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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, 2000
--------------
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, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2994534
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(State or other jurisdiction of (IRS 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)
- --------------------------------------------------------------------------------
(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 30, 2000: Common Stock including Exchangeable Shares -
263,018,311.
================================================================================
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
(UNAUDITED)
TABLE OF CONTENTS PAGE
----
PART I. FINANCIAL INFORMATION 1
Item 1. Condensed Financial Statements
Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999. 2
Consolidated Income Statements for the three months
ended March 31, 2000 and 1999. 3
Consolidated Statements of Changes in Stockholders' Equity for
the three months ended March 31, 2000 and 1999. 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999. 5
Notes to Condensed Consolidated Financial Statements. 6-10
Item 2. Management's Discussion and Analysis of Financial
and Condition and Results of Operations 11-26
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 27
- --------------------------------------------------------------------------------
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995. Because such statements involve 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, potential changes in interest rates,
competitive factors, and general economic conditions and the ability to
integrate recent acqusitions.
- --------------------------------------------------------------------------------
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 these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the December 31,
1999 Annual Report on Form 10-K for The CIT Group, Inc. ("we", "our", "us",
"CIT", or the "Company").
1
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
Assets
- ------
Financing and leasing assets
Loans and leases
Commercial $29,211.9 $27,119.2
Consumer 4,127.2 3,887.9
--------- ---------
Finance receivables 33,339.1 31,007.1
Reserve for credit losses (476.2) (446.9)
--------- ---------
Net finance receivables 32,862.9 30,560.2
Operating lease equipment, net 6,495.6 6,125.9
Finance receivables held for sale 2,762.5 3,123.7
Cash and cash equivalents 388.8 1,073.4
Goodwill 1,830.1 1,850.5
Other assets 2,310.4 2,347.4
--------- ---------
Total assets $46,650.3 $45,081.1
========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Debt
Commercial paper $10,618.1 $ 8,974.0
Variable rate senior notes 7,914.7 7,147.2
Fixed rate senior notes 18,180.6 19,052.3
Subordinated fixed rate notes 200.0 200.0
---------- ---------
Total debt 36,913.4 35,373.5
Credit balances of factoring clients 2,256.7 2,200.6
Accrued liabilities and payables 1,020.1 1,191.8
Deferred federal income taxes 558.5 510.8
--------- ---------
Total liabilities 40,748.7 39,276.7
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely debentures of the Company 250.0 250.0
Stockholders' equity
Common stock 2.7 2.7
Paid-in capital 3,524.7 3,521.8
Retained earnings 2,214.9 2,097.6
Accumulated other comprehensive income 0.1 2.8
Treasury stock at cost (90.8) (70.5)
--------- ---------
Total stockholders' equity 5,651.6 5,554.4
--------- ---------
Total liabilities and stockholders' equity $46,650.3 $45,081.1
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollars in Millions, except per share amounts)
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
-----------------------------
2000 1999
--------- -------
(unaudited)
<S> <C> <C>
Finance income $ 1,228.8 $ 541.5
Interest expense 571.9 273.3
--------- -------
Net finance income 656.9 268.2
Depreciation on operating lease equipment 307.8 56.1
--------- -------
Net finance margin 349.1 212.1
Fees and other income 238.2 64.7
--------- -------
Operating revenue 587.3 276.8
--------- -------
Salaries and general operating expenses 268.2 105.8
Provision for credit losses 61.6 21.9
Goodwill amortization 20.5 3.2
Minority interest in subsidiary trust holding solely
debentures of the Company 4.8 4.8
--------- -------
Operating expenses 355.1 135.7
--------- -------
Income before provision for income taxes 232.2 141.1
Provision for income taxes 88.3 49.2
--------- =======
Net income $ 143.9 $ 91.9
========= =======
Basic net income per share $ 0.55 $ 0.57
Diluted net income per share $ 0.55 $ 0.57
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Millions)
Three Months Ended
March 31,
------------------------------
2000 1999
---------- -----------
(unaudited)
Balance, January 1 $ 5,554.4 $ 2,701.6
---------- ----------
Net income 143.9 91.9
Foreign currency translation adjustments (3.3) --
Unrealized gain on equity and securitization
investments, net 0.6 --
---------- ----------
Total comprehensive income 141.2 91.9
Dividends declared (26.6) (16.2)
Treasury stock purchased (20.3) (7.2)
Other 2.9 3.6
---------- ----------
Balance, March 31 $ 5,651.6 $ 2,773.7
========== ==========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
---------- ----------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $ 143.9 $ 91.9
Adjustments to reconcile net income to net cash flows
from operations:
Provision for credit losses 61.6 21.9
Depreciation and amortization 353.4 73.1
Provision for deferred federal income taxes 47.7 26.2
Gains on equipment, receivable and investment sales (95.7) (14.0)
(Decrease) increase in accrued liabilities and payables (126.8) 72.0
Decrease (increase) in other assets 32.7 (53.1)
Other 4.1 15.7
---------- ---------
Net cash flows provided by operations 420.9 233.7
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans extended (11,658.2) (7,827.7)
Collections on loans 9,453.7 7,485.0
Proceeds from asset and receivable sales 1,168.5 775.2
Purchase of finance receivable portfolios (706.0) (202.0)
Purchases of assets to be leased (547.8) (472.5)
Net increase in short-term factoring receivables (267.3) (91.4)
Other 25.1 (6.3)
---------- ---------
Net cash flows used for investing activities (2,532.0) (339.7)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of variable and fixed rate notes (3,199.3) (1,598.9)
Proceeds from the issuance of variable and fixed rate notes 3,095.1 2,248.4
Net increase (decrease) in commercial paper 1,644.1 (334.8)
Repayments of non-recourse leveraged lease debt (66.9) (70.0)
Cash dividends paid (26.6) (16.2)
Purchase of treasury stock (20.3) (7.2)
---------- ---------
Net cash flows provided by financing activities 1,426.1 221.3
---------- ---------
Effect of exchange rate on cash 0.4 --
---------- ---------
Net (decrease) increase in cash and cash equivalents (684.6) 115.3
Cash and cash equivalents, beginning of period 1,073.4 73.6
---------- ---------
Cash and cash equivalents, end of period $ 388.8 $ 188.9
========== =========
Supplemental disclosures
Interest paid $ 526.7 $ 225.7
Federal, state and local and foreign income taxes paid $ 4.2 $ 3.4
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1-Basis of Presentation
We believe all adjustments (all of which are normal recurring accruals)
necessary for a fair statement of financial position and results of operations
for these periods have been made. Results for interim periods are not
necessarily indicative of results for a full year and are subject to year-end
audit adjustments.
Note 2-Earnings Per Share
The reconciliation of the numerator and denominator of basic earnings per share
("EPS") with that of diluted EPS is presented below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31,
-----------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
(Dollars in Millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to
common shareholders $143.9 262,931,435 $0.55 $91.9 161,166,060 $0.57
===== =====
Effect of Dilutive
Securities:
Restricted shares - 660,570 - 962,291
Stock options - 28,097 - 292,676
------ ----------- ----- -----------
Diluted EPS $143.9 263,620,102 $0.55 $91.9 162,421,027 $0.57
====== =========== ===== ===== =========== =====
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 3-Stockholders' Equity
The following table summarizes the outstanding common stock, par value $.01 per
share with 1,210,000,000 shares authorized, and exchangeable shares at March 31,
2000 and December 31, 1999.
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------
Less Exchangeable
Issued Treasury Outstanding Shares
------ -------- ----------- ------
<S> <C> <C> <C> <C>
Balance at March 31, 2000 254,891,002 (3,928,986) 250,962,016 12,405,295
=========== =========== =========== ==========
Balance at December 31, 1999 242,285,952 (2,745,685) 239,540,267 24,892,310
=========== =========== =========== ==========
</TABLE>
6
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Exchangeable shares of CIT Exchangeco Inc., par value of $.01 per share, were
issued in connection with the acquisition of Newcourt. The holders of Exchangeco
shares have dividend, voting and other rights equivalent to those of CIT common
stock holders. These shares may be exchanged at any time at the option of the
holder on a one-for-one basis for CIT common stock, and in any event must be
exchanged no later than November 2004.
Note 4 - Business Segment Information
The following table presents reportable segment information and the
reconciliation to the consolidated totals as of March 31, 2000 and 1999. The
2000 amounts reflect integration related portfolio transfers between Vendor
Technology Finance, Structured Finance and Equipment Financing and Leasing.
Prior year balances have been reclassified to conform with the current year
presentation.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Equipment Vendor
Financing Technology Commercial Structured Total Corporate Consolidated
and Leasing Finance Finance Finance Consumer Segments and Other Total
----------- ------- ------- ------- -------- -------- --------- -----
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 2000
Operating revenue $ 165.8 $ 188.9 $ 117.0 $ 32.3 $ 57.5 $ 561.5 $ 25.8 $ 587.3
Net income 64.4 28.2 35.8 16.3 13.8 158.5 (14.6) 143.9
Total managed assets 19,892.0 16,067.8 7,585.8 2,043.2 7,400.0 52,988.8 160.7 53,149.5
March 31, 1999
Operating revenue $ 121.0 $ - $ 89.4 $ - $ 58.8 $ 269.2 $ 7.6 $ 276.8
Net income 57.4 - 28.5 - 13.0 98.9 (7.0) 91.9
Total managed assets 13,640.2 - 5,466.4 - 7,913.4 27,020.0 84.6 27,104.6
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 5 - 1999 Restructuring Charge
On November 15, 1999, CIT concluded its acquisition of Newcourt, a
publicly-traded non-bank financial services enterprise, which originated,
invested in and securitized, syndicated and sold asset-based loans and leases.
Newcourt's origination activities focus on the commercial and corporate finance
segments of the asset-based financing market. The acquisition of Newcourt has
been accounted for using the purchase method.
7
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the restructuring liability,
which resulted from the Newcourt acquisition.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Severance and
Other Leasehold Transaction
Termination Termination and Other
Costs Costs Costs Total
------------- ----------- ----------- ---------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Balance at November 15, 1999 $102.1 $24.5 $72.6 $199.2
Cash payments (48.1) -- (38.0) (86.1)
Transaction fees settled in CIT stock -- -- (14.3) (14.3)
Non-cash adjustments -- -- (2.5) (2.5)
------ ----- ------ ------
Balance at December 31, 1999 54.0 24.5 17.8 96.3
Cash payments (21.3) -- (5.3) (26.6)
------ ----- ----- ------
Balance at March 31, 2000 $ 32.7 $24.5 $12.5 $ 69.7
====== ===== ===== ======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The purchase accounting adjustments include estimated fair value adjustments
relating to certain receivable portfolios that are held for sale. Goodwill may
be further adjusted upon the sale of these portfolios to reflect the allocation
of goodwill to the cost basis of the assets sold. Further, additional
restructuring activities, which were contemplated in CIT's overall integration
plan, may occur in the year 2000. Any associated incremental exit costs will
also be reflected as goodwill adjustments in 2000 to the extent applicable.
Based upon currently available information and final determination of fair
value, management anticipates that as a result of the above factors, goodwill
will be increased in 2000.
Note 6 - Selected Pro Forma Information
The unaudited condensed consolidated statement of income for the three months
ended March 31, 2000 and the unaudited pro forma condensed consolidated
statement of income for the three months ended March 31, 1999 follow. The 1999
pro forma statement has been prepared assuming that the Newcourt acquisition had
occurred at the beginning of the period.
8
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
For the Three Months Ended
March 31,
-------------------------
2000 1999*
------ ------
(Dollars in Millions, except per share amounts)
<S> <C> <C>
Operating revenue $587.3 $546.2
Net income $143.9 $120.1
Basic earnings per share $ 0.55 $ 0.45
Diluted earnings per share $ 0.55 $ 0.45
- --------------------------------------------------------------------------------------
</TABLE>
* 1999 pro forma results include a non-recurring gain from the extinguishment
of certain derivative instruments by Newcourt of $56.6 million pretax,
$31.1 million after tax and $0.12 pro forma EPS.
The pro forma results have been prepared for comparative purposes only, and are
based on the historical operating results of Newcourt prior to the acquisition.
The pro forma results include certain adjustments, primarily to recognize
accretion and amortization based on the allocated purchase price of assets and
liabilities. Further, the 1999 results do not include cost savings, reduced
securitization activity and other initiatives introduced by CIT that management
believes will be reflected in the post-acquisition results. Accordingly,
management does not believe that the 1999 pro forma results are indicative of
the actual results that would have occurred had the acquisition closed at the
beginning of the year.
Note 7 - Summarized Financial Information of Subsidiaries
The following table shows summarized consolidated financial information for
Newcourt Credit Group Inc. and for AT&T Capital. CIT has guaranteed on a full
and unconditional basis the existing registered debt securities and certain
other indebtedness of these subsidiaries. Therefore, CIT has not presented
related financial statements or other information for these subsidiaries on a
stand-alone basis.
9
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following summarized consolidated financial information reflects results as
of and for the quarter ended March 31, 2000 and also the transfer of various
subsidiaries to other CIT entities during January 2000.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Three Months Ended March 31, 2000
---------------------------------------
Newcourt
Credit AT&T
Group Inc. Capital
----------- ----------
(Dollars in Millions)
<S> <C> <C>
Operating revenue $ 50.2 $ 75.1
Operating expenses 26.9 73.6
Operating income before taxes 23.3 1.5
Net income 15.8 0.9
At March 31, 2000
---------------------------------------
Assets
Cash and cash equivalents $ 24.0 $ 201.1
Financing and leasing portfolio assets 1,755.1 5,459.2
Receivables from affiliates and other assets 508.6 6,839.1
-------- ---------
Total assets $2,287.7 $12,499.4
======== =========
Liabilities and Stockholders' Equity
Liabilities:
Debt $ 464.2 $11,066.6
Other 38.8 224.7
-------- ---------
Total liabilities 503.0 11,291.3
Total stockholders' equity 1,784.7 1,208.1
-------- ---------
Total liabilities and stockholders' equity $2,287.7 $12,499.4
======== =========
- ----------------------------------------------------------------------------------------------
</TABLE>
Note 8 - Recent Accounting Pronouncements
During 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No.
133". SFAS 137 delayed the implementation of SFAS 133, which is now effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000. Due
to the additional derivative instruments acquired in the Newcourt purchase, we
have not yet finalized the evaluation of the impact of SFAS 133.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
and CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
OVERVIEW
Net income for the quarters ended March 31, 2000 and 1999 totaled $143.9 million
and $91.9 million, respectively. Earnings per diluted share for the first
quarter of 2000 were $0.55, compared to $0.57 in the first quarter of 1999
reflecting higher 2000 earnings offset by the dilutive effective of stock issued
in connection with the November 15, 1999 acquisition of Newcourt. The first
quarter 2000 earnings reflect growth from our 1999 acquisition activity,
continued strong originations, and excellent fee and other income, as well as
expense savings related to our operational integrations.
Return on equity, for the first quarter of 2000, was 10.3% compared to 13.5% for
the same period in 1999 reflecting the increase in stock issued for the Newcourt
acquisition. Return on average tangible equity, for the first quarter of 2000,
was 15.3% compared to 14.6% for the same period in 1999. Return on average
earning assets ("AEA"), for the first quarter of 2000, was 1.48% compared to
1.63% for the first quarter of 1999.
New business origination volume, excluding factoring volume, for the first
quarter of 2000 was just under $6.8 billion compared to $2.6 billion in the
first quarter of 1999, due primarily to the Newcourt acquisition.
Managed assets, comprised of financing and leasing assets and finance
receivables previously securitized that we continue to manage, totaled $53.1
billion at March 31, 2000, up 3.3% from $51.4 billion at year end, and $27.1
billion at March 31, 1999. Owned financing and leasing assets increased 5.9% to
$42.8 billion at March 31, 2000 from $40.4 billion at December 31, 1999, and
from $24.3 billion at March 31, 1999. The December 31, 1999 securitized asset
balance included in managed assets reflects an adjustment to the securitized
asset balance to conform to the current quarter presentation.
11
<PAGE>
NET FINANCE INCOME AND MARGIN
We earn finance income on the loans and leases we provide to our borrowers and
equipment users. The interest expense is the cost to us of borrowing funds used
to make loans and purchase equipment to lease to customers. The excess of
finance income over interest expense is "net finance income." During the first
quarter of 2000, our net finance income as a percentage of AEA increased
significantly due to a higher level of operating leases, as well as the acquired
Newcourt portfolios. Considering this growing proportion of operating leases in
the portfolio, we believe that a more meaningful measure of profitability is net
finance income after depreciation on operating lease equipment or "net finance
margin."
A comparison of 2000 and 1999 net finance income and net finance margin is set
forth below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended
---------------------------
March 31, Increase
--------------------------- --------------------------
2000 1999 Amount Percent
--------- --------- -------- -------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Finance income $ 1,228.8 $ 541.5 $ 687.3 126.9%
Interest expense 571.9 273.3 298.6 109.3
--------- --------- --------- -----
Net finance income 656.9 268.2 388.7 144.9
Depreciation on operating lease
equipment 307.8 56.1 251.7 448.7
--------- --------- --------- ------
Net finance margin $ 349.1 $ 212.1 $ 137.0 64.6%
========= ========= ========= ======
AEA $38,968.1 $22,603.8 $16,364.3 72.4%
Net finance income as a % of AEA 6.74% 4.75%
Net finance margin as a % of AEA 3.58% 3.75%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Net finance margin increased 64.6% to $349.1 million for the three months ended
March 31, 2000 from the same period in 1999. The increase primarily reflects
growth in our loans, leases and operating leases primarily attributed to
acquisitions, as well as higher margins on the acquired Newcourt portfolios. As
a percentage of AEA, net finance margin declined to 3.58% at March 31, 2000 from
3.75% at March 31, 1999, primarily reflecting the growing operating lease
business, which has more than
12
<PAGE>
doubled to $6.5 billion from March 31, 1999. Our operating leases, which
generally have lower net margins than finance receivables at inception, also
generate equipment gains, renewal fees and tax depreciation benefits. Other
factors contributing to the decline include higher leverage, an increasing
interest rate environment and competitive environment.
Finance income for the three months ended March 31, 2000 increased $687.3
million or 126.9% to $1,228.8 million from the comparable 1999 period. As a
percentage of AEA, finance income (excluding interest income relating to
short-term interest-bearing deposits) was 12.46% for the first quarter ended
March 31, 2000, compared to 9.47% for the same quarter of 1999. The increase in
yield was due to changes in product mix primarily as a result of the 1999 fourth
quarter Newcourt acquisition.
Interest expense for the three months ended March 31, 2000 increased $298.6
million or 109.3% from the comparable 1999 period. As a percentage of AEA,
interest expense (excluding interest expense relating to short-term
interest-bearing deposits and dividends related to the Company's preferred
capital securities) for the first quarter of 2000 increased to 5.72% from 4.72%.
The rate increase from the comparable period of 1999 reflects the rising
interest rate environment in the latter half of 1999 and into 2000.
We seek to mitigate interest rate risk by matching the repricing characteristics
of our assets with our liabilities, which is done in part through the use of
derivative financial instruments, principally interest rate swaps. A comparative
analysis of the weighted average principal
13
<PAGE>
outstanding and interest rates paid on our debt before and after the effect of
interest rate swaps is shown in the following table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 2000
----------------------------------------------------------
Before Swaps After Swaps
---------------------- ------------------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Commercial paper and variable rate
senior notes $18,556.3 6.05% $15,242.6 6.28%
Fixed rate senior and subordinated notes 17,764.1 6.66% 21,077.8 6.53%
--------- ---------
Composite interest rate paid $36,320.4 6.35% $36,320.4 6.43%
========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
---------------------------------------------------------
Before Swaps After Swaps
---------------------- ----------------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Commercial paper and variable rate
senior notes $10,669.8 5.01% $ 8,335.4 4.97%
Fixed rate senior and subordinated notes 8,498.5 6.21% 10,832.9 6.27%
--------- ---------
Composite interest rate paid $19,168.3 5.54% $19,168.3 5.71%
========= =========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average composite interest rate after swaps in each of the periods
presented increased from the composite interest rate before swaps primarily
because a larger proportion of our debt, after giving effect to interest rate
swaps, was subject to a fixed interest rate. However, the weighted average
interest rates before swaps do not necessarily reflect the interest expense that
would have been incurred had we chosen to manage interest rate risk without the
use of such swaps.
The operating equipment lease portfolio was $6.5 billion at March 31, 2000
versus $3.2 billion at March 31, 1999. Operating lease margin (rental income
less depreciation expense) was 8.1% for the first quarter of 2000 compared to
6.6% for the prior year quarter. Depreciation on operating lease equipment was
$307.8 million in 2000, versus $56.1 million in 1999. As a percentage of average
operating leases, depreciation expense, on an annualized basis, was 19.7% and
7.5% at March 31, 2000 and March 31, 1999, respectively. The increase in 2000
over 1999 reflects the acquired Newcourt portfolios, which include shorter term
assets with more rapid depreciable lives. See "Financing and Leasing Assets" for
further discussion on growth of our operating lease portfolio.
14
<PAGE>
FEES AND OTHER INCOME
Non-spread revenues for the three months ended March 31, 2000 totaled $238.2
million, compared to $64.7 million for the first quarter of 1999, as shown in
the following table.
- -------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------
2000 1999
------ ------
(Dollars in Millions)
Fees and other income $121.4 $30.9
Factoring commissions 38.5 24.0
Gains on venture capital investments 37.5 --
Gains on sales of leasing equipment 21.8 9.2
Gains on securitizations 19.0 0.6
====== =====
$238.2 $64.7
====== =====
- -------------------------------------------------------------------------------
Fees and other income increased $90.5 million from the first quarter of 1999 to
$121.4 million, reflecting the higher proportion of fee-based business in the
former Newcourt business units, as the combination of Vendor Technology Finance
and Structured Finance contributed $74.0 million of the year-over-year increase.
Factoring commissions increased reflecting higher core volumes and the 1999
acquisitions. Gains of $37.5 million were realized on a number of venture
capital investment transactions, one of which accounted for a substantial
portion of the gains. Gains on equipment sales increased due to the higher
volume of equipment coming off lease as a result of the larger operating lease
portfolio. Securitization gains were $19.0 million or 8.2% of pretax income,
versus $0.6 million in the first quarter of 1999.
SALARIES AND GENERAL OPERATING EXPENSES
Salaries and general operating expenses increased to $268.2 million in the first
quarter of 2000 from $105.8 million in the comparable 1999 period, reflecting
increased personnel and facilities due to the 1999 acquisitions and normal
expense increases. Although up from the prior year quarter, we have realized
integration savings of approximately $24 million on a run-rate basis for this
first quarter from pre-acquisition levels, or slightly less than $100 million on
a full year pro-forma basis. The full year savings target set by management is
$150 million. Expense savings to date are primarily from the elimination of
duplicate corporate overhead and consolidation of non-
15
<PAGE>
revenue department activities. Operational savings from the consolidation of
certain servicing centers, as well as real estate cost reductions, are expected
to be realized in the coming quarters. Headcount was 7,650 at quarter end, down
600 from December 31, 1999.
Management monitors productivity via the efficiency ratio and the ratio of
salaries and general operating expenses to average managed assets ("AMA"). These
ratios, excluding goodwill amortization, are set forth in the following table.
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
--------------------------
2000 1999
------- -------
Efficiency ratio 46.0% 38.9%
Salaries and general operating expenses as a
percentage of AMA 2.15% 1.68%
- --------------------------------------------------------------------------------
The higher 2000 ratios reflect the acquired Vendor Technology Finance
operations, which carry significantly higher expense ratios.
GOODWILL AMORTIZATION
Goodwill amortization was $20.5 million in 2000 versus $3.2 million in 1999.
This increase reflects the impact of the 1999 acquisitions of Newcourt, Heller
and Congress, each of which were accounted for under the purchase method and
occurred after March 31, 1999.
RESERVE AND PROVISION FOR CREDIT LOSSES/CREDIT QUALITY
The reserve for credit losses is periodically reviewed for adequacy considering
economic conditions, collateral values and credit quality indicators, including
charge-off experience, and levels of past due loans and non-performing assets.
The reserve increased to $476.2 million (1.43% of finance receivables) at March
31, 2000 from $446.9 million (1.44% of finance receivables) at December 31, 1999
and $265.8 million (1.32% of finance receivables) at March 31, 1999. The reserve
percentage decreased slightly to 1.43% at March 31, 2000 due to seasonal growth
in factoring receivables in the first quarter. The relationship of the reserve
for
16
<PAGE>
credit losses to non-accrual finance receivables was 70.8% at March 31, 2000
compared to 87.6% at December 31, 1999.
The provision for credit losses for the first quarter of 2000 was $61.6 million,
up from $21.9 million in the first quarter of 1999, reflecting higher 2000 net
credit losses and provisions for portfolio growth.
For the quarter ended March 31, 2000, net credit losses were $53.0 million
(0.67% of average finance receivables) as compared to $20.9 million (0.42% of
average finance receivables) for the same period last year. The increase in net
credit losses as a percentage of average finance receivables reflects product
mix changes due to the acquisitions.
The following table sets forth net credit losses as a percentage of average
finance receivables (annualized), excluding consumer finance receivables held
for sale.
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------
2000 1999
------- -------
Equipment Financing and Leasing 0.45% 0.11%
Vendor Technology Finance 0.76 --
Commercial Finance 0.59 0.43
----- -----
Total Commercial 0.55 0.22
Consumer 1.48 1.17
===== =====
Total 0.67% 0.42%
===== =====
- --------------------------------------------------------------------------------
Commercial net credit losses were up from 0.22% in 1999 to 0.55% in 2000 due
mainly to higher charge-offs in Equipment Financing and Leasing and Commercial
Finance and to the addition of Vendor Technology Finance. Consumer net credit
losses were 1.48% compared to 1.17% for the three months ended March 31, 2000
and 1999, respectively, primarily due to higher losses in the manufactured
housing portfolio. Equipment Financing and Leasing net credit losses increased
primarily due to the transfer of assets from the Newcourt portfolios. The
increase in Commercial Finance net credit losses was primarily due to lower than
normal loss rates in the first quarter of 1999.
17
<PAGE>
PAST DUE AND NON-PERFORMING ASSETS
The following table sets forth certain information concerning past due and total
non-performing assets (and the related percentages of finance receivables) at
March 31, 2000 and December 31, 1999. The 2000 amounts and ratios reflect
integration related portfolio transfers between Vendor Technology Finance,
Structured Finance and Equipment Financing and Leasing.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
At March 31, 2000 At December 31, 1999
--------------------- ----------------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Finance receivables, past due 60
days or more
Equipment Financing and Leasing $ 305.1 2.35% $ 209.6 1.93%
Vendor Technology Finance 322.8 4.26 376.4(1) 4.15(1)
Commercial Finance 59.2 0.78 64.0 0.91
Structured Finance 86.9 7.83 -(1) -(1)
------- ---- ------- ----
Total Commercial Segments 774.0 2.65 650.0 2.42
Consumer 178.2 4.32 189.1(2) 4.62(2)
------- ---- ------- ----
Total $ 952.2 2.85% $ 839.1 2.71%
======= ==== ======= ====
Total non-performing assets
Equipment Financing and Leasing $ 303.6 2.34% $ 139.9 1.29%
Vendor Technology Finance 247.2 3.27 309.4(1) 3.41(1)
Commercial Finance 22.6 0.30 27.6 0.39
Structured Finance 85.9 7.74 -(1) -(1)
------- ---- ------- ----
Total Commercial Segments 659.3 2.26 476.9 1.77
Consumer 162.3 3.93 158.5(2) 3.87(2)
------- ---- ------- ----
Total $ 821.6 2.46% $ 635.4 2.05%
======= ==== ======= ====
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All Newcourt Segment data, at December 31, 1999, as presented above, is
included in Vendor Technology Finance. Additionally, the 1999 amounts and
ratios do not reflect integration related portfolio transfers between
Vendor Technology Finance, Structured Finance and Equipment Financing and
Leasing.
(2) For these calculations, certain finance receivables held for sale and the
associated past due and non-performing balances are included.
Non-performing assets reflect both finance receivables on non-accrual status and
assets received in satisfaction of loans.
Commercial past due and non-performing accounts increased primarily due to the
acquired portfolios and as a result of the consolidation of the servicing
centers. The increase in
18
<PAGE>
Equipment Financing and Leasing is due to the transfer of assets from Vendor
Technology Finance and Structured Finance, which is not reflected in the
December 31, 1999 information.
INCOME TAXES
The effective income tax rates for the first quarters of 2000 and 1999 were
38.0% and 34.9%, respectively. The increase in the 2000 effective tax rate was
primarily due to nondeductible goodwill amortization.
FINANCING AND LEASING ASSETS
Our managed assets grew $1.7 billion (3.3%), to $53.1 billion at March 31, 2000
from $51.4 billion at December 31, 1999. Financing and leasing assets grew $2.4
billion (5.9%) to $42.8 billion at March 31, 2000 from December 31, 1999.
Managed assets include finance receivables, operating lease equipment, finance
receivables held for sale, certain investments, and finance receivables
previously securitized and still managed by us.
The managed assets of our business segments and the corresponding strategic
business units are presented in the following table.
19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
At At
March 31, December 31, Change
2000 1999 Amount Percent
-------- ----------- -------- ---------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Equipment Financing
Finance receivables $11,081.1 $10,899.3 $ 181.8 1.7%
Operating lease equipment, net 1,170.9 1,066.2 104.7 9.8
--------- --------- -------- ------
Total 12,252.0 11,965.5 286.5 2.4
--------- --------- -------- ------
Capital Finance
Finance receivables 1,638.3 1,838.0 (199.7) (10.9)
Operating lease equipment, net 3,187.0 2,931.8 255.2 8.7
Liquidating portfolio (1) (2) 259.7 281.4 (21.7) (7.7)
--------- --------- -------- ------
Total 5,085.0 5,051.2 33.8 0.7
--------- --------- -------- ------
Total Equipment Financing and Leasing Segment 17,337.0 17,016.7 320.3 1.9
--------- --------- -------- ------
Vendor Technology Finance
Finance receivables 8,568.6 7,488.9 1,079.7 14.4
Operating lease equipment, net 2,091.0 2,108.8 (17.8) (0.8)
--------- --------- -------- ------
Total Vendor Technology Finance Segment 10,659.6 9,597.7 1,061.9 11.1
--------- --------- -------- ------
Structured Finance
Finance receivables 2,014.4 1,933.9 80.5 4.2
Operating lease equipment, net 28.8 - 28.8 100.0
--------- --------- -------- ------
Total Structured Finance Segment 2,043.2 1,933.9 109.3 5.7
--------- --------- -------- ------
Commercial Services 4,482.0 4,165.1 316.9 7.6
Business Credit 3,103.8 2,837.0 266.8 9.4
--------- --------- -------- ------
Total Commercial Finance Segment 7,585.8 7,002.1 583.7 8.3
--------- --------- -------- ------
Total Commercial Segments 37,625.6 35,550.4 2,075.2 5.8
--------- --------- -------- ------
Home equity 2,408.4 2,215.4 193.0 8.7
Manufactured housing 1,687.1 1,666.9 20.2 1.2
Recreational vehicles 437.0 361.2 75.8 21.0
Liquidating portfolio (3) 439.1 462.8 (23.7) (5.1)
--------- --------- -------- ------
Total Consumer Segment 4,971.6 4,706.3 265.3 5.6
--------- --------- -------- ------
Other - Equity Investments 160.7 137.3 23.4 17.0
--------- --------- -------- ------
Total Financing and Leasing Portfolio Assets 42,757.9 40,394.0 2,363.9 5.9
--------- --------- -------- ------
Finance receivables previously securitized
Commercial (4) 7,963.2 8,471.5 (508.3) (6.0)
Consumer 1,878.8 1,987.0 (108.2) (5.4)
Consumer liquidating portfolio (3) 549.6 580.8 (31.2) (5.4)
--------- --------- -------- ------
Total 10,391.6 11,039.3 (647.7) (5.9)
--------- --------- -------- ------
Total Managed Assets $53,149.5 $51,433.3 $1,716.2 3.3%
========= ========= ======== ======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consists primarily of ocean going maritime and project finance. Capital
Finance discontinued marketing to these sectors in 1997.
(2) Operating lease equipment, net, of $17.9 million and $19.1 million are
included in the liquidating portfolios at March 31, 2000 and December 31,
1999, respectively.
(3) In 1999, we decided to exit the recreational boat and wholesale loan
product lines.
(4) December 1999 managed asset balances have been adjusted to reflect a
vehicle in the Newcourt securitization program previously excluded. The
adjustment did not affect either the balance sheet or the income statement
for December 1999.
20
<PAGE>
Strong originations in transportation, corporate aerospace and SBA resulted in
first quarter 2000 growth in the Equipment Financing and Leasing operating lease
portfolios. Vendor Technology grew its major vendor relationships, whereas the
growth in the Commercial Finance segment resulted from strong new business
generation and seasonal growth in factoring.
Consumer managed assets were $7.4 billion at March 31, 2000 compared to $7.3
billion at December 31, 1999.
CONCENTRATIONS
Financing and Leasing Assets Composition
Our ten largest financing and leasing asset accounts at March 31, 2000 in the
aggregate accounted for 3.9% of the total financing and leasing assets, all of
which are commercial accounts secured by equipment, accounts receivable or
inventories.
Geographic Composition
The following table presents financing and leasing assets by customer location.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
At March 31, 2000 At December 31, 1999
---------------------------- --------------------------
Amount Percent Amount Percent
--------- ------- --------- -------
(Dollars in Millions)
<S> <C> <C> <C> <C>
United States
Northeast $ 8,388.2 19.6% $ 8,145.1 20.2%
West 8,174.4 19.1 7,517.2 18.6
Midwest 7,872.4 18.4 6,966.8 17.2
Southeast 5,777.6 13.5 5,318.5 13.2
Southwest 4,806.0 11.2 4,387.0 10.9
--------- ----- --------- -----
Total United States 35,018.6 81.8 32,334.6 80.1
--------- ----- --------- -----
Foreign
Canada 2,848.0 6.7 3,163.4 7.8
All other 4,891.3 11.5 4,896.0 12.1
--------- ------ --------- ------
Total $42,757.9 100.0% $40,394.0 100.0%
========= ====== ========= ======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Our managed asset geographic diversity does not differ significantly from our
owned asset geographic diversity.
Our financing and leasing asset portfolio in the United States is diversified by
state. At March 31, 2000, with the exception of California (10.7%), Texas
(7.9%), and New York (6.6%), no state represented more than 4.1% of financing
and leasing assets. Our managed and owned asset geographic composition did not
significantly differ from our December 31, 1999 managed and owned asset
geographic composition.
Financing and leasing assets to foreign obligors totaled $7.7 billion at March
31, 2000. After Canada, $2.8 billion (6.7% of financing and leasing assets), the
largest foreign exposures were England, $1.2 billion (2.8%), and Australia,
$442.3 million (1.0%). Our remaining foreign exposure was geographically
dispersed, with no other individual country exposure greater than 0.7% of
financing and leasing assets.
Financing and leasing assets to foreign obligors totaled $8.1 billion at
December 31, 1999. After Canada, $3.2 billion (7.8% of financing and leasing
assets), the largest foreign exposures were England, $1.6 billion (4.0%), and
Australia, $397.6 million (1.0%). Our remaining foreign exposure was
geographically dispersed, with no other individual country exposure greater than
0.8% of financing and leasing assets.
22
<PAGE>
Industry Composition
The following table presents financing and leasing assets by major industry
class.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
At March 31, 2000 At December 31, 1999
----------------------------- --------------------------
Amount Percent Amount Percent
--------- ------- --------- -------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Manufacturing (1)
(none greater than 2.9%) $ 8,689.5 20.3% $ 8,566.5 21.2%
Retail (2) 4,835.3 11.3 5,194.1 12.9
Transportation (3) 3,735.8 8.7 3,348.2 8.3
Commercial airlines 3,255.4 7.6 3,091.2 7.7
Construction equipment 2,497.5 5.9 2,697.0 6.7
Home mortgage 2,408.7 5.6 2,215.4 5.5
Service industries 1,807.1 4.2 1,214.3 3.0
Manufactured housing 1,687.1 4.0 1,666.9 4.1
Wholesaling 1,260.2 3.0 1,303.6 3.2
Financial institutions 1,163.9 2.7 1,205.3 3.0
Other (none greater than 2.3%) 11,417.4 26.7 9,891.5 24.4
--------- ----- --------- -----
Total $42,757.9 100.0% $40,394.0 100.0%
========= ===== ========= =====
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes manufacturers of steel and metal products, textiles and apparel,
printing and paper products, and other industries.
(2) Includes retailers of apparel (4.4%) and general merchandise (2.3%).
(3) Includes rail, bus, and over-the-road trucking industries, and business
aircraft.
Liquidity Risk Management
Liquidity risk refers to the risk of CIT being unable to meet potential cash
outflows promptly and cost effectively. Factors that could cause such a risk to
arise might be a disruption of a securities market or other source of funds. We
actively manage and mitigate liquidity risk by maintaining diversified sources
of funding. The primary funding sources are commercial paper (U.S., Canada and
Australia), medium-term notes (U.S., Canada and Europe) and asset-backed
securities (U.S. and Canada). We also maintain committed bank lines of credit
aggregating $8.5 billion to provide back-stop support of commercial paper
borrowings and approximately $393 million of local bank lines to support our
international operations. Additional sources of liquidity are loan and lease
payments from customers and wholeloan sales, syndications and asset-backed
receivable conduits. At March 31, 2000, $18.1 billion of registered, but
unissued, debt securities remained available under shelf registration
statements, including $2.0 billion of European Medium-Term Notes.
23
<PAGE>
To ensure uninterrupted access to capital, we maintain strong investment grade
ratings as outlined below:
- --------------------------------------------------------------------------------
Short Term Long Term
---------- ---------
Moody's P-1 A1
Standard & Poor's A-1 A+
Duff & Phelps D-1+ AA-
Dominion Bond Rating Service R-1 (mid) A (mid)
- --------------------------------------------------------------------------------
As part of our continuing program of accessing the public and private
asset-backed securitization markets as an additional liquidity source, general
equipment finance receivables of $680.0 million were securitized during the
first quarter of 2000. At March 31, 2000, we had $4.3 billion of registered, but
unissued, securities available under public shelf registration statements
relating to our asset-backed securitization program.
We also target and monitor certain liquidity metrics to ensure both a balanced
liability profile and adequate alternate liquidity availability. Among the
target ratios are commercial paper as a percentage of total debt and committed
bank line coverage of outstanding commercial paper.
24
<PAGE>
Capitalization
The following table presents information regarding our capital structure.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
At March 31, At December 31,
2000 1999
------------ ---------------
(Dollars in Millions)
<S> <C> <C>
Commercial paper $10,618.1 $ 8,974.0
Term debt 26,295.3 26,399.5
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely debentures
of the Company 250.0 250.0
Stockholders' equity 5,651.6 5,554.4
--------- ---------
Total capitalization $42,815.0 $41,177.9
========= =========
Total debt (excluding overnight deposits) to stockholders'
equity and Company-obligated mandatorily
redeemable preferred securities of subsidiary trust
holding solely debentures of the Company 6.23x 5.96x
Total debt (excluding overnight deposits) to tangible
stockholders' equity and Company-obligated
mandatorily redeemable preferred securities of
subsidiary trust holding solely debentures of the
Company 9.04x 8.75x
Tangible stockholders' equity and Company-obligated
mandatorily redeemable preferred securities of
subsidiary trust holding solely debentures of the
Company to managed assets 7.7% 7.7%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
STATISTICAL DATA
The following table presents components of net income as a percentage of AEA,
along with other selected financial data.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
For the Three Months Ended
March 31,
----------------------------
2000 1999
-------- ----------
<S> <C> <C> <C>
Finance income (1) 12.46% 9.47%
Interest expense (1) 5.72 4.72
--------- ---------
Net finance income 6.74 4.75
Depreciation on operating lease equipment 3.16 0.99
--------- ---------
Net finance margin 3.58 3.76
Fees and other income 2.45 1.14
--------- ---------
Operating revenue 6.03 4.90
--------- ---------
Salaries and general operating expenses 2.75 1.87
Provision for credit losses 0.63 0.39
Goodwill amortization 0.21 0.06
Minority interest in subsidiary trust holding solely
debentures of the Company 0.05 0.08
--------- ---------
Operating expenses 3.64 2.40
--------- ---------
Income before provision for income taxes 2.39 2.50
Provision for income taxes 0.91 0.87
--------- ---------
Net income 1.48% 1.63%
--------- ---------
Average earning assets (dollars in millions) $38,968.1 $22,603.8
========= =========
- --------------------------------------------------------------------------------------
</TABLE>
(1) Excludes interest income and interest expense relating to short-term
interest-bearing deposits.
26
<PAGE>
PART II. OTHER INFORMATION
--------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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 February 3, 2000 was filed with the
Commission reporting the Company's announcement of financial results
for the year ended December 31, 1999, the declaration of a quarterly
dividend for the quarter ended December 31, 1999 and the appointment
of a new Chairman of the Board, a new Director and the retirement of
one Director.
A Form 8-K/A was filed on January 31, 2000 to provide the required
September 30, 1999 pro-forma financial information.
27
<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, 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 15, 2000
28
EXHIBIT 12
THE CIT GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For the Three Months Ended
March 31,
----------------------------
2000 1999
------- ------
<S> <C> <C>
Net income $ 143.9 $ 91.9
Provision for income taxes 88.3 49.2
------- ------
Earnings before provision for income taxes 232.2 141.1
------- ------
Fixed charges:
Interest and debt expense on indebtedness 571.9 273.3
Minority interest in subsidiary trust holding solely
debentures of the Company 4.8 4.8
Interest factor - one third of rentals on real and
personal properties 6.0 2.3
------- ------
Total fixed charges 582.7 280.4
------- ------
Total earnings before provision for income taxes
and fixed charges $814.9 $421.5
====== ======
Ratios of earnings to fixed charges 1.40x 1.50x
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 389
<SECURITIES> 0
<RECEIVABLES> 33,339
<ALLOWANCES> 476
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,650
<CURRENT-LIABILITIES> 0
<BONDS> 26,295
250
0
<COMMON> 3
<OTHER-SE> 5,652
<TOTAL-LIABILITY-AND-EQUITY> 46,650
<SALES> 0
<TOTAL-REVENUES> 1,467
<CGS> 0
<TOTAL-COSTS> 289
<OTHER-EXPENSES> 312
<LOSS-PROVISION> 62
<INTEREST-EXPENSE> 572
<INCOME-PRETAX> 232
<INCOME-TAX> 88
<INCOME-CONTINUING> 144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.55
</TABLE>
