing and leasing assets
Loans
Commercial -- $ 4,936.4 (a) $ 4,936.4
Lease receivables -- 3,260.2 (a) 3,317.0
56.8 (b)
--------- --------- ---------
Finance receivables -- $ 8,253.4 $ 8,253.4
Reserve for credit losses -- (183.7) (a) (183.7)
--------- --------- ---------
Net finance receivables -- $ 8,069.7 $ 8,069.7
Operating lease equipment, net $ 2,173.5 (56.8) (b) 2,116.7
Commercial finance receivables
held for sale 1,542.8 -- 1,542.8
Goodwill 1,222.0 -- 1,222.0
Cash and cash equivalents 998.8 -- 998.8
Other assets -- 587.2 Sum of (c) 1,186.0
598.8 (a)
Finance assets held for investment 8,611.7 (8,611.7) Sum of (a) --
Investment in affiliated companies 194.8 (194.8) (c) --
Accounts receivable, prepaids and other 298.5 (298.5) (c) --
Property and equipment, net 93.9 (93.9) (c) --
Future income tax asset 152.0 (152.0) (d) --
--------- --------- ---------
Total assets $15,288.0 $ (152.0) $15,136.0
========= ========= =========
Liabilities and Stockholders' Equity:
Commercial paper -- $ 2,019.0 (e) $ 2,019.0
Variable rate senior notes -- 1,480.4 (e) 1,480.4
Fixed rate senior notes -- 8,107.8 (e) 8,107.8
--------- --------- ---------
Total debt -- $11,607.2 $11,607.2
Accrued liabilities and payables $ 669.4 -- 669.4
Deferred federal income taxes -- (152.0) (d) (152.0)
Debt 11,607.2 (11,607.2) Sum of (e) --
--------- --------- ---------
Total liabilities $12,276.6 $ ( 152.0) $12,124.6
--------- --------- ---------
Share capital 2,792.8 -- $2,792.8
Retained earnings 218.6 -- 218.6
--------- --------- ---------
Total stockholders' equity $ 3,011.4 -- $3,011.4
--------- --------- ---------
Total liabilities and
stockholders' equity $15,288.0 $ ( 152.0) $15,136.0
========= ========= =========
</TABLE>
8
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in Millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Newcourt
Newcourt Forma Presented on
Income Statement Category Presentation(j) Reclassifications Note CIT's Reporting Basis
- -------------------------------------------------------------------------------------------------------------------
(U.S. Dollars in Millions)
<S> <C> <C> <C> <C>
Finance income -- $ 1,888.4 (f) $1,888.4
Interest expense -- 657.9 (f) 657.9
Net finance and rental income $ 549.2 (549.2) Sum of (f) --
----------- --------- ---------
Net finance income $ 549.2 $ 681.3 $1,230.5
Gain on sale of finance assets 287.5 (287.5) (i) --
Fees and other income 155.3 287.5 (i) 548.7
105.9 (f)
----------- --------- ---------
Operating revenues $ 992.0 $ 787.2 $1,779.2
----------- --------- ---------
Salaries and general operating expenses -- 34.5 (h) 698.3
663.8 Sum of (g)
Provision for credit losses -- 100.5 (f) 100.5
Depreciation on operating lease equipment -- 686.7 (f) 686.7
Goodwill amortization -- 44.4 (h) 44.4
Operating and administrative 365.2 (365.2) (g) --
Salaries and wages 298.6 (298.6) (g) --
Goodwill amortization, depreciation and 78.9 (78.9) Sum of (h) --
other expenses
----------- --------- ---------
Operating expenses $ 742.7 $ 787.2 $1,529.9
----------- --------- ---------
Income before provision for income
taxes $ 249.3 -- $ 249.3
Provision for income taxes 91.5 -- 91.5
----------- --------- ---------
Net income $ 157.8 -- $ 157.8
=========== ========= =========
</TABLE>
(a) Finance assets held for investment has been reclassified to the line items
Commercial loans, Lease receivable, Reserve for credit losses and Other
assets (relating to interests in securitized receivables).
(b) Rental receivables, net, has been reclassified to the line item Lease
receivables.
(c) The Investment in affiliated companies, Accounts receivable, prepaids and
other, and Property and equipment, net have been reclassified to the line
item Other assets.
9
<PAGE>
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Year ended December 31, 1998
(Dollars in millions, except per share amounts)
(d) The Future income tax asset has been reclassified to the line item
Deferred federal income taxes.
(e) Debt has been reclassified to the line items Commercial paper, Variable
rate senior notes and Fixed rate senior notes.
(f) Net finance and rental income has been reclassified to the line items
Finance income, Fees and Other Income, Interest expense, Provision for
credit losses, and Depreciation on operating lease equipment.
(g) Operating and administrative and Salaries and wages have been reclassified
to the line item Salaries and general operating expenses.
(h) Goodwill amortization, depreciation and other expenses have been
reclassified to the line items Salaries and general operating expenses
(relating to depreciation on property and equipment and the amortization
of other intangibles) and Goodwill amortization.
(i) Gain on sale of finance assets has been reclassified to the line item Fees
and other income.
(j) The audited consolidated financial statements included in Newcourt's Form
6-K for the year ended December 31, 1998, were prepared in accordance with
accounting principles generally accepted in Canada and are expressed in
Canadian dollars. The primary differences between Canadian and U.S. GAAP,
as they relate to Newcourt's 1998 financial statements, are the accounting
treatment of certain securitization transactions and restructuring
charges. For the purposes of these unaudited pro forma condensed
consolidated financial statements (presented in U.S. dollars as described
in Note 1b), adjustments have been made to the balance sheet and income
statement of Newcourt as of or for the year ended December 31, 1998 to
conform to U.S. GAAP. These adjustments are presented in Note 21 to the
audited consolidated financial statements included in Newcourt's Form 6-K
for the year ended December 31, 1998, and are summarized in the following
table.
(Dollars in Millions)
Income Statement:
- --------------------------------------------------------------------------------
Net income as reported under Canadian GAAP $ 198.2
Differences in accounting for securitization
transactions (net of income taxes of $7.1) $ (9.8)
Differences in accounting for restructuring
charge (net of income taxes of $19.5) $ (25.6)
Other (net of income taxes of $1.6) $ (5.0)
- --------------------------------------------------------------------------------
Net income, as reported under U.S. GAAP $ 157.8
- --------------------------------------------------------------------------------
The cumulative effect of the differences between Canadian and U.S. GAAP resulted
in a decrease in Retained earnings of $6.8 million, which was recorded as a
decrease of $12.4 million to Accounts receivable, prepaids and other and an
increase to the Future income tax asset of $5.6 million.
10
<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.
--------------------------------
(Registrant)
By: /s/ JOSEPH M. LEONE
--------------------------------
Joseph M. Leone
Executive Vice President and
Chief Financial Officer
Dated: March 19, 1999
