-----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, Atn3NBvzdPjJ3Iz5nAHndaTczoPRhZ7bQVg4aLogIR7G1LyGepbZX+i77pqCA816 WCrsiyC9Hqg/j2pfuxuHzg== 0000891092-95-000044.txt : 19950505 0000891092-95-000044.hdr.sgml : 19950505 ACCESSION NUMBER: 0000891092-95-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950504 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: 95534535 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 QUARTERLY REPORT ================================================================================ 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, 1995 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 April 15, 1995: 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, 1995 and December 31, 1994. 2-3 Consolidated Income Statements for the three month periods ended March 31, 1995 and 1994. 4 Consolidated Statements of Changes in Stockholders' Equity for the three month periods ended March 31, 1995 and 1994. 5 Consolidated Statements of Cash Flows for the three month periods ended March 31, 1995 and 1994. 6 Note to Condensed Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-18 PART II. OTHER INFORMATION Item 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, 1994 Annual Report on Form 10-K for The CIT Group Holdings, Inc. (the "Corporation"). The additional disclosures required by the adoption of Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" as at January 1, 1995 are 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. Amounts for 1994 have been reclassified, where necessary, to conform to 1995 presentations. -1- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar Amounts in Thousands) March 31, December 31, Assets 1995 1994 ----------- ------------ Financing and leasing assets Capital Equipment Financing $ 4,413,355 $ 4,493,531 Business Credit 1,649,311 1,442,049 Credit Finance 768,834 719,642 ----------- ----------- Corporate Finance 6,831,500 6,655,222 Commercial Services 1,827,137 1,896,233 Industrial Financing 4,317,720 4,269,693 Sales Financing 1,346,140 1,402,443 ----------- ----------- Dealer and Manufacturer Financing 5,663,860 5,672,136 Consumer Finance 678,148 570,772 ----------- ----------- Finance receivables 15,000,645 14,794,363 Reserve for credit losses (195,420) (192,421) ----------- ----------- Net finance receivables 14,805,225 14,601,942 Operating lease equipment 882,697 867,914 ----------- ----------- Net financing and leasing assets 15,687,922 15,469,856 Cash and cash equivalents 120,201 6,558 Other assets 540,560 487,076 ----------- ----------- Total assets $16,348,683 $15,963,490 =========== =========== See accompanying note to condensed consolidated financial statements. -2- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar Amounts in Thousands) March 31, December 31, Liabilities and Stockholders' Equity 1995 1994 ----------- ------------ Debt Commercial paper $ 6,017,855 $ 5,660,194 Variable rate notes 3,702,500 3,812,500 Fixed rate notes 2,808,109 2,623,150 Subordinated fixed rate notes 300,000 300,000 ----------- ----------- Total debt 12,828,464 12,395,844 Credit balances of factoring clients 833,289 993,394 Accrued liabilities and payables 438,626 354,714 Deferred Federal income taxes 428,643 426,511 ----------- ----------- Total liabilities 14,529,022 14,170,463 Stockholders' equity Common stock - authorized, issued and outstanding - 1,000 shares 250,000 250,000 Paid-in capital 408,320 408,320 Retained earnings 1,161,341 1,134,707 ----------- ----------- Total stockholders' equity 1,819,661 1,793,027 ----------- ----------- Total liabilities and stockholders' equity $16,348,683 $15,963,490 =========== =========== See accompanying note to condensed consolidated financial statements. -3- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Dollar Amounts in Thousands) Three Months Ended March 31, ----------------------- 1995 1994 --------- --------- Finance income $ 363,743 $ 285,968 Interest expense 199,198 128,840 --------- --------- Net finance income 164,545 157,128 Fees and other income 43,344 39,857 --------- --------- Operating revenue 207,889 196,985 --------- --------- Salaries and general operating expenses 84,837 80,549 Provision for credit losses 20,926 24,881 Depreciation on operating lease equipment 17,639 14,290 --------- --------- Operating expenses 123,402 119,720 --------- --------- Income before provision for income taxes 84,487 77,265 Provision for income taxes 31,675 29,230 --------- --------- Net income $ 52,812 $ 48,035 ========= ========= Ratio of earnings to fixed charges 1.42 1.59 See accompanying note to condensed consolidated financial statements. -4- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollar Amounts in Thousands) Three Months Ended March 31, ---------------------------------- 1995 1994 ----------- ----------- Balance, January 1 $ 1,793,027 $ 1,692,235 Net income 52,812 48,035 Dividends paid (26,178) (24,596) ----------- ----------- Balance, March 31 $ 1,819,661 $ 1,715,674 =========== =========== See accompanying note to condensed consolidated financial statements. -5- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)
Three Months Ended March 31, -------------------------- 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATIONS Net income $ 52,812 $ 48,035 Adjustments to reconcile net income to net cash flows from operations: Provision for credit losses 20,926 24,881 Depreciation and amortization 19,165 17,251 Provision (benefit) for deferred Federal income taxes 2,132 (33) Gains on asset sales (6,510) (7,625) Increase in accrued liabilities and payables 83,912 46,549 Increase in other assets (13,143) (1,594) Other (5,737) (5,169) ----------- ----------- Net cash flows provided by operations 153,557 122,295 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Loans extended (7,201,772) (5,111,186) Collections on loans 6,754,770 5,061,096 Purchases of assets to be leased (146,603) (66,106) Collections on lease receivables 220,308 159,523 Net increase in short-term factoring receivables (157,091) (176,166) Proceeds from asset sales 130,607 198,643 Proceeds from sales of assets received in satisfaction of loans 9,637 13,925 Purchases of finance receivables portfolios -- (13,943) Acquisition of Barclays Commercial Corp. -- (435,630) Other (14,606) (7,854) ----------- ----------- Net cash flows used for investing activities (404,750) (377,698) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of variable and fixed rate notes 450,000 1,101,000 Repayments of variable and fixed rate notes (375,041) (507,500) Net increase (decrease) in commercial paper 357,661 (313,203) Repayments of nonrecourse leveraged lease debt (41,606) (35,699) Cash dividends paid (26,178) (24,596) ----------- ----------- Net cash flows from financing activities 364,836 220,002 ----------- ----------- Net increase (decrease) in cash and cash equivalents 113,643 (35,401) Cash and cash equivalents, beginning of period 6,558 101,554 ----------- ----------- Cash and cash equivalents, end of period $ 120,201 $ 66,153 =========== =========== Supplemental disclosures Interest paid $ 191,892 $ 145,171 Federal and State and local taxes paid $ 1,629 $ 2,758 Noncash transfer of receivables to other assets $ 80,638 -- Noncash transfers of financing and leasing assets to assets received in satisfaction of loans $ 8,680 $ 21,643
See accompanying note to condensed consolidated financial statements. -6- THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Impaired Loans The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan", in May 1993 and amended it with Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures", issued in October 1994 (collectively referred to hereafter as "SFAS 114"). SFAS 114 requires that the value of an impaired loan be measured based upon 1) the present value of expected future cash flows discounted at the loan's effective interest rate or, 2) at the fair value of the collateral, if the loan is collateral dependent. Any shortfall between this value and the recorded investment in the loan must be recognized by establishing a reserve for credit losses. The adoption of SFAS 114 as at January 1, 1995 had no effect on the Corporation's 1995 first quarter financial condition or results of operations. As prescribed by SFAS 114, impaired loans include any finance receivable transaction on nonaccrual status or troubled debt restructuring subject to periodic review by the Corporation's Asset Quality Review Committee, comprised of members of senior management, which covers finance receivables of $500,000 or more meeting certain credit risk grading parameters. Excluded from impaired loans are: 1) $21.0 million of individual small dollar nonaccrual finance receivables (under $500,000) in Industrial Financing for which the collateral value supported the outstanding balance, 2) Sales Financing and Consumer Finance finance receivables, which are subject to automatic charge-off procedures, and 3) Commercial Services short-term customer receivables generally having terms of no more than 30 days. -7- At March 31, 1995, the recorded investment in impaired loans, which are generally collateral dependent, totaled $85.1 million. The fair value of the collateral or the present value of expected future cash flows equaled or exceeded the recorded investment for each impaired loan and, as such, there was no related SFAS 114 allowance for credit losses. The average monthly recorded investment in the impaired loans was $89.4 million for the quarter ended March 31, 1995. During the quarter, no finance income was recognized on any impaired loan after it was classified as impaired. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET INCOME Net income for the 1995 first quarter totaled a record $52.8 million, an increase of $4.8 million (10.0%) from $48.0 million in 1994. The improvement was principally due to growth in average financing and leasing assets, increased factoring commissions, and sharply lower net credit losses. FINANCING AND LEASING ASSETS Financing and leasing assets (finance receivables plus operating lease equipment) increased from year-end 1994 on strong new business volume in most business units. The changes in financing and leasing assets are presented in the following table. Change March 31, December --------------- 1995 31, 1994 Amount Percent --------- --------- ------ ------- (Dollar amounts in millions) Finance receivables Capital Equipment Financing $ 4,413.4 $ 4,493.5 $(80.1) (1.8) Business Credit 1,649.3 1,442.1 207.2 14.4 Credit Finance 768.8 719.6 49.2 6.8 Commercial Services 1,827.1 1,896.2 (69.1) (3.6) Industrial Financing 4,317.7 4,269.7 48.0 1.1 Sales Financing 1,346.1 1,402.5 (56.4) (4.0) Consumer Finance 678.2 570.8 107.4 18.8 --------- --------- ------ ---- Total finance receivables 15,000.6 14,794.4 206.2 1.4 --------- --------- ------ ---- Operating lease equipment Capital Equipment Financing 668.2 648.7 19.5 3.0 Industrial Financing 214.5 219.2 (4.7) (2.1) --------- --------- ------ ---- Total operating lease equipment 882.7 867.9 14.8 1.7 --------- --------- ------ ---- Total financing and leasing assets $15,883.3 $15,662.3 $221.0 1.4% ========= ========= ====== ==== -9- The changes from December 31, 1994, with respect to finance receivables, are discussed below for each business unit. o Capital Equipment Financing - Customized secured equipment financing and leasing of major capital equipment for medium and larger-sized companies. The decline in finance receivables of $80.1 million (1.8%) reflects new business volume of $200 million, offset by normally higher liquidations in the first quarter. 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. Finance receivables increased $207.2 million (14.4%) reflecting strong first quarter new business volume of $156 million and the transfer from Commercial Services of approximately $75 million of revolving and term loans, secured by accounts receivable and inventory, originally acquired as part of the Barclays Commercial Corporation ("BCC") purchase. o Credit Finance - Revolving and term loans, including restructurings, for small and medium-sized companies secured by accounts receivable, inventory and fixed assets. Finance receivables rose $49.2 million (6.8%) from December 31, 1994 continuing the steady growth trend since the acquisition of this unit in February 1991. Quarterly new business volume totaled $60 million. o Commercial Services - Factoring of accounts receivable, including credit protection, bookkeeping and collection activities. The decrease of $69.1 million (3.6%) in finance receivables from year-end 1994 is principally due to the previously discussed transfer of $75 million of revolving and term loans to Business Credit, which more than offset seasonally higher factored receivable volume of $3.19 billion for the quarter. -10- o Industrial Financing - Secured equipment financing and leasing for medium-sized companies, including dealer and manufacturer financing. The increase in finance receivables of $48.0 million (1.1%) reflects strong first quarter new business volume of $494 million. o Sales Financing - Retail secured financing of recreational vehicles, recreational boats, and manufactured housing through dealers and manufacturers. Finance receivables declined $56.4 million (4.0%) from December 1994. New business volume of $150 million was offset by a $124 million securitization of manufactured housing finance receivables, including $55 million funded during the quarter, and the reclassification of $80.6 million of recreational vehicle finance receivables to assets held for sale at March 31, 1995. o Consumer Finance - Loans secured by first or second mortgages on residential real estate. Finance receivables increased $107.4 million (18.8%) reflecting continuing efforts to grow this portfolio through direct loan originations and by occasional bulk purchases of existing portfolios. New business volume during the quarter totaled $122 million. Operating lease equipment of $882.7 million did not change significantly from December 31, 1994. -11- Commercial Airline Industry Commercial airline finance receivables and operating lease equipment totaled $1.84 billion or 11.6% of total financing and leasing assets (before the reserve for credit losses) at March 31, 1995, compared with $1.90 billion (12.1%) at December 31, 1994. The portfolio is secured by commercial aircraft and related equipment. Management continues to monitor the size of this portfolio relative to total financing and leasing assets. The following table presents information about the commercial airline industry portfolio. - -------------------------------------------------------------------------------- March 31, December 31, 1995 1994 -------- ------------ (Dollar Amounts In Millions) Finance Receivables Amount outstanding(a) $1,349.8 $1,417.0 Number of obligors 44 46 Operating Leases Net carrying value $ 489.2 $ 482.3 Number of obligors 21 21 -------- -------- Total $1,839.0 $1,899.3 -------- -------- Number of obligors(b) 62 62 -------- -------- Number of aircraft 253 282 -------- -------- (a) Includes accrued rents on operating leases of $0.8 million at March 31, 1995 and $1.1 million at December 31, 1994, which were classified as finance receivables in the Consolidated Balance Sheets. (b) Certain obligors have both finance receivable and operating lease transactions. - -------------------------------------------------------------------------------- The $60.3 million decline in commercial airline industry outstandings and the decline in the number of aircraft principally reflect scheduled liquidations and maturities. During the quarter, the Corporation converted its outstanding loans with Trans World Airlines, Inc. to operating leases as part of a restructuring which did not have a significant effect on the Corporation's consolidated financial position or results of operations. -12- Highly Leveraged Transactions Highly leveraged transactions ("HLTs") totaled $478.2 million (3.0% of financing and leasing assets before the reserve for credit losses) at March 31, 1995, compared with $436.1 million (2.8%) at December 31, 1994. 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 $172.6 million at March 31, 1995, compared with $202.1 million at December 31, 1994. At March 31, 1995, the portfolio consisted of 33 obligors in 11 industry groups located throughout the United States, with the largest regional concentration in the West (33.0%). Total HLT outstandings classified as nonaccrual totaled $53.2 million (4 accounts) at March 31, 1995 compared with $57.7 million (4 accounts) at December 31, 1994. FINANCE INCOME A comparison of 1995 and 1994 first quarter net finance income is set forth below: - -------------------------------------------------------------------------------- Three Months Ended --------------------------------------- March 31, Increase ------------------------ -------- (Dollar Amounts in Millions) 1995 1994 Amount --------- --------- -------- Finance income $ 363.7 $ 286.0 $ 77.7 Interest expense 199.2 128.8 70.4 --------- --------- -------- Net finance income $ 164.5 $ 157.2 $ 7.3 ========= ========= ======== Average financing and $14,808.3 $13,024.2 $1,784.1 leasing assets (AEA) ========= ========= ======= Net finance income as a % of AEA 4.45% 4.83% ==== ==== - -------------------------------------------------------------------------------- The $77.7 million increase in finance income reflects the growth in financing and leasing assets and higher market interest rates, offset in part by the adverse effect of aggressive pricing competition on new business. This competition also resulted in a lower net finance -13- income as a percent of AEA as the increase in market interest rates on the funds borrowed by the Corporation outpaced the increase in rates charged on new business. A comparative analysis of the weighted average interest rates paid on the Corporation's debt, before and after giving effect to interest rate swaps, is set forth below. - -------------------------------------------------------------------------------- Three Months Ended March 31, ------------------------------------------ 1995 1994 ------------------ ------------------ Before After Before After ------ ----- ------ ----- Variable rate debt 6.13% 6.09% 3.45% 3.46% Fixed rate debt 7.10% 6.76% 7.38% 6.70% Composite interest rate 6.35% 6.37% 4.32% 4.70% - -------------------------------------------------------------------------------- The increases in the composite rate, after the effect of interest rate swaps, take into account the variable and fixed rates as well as the change in the notional principal subject to those rates. Since the Corporation's interest rate swaps principally convert floating rate debt to a fixed rate, the composite interest rate increases although the variable and fixed rates decrease because a larger proportion of the Corporation's debt, after the effect of interest rate swaps, is subject to a fixed rate. The Corporation enters into interest rate swaps as hedges against market interest rate fluctuations and not for trading or speculative purposes. FEES AND OTHER INCOME Fees and other income totaled $43.3 million in the 1995 first quarter, compared with $39.9 million in 1994, as there were two additional months of factoring commissions from BCC, which was acquired on February 28, 1994, offset in part by lower gains on asset sales. -14- SALARIES AND GENERAL OPERATING EXPENSES The following table sets forth the components of salaries and general operating expenses. - -------------------------------------------------------------------------------- Three Months Ended ---------------------------------------- March 31, Increase ------------------- ------------------ (Dollar Amounts in Thousands) 1995 1994 Amount Percent -------- -------- -------- ------- Salaries and employee benefits $ 48,102 $ 43,250 $ 4,852 11.2% General operating expenses 36,735 37,299 (564) (1.5)% -------- -------- -------- ---- $ 84,837 $ 80,549 $ 4,288 5.3% ======== ======== ======== ==== Percent to AEA 2.29% 2.47% ==== ==== - -------------------------------------------------------------------------------- The increase of $4.3 million in salaries and general operating expenses is principally attributable to a full quarter effect of BCC in 1995. However, the ratio of salaries and general operating expenses to AEA improved from 2.47% in the 1994 first quarter to 2.29% in 1995, the lowest quarterly ratio since the second quarter of 1993, reflecting various efficiency initiatives including: o The integration of BCC and Commercial Services operations which have resulted in improved efficiency while maintaining a high level of quality client services; o savings from technological advances in Industrial Financing coupled with a $443.5 million increase in that unit's financing and leasing assets over the past twelve months; o the consolidation of Sales Financing's 12 business acquisition centers into five regional business centers; and o significant finance receivable growth in Consumer Finance within the existing sales office infrastructure. -15- PAST DUE AND NONACCRUAL FINANCE RECEIVABLES AND ASSETS RECEIVED IN SATISFACTION OF LOANS Finance receivables past due 60 days or more were $192.7 million (1.28% of finance receivables before the reserve for credit losses) at March 31, 1995, compared with $176.9 million (1.20%) at December 31, 1994 and $198.2 million (1.46%) at March 31, 1994. 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 1.14% at March 31, 1995, compared with 1.03% at December 31, 1994 and 1.16% at March 31, 1994. Finance receivables on nonaccrual status, included in past due finance receivables, were $106.1 million (0.71% of finance receivables before the reserve for credit losses) at March 31, 1995 compared with $110.2 million (0.75%) at December 31, 1994 and $105.6 million (0.78%) at March 31, 1994. Assets received in satisfaction of loans were $82.4 million at March 31, 1995 compared with $86.5 million at December 31, 1994 and $79.5 million at March 31, 1994. PROVISION AND RESERVE FOR CREDIT LOSSES The following table summarizes the activity in the reserve for credit losses. - -------------------------------------------------------------------------------- Three Months Ended March 31, ------------------- (Dollar Amounts in Millions) 1995 1994 ----- ----- Net credit losses $17.5 $25.8 Provision for finance receivables change 3.4 (0.9) ----- ----- Total provision for credit losses $20.9 $24.9 ===== ===== Net credit losses as a percent (annualized) of average finance receivables 0.47% 0.80% ==== ==== - -------------------------------------------------------------------------------- The significant decrease in net charge-offs as a percent of average finance receivables during the first quarter of 1995 reflects the continued improvement in the credit quality of financing -16- and leasing assets. The reserve for credit losses at March 31, 1995 was $195.4 million (1.30% of finance receivables), compared with $192.4 million (1.30%) at year-end 1994. INCOME TAXES The effective income tax rate for the 1995 first quarter was 37.5%, compared with 37.8% in the prior year period. STATISTICAL DATA The following table presents components of net income as a percentage of AEA, along with other selected financial data: Three Months Ended March 31, ------------------- 1995 1994 ---- ---- Finance income* 9.78% 8.68% Interest expense* 5.33 3.85 ---- ---- Net finance income 4.45 4.83 Fees and other income 1.17 1.22 ---- ---- Operating revenue 5.62 6.05 ---- ---- Salaries and general operating expenses 2.29 2.47 Net credit losses** 0.47 0.80 Provision for finance receivables change 0.09 (0.03) ---- ---- Net credit losses 0.57 0.77 Depreciation on operating lease equipment 0.47 0.44 ---- ---- Operating expenses 3.33 3.68 ---- ---- Income before provision for income taxes 2.29 2.37 Provision for income taxes 0.86 0.89 ---- ---- Net income 1.43% 1.48% ==== ==== Average Financing and Leasing Assets $14,808,286 $13,024,231 =========== =========== Average Finance Receivables $14,884,342 $12,850,556 =========== =========== *Excludes interest income and interest expense relating to short-term interest-bearing deposits. **Percentage to average finance receivables. -17- LIQUIDITY AND CAPITALIZATION 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 following table presents information regarding the Corporation's capital structure. - -------------------------------------------------------------------------------- March 31, December 31, 1995 1994 ------------ ------------ (Dollars in Thousands) Commercial Paper $ 6,017,855 $ 5,660,194 Term Debt 6,810,609 6,735,650 Stockholders' Equity 1,819,661 1,793,027 ------------ ------------ Total Capitalization $ 14,648,125 $ 14,188,871 ============ ============ Ratios: Debt-to-equity 7.05 to 1 6.91 to 1 Debt-to-equity plus reserve for credit losses 6.37 to 1 6.24 to 1 - -------------------------------------------------------------------------------- During the first quarter of 1995, commercial paper borrowings increased $357.7 million, and the Corporation issued $250.0 million of variable rate and $200.0 million of fixed rate debt. Repayments of term debt totaled $375.0 million. At March 31, 1995, commercial paper borrowings were supported by $4.68 billion of committed credit line facilities, representing 78.3% of operating commercial paper outstanding (commercial paper outstanding less short-term interest-bearing deposits). No borrowings have been made under credit lines since 1970. At March 31, 1995, $8.51 billion of registered but unissued debt securities remained available under shelf registration statements. -18- 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 18, 1995 was filed with the Commission reporting the Corporation's announcement of results for the year ended December 31, 1994. (d) A Form 8-K report dated April 11, 1995 was filed with the Commission reporting the Corporation's announcement of results for the quarter ended March 31, 1995. -19- 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: May 4, 1995 -20- 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 Thousands) Three Months Ended March 31, ------------------------- 1995 1994 ---------- ---------- Net Income $ 52,812 $ 48,035 Provision for income taxes 31,675 29,230 ---------- ---------- Earnings before provision for income taxes 84,487 77,265 ---------- ---------- Fixed charges: Interest and debt expense on indebtedness 199,198 128,840 Interest factor - one third of rentals on real and personal properties 1,816 1,903 ---------- ---------- Total fixed charges 201,014 130,743 ---------- ---------- Total earnings before provision for income taxes and fixed charges $ 285,501 $ 208,008 ========== ========== Ratio of earnings to fixed charges 1.42 1.59 EX-27 3 FDS
5 1,000 3-MOS 3-MOS DEC-31-1994 DEC-31-1995 MAR-31-1994 MAR-31-1995 66,153 120,201 0 0 13,590,145 15,000,645 180,046 195,420 0 0 0 0 0 0 0 0 14,606,246 16,348,683 0 0 4,872,500 6,810,609 250,000 250,000 0 0 0 0 1,465,674 1,569,661 14,606,246 16,348,683 0 0 325,825 407,087 0 0 80,549 84,837 0 0 24,881 20,926 128,840 199,198 77,265 84,487 29,230 31,675 48,035 52,812 0 0 0 0 0 0 48,035 52,812 0 0 0 0
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