-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JI8hcSVXSorFYE9k4YG6tp6xTezOuqBd2DkN+JWNPTqPdTgA8GLr+YVsFz8Kmjmj jcKOapN/mccrjMlmc2HbkA== 0000891092-97-000133.txt : 19970512 0000891092-97-000133.hdr.sgml : 19970512 ACCESSION NUMBER: 0000891092-97-000133 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIT GROUP HOLDINGS INC /DE/ CENTRAL INDEX KEY: 0000020388 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [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: 97598722 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 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number 1-1861 THE CIT GROUP HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-2994534 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1211 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036 (Address of principal executive offices) (Zip Code) (212) 536-1390 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 1, 1997: 1,000 shares. ================================================================================ THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES (UNAUDITED) TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1997 and December 31, 1996. 3 Consolidated Income Statements for the three month periods ended March 31, 1997 and 1996. 4 Consolidated Statements of Changes in Stockholders' Equity for the three month periods ended March 31, 1997 and 1996. 5 Consolidated Statements of Cash Flows for the three month periods ended March 31, 1997 and 1996. 6 Note to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-17 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 18 PART I. FINANCIAL INFORMATION Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the December 31, 1996 Annual Report on Form 10-K for The CIT Group Holdings, Inc. (the "Corporation"). The discussion of the adoption of Statements of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" as amended by Statement of Financial Accounting Standards No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125" (collectively referred to hereafter as "SFAS 125") as of January 1, 1997 is included in Item 1. Financial Statements. The Corporation considers that all adjustments (all of which are normal recurring accruals) necessary for a fair statement of the financial position and results of operations for these periods have been made; however, results for such interim periods are subject to year-end audit adjustments. Results for such interim periods are not necessarily indicative of results for a full year. -2- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Millions) March 31, December 31, 1997 1996 --------- --------- Assets Financing and leasing assets Loans Commercial $ 9,996.4 $10,195.6 Consumer 3,186.0 3,239.0 Lease receivables 3,834.0 3,562.0 --------- --------- Finance receivables 17,016.4 16,996.6 Reserve for credit losses (222.0) (220.8) --------- --------- Net finance receivables 16,794.4 16,775.8 Operating lease equipment, net 1,501.9 1,402.1 Consumer finance receivables held for sale 539.8 116.3 Cash and cash equivalents 176.9 103.1 Other assets 571.7 535.2 --------- --------- Total assets $19,584.7 $18,932.5 ========= ========= Liabilities and Stockholders' Equity Debt Commercial paper $ 6,143.1 $ 5,827.0 Variable rate senior notes 3,611.5 3,717.5 Fixed rate senior notes 4,829.9 4,761.2 Subordinated fixed rate notes 300.0 300.0 --------- --------- Total debt 14,884.5 14,605.7 Credit balances of factoring clients 1,193.8 1,134.1 Accrued liabilities and payables 598.8 594.0 Deferred Federal income taxes 524.6 523.3 --------- --------- Total liabilities 17,201.7 16,857.1 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 250.0 -- Stockholders' equity Common stock - authorized, issued and outstanding - 1,000 shares 250.0 250.0 Paid-in capital 573.3 573.3 Unrealized gain on investment securities, net of taxes 8.5 -- Retained earnings 1,301.2 1,252.1 --------- --------- Total stockholders' equity 2,133.0 2,075.4 --------- --------- Total liabilities and stockholders' equity $19,584.7 $18,932.5 ========= ========= See accompanying note to condensed consolidated financial statements. -3- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Dollar Amounts in Millions) Three Months Ended March 31, ------------------- 1997 1996 ------ ------ Finance income $437.1 $402.6 Interest expense 223.1 207.2 ------ ------ Net finance income 214.0 195.4 Fees and other income 57.7 52.7 ------ ------ Operating revenue 271.7 248.1 ------ ------ Salaries and general operating expenses 99.9 95.9 Provision for credit losses 27.0 27.8 Depreciation on operating lease equipment 32.1 27.5 Minority interest in subsidiary trust holding solely debentures of the company 1.9 -- ------ ------ Operating expenses 160.9 151.2 ------ ------ Income before provision for income taxes 110.8 96.9 Provision for income taxes 40.7 37.1 ------ ------ Net income $ 70.1 $ 59.8 ====== ====== See accompanying note to condensed consolidated financial statements. -4- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Amounts in Millions) Three Months Ended March 31, ------------------------- 1997 1996 ------ ------ Balance, January 1 $2,075.4 $1,914.2 Net income 70.1 59.8 Unrealized gain on investment securities, net of taxes 8.5 -- Dividends paid (21.0) (37.9) -------- -------- Balance, March 31 $2,133.0 $1,936.1 ======== ======== See accompanying note to condensed consolidated financial statements. -5- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Millions) Three Months Ended March 31, ------------------- 1997 1996 ------ ------ CASH FLOWS FROM OPERATIONS Net income $ 70.1 $ 59.8 Adjustments to reconcile net income to net cash flows from operations: Provision for credit losses 27.0 27.8 Depreciation and amortization 37.3 31.6 Benefit for deferred Federal income taxes (2.1) (3.3) Gains on asset sales (20.0) (12.5) Increase in accrued liabilities and payables 3.3 12.9 Increase in other assets (24.4) (16.8) Other (0.5) (15.0) -------- -------- Net cash flows provided by operations 90.7 84.5 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Loans extended (7,300.7) (6,927.7) Collections on loans 7,052.2 6,727.9 Net increase in short-term factoring receivables (149.2) (97.6) Purchases of assets to be leased (133.5) (45.8) Proceeds from asset and receivable sales 67.3 256.5 Purchases of investment securities (9.2) (3.5) Proceeds from sales of assets received in satisfaction of loans 6.6 10.5 Other (5.0) (3.4) -------- -------- Net cash flows used for investing activities (471.5) (83.1) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of variable and fixed rate notes (1,036.3) (765.5) Proceeds from the issuance of variable and fixed rate notes 999.0 950.0 Net increase (decrease) in commercial paper 316.1 (158.2) Proceeds from the issuance of company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 250.0 -- Repayments of nonrecourse leveraged lease debt (53.2) (47.1) Cash dividends paid (21.0) (37.9) -------- -------- Net cash flows provided by (used for) financing activities 454.6 (58.7) -------- -------- Net increase (decrease) in cash and cash equivalents 73.8 (57.3) Cash and cash equivalents, beginning of period 103.1 161.5 -------- -------- Cash and cash equivalents, end of period $ 176.9 $ 104.2 ======== ======== Supplemental disclosures Interest paid $ 208.8 $ 279.4 Federal and State and local taxes paid $ 2.0 $ 2.2 Noncash transfer of finance receivables to finance receivables held for sale $ 464.8 $ 146.7 Noncash transfers of finance receivables to assets received in satisfaction of loans $ 7.3 $ 62.1 Noncash transfer of assets received in satisfaction of loans to finance receivables $ 4.6 $ -- See accompanying note to condensed consolidated financial statements. -6- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Corporation adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125") as amended by Statement of Financial Accounting Standards No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125" (collectively referred to hereafter as "SFAS 125") on January 1, 1997. SFAS 125 uses a "financial components" approach that focuses on control to determine the proper accounting for financial asset transfers and addresses the accounting for servicing rights on financial assets in addition to mortgage loans. Securitizations of finance receivables are accounted for as sales when legal and effective control over the related receivables is surrendered. Servicing assets or liabilities are recognized when the servicing rights are retained by the seller. In accordance with the transition rules set forth in SFAS 125, the Corporation, on January 1, 1997, reclassified the portion of previously recognized excess servicing assets that did not exceed contractually specified servicing fees to servicing assets which are included in other assets in the Consolidated Balance Sheets. The remaining balances of previously recognized excess servicing assets are included in other assets in the Consolidated Balance Sheets and are classified as available-for-sale investment securities subject to the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Unrealized gains and losses, representing the difference between amortized cost and current fair market value of such assets, are shown as a separate component of stockholders' equity, net of tax, in the Consolidated Balance Sheets. The Corporation recognized an $8.5 million unrealized gain on investment securities, net of taxes, upon the adoption of SFAS 125 which did not have a significant impact on the Corporation's financial position, results of operations, or liquidity. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET INCOME Net income for the 1997 first quarter totaled $70.1 million, an increase of $10.3 million (17.4%) from $59.8 million in 1996. The improvement was principally due to an increase in average financing and leasing assets and corresponding growth in net finance income as well as higher fees and other income. NET FINANCE INCOME A comparison of 1997 and 1996 first quarter net finance income is set forth below:
- --------------------------------------------------------------------------------------------- Three Months Ended ----------------------------------------------- March 31, Increase ---------------------- ------------------- 1997 1996 Amount Percent -------- -------- --------- ------- (Dollar Amounts in Millions) Finance income $ 437.1 $ 402.6 $ 34.5 8.6% Interest expense 223.1 207.2 15.9 7.7% ---------- ---------- ---------- ---- Net finance income $ 214.0 $ 195.4 $ 18.6 9.5% ========== ========== ========== ==== Average financing and leasing assets (AEA) $ 17,590.1 $ 16,065.6 $ 1,524.5 9.5% ========== ========== ========== ==== Net finance income as a % of AEA 4.87% 4.86% ========== ========== - ---------------------------------------------------------------------------------------------
The increase in net finance income was attributable to a 9.5% growth in average financing and leasing assets (primarily comprised of finance receivables, operating lease equipment and consumer finance receivables held for sale less credit balances of factoring clients) and lower cost of funds offset by slightly lower yields. -8- A comparative analysis of the weighted average principal outstanding and interest rates paid on the Corporation's debt, before and after giving effect to interest rate swaps, is shown in the following tables. - -------------------------------------------------------------------------------- Three Months Ended March 31, 1997 --------------------------------- Before Swaps After Swaps ------------ ----------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $ 9,776.2 5.46% $ 6,258.9 5.38% Fixed rate senior and subordinated notes 4,914.4 6.55% 8,431.7 6.50% --------- --------- Composite $14,690.6 5.82% $14,690.6 6.02% ========= ========= - -------------------------------------------------------------------------------- Three Months Ended March 31, 1996 --------------------------------- Before Swaps After Swaps ------------ ----------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $10,060.7 5.54% $ 7,155.8 5.52% Fixed rate senior and subordinated notes 3,409.4 7.01% 6,314.3 6.79% --------- --------- Composite $13,470.1 5.92% $13,470.1 6.11% ========= ========= - -------------------------------------------------------------------------------- The Corporation's interest rate swaps principally convert floating rate debt to fixed rate debt and effectively lower both the variable and fixed rates. The weighted average composite rate increases, however, because a larger proportion of the Corporation's debt, after giving effect to interest rate swaps, is subject to a fixed rate. The Corporation does not enter into derivative financial instruments for trading or speculative purposes. -9- FEES AND OTHER INCOME Fees and other income totaled $57.7 million in the 1997 first quarter, compared to $52.7 million in 1996. The increase reflects gains on sales of equipment and investments offset by reduced securitization activity ($41.2 million of finance receivables securitized in the first quarter of 1997 as compared to $211.1 million in the first quarter of 1996). SALARIES AND GENERAL OPERATING EXPENSES The following table sets forth the components of salaries and general operating expenses:
- ------------------------------------------------------------------------------------------- Three Months Ended --------------------------------------------- March 31, Increase ------------------- ------------------- 1997 1996 Amount Percent ------- ------- --------- ------- (Dollar Amounts in Millions) Salaries and employee benefits $ 59.3 $ 56.1 $ 3.2 5.7% General operating expenses 40.6 39.8 0.8 0.2% ------ ------ ------ ---- $ 99.9 $ 95.9 $ 4.0 4.2% ====== ====== ====== ==== Percent to AEA 2.27% 2.39% ====== ====== Percent to average serviced assets 2.05% 2.16% ====== ====== - -------------------------------------------------------------------------------------------
The 4.2% increase in salaries and general operating expenses is attributable to the growth in the consumer related business units, as well as to the higher serviced asset portfolio. Management monitors productivity via the relationship of these expenses to both AEA and average serviced assets. As a percentage of AEA, salaries and general operating expenses decreased to 2.27% for the first quarter of 1997 from 2.39% in 1996. As a percentage of average serviced assets, which is comprised of financing and leasing assets, off-balance sheet securitized finance receivables and other consumer -10- receivables serviced for third parties, these expenses improved to 2.05% for the first quarter of 1997 compared to 2.16% for the same period of 1996. PROVISION AND RESERVE FOR CREDIT LOSSES The following table summarizes the activity in the reserve for credit losses:
- --------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ----------------------------- 1997 1996 ---- ---- (Dollar Amounts in Millions) Net credit losses (percent, annualized, of average finance receivables) $ 25.7 0.60% $ 25.4 0.64% ======= ==== ======== ==== Provision for credit losses (percent, annualized, of AEA) $ 27.0 0.61% $ 27.8 0.69% ======= ==== ======== ==== - --------------------------------------------------------------------------------------------------------- At March 31, At December 31, ------------ --------------- 1997 1996 ---- ---- Reserve for credit losses (percent of finance receivables) $222.0 1.30% $220.8 1.30% ====== ==== ====== ==== - ---------------------------------------------------------------------------------------------------------
Net credit losses increased slightly during the first quarter of 1997 compared to the first quarter of 1996. The increase was the result of higher consumer net credit losses due to a more seasoned portfolio offset by lower levels of commercial net credit losses. DEPRECIATION ON OPERATING LEASE EQUIPMENT Depreciation on operating lease equipment for the first quarter of 1997 was $32.1 million, up from $27.5 million for the same period in 1996, due to additions to the portfolio. -11- INCOME TAXES The effective income tax rate for the 1997 first quarter decreased to 36.7%, from 38.3% in the prior year period due to lower state and local taxes. FINANCING AND LEASING ASSETS The changes in financing and leasing assets by business unit are presented in the following table:
March 31, December 31, Change 1997 1996 Amount Percent ---------- ------------ ------ ------- (Dollar Amounts in Millions) Finance receivables and consumer finance receivables held for sale Commercial Business Credit $ 1,351.4 $ 1,235.6 $ 115.8 9.4% Capital Finance (formerly Capital Equipment Financing)(1) 2,576.9 4,302.7 (1,725.8) (40.1) Commercial Services, net(2) 815.6 670.6 145.0 21.6 Credit Finance 799.0 797.8 1.2 0.1 Equipment Financing (formerly Industrial Financing)(1) 7,093.7 5,616.8 1,476.9 26.3 --------- --------- --------- ----- 12,636.6 12,623.5 13.1 0.1 --------- --------- --------- ----- Consumer Consumer Finance 2,143.8 2,005.5 138.3 6.9 Sales Financing 1,582.0 1,349.8 232.2 17.2 --------- --------- --------- ----- 3,725.8 3,355.3 370.5 11.0 --------- --------- --------- ----- 16,362.4 15,978.8 383.6 2.4 --------- --------- --------- ----- Operating lease equipment, net Capital Finance 1,027.0 975.5 51.5 5.3 Equipment Financing 474.9 426.6 48.3 11.4 --------- --------- --------- ----- 1,501.9 1,402.1 99.8 7.1 --------- --------- --------- ----- Total financing and leasing assets $17,864.3 $17,380.9 $ 483.4 2.8% ========= ========= ========= =====
(1) On January 1, 1997, $1.5 billion of financing and leasing assets were transferred from Capital Finance to Equipment Financing. (2) Net of credit balances of factoring clients of $1,193.8 million and $1,134.1 million at March 31, 1997 and December 31, 1996, respectively. -12- Commercial finance receivables increased slightly from December 31, 1996 due to a seasonal rise in factored receivables offset by paydowns and a competitive origination environment. The 11.0% increase in consumer finance receivables is a result of growth in retail new business originations of 39.8% for Consumer Finance and 30.2% for Sales Financing. The growth in operating lease equipment of 7.1% was primarily in commercial aircraft and manufacturing equipment. Concentrations Commercial Airline Industry Commercial airline finance receivables and operating lease equipment totaled $1.9 billion or 10.5% of financing receivables and operating lease equipment at March 31, 1997, essentially unchanged from December 31, 1996. The portfolio is secured by commercial aircraft and related equipment. Management continues to limit the growth in this portfolio relative to total financing and leasing assets. The following table presents information about the commercial airline industry portfolio. - -------------------------------------------------------------------------------- March 31, December 31, 1997 1996 -------- ----------- (Dollar Amounts in Millions) Finance Receivables Amount outstanding(a) $ 1,258.3 $ 1,286.0 Number of obligors 51 54 Operating Leases Net carrying value $ 685.5 $ 624.0 Number of obligors 33 32 Total $ 1,943.8 $ 1,910.0 Number of obligors(b) 72 72 Number of aircraft 236 239 (a) Includes accrued rents which were classified as finance receivables in the Consolidated Balance Sheets. (b) Certain obligors have both finance receivable and operating lease transactions. - -------------------------------------------------------------------------------- -13- From time to time, certain commercial aircraft related obligors may experience financial or operational difficulties which may affect their ability to meet their contractual obligations with the Corporation. At March 31, 1997, three lessees of operating lease equipment totaling $84.1 million were experiencing financial or operational difficulties which the Corporation believes will not have a significant effect on its consolidated financial position, results of operations or liquidity. PAST DUE AND NONACCRUAL FINANCE RECEIVABLES AND ASSETS RECEIVED IN SATISFACTION OF LOANS Finance receivables past due 60 days or more declined to $289.2 million (1.70% of finance receivables) at March 31, 1997, from $292.3 million (1.72%) at December 31, 1996. Finance receivables on nonaccrual status decreased to $97.8 million (0.57% of finance receivables) at March 31, 1997 from $119.6 million (0.70%) at December 31, 1996. Assets received in satisfaction of loans decreased to $46.9 million at March 31, 1997 from $47.9 million at December 31, 1996. Total nonperforming assets, comprised of finance receivables on nonaccrual status and assets received in satisfaction of loans, as a percentage of finance receivables, fell to 0.85% at March 31, 1997 from 0.99% at December 31, 1996. -14- LIQUIDITY The Corporation manages liquidity by monitoring the relative maturities of assets and liabilities and by borrowing funds, primarily in the United States money and capital markets. Such cash is used to fund asset growth (including the bulk purchase of finance receivables and the acquisition of other finance-related businesses) and to meet debt obligations and other commitments on a timely and cost-effective basis. The primary sources of funding are commercial paper borrowings, proceeds from the sales of medium-term notes and other debt securities and securitizations. During the first quarter of 1997, commercial paper borrowings increased $316.1 million, and the Corporation issued $600.0 million of prime based variable rate debt and $399.0 million of fixed rate debt. Repayments of term debt totaled $1.0 billion. At March 31, 1997, $2.51 billion of registered but unissued term debt securities remained available under shelf registration statements. At March 31, 1997, commercial paper borrowings were supported by $5.04 billion of committed revolving credit line facilities, representing 84% of operating commercial paper outstanding (commercial paper outstanding less interest-bearing deposits). No borrowings have been made under credit lines supporting commercial paper since 1970. -15- As part of the Corporation's continuing program of accessing the public and private asset backed securitization markets as an additional liquidity source, recreational marine finance receivables of $41.2 million were securitized by the Corporation during the first quarter of 1997. At March 31, 1997, $211.8 million of registered but unissued securities relating to the Corporation's asset backed securitization program remained available under shelf registration statements. In February 1997, CIT Capital Trust I, a wholly owned subsidiary of the Corporation, issued $250.0 million of 7.70% Preferred Capital Securities and subsequently invested the offering proceeds in Junior Subordinated Debentures of the Corporation having identical rates and payment dates. CAPITALIZATION The following table presents information regarding the Corporation's capital structure. - -------------------------------------------------------------------------------- March 31, December 31, 1997 1996 --------- ----------- (Dollars in Millions) Commercial paper $ 6,143.1 $ 5,827.0 Term debt 8,741.4 8,778.7 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 250.0 -- Stockholders' equity 2,133.0 2,075.4 --------- --------- Total capitalization $17,267.5 $16,681.1 ========= ========= Ratio of total debt to stockholders' equity and company- obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 6.25 to 1 7.04 to 1 - -------------------------------------------------------------------------------- The Corporation operates under a dividend policy requiring the payment of dividends by the Corporation, equal to and not exceeding 30% of net operating earnings on a quarterly basis. -16- STATISTICAL DATA The following table presents components of net income as a percentage of AEA. Three Months Ended March 31, ------------------------ 1997 1996 ---------- ---------- Finance income* 9.87% 9.97% Interest expense* 5.00 5.11 ---------- ---------- Net finance income 4.87 4.86 Fees and other income 1.31 1.31 ---------- ---------- Operating revenue 6.18 6.17 ---------- ---------- Salaries and general operating expenses 2.27 2.39 Provision for credit losses 0.61 0.69 Depreciation on operating lease equipment 0.73 0.68 Minority interest in subsidiary trust holding solely debentures of the company 0.04 -- ---------- ---------- Operating expenses 3.65 3.76 ---------- ---------- Income before provision for income taxes 2.53 2.41 Provision for income taxes 0.93 0.92 ---------- ---------- Net income 1.60% 1.49% ========== ========== Average financing and leasing assets (in millions) $ 17,590.1 $ 16,065.6 ========== ========== * Excludes interest income and interest expense relating to short-term interest-bearing deposits. -17- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges. (b) Exhibit 27 - Financial Data Schedule (c) A Form 8-K report dated January 23, 1997, as amended by Form 8-K/A dated February 14, 1997, was filed with the Commission reporting the Corporation's announcement of results for the year ended December 31, 1996. (d) A Form 8-K report dated April 17, 1997 was filed with the Commission reporting the Corporation's announcement of results for the quarter ended March 31, 1997. -18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The CIT Group Holdings, Inc. ----------------------------- (Registrant) BY /s/ J. M. Leone ----------------------------- J. M. Leone Executive Vice President and Chief Financial Officer (duly authorized and principal accounting officer) DATE: May 8, 1997 -19- EX-12 2 EXHIBIT 12 EXHIBIT 12 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar Amounts In Millions) Three Months Ended March 31, ---------------- 1997 1996 ------ ------ Net income $ 70.1 $ 59.8 Provision for income taxes 40.7 37.1 ------ ------ Earnings before provision for income taxes 110.8 96.9 ------ ------ Fixed charges: Interest and debt expense on indebtedness 223.1 207.2 Interest factor - one third of rentals on real and personal properties 2.1 1.9 Minority interest in subsidiary trust holding solely debentures of the company 1.9 -- ------ ------ Total fixed charges 227.1 209.1 ------ ------ Total earnings before provision for income taxes and fixed charges $337.9 $306.0 ====== ====== Ratio of earnings to fixed charges 1.49x 1.46x ====== ====== EX-27 3 FDS --
5 1,000,000 3-mos 3-mos DEC-31-1997 DEC-31-1996 MAR-31-1997 MAR-31-1996 177 104 0 0 17,016 15,911 222 209 0 0 0 0 0 0 0 0 19,585 17,483 0 0 8,741 7,649 250 0 0 0 250 250 1,883 1,686 19,585 17,483 0 0 495 455 0 0 100 96 34 28 27 28 223 207 111 97 41 37 70 60 0 0 0 0 0 0 70 60 0 0 0 0
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