-----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, A3AKYGMmZv39g2ojqJtF+VJdXd7NDPWs6QMggwLgNRzeNhOdRqXUKrLvIpMu1B9Y sjbO8+cOGCdenOd3Xp1Igg== 0000891092-00-000053.txt : 20000203 0000891092-00-000053.hdr.sgml : 20000203 ACCESSION NUMBER: 0000891092-00-000053 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000131 ITEM INFORMATION: FILED AS OF DATE: 20000131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIT GROUP INC 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: 8-K/A SEC ACT: SEC FILE NUMBER: 001-01861 FILM NUMBER: 518193 BUSINESS ADDRESS: STREET 1: 1211 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2125361390 MAIL ADDRESS: STREET 1: 1211 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: CIT GROUP HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CIT FINANCIAL CORP/OLD/ DATE OF NAME CHANGE: 19860512 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 15, 1999 The CIT Group, Inc. (Exact name of registrant as specified in its charter) Delaware 1-1861 13-2994534 (State or other (Commission File Number) (IRS Employer jurisdiction of Identification No.) incorporation) 1211 Avenue of the Americas New York, New York 10036 Registrant's telephone number, including area code (212) 536-1390 (Former name or former address, if changed since last report) As provided in Item 7(b)2 of Form 8-K, The CIT Group, Inc. and Subsidiaries, ("CIT" or the "Company") is filing this Current Report on Form 8-K/A to amend Item 7(b)(1) of its Form 8-K dated November 15, 1999, which announced the closing of the acquisition of Newcourt Credit Group Inc. ("Newcourt"), by adding the required September 30, 1999 pro forma financial information that follows: Item 7. Financial Statements, Pro Forma Financial (b)(1) Information and Exhibits THE CIT GROUP, INC. AND NEWCOURT CREDIT GROUP INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated balance sheet and statements of income of CIT are based on the historical consolidated financial statements of CIT and Newcourt as of September 30, 1999 and for the nine months then ended and for the year ended December 31, 1998. The unaudited pro forma condensed consolidated balance sheet has been prepared assuming that the Newcourt Acquisition, as defined herein, which closed on November 15, 1999, had occurred on September 30, 1999. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 1999 and for the year ended December 31, 1998 have been prepared assuming that the Newcourt Acquisition had occurred at the beginning of each respective period. On November 15, 1999 CIT announced that it had acquired Newcourt. The terms of the acquisition were those agreed to on August 5, 1999. At that time, CIT announced that it had reached a new agreement with Newcourt under which it would acquire Newcourt in an exchange of .70 share of CIT Common Stock for each outstanding share of Newcourt common stock ("Newcourt Acquisition"). The unaudited pro forma condensed consolidated financial statements reflect pro forma adjustments to Newcourt's assets and liabilities to reflect their respective estimated fair values under the purchase method of accounting utilizing valuations and market rates of interest at November 15, 1999. The excess of the purchase price over the estimated fair value of the net assets acquired has been allocated to goodwill. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the following: (i) the accompanying notes thereto, (ii) CIT's unaudited condensed consolidated financial statements, included in CIT's Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 1999, and the 1998 audited consolidated financial statements, included in CIT's Annual Report on Form 10-K as of and for the year ended December 31, 1998, and (iii) the unaudited consolidated financial statements, included in Newcourt's Form 6-K, as of and for the nine months ended September 30, 1999, and the audited consolidated financial statements, included in Newcourt's Form 6-K, as of and for the year ended December 31, 1998. The unaudited pro forma condensed consolidated financial statements have been prepared based upon currently available information and assumptions deemed appropriate by management of CIT. These unaudited pro forma results include the historical operating results of Newcourt and assume that the acquisition occurred at the beginning of each applicable period. Certain adjustments, including additional common shares outstanding and interest and amortization expenses associated with this purchase are reflected in the pro forma results. This information has been prepared for comparative purposes only, and is based on the historical operating results of Newcourt prior to acquisition by the Company and does not include cost savings, reduced securitization activity and other initiatives introduced by the Company that management believes will be reflected in the post-acquisition operating results. As a result, management does not believe that these pro forma results are indicative of the actual results that would have occurred had the acquisition closed at the beginning of each period, nor indicative of future results. Certain information contained in the unaudited pro forma condensed consolidated financial statements and the accompanying notes constitute forward-looking statements concerning the combined companies' operations, economic performance and financial condition. Because such statements reflect risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include but are not limited to risks of economic slowdown or downturn, risks inherent in changes in prevailing market interest rates, unanticipated difficulties in combining the management, operations or cultures of CIT and Newcourt, cost savings that are not realized or are not realizable within the time anticipated, risks associated with the value and recoverability of leased equipment, adequacy of credit reserves for credit losses, funding opportunities and borrowing costs, changes in funding markets (including the asset based securitization market), changes in regulations governing the combined companies' business and operations, competitive factors, and uncertainties associated with risk management, including credit risk management, asset/liability management, interest rate risk management and cross currency risk management. In addition, certain of such information is based upon management's estimates of fair values and of future costs, using currently available information. 1 THE CIT GROUP, INC. AND SUBSIDIARIES AND NEWCOURT CREDIT GROUP INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of September 30, 1999
CIT Pro Forma Pro Forma (Dollars in Millions) CIT Newcourt(a) Adjustments Note Consolidated - -------------------------------------------------------------------------------------------------------------------------- Assets Financing and leasing assets Loans Commercial $ 13,151.5 $ 5,568.6 $ (177.3) 3a $ 18,542.8 Consumer 4,068.8 -- -- 4,068.8 Lease receivables 4,112.6 4,930.3 (83.1) 3a 8,959.8 ----------- ----------- ---------- ----------- Finance receivables 21,332.9 10,498.9 (260.4) 31,571.4 Reserve for credit losses (283.8) (203.0) -- (486.8) ----------- ----------- ---------- ----------- Net finance receivables 21,049.1 10,295.9 (260.4) 31,084.6 Operating lease equipment, net 3,677.2 2,165.3 (17.0) 3a 5,825.5 Consumer finance receivables held for sale 737.8 -- -- 737.8 Commercial finance receivables held for sale -- 747.6 -- 747.6 Goodwill 344.2 1,266.2 105.6 3c 1,716.0 Cash and cash equivalents 143.0 87.2 -- 230.2 Other assets 788.1 1,599.9 (224.1) 3a 2,163.9 ----------- ----------- ---------- ----------- Total assets $ 26,739.4 $ 16,162.1 $ (395.9) $ 42,505.6 =========== =========== ========== =========== Liabilities and Stockholders' Equity Debt Commercial paper $ 5,472.6 $ 2,092.0 $ -- $ 7,564.6 Variable rate senior notes 5,758.1 1,096.7 -- 6,854.8 Fixed rate senior notes 8,611.8 9,731.5 169.3 3a 18,512.6 Subordinated fixed rate notes 200.0 -- -- 200.0 ----------- ----------- ---------- ----------- Total debt 20,042.5 12,920.2 169.3 33,132.0 Credit balances of factoring clients 1,971.9 -- -- 1,971.9 Accrued liabilities and payables 738.4 491.3 251.0 3a 1,480.7 Deferred federal income taxes 822.0 (286.8) (342.5) 3a 192.7 ----------- ----------- ---------- ----------- Total liabilities 23,574.8 13,124.7 77.8 36,777.3 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company 250.0 -- -- 250.0 Stockholders' equity: Common stock 1.7 -- 1.0 2a 2.7 Paid-in capital 958.2 -- 2,562.7 2a 3,520.9 Share capital -- 2,756.4 (2,756.4) 3b -- Retained earnings 2,009.3 281.0 (281.0) 3b 2,009.3 Treasury stock at cost (54.6) -- -- (54.6) ----------- ----------- ---------- ----------- Total stockholders' equity 2,914.6 3,037.4 (473.7) 5,478.3 ----------- ----------- ---------- ----------- Total liabilities and stockholders' equity $ 26,739.4 $ 16,162.1 $ (395.9) $ 42,505.6 =========== =========== ========== ===========
See accompanying notes to unaudited pro forma condensed consolidated financial statements. (a) Presented in accordance with U.S. GAAP - See Note 1 - Basis of Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions. 2 THE CIT GROUP, INC. AND SUBSIDIARIES AND NEWCOURT CREDIT GROUP INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Nine Months Ended September 30, 1999
CIT Pro Forma Pro Forma (Dollars in Millions, except per share amounts) CIT Newcourt(a) Adjustments Note Consolidated - -------------------------------------------------------------------------------------------------------------------------- Finance income $ 1,679.8 $ 1,610.5 $ 30.8 3e $ 3,321.1 Interest expense 858.2 630.9 (31.2) 3e 1,457.9 ----------- ----------- ---------- ----------- Net finance income 821.6 979.6 62.0 1,863.2 Fees and other income 221.4 376.0 -- 597.4 Gain on sale of automobile fleet leasing businesses -- 34.3 -- 34.3 Gain on extinguishment of derivative financial instruments -- 56.6 -- 56.6 ----------- ----------- ---------- ----------- Operating revenue 1,043.0 1,446.5 62.0 2,551.5 ----------- ----------- ---------- ----------- Salaries and general operating expenses 324.0 575.1 -- 899.1 Provision for credit losses 77.9 93.9 -- 171.8 Depreciation on operating lease equipment 176.9 600.6 -- 777.5 Goodwill amortization 13.1 35.7 5.5 3d 54.3 Minority interest in subsidiary trust holding solely debentures of the Company 14.4 -- -- 14.4 ----------- ----------- ---------- ----------- Operating expenses 606.3 1,305.3 5.5 1,917.1 ----------- ----------- ---------- ----------- Income before provision for income taxes 436.7 141.2 56.5 634.4 Provision for income taxes 151.6 53.2 24.2 3f 229.0 ----------- ----------- ---------- ----------- Net income $ 285.1 $ 88.0 $ 32.3 $ 405.4 =========== =========== ========== =========== Basic earnings per share $ 1.77 $ 0.59 4 $ 1.53 Weighted average common shares outstanding 160,850,093 148,508,329 264,805,923 Diluted earnings per share $ 1.76 $ 0.59 4 $ 1.52 Weighted average common shares outstanding 161,997,841 148,885,039 266,217,368
See accompanying notes to unaudited pro forma condensed consolidated financial statements. (a) Presented in accordance with U.S. GAAP - See Note 1 - Basis of Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions. 3 THE CIT GROUP, INC. AND SUBSIDIARIES AND NEWCOURT CREDIT GROUP INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Year Ended December 31, 1998
CIT Pro Forma Pro Forma (Dollars in Millions, except per share amounts) CIT Newcourt(a) Adjustments Note Consolidated - -------------------------------------------------------------------------------------------------------------------------- Finance income $ 2,015.1 $ 1,888.4 $ 41.1 3e $ 3,944.6 Interest expense 1,040.8 657.9 (41.6) 3e 1,657.1 ----------- ----------- ---------- ----------- Net finance income 974.3 1,230.5 82.7 2,287.5 Fees and other income 255.4 548.7 -- 804.1 ----------- ----------- ---------- ----------- Operating revenue 1,229.7 1,779.2 82.7 3,091.6 ----------- ----------- ---------- ----------- Salaries and general operating expenses 407.7 698.3 -- 1,106.0 Provision for credit losses 99.4 100.5 -- 199.9 Depreciation on operating lease equipment 169.5 686.7 -- 856.2 Goodwill amortization 10.1 44.4 10.5 3d 65.0 Minority interest in subsidiary trust holding solely debentures of the Company 19.2 -- -- 19.2 ----------- ----------- ---------- ----------- Operating expenses 705.9 1,529.9 10.5 2,246.3 ----------- ----------- ---------- ----------- Income before provision for income taxes 523.8 249.3 72.2 845.3 Provision for income taxes 185.0 91.5 32.3 3f 308.8 ----------- ----------- ---------- ----------- Net income $ 338.8 $ 157.8 $ 39.9 $ 536.5 =========== =========== ========== =========== Basic earnings per share $ 2.09 $ 1.11 4 $ 2.05 Weighted average common shares outstanding 161,987,897 142,741,776 261,907,140 Diluted earnings per share $ 2.08 $ 1.09 4 $ 2.03 Weighted average common shares outstanding 163,188,739 144,859,067 264,590,086
See accompanying notes to unaudited pro forma condensed consolidated financial statements. (a) Presented in U.S. dollars and in accordance with U.S. GAAP - See Note 1 - Basis of Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions. 4 THE CIT GROUP, INC. AND NEWCOURT CREDIT GROUP INC. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements As of and for the Nine Months Ended September 30, 1999 and For the Year Ended December 31, 1998 1. Basis of Presentation The unaudited pro forma condensed consolidated balance sheet as of September 30, 1999 was prepared as if the Newcourt Acquisition had been consummated on that date with estimated fair values computed based upon market values and rates of interest as of November 15, 1999. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 1999 and for the year ended December 31, 1998 were prepared as if the Newcourt Acquisition had been consummated at the beginning of each respective period with estimated fair values computed based upon market values and rates of interest as of November 15, 1999. The unaudited pro forma condensed consolidated financial statements have been prepared using the following information: (a) Unaudited condensed consolidated financial statements of The CIT Group, Inc. ("CIT" or the "Company") as of and for the nine months ended September 30, 1999, which are included in CIT's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC"), and audited consolidated financial statements of CIT as of and for the year ended December 31, 1998, which are included in CIT's Annual Report on Form 10-K filed with the SEC; (b) Unaudited consolidated financial statements of Newcourt Credit Group Inc. ("Newcourt") as of and for the nine months ended September 30, 1999, as filed on Form 6-K with the SEC, and audited consolidated financial statements of Newcourt as of and for the year ended December 31, 1998, as filed on Form 6-K with the SEC, both prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). The financial statements of Newcourt prior to January 1, 1999 were reported in Canadian dollars. Effective January 1, 1999, Newcourt changed its reporting currency to U.S. dollars. For purposes of these unaudited pro forma condensed consolidated financial statements, Newcourt's balance sheet and income statement information has been: (1) adjusted to conform to U.S. generally accepted accounting principles ("U.S. GAAP"), (2) reclassified as to certain financial statement line items to conform to CIT's presentation under U.S. GAAP - See Note 6 - Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions and (3) with respect to the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 1998, converted to a presentation in U.S. dollars using an exchange rate of .6733 Canadian dollar to each U.S. dollar. 2. Pro Forma Assumptions (a) The value of CIT common stock, par value $0.01 per share, issued to acquire Newcourt common stock is $2,563.7 million, based upon 148,536,081 outstanding shares of Newcourt common stock at November 15, 1999 per the Amended and Restated Agreement and Plan of Reorganization at a price per Newcourt share of $17.26. The price per share was determined by multiplying by .70 ("the exchange ratio") the average closing price of CIT Common Stock for the two day period both before and after the date of the announcement of the Newcourt Acquisition, August 5, 1999. (b) The acquisition of Newcourt has been accounted for using the purchase method. The difference between the total purchase price and the estimated fair value of net assets acquired has been allocated to goodwill. 5 (c) Estimated fair values for commercial loans, lease receivables, operating lease equipment, finance receivables held for sale, other assets, fixed rate senior notes and debt related hedges were estimated through the application of cash flow discounting methodologies considering such factors as current market interest rates, current market equipment values and credit risks, as applicable. The resulting net premium/discount on commercial loans, fixed rate senior notes and debt related hedges for the purposes of these unaudited condensed consolidated pro forma statements, is assumed to be amortized/accreted into interest income/expense to produce a constant yield to maturity. 3. Pro Forma Adjustments - The allocation of the purchase price and the portion of the purchase price allocated to fair value adjustments and goodwill is detailed below. (a) Estimated pro forma purchase accounting adjustments for the Newcourt Acquisition were as follows (dollars in millions): Newcourt net tangible assets - historical at September 30, 1999................................. $ 1,771.2 Purchase Accounting Adjustments: Commercial loans................................ (177.3) (i) Lease receivables............................... (83.1) (ii) Assets - other (including $17.0 million relating to operating leases) ............... (204.6) (iii) Fixed rate senior notes......................... (169.3) (iv) Accrued liabilities and payables................ (51.8) (vi) ---------- (686.1) ---------- Restructuring Charge: Restructuring charge - other assets.......... (36.5) (v) Restructuring charge - accrued liabilities and payables ............................. (199.2) (v) ---------- Total Restructuring Charge................. (235.7) ---------- Subtotal Purchase Accounting Adjustments........ (921.8) Tax effects of adjustments......................... 342.5 ---------- Total net adjustments to net assets acquired....... (579.3) ---------- Net tangible assets acquired....................... $ 1,191.9 ========== Income tax was calculated at a 39% tax rate except for certain items which are not tax deductible. i. Adjustment includes a mark-to-market to decrease the value of the portfolio based upon market interest rates. Adjustment also reflects the estimated decrease in carrying value required in connection with the acquisition to conform Newcourt credit policies and practices, including charge-offs and loss reserves, to CIT standards and practices, as well as post acquisition strategies for problem loan resolution. ii. Adjustment to reflect the future realizability of estimated lease residuals as well as interest related adjustments. iii. Adjustments to estimated fair value of other assets (excluding $17.0 million relating to operating leases) are as follows: Debt issuance & other deferred costs ................... $ 61.5 Retained interests in securitizations .................. 33.7 Assets held for disposition, including repossessions ... 30.4 Venture capital investments ............................ 19.0 Other .................................................. 43.0 ------ Subtotal adjustments to other assets ................. 187.6 Restructuring related charge-other assets .............. 36.5 ------ Total adjustments to other assets ...................... $224.1 ====== iv. Mark-to-market to increase fixed rate debt and debt related hedges, based upon current market interest rates. 6 v. Restructuring charges include transaction costs (such as advising, legal and accounting costs), severance, real estate expenses related to closing of duplicate facilities, operational redundancies and other expenses. A summary of the restructuring charges are in the table below. Certain components of this charge are not deductible for tax purposes. This restructuring charge is based on information currently available to management and is subject to change. Other Assets: Leasehold abandonment ....................... $ 21.8 Other ....................................... 14.7 ------ 36.5 ------ Accrued Liabilities and Payables: Severance and other termination payments .... 102.1 Combined CIT & Newcourt transaction costs for legal, investment banking & accounting .. 62.9 Leasehold termination costs ................. 24.5 Other ....................................... 9.7 ------ 199.2 ------ Total Restructuring Charge .................... $235.7 ====== vi. In addition to restructuring related charges of $199.2 million, estimated fair value adjustments related to equity interest in partnerships of $37.5 million and various other items totaling $14.3 million are included in other liabilities. (b) Purchase accounting adjustments were made to eliminate Newcourt's stockholders' equity accounts and to reflect the issuance of shares of CIT common stock to purchase Newcourt common stock at the exchange ratio of .70. (c) Goodwill for the Newcourt Acquisition was calculated as follows (dollars in millions): Purchase price............................................... $2,563.7 Net tangible assets acquired, as above....................... 1,191.9 --------- Goodwill................................................. 1,371.8 Newcourt goodwill at September 30, 1999...................... 1,266.2 --------- Incremental goodwill created by the Newcourt Acquisition..... $ 105.6 ========= (d) The goodwill related to the Newcourt Acquisition is amortized on a straight-line basis over a period of twenty-five years. (e) Pro forma adjustments to finance income and interest expense were estimated for the Newcourt Acquisition as follows (dollars in millions):
Nine Months Ended Year Ended September 30, 1999 December 31, 1998 ------------------ ----------------- Accretion of discount on commercial loans............. $ 30.8 $ 41.1 Amortization of premium on fixed rate senior notes and debt related hedges.............................. 31.2 41.6 ------- ------- Total net adjustment to net finance income............ $ 62.0 $ 82.7 ======= =======
(f) Income tax expense was calculated at a 39% tax rate, representing the expected tax rate of the temporary differences, which are expected to be realized. Goodwill amortization is non-deductible for tax purposes. 7 4. Earnings Per Share Basic earnings per common share was calculated by dividing the net income by the weighted average number of common shares outstanding for the nine months ended September 30, 1999 and for the year ended December 31, 1998, for both CIT and Newcourt. For the unaudited pro forma condensed consolidated financial statements, Newcourt shares were adjusted to the equivalent shares of CIT stock based upon the exchange ratio. Diluted earnings per common share was calculated using the same method as basic earnings per share, and includes potential dilution of common stock equivalents. The calculation of basic and diluted earnings per common share for Newcourt for the year ended December 31, 1998 excludes a non-recurring premium of $29.9 million on the redemption of preferred securities. Including the premium in the calculation of basic and diluted earnings per common share, Newcourt's basic earnings per common share and diluted earnings per common share were $0.90 and $0.88, respectively. For purposes of these unaudited pro forma condensed consolidated financial statements, pro forma consolidated basic earnings per common share and diluted earnings per common share would have been $1.87 and $1.85, respectively. 5. Estimated Effect of Pro Forma Amortization and Accretion of Purchase Accounting Adjustments The following table summarizes the prospective estimated impact of the amortization and accretion of the purchase accounting adjustments made in connection with the Newcourt Acquisition on CIT's results of operations for the years indicated (dollars in millions):
Loan & Lease Effect on For the year ended Goodwill Receivable Debt Pretax Income December 31, Amortization Accretion Amortization (Loss) - ----------------------------------------------------------------------------------------- 2000 $ (54.9) $ 41.1 $ 41.6 $ 27.8 2001 (54.9) 30.8 10.7 (13.4) 2002 (54.9) 21.0 10.4 (23.5) 2003 (54.9) 12.4 10.8 (31.7) 2004 (54.9) 7.1 6.9 (40.9) 2005 and thereafter (1,097.3) 30.2 88.9 (978.2) ----------- -------- -------- ----------- Totals $ (1,371.8) $ 142.6 $ 169.3 $ (1,059.9) =========== ======== ======== ===========
8 6. Newcourt Credit Group Inc. - Pro Forma Reclassifications and Conversions The following consolidated balance sheet and income statement schedules and related footnotes set forth the conversion of Newcourt's historical financial statements to U.S. dollars as applicable, and U.S. GAAP and the pro forma reclassifications necessary to conform the financial statements to a reporting basis consistent with CIT. As of September 30, 1999
Newcourt Presented on Balance Sheet Category Newcourt Pro Forma CIT's Reporting Presentation(l) Reclassifications Note Basis - ---------------------------------------------------------------------------------------------------------------------- (Dollars in Millions) Assets: Financing and leasing assets Loans Commercial $ -- $ 5,568.6 (a) $ 5,568.6 Lease receivables -- 4,872.5 (a) 4,930.3 57.8 (b) ----------- ----------- ----------- Finance receivables -- 10,498.9 10,498.9 Reserve for credit losses -- (203.0) (a) (203.0) ----------- ----------- ----------- Net finance receivables -- 10,295.9 10,295.9 Operating lease equipment, net 2,223.1 (57.8) (b) 2,165.3 Commercial finance receivables held for sale 747.6 -- 747.6 Goodwill 1,266.2 -- 1,266.2 Cash and cash equivalents 87.2 -- 87.2 Other assets -- 811.9 Sum of (c) 1,599.9 788.0 (a) Finance assets held for investment 11,026.1 (11,026.1) Sum of (a) -- Investment in affiliated companies 323.1 (323.1) (c) -- Accounts receivable, prepaids and other 363.9 (363.9) (c) -- Property and equipment, net 124.9 (124.9) (c) -- Future income tax asset 286.8 (286.8) (d) -- ----------- ----------- ----------- Total assets $ 16,448.9 $ (286.8) $ 16,162.1 =========== =========== =========== Liabilities and Stockholders' Equity: Commercial paper $ -- $ 2,092.0 (e) $ 2,092.0 Variable rate senior notes -- 1,096.7 (e) 1,096.7 Fixed rate senior notes -- 9,731.5 (e) 9,731.5 ----------- ----------- ----------- Total debt -- 12,920.2 12,920.2 Accrued liabilities and payables 491.3 -- 491.3 Deferred federal income taxes -- (286.8) (d) (286.8) Debt 12,920.2 (12,920.2) Sum of (e) -- ----------- ----------- ----------- Total liabilities 13,411.5 (286.8) 13,124.7 ----------- ----------- ----------- Share capital 2,756.4 -- 2,756.4 Retained earnings 281.0 -- 281.0 ----------- ----------- ----------- Total stockholders' equity 3,037.4 -- 3,037.4 ----------- ----------- ----------- Total liabilities and stockholders' equity $ 16,448.9 $ (286.8) $ 16,162.1 =========== =========== ===========
9 For the nine months ended September 30, 1999
Newcourt Presented on Newcourt Pro Forma CIT's Reporting Income Statement Category Presentation(l) Reclassifications Note Basis - -------------------------------------------------------------------------------------------------------------------- (Dollars in Millions) Finance income $ -- $ 1,610.5 (f) $ 1,610.5 Interest expense -- 630.9 (f) 630.9 Net finance and rental income 341.8 (341.8) Sum of (f) -- ----------- ----------- ----------- Net finance income 341.8 637.8 979.6 Securitization gains 128.4 (128.4) (i) -- Syndication fees 91.1 (91.1) (i) -- Fees and other income 190.7 219.5 Sum of (i) 376.0 (90.9) Sum of (k) 56.7 (f) Gain on sale of automobile fleet leasing businesses -- 34.3 (k) 34.3 Gain on extinguishment of derivative financial instruments -- 56.6 (k) 56.6 ----------- ----------- ----------- Operating revenues 752.0 694.5 1,446.5 ----------- ----------- ----------- Salaries and general operating expenses -- 20.8 (h) 575.1 554.3 Sum of (g) Provision for credit losses -- 93.9 (f) 93.9 Depreciation on operating lease equipment -- 600.6 (f) 600.6 Goodwill amortization -- 35.7 (h) 35.7 Operating and administrative 283.1 (283.1) (g) -- Salaries and wages 271.2 (271.2) (g) -- Goodwill amortization, depreciation and other expenses 56.5 (56.5) Sum of (h) -- ----------- ----------- ----------- Operating expenses 610.8 694.5 1,305.3 ----------- ----------- ----------- Income before provision for income taxes 141.2 -- 141.2 Provision for income taxes 53.2 -- 53.2 ----------- ----------- ----------- Net income $ 88.0 $ -- $ 88.0 =========== =========== ===========
10 For the year ended December 31, 1998
Newcourt Presented on Newcourt Pro Forma CIT's Reporting Income Statement Category Presentation(l) Reclassifications Note Basis - ------------------------------------------------------------------------------------------------------------------------- (Dollars in Millions) Finance income $ -- $ 1,888.4 (f) $ 1,888.4 Interest expense -- 657.9 (f) 657.9 Net finance and rental income 549.2 (549.2) Sum of (f) -- ----------- ----------- ----------- Net finance income 549.2 681.3 1,230.5 Gain on sale of finance assets 287.5 (287.5) (j) -- Fees and other income 155.3 287.5 (j) 548.7 105.9 (f) ----------- ----------- ----------- Operating revenues 992.0 787.2 1,779.2 ----------- ----------- ----------- Salaries and general operating expenses -- 34.5 (h) 698.3 663.8 Sum of (g) Provision for credit losses -- 100.5 (f) 100.5 Depreciation on operating lease equipment -- 686.7 (f) 686.7 Goodwill amortization -- 44.4 (h) 44.4 Operating and administrative 365.2 (365.2) (g) -- Salaries and wages 298.6 (298.6) (g) -- Goodwill amortization, depreciation and other expenses 78.9 (78.9) Sum of (h) -- ----------- ----------- ----------- Operating expenses 742.7 787.2 1,529.9 ----------- ----------- ----------- Income before provision for income taxes 249.3 -- 249.3 Provision for income taxes 91.5 -- 91.5 ----------- ----------- ----------- Net income $ 157.8 $ -- $ 157.8 =========== =========== ===========
(a) Finance assets held for investment has been reclassified to the line items Commercial loans, Lease receivables, Reserve for credit losses and Other assets (relating to interests in securitized receivables). (b) Rental receivables, net, have been reclassified to the line item Lease receivables. (c) Investment in affiliated companies, Accounts receivable, prepaids and other, and Property and equipment, net have been reclassified to the line item Other assets. (d) Future income tax asset has been reclassified to the line item Deferred federal income taxes. (e) Debt has been reclassified to the line items Commercial paper, Variable rate senior notes and Fixed rate senior notes. (f) Net finance and rental income has been reclassified to the line items Finance income, Interest expense, Fees and other income, Provision for credit losses, and Depreciation on operating lease equipment. (g) Operating and administrative and Salaries and wages have been reclassified to the line item Salaries and general operating expenses. 11 (h) Goodwill amortization, depreciation and other expenses have been reclassified to the line items Salaries and general operating expenses (relating to depreciation on property and equipment and the amortization of other intangibles) and Goodwill amortization. (i) Securitization gains and Syndication fees have been reclassified to the line item Fees and other income. (j) Gain on sale of finance assets has been reclassified to Fees and other income. (k) Gain on sale of automobile fleet leasing businesses and Gain on extinguishment of derivative financial instruments have been reclassified from Fees and other income. (l) The unaudited consolidated financial statements of Newcourt as of and for the nine months ended September 30, 1999 and the audited consolidated statement of income for the year ended December 31, 1998, were prepared in accordance with accounting principles generally accepted in Canada. Financial statements for Newcourt prior to January 1, 1999 were reported in Canadian dollars. On January 1, 1999, Newcourt changed its reporting currency to U.S. dollars. The primary differences between Canadian and U.S. GAAP, as they relate to Newcourt's financial statements, are the accounting treatment of securitizations and restructuring charges. For the purposes of these unaudited pro forma condensed consolidated financial statements (presented in U.S. dollars as described in Note 1b), adjustments have been made to the balance sheet and income statements of Newcourt as of and for the nine months ended September 30, 1999 and for the year ended December 31, 1998 to conform them to U.S. GAAP. The 1998 adjustments are presented in Note 21 to the audited consolidated financial statements included in Newcourt's Form 6-K for the year ended December 31, 1998. The adjustments for the nine months ended September 30, 1999 have been provided by Newcourt management. The adjustments are summarized in the following table.
For the Nine (Dollars in Millions) Months Ended For the Year Ended Income Statement: September 30, 1999 December 31, 1998 - ---------------------------------------------------------------------------------------------------------------- Net income as reported under Canadian GAAP $ 138.5 $ 198.2 Differences in accounting for securitization transactions (net of income taxes of $7.5 million for the nine months ended September 30, 1999 and $7.1 million for the year ended December 31, 1998) (13.9) (9.8) Differences in accounting for restructuring charge (net of income taxes of $12.8 million for the nine months ended September 30, 1999 and $19.5 million for the year ended December 31, 1998) (16.9) (25.6) Differences resulting from costs relating to sale of Newcourt (net of income taxes of $7.5 million for the nine months ended September 30, 1999) (11.2) -- Other (net of income taxes of $5.2 million for the nine months ended September 30, 1999 and $1.6 million for the year ended December 31, 1998) (8.5) (5.0) - ------------------------------------------------------------------------------------------------------------------ Net income, as reported under U.S. GAAP $ 88.0 $ 157.8 - ------------------------------------------------------------------------------------------------------------------
At September 30, 1999 the cumulative effect of the difference between Canadian and U.S. GAAP resulted in a decrease in Total stockholders' equity of $95.9 million, which was recorded as a decrease of $158.6 million to Accounts receivable, prepaids and other and an increase to the Future income tax asset of $62.7 million. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized. THE CIT GROUP ---------------------------------------- (Registrant) By: /s/ JOSEPH M. LEONE --------------------------------------- Joseph M. Leone Executive Vice President and Chief Financial Officer Dated: January 31, 2000 13 -----END PRIVACY-ENHANCED MESSAGE-----