-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RFX+kuCP4KPoc0JMBoM93BPcfkwD8K/nbKc77Apr2CYFW8wEHbr9Hz1WUy2A2kOL xd1g2jiFDaThS9H/7PYn2w== 0000020388-94-000080.txt : 19941103 0000020388-94-000080.hdr.sgml : 19941103 ACCESSION NUMBER: 0000020388-94-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941031 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIT GROUP HOLDINGS INC /DE/ CENTRAL INDEX KEY: 0000020388 STANDARD INDUSTRIAL CLASSIFICATION: 6153 IRS NUMBER: 132994534 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01861 FILM NUMBER: 94557012 BUSINESS ADDRESS: STREET 1: 1211 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2125361950 MAIL ADDRESS: STREET 1: 1211 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: CIT FINANCIAL CORP/OLD/ DATE OF NAME CHANGE: 19860512 10-Q 1 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 SEPTEMBER 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-1861 THE CIT GROUP HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-2994534 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1211 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036 (Address of principal executive offices) (Zip Code) (212) 536-1950 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 31, 1994: 1,000 shares. THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES (UNAUDITED) TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1994 and December 31, 1993. 2-3 Consolidated Income Statements for the three and nine month periods ended September 30, 1994 and 1993. 4 Consolidated Statements of Stockholders' Equity for the nine month periods ended September 30, 1994 and 1993. 5 Consolidated Statements of Cash Flows for the nine month periods ended September 30, 1994 and 1993. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-18 PART II. OTHER INFORMATION Item 2. Changes in Securities 19 4. Submission of Matters to a Vote of Security Holders 19 6. Exhibits and Reports on Form 8-K 19 PART I. FINANCIAL INFORMATION Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the December 31, 1993 Annual Report on Form 10-K for The CIT Group Holdings, Inc. (the "Corporation"). The Corporation considers that all adjustments (all of which are normal recurring accruals) necessary for a fair statement of the financial position and results of operations for these periods have been made; however, results for such interim periods are subject to year-end audit adjustments. Results for such interim periods are not necessarily indicative of results for a full year. Amounts for 1993 have been reclassified, where necessary, to conform to 1994 presentations. THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, ASSETS 1994 1993 ------------- ------------ FINANCING AND LEASING ASSETS Finance receivables (net of unearned finance income of $1,359,980 and $1,482,069) CORPORATE FINANCE Capital Equipment Financing $4,313,364 $4,394,528 Business Credit 1,406,090 1,282,133 Credit Finance 714,346 645,642 ----------- ----------- 6,433,800 6,322,303 DEALER AND MANUFACTURER FINANCING Industrial Financing 4,069,811 3,880,991 Sales Financing and Consumer Finance 1,751,936 1,438,865 ----------- ----------- 5,821,747 5,319,856 FACTORING Commercial Services 2,115,161 981,935 ----------- ----------- Finance receivables 14,370,708 12,624,094 Reserve for credit losses (185,321) (169,378) ----------- ----------- Net finance receivables 14,185,387 12,454,716 Equipment under operating lease, net 790,692 751,901 ----------- ----------- Net financing and leasing assets 14,976,079 13,206,617 CASH AND CASH EQUIVALENTS Cash 24,379 101,554 Interest-bearing deposits 40,000 - ----------- ----------- Cash and cash equivalents 64,379 101,554 OTHER ASSETS 396,826 420,310 ----------- ----------- TOTAL ASSETS $15,437,284 $13,728,481 =========== ===========
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 ------------- ------------- DEBT Commercial paper $6,541,220 $6,516,139 Variable rate notes 2,412,500 1,686,500 Fixed rate notes 2,473,150 2,392,500 Subordinated fixed rate notes 300,000 200,000 ---------- ----------- Total debt 11,726,870 10,795,139 Credit balances of factoring clients 1,155,480 521,728 Accrued liabilities and payables 377,051 324,520 Deferred Federal income taxes and investment tax credits 409,971 394,859 ---------- ----------- Total liabilities 13,669,372 12,036,246 STOCKHOLDERS' EQUITY Common stock - authorized, issued and outstanding - 1,000 shares 250,000 250,000 Paid-in capital 408,320 408,320 Retained earnings 1,109,592 1,033,915 ---------- ----------- Total stockholders' equity 1,767,912 1,692,235 ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $15,437,284 $13,728,481 ============ =============
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1994 1993 1994 1993 --------- ---------- ---------- ---------- Interest and fees earned $342,838 $304,691 $987,252 $887,562 Interest expense 161,349 127,782 437,444 379,201 --------- ---------- --------- ---------- Net interest and fees 181,489 176,909 549,808 508,361 --------- ---------- --------- ---------- Gains on asset sales 9,920 18,850 20,916 23,028 --------- ---------- --------- ---------- Salaries and employee benefits 46,861 38,209 139,168 112,892 Other operating expenses 38,333 34,741 113,021 96,586 --------- ---------- --------- ---------- Operating expenses before provision for credit losses 85,194 72,950 252,189 209,478 Provision for credit losses 20,041 28,404 72,333 79,597 --------- ---------- --------- ---------- Total operating expenses 105,235 101,354 324,522 289,075 --------- ---------- --------- ---------- Income before provision for income taxes 86,174 94,405 246,202 242,314 Provision for income taxes 33,587 46,956 94,609 104,730 --------- ---------- --------- ---------- Net income $52,587 $47,449 $151,593 $137,584 =========== ========== ========== ========== Ratio of earnings to fixed charges - - 1.56 1.63
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1994 1993 ------ ------ Balance, January 1 $1,692,235 $1,601,091 Net income 151,593 137,584 Dividends paid (75,916) (68,874) ---------- ---------- Balance, September 30 $1,767,912 $1,669,801 ========== ==========
THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
Nine Months Ended SEPTEMBER 30, 1994 1993 ------ ------ CASH FLOWS FROM OPERATIONS Net income $151,593 $137,584 Adjustments to reconcile net income to net cash flows from operations: Provision for credit losses 72,333 79,597 Depreciation and amortization 54,413 34,096 Provision for deferred Federal income taxes 11,112 9,007 Gains on asset sales (20,916) (23,028) Increase in accrued liabilities and payables 56,475 50,012 (Increase) decrease in other assets (3,846) 17,621 Other (14,516) (22,419) -------- -------- Net cash flows provided by operations 306,648 282,470 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Loans extended (16,667,886) (14,951,282) Collections on loans 16,119,606 14,369,071 Purchases of assets to be leased (673,394) (632,665) Collections on lease receivables 400,396 369,804 Net increase in short-term factoring receivables (261,420) (34,343) Acquisition of Barclays Commercial Corp. (435,630) - Proceeds from asset sales 493,209 209,023 Purchases of loan portfolios (133,168) (197,717) Proceeds from sales of assets received in satisfaction of loans 34,896 33,515 Other (27,060) (8,454) --------- -------- Net cash flows used for investing activities (1,150,451) (843,048) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of variable and fixed rate notes 2,086,200 1,635,000 Repayments of variable and fixed rate notes (1,179,550) (871,330) Net increase (decrease) in commercial paper 25,081 (545,910) Proceeds from nonrecourse leveraged lease debt 27,571 107,153 Repayments of nonrecourse leveraged lease debt (76,758) (57,786) Cash dividends paid (75,916) (68,874) -------- -------- Net cash flows from financing activities 806,628 198,253 -------- -------- Net decrease in cash and cash equivalents (37,175) (362,325) Cash and cash equivalents, beginning of year 101,554 699,793 -------- -------- Cash and cash equivalents, end of quarter $64,379 $337,468 ======== ======== Supplemental disclosures Interest paid $428,692 $375,900 Federal and State and local taxes paid $75,965 $71,970 Noncash transfer of receivables to other assets $48,381 $155,038 Noncash transfers of financing and leasing assets to assets received in satisfaction of loans $37,984 $140,140
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET INCOME Net income for the 1994 third quarter totaled $52.6 million, an increase of $5.1 million (10.8%) from $47.4 million reported in the third quarter of 1993. For the nine months ended September 30, 1994, net income was $151.6 million, a $14.0 million (10.2%) increase from $137.6 million in 1993. The results for both 1994 periods were records, reflecting growth in interest income from the higher level of financing and leasing assets and increased factoring commissions, due in part, to the acquisition of Barclays Commercial Corporation (BCC) on February 28, 1994. Also contributing to the record earnings were lower charge-offs resulting from improved credit quality. FINANCING AND LEASING ASSETS Financing and leasing assets increased from both June 30, 1994 and year-end 1993 as presented in the following table. ------------------------------------------------------------------------------------------------------------
September 30, June 30, December 31, 1994 1994 1993 --------- ---------- --------- (Amounts in Millions) Finance receivables $14,370.7 $13,779.2 $12,624.1 Equipment under operating lease 790.7 736.7 751.9 --------- ---------- ---------- Financing and leasing assets $15,161.4 $14,515.9 $13,376.0 ========== =========== =========== ------------------------------------------------------------------------------------------------------------
The increases of $645.5 million (4.4%) in financing and leasing assets from June 30, 1994 and $1.79 billion (13.3%) from December 31, 1993 reflect continued growth in middle-market financing, home equity lending, inventory and accounts receivable commercial financing, and a seasonal increase in factored receivables. The increase from December 31, 1993 also included over $700.0 million in factored receivables from the acquisition of BCC. Financing and leasing assets at September 30, 1994 and the changes from December 31, 1993 are discussed below for each business unit. Corporate Finance o Capital Equipment Financing - Customized secured equipment financing and leasing of major capital equipment for medium and larger-sized companies. Financing and leasing assets totaled $4.90 billion at September 30, 1994, down $59.2 million (1.2%) from $4.96 billion at December 31, 1993. These amounts include equipment under operating lease of $587.6 million at September 30, 1994 and $565.7 million at December 31, 1993. While 1994 new business volume totaled $713.8 million (an increase of 10.6% from $645.2 million in the prior year period), financing and leasing assets declined slightly due to higher than normal prepayments and receivable sales for credit risk management purposes. o Business Credit - Revolving and term loans, including debtor-in-possession and workout financing, for medium and larger-sized companies secured by accounts receivable, inventory and fixed assets. Financing and leasing assets totaled $1.41 billion, an increase of $124.0 million (9.7%) from $1.28 billion, reflecting new business volume, additional borrowings under existing credit arrangements, and customer paydowns returning to more normal levels. o Credit Finance - Revolving and term loans, including restructurings, for small and medium-sized companies secured by accounts receivable, inventory and fixed assets. Financing and leasing assets totaled $714.3 million, a gain of $68.7 million (10.6%), from $645.6 million reflecting record new business volume from a strengthened competitive position with small to middle-market companies. Dealer and Manufacturer Financing o Industrial Financing - Secured equipment financing and leasing for medium- sized companies, including dealer and manufacturer financing. Financing and leasing assets totaled $4.27 billion, an increase of $205.7 million (5.1%), from $4.07 billion, as new business volume, principally with middle-market companies, continued at record levels. Financing and leasing assets at September 30, 1994 included equipment under operating lease totaling $203.1 million, an increase of $16.9 million (9.1%) from $186.2 million at December 31, 1993. o Sales Financing - Retail secured financing of recreational vehicles, recreational boats, and manufactured housing through dealers and manufacturers. Financing and leasing assets totaled $1.36 billion, an increase of $55.5 million (4.2%) from $1.31 billion reflecting improved new business volume. The 1994 growth was tempered by a second quarter $48.0 million securitization and a third quarter $114.0 million asset sale for credit risk management purposes, both comprised of manufactured housing receivables. o Consumer Finance - Loans secured by first or second mortgages on residential real estate, generated primarily through direct marketing. Financing and leasing assets totaled $388.9 million, an increase of $257.6 million (196.2%), from $131.3 million. The growth reflects continued improvement in new loan originations supplemented by occasional bulk purchases of existing portfolios. Factoring o Commercial Services - Factoring of accounts receivables, including credit protection, bookkeeping and collection activities. Financing and leasing assets totaled $2.12 billion, an increase of $1.13 billion (115.4%) from $981.9 million at year-end. The increase reflects the acquisition of BCC, record new client signings in 1994, and a seasonal increase in the volume of factored receivables. Commercial Airline Industry Commercial airline finance receivables and equipment under operating lease totaled $1.84 billion or 12.2% of total financing and leasing assets (before the reserve for credit losses) at September 30, 1994, compared with $1.89 billion (14.2%) at December 31, 1993. The portfolio is secured by commercial aircraft and related equipment, and is further described in the following table. -----------------------------------------------------------------------------------------------------------
September 30, December 31, 1994 1993 ----------- ----------- (Dollar Amounts in Millions) Finance Receivables Amount outstanding(a) $1,401.9 $1,437.3 Number of obligors 44 43 Operating Leases Net carrying value $442.1 $457.6 Number of obligors 18 21 ----------------------------------------------------------------------------------------------------------- Total $1,844.0 $1,894.9 ----------------------------------------------------------------------------------------------------------- Number of obligors(b) 57 58 ----------------------------------------------------------------------------------------------------------- Number of aircraft 277 276 ----------------------------------------------------------------------------------------------------------- (a) Includes accrued rents on operating leases of $0.5 million at September 30, 1994 and $1.0 million at December 31, 1993, which were classified as finance receivables in the Consolidated Balance Sheets. (b) Certain obligors have both finance receivable and operating lease transactions. -----------------------------------------------------------------------------------------------------------
The $50.9 million decline in commercial airline industry outstandings reflects scheduled maturities and the sale of existing transactions for credit risk management purposes, offset in part by additional fundings. Management continues to monitor closely the investment in this portfolio relative to total financing and leasing assets. On August 25, 1994, America West Airlines emerged from under the protection of Chapter 11 of the Bankruptcy Reform Act of 1978, as amended (Chapter 11). As such, at September 30, 1994, none of the obligors in the Corporation's commercial airline industry portfolio were subject to bankruptcy proceedings. However, Trans World Airlines, Inc., with total outstandings to the Corporation of $34.1 million at September 30, 1994, has publicly announced that it may file a prepackaged Chapter 11 bankruptcy plan if its recently disclosed restructuring proposal is not agreed to by creditors. All of the Corporation's transactions (loans and leases) with this obligor are cross-collateralized, and the total fair value of that collateral exceeds the total outstandings. As such, management does not believe this situation will have a significant effect on the Corporation's 1994 financial position or results of operations. Highly Leveraged Transactions Highly leveraged transactions ("HLTs") totaled $471.9 million (3.1% of financing and leasing assets before the reserve for credit losses) at September 30, 1994, compared with $476.6 million (3.6%) at December 31, 1993. The Corporation's HLT outstandings are generally secured by collateral, as distinguished from HLTs that rely primarily on cash flow from operations. Unfunded commitments to lend in secured HLTs were $207.9 million at September 30, 1994, compared with $123.1 million at December 31, 1993. At September 30, 1994, the portfolio consisted of 31 obligors in 13 industry groups located throughout the United States, with the largest regional concentration in the West (32.2%). Total HLT outstandings classified as nonaccrual increased to $68.5 million (4 accounts) at September 30, 1994 from $34.7 million (3 accounts) at December 31, 1993 as one additional account was placed on nonaccrual in the second quarter of 1994. NET INTEREST AND FEES Net interest and fees includes interest earned and rents received on financing and leasing assets, net of interest expense, as well as noninterest revenues reflecting commissions generated from processing factored accounts receivable invoices, and from syndication, pre-payment and other fees, many of which are not dependent upon the advancement of funds. A comparison of 1994 and 1993 interest and fees earned and interest expense is set forth below: - ------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, ----------- ----------- --------------------- (Dollar Amounts in Millions) 1994 1993 Increase ----------- ----------- --------------------- Interest and fees earned $342.8 $304.7 $38.1 12.5% Interest expense 161.3 127.8 33.5 26.2% --------- --------- -------- ----- Net interest and fees $181.5 $176.9 $4.6 2.6% ========= ========= ======== ===== Average financing and leasing assets (AEA) $13,732.1 $12,319.2 $1,412.9 11.5% ========= ========= ======== ===== Net interest and fees as a % of AEA 5.29% 5.75% ====== ====== Nine Months Ended September 30, ----------- ----------- --------------------- 1994 1993 Increase ----------- ----------- --------------------- Interest and fees earned $987.2 $887.6 $99.6 11.2% Interest expense 437.4 379.2 58.2 15.3% -------- -------- -------- ------ Net interest and fees $549.8 $508.4 $41.4 8.1% ======= ====== ===== ===== Average financing and leasing assets (AEA) $13,408.6 $12,171.8 $1,236.8 10.2% ========= ========= ======== ===== Net interest and fees as a % of AEA 5.47% 5.57% ===== ===== - ---------------------------------------------------------------------------------------------------------------
Although increased pricing competition put pressure on interest earned, growth in average financing and leasing assets (which increased 11.5% and 10.2% from the respective 1993 three and nine month periods) and improved noninterest revenue (principally commissions earned on factored receivable volume generated by BCC since March) resulted in higher interest and fees earned. While there was an improvement in interest and fees earned, increased interest expense due to rising market interest rates, resulted in a decline in net interest and fees as a percent of AEA. The comparison in the net interest and fees as a percent of AEA between the third quarters of 1994 and 1993 is also affected by a lower level of syndication fees this year, which have an irregular earning pattern. A comparative analysis of the weighted average interest rates paid on the Corporation's debt, after giving effect to interest rate swaps, is set forth below. - -------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, 1994 1993 1994 1993 ----- ----- ------ ----- Floating rate debt 4.71% 3.35% 4.09% 3.35% Fixed rate debt 6.68% 7.44% 6.69% 7.50% Composite interest rate 5.49% 4.81% 5.11% 4.85% - -------------------------------------------------------------------------------------------------------------
Derivative transactions are generally entered into by the Corporation as a hedge against market interest rate fluctuations and are not entered into for trading or speculative purposes. GAINS ON ASSET SALES Gains on asset sales for the third quarter of 1994 were $9.9 million, compared with $18.9 million in the comparable 1993 quarter. For the nine months ended September 30, 1994, gains on asset sales were $20.9 million, compared to $23.0 million in the 1993 period. The 1993 third quarter included a $15.3 million gain on the securitization of $155.0 million of manufactured housing receivables. Gains on asset sales arise from sales of equipment coming off lease in the normal course of business, asset securitizations, and sales of receivables for credit risk management purposes. OPERATING EXPENSES Operating expenses before the provision for credit losses totaled $85.2 million for the 1994 third quarter, an increase of $12.2 million (16.8%) from $73.0 million for the 1993 third quarter. For the nine months ended September 30, 1994, operating expenses before the provision for credit losses totaled $252.2 million, an increase of $42.7 million (20.4%), compared with $209.5 million for the comparable 1993 period. As a percentage of AEA, operating expenses were 2.48% for the 1994 third quarter, compared with 2.37% for 1993, and 2.51% for the current nine month period, compared with 2.30% a year ago. The 1994 increases reflect the February acquisition of BCC and expanded staffing in Consumer Finance. Operating expenses as a percentage of AEA trended downward to 2.48% in the 1994 third quarter from the second quarter level of 2.57%. This improvement reflects (1) continued progress with the integration of Commercial Services and BCC operations, and (2) increasing new business volume from Consumer Finance's investment in staff, sales offices and systems. Management believes that these continuing efforts will, over time, reduce the Corporation's operating expense ratios to levels more comparable with past experience. The following table presents components of net income as a percentage of AEA, along with other selected financial data: -----------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, (Dollar Amounts in Thousands) 1994 1993 ------- ------- Interest and fees earned* 9.72% 9.58% Interest expense* 4.25 4.01 ------ ------- Net interest and fees 5.47 5.57 Gains on asset sales 0.21 0.26 Operating expenses before provision for credit losses 2.51 2.30 Net charge-offs** 0.66 0.79 Loss reserve increase 0.05 0.09 Income before provision for income taxes 2.45 2.66 Provision for income taxes 0.94 1.15 ------ ------- Net income 1.51% 1.51% ======= ======= AEA $13,408,639 $12,171,821 =========== ============ Average finance receivables $13,518,880 $12,172,469 =========== =========== Ratio of earnings to fixed charges 1.56 1.63 * Percentage calculated excluding interest income and interest expense relating to short-term interest-bearing deposits. ** Percentage of average finance receivables. -------------------------------------------------------------------------------------------------------------
PAST DUE AND NONACCRUAL FINANCE RECEIVABLES Finance receivables past due 60 days or more were $214.5 million (1.49% of finance receivables before the reserve for credit losses) at September 30, 1994, compared with $187.8 million (1.36%) at June 30, 1994 and $216.1 million (1.71%) at year-end 1993. Excluding past due loans in Industrial Financing that have dealer or manufacturer recourse provisions, the percentage of finance receivables past due 60 days or more was 1.26% at September 30, 1994, compared with 1.12% at June 30, 1994 and 1.47% at December 31, 1993. Past due finance receivables on nonaccrual status were $128.7 million (0.90% of finance receivables before the reserve for credit losses) at September 30, 1994, up from $117.0 million (0.85%) at June 30, 1994 but improved from $139.9 million (1.11%) at December 31, 1993. PROVISION AND RESERVE FOR CREDIT LOSSES The following table summarizes the activity in the reserve for credit losses. -----------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, (Dollar Amounts in Millions) 1994 1993 1994 1993 ------- ------- ------ ------ Net charge-offs $18.2 $27.2 $67.1 $71.8 Reserve change 1.8 1.2 5.2 7.8 ------ ------ ------ ------ Provision for credit losses $20.0 $28.4 $72.3 $79.6 ===== ===== ===== ===== Net charge-offs as a percent (annualized) of average finance receivables 0.52% 0.88% 0.66% 0.79% ===== ===== ===== ====== --------------------------------------------------------------------------------------------------------------
The decrease in net charge-offs as a percent of average finance receivables during 1994 reflects the overall improvement in the credit quality of financing and leasing assets. The reserve for credit losses at September 30, 1994 was $185.3 million (1.29% of finance receivables), compared with $169.4 million (1.34%) at year-end 1993. The increased balance from year-end 1993 is largely attributable to acquired credit loss reserves, principally BCC's. ASSETS RECEIVED IN SATISFACTION OF LOANS Assets received in satisfaction of loans were $60.4 million at September 30, 1994, down from $67.6 million at June 30, 1994 and $87.0 million at year-end 1993. INCOME TAXES The effective income tax rate for the 1994 third quarter was 39.0%, compared with 49.7% in the prior year period. For the first nine months of 1994, the effective tax rate was 38.4%, compared with 43.2% for the comparable 1993 period. The 1993 third quarter included a $10.3 million net charge (reflected in the 1993 three and nine month effective income tax rates) to record the effect of a retroactive one percent increase in the corporate Federal income tax rate enacted in August 1993. LIQUIDITY AND CAPITALIZATION The Corporation manages liquidity through: (1) principal repayments of existing finance receivables and the generation of cash flow from operations and (2) the borrowing of funds, primarily in the United States money and capital markets. Such cash is used to fund asset growth (including the bulk purchase of receivables and the acquisition of other finance-related businesses) and to meet debt obligations and other commitments on a timely and cost-effective basis. The following table presents information regarding the Corporation's capital structure. - --------------------------------------------------------------------------------------------------------------
September 30, December 31, 1994 1993 ------------- ------------- (Dollars in Thousands) Commercial Paper $6,541,220 $6,516,139 Term Debt 5,185,650 4,279,000 Stockholders' equity 1,767,912 1,692,235 ----------- ------------ Total Capitalization $13,494,782 $12,487,374 =========== ============ Ratios: Debt-to-equity 6.63 to 1 6.38 to 1 Debt-to-equity plus reserve for credit losses 6.00 to 1 5.80 to 1 - ---------------------------------------------------------------------------------------------------------------
Commercial paper borrowings of $6.54 billion were relatively unchanged from year-end. However, the Corporation issued $2.09 billion of term debt ($1.51 billion of variable rate and $580.2 million of fixed rate) during the first nine months of 1994. Repayments of term debt totaled $1.18 billion in the first nine months of 1994. At September 30, 1994, commercial paper borrowings were supported by $4.68 billion of committed credit line facilities, representing 72% of commercial paper outstanding. No borrowings have been made under credit lines since 1970. At September 30, 1994, $4.9 billion of registered but unissued debt securities remained available under shelf registration statements. PART II. OTHER INFORMATION ------------------------------ ITEM 2. CHANGES IN SECURITIES Under the most restrictive provisions of agreements relating to outstanding term debt, the Corporation may not, without the consent of the holders of such term debt, permit stockholders' equity to be less than $300,000,000. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS On August 15, 1994, Mr. Tomoaki Tanaka resigned from the Board, and the stockholders, by unanimous written consent, elected Mr. Hideo Kitahara for the balance of Mr. Tanaka's term as Director. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges. (b) A Form 8-K report dated July 14, 1994 was filed with the Commission reporting the Corporation's announcement of results for the quarter ended June 30, 1994. (c) A Form 8-K report dated October 21, 1994 was filed with the Commission reporting the Corporation's announcement of results for the quarter ended September 30, 1994. (d) Exhibit 27 - Financial Data Schedule EXHIBIT 12 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (DOLLAR AMOUNTS IN THOUSANDS)
Nine Months Ended September 30, 1994 1993 ------- ------- Net Income $151,593 $137,584 Provision for income taxes 94,609 104,730 -------- --------- Earnings before provision for income taxes 246,202 242,314 -------- -------- Fixed charges: Interest and debt expense on indebtedness 437,444 379,201 Interest factor - one third of rentals on real and personal properties 5,857 5,924 -------- -------- Total fixed charges 443,301 385,125 -------- -------- Total earnings before provision for income taxes and fixed charges $689,503 $627,439 ======== ======== Ratio of earnings to fixed charges 1.56 1.63
SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The CIT Group Holdings, Inc. -------------------------------------- (Registrant) BY /s/ J. J. Carroll ---------------------- J. J. Carroll Executive Vice President and Chief Financial Officer (duly authorized and principal accounting officer) DATE: October 31, 1994 EX-27 2
5 1,000 YEAR 9-MOS DEC-31-1993 DEC-31-1994 DEC-31-1993 SEP-30-1994 101,554 64,379 0 0 12,624,094 14,370,708 169,378 185,321 0 0 0 0 0 0 0 0 13,728,481 15,437,284 0 0 4,279,000 5,185,650 250,000 250,000 0 0 0 0 1,442,235 1,517,912 13,728,481 15,437,284 0 0 1,205,859 1,008,168 0 0 282,182 252,189 0 0 104,874 72,333 508,006 437,444 310,797 246,202 128,489 94,609 182,308 151,593 0 0 0 0 0 0 182,308 151,593 0 0 0 0
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