-----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, TlL48dQWKLtEa22b1soNu860jZw1PS6tnNXRYGDiziAUpf0snEq6v1T5J1GBYqC7 GUGqTDrFI2gdZn+cqzyM3A== 0000891092-99-000715.txt : 19991110 0000891092-99-000715.hdr.sgml : 19991110 ACCESSION NUMBER: 0000891092-99-000715 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-01861 FILM NUMBER: 99744567 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 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 SEPTEMBER 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission File Number 1-1861 ---------------------- THE CIT GROUP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-2994534 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1211 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 536-1390 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No ______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 29, 1999: Class A Common Stock - 161,127,581 shares. ================================================================================ THE CIT GROUP, INC. AND SUBSIDIARIES (UNAUDITED) TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Condensed Financial Statements Consolidated Balance Sheets - September 30, 1999 and December 31, 1998. 2 Consolidated Income Statements for the three and nine month periods ended September 30, 1999 and 1998. 3 Consolidated Statements of Changes in Stockholders' Equity for the nine month periods ended September 30, 1999 and 1998. 4 Consolidated Statements of Cash Flows for the nine month periods ended September 30, 1999 and 1998. 5 Notes to Condensed Consolidated Financial Statements. 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 3. Quantitative and Qualitative Disclosures about Market Risk 8-27 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 28 Item 6. Exhibits and Reports on Form 8-K 29 ================================================================================ Statements contained in this Form 10-Q that are not historical facts are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, potential changes in interest rates, competitive factors, and general economic conditions. ================================================================================ PART I. FINANCIAL INFORMATION Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the December 31, 1998 Annual Report on Form 10-K and the March 31, 1999 and June 30, 1999 quarterly reports on Form 10-Q for The CIT Group, Inc. ("we", "our", "us", "CIT", or the "Company"). 1 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Millions)
September 30, December 31, 1999 1998 --------- --------- (unaudited) Assets Financing and leasing assets Loans Commercial $13,151.5 $11,415.5 Consumer 4,068.8 4,266.9 Lease receivables 4,112.6 4,173.6 --------- --------- Finance receivables 21,332.9 19,856.0 Reserve for credit losses (283.8) (263.7) --------- --------- Net finance receivables 21,049.1 19,592.3 Operating lease equipment, net 3,677.2 2,774.1 Consumer finance receivables held for sale 737.8 987.4 Cash and cash equivalents 143.0 73.6 Other assets 1,132.3 875.7 --------- --------- Total assets $26,739.4 $24,303.1 ========= ========= Liabilities and Stockholders' Equity Debt Commercial paper $ 5,472.6 $ 6,144.1 Variable rate senior notes 5,758.1 4,275.0 Fixed rate senior notes 8,611.8 8,032.3 Subordinated fixed rate notes 200.0 200.0 --------- --------- Total debt 20,042.5 18,651.4 Credit balances of factoring clients 1,971.9 1,302.1 Accrued liabilities and payables 738.4 694.3 Deferred federal income taxes 822.0 703.7 --------- --------- Total liabilities 23,574.8 21,351.5 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company 250.0 250.0 Stockholders' equity Class A Common Stock, par value $0.01 per share; Authorized: 700,000,000 shares. Issued: 163,172,966 shares in 1999 and 163,144,879 shares in 1998. Outstanding: 161,147,581 shares in 1999 and 162,176,949 shares in 1998. 1.7 1.7 Paid-in capital 958.2 952.5 Retained earnings 2,009.3 1,772.8 Treasury stock at cost (2,025,385 shares in 1999 and 967,930 shares in 1998; Class A Common Stock) (54.6) (25.4) --------- --------- Total stockholders' equity 2,914.6 2,701.6 --------- --------- Total liabilities and stockholders' equity $26,739.4 $24,303.1 ========= =========
See accompanying notes to condensed consolidated financial statements. 2 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Amounts in Millions, except Net Income per Share)
For the Quarter For the Nine Months Ended September 30, Ended September 30, ----------------------------- ------------------------------ 1999 1998 1999 1998 ---- ---- ---- ---- (unaudited) (unaudited) Finance income $ 583.9 $ 510.6 $ 1,679.8 $ 1,481.4 Interest expense 304.1 263.8 858.2 766.2 --------- --------- --------- --------- Net finance income 279.8 246.8 821.6 715.2 Fees and other income 81.9 69.0 221.4 196.1 --------- --------- --------- --------- Operating revenue 361.7 315.8 1,043.0 911.3 --------- --------- --------- --------- Salaries and general operating expenses 115.1 105.3 337.1 311.0 Provision for credit losses 32.2 30.6 77.9 75.0 Depreciation on operating lease equipment 61.6 42.7 176.9 121.4 Minority interest in subsidiary trust holding solely debentures of the Company 4.8 4.8 14.4 14.4 --------- --------- --------- --------- Operating expenses 213.7 183.4 606.3 521.8 --------- --------- --------- --------- Income before provision for income taxes 148.0 132.4 436.7 389.5 Provision for income taxes 51.1 46.3 151.6 138.0 --------- --------- --------- --------- Net income $ 96.9 $ 86.1 $ 285.1 $ 251.5 ========= ========= ========= ========= Net income per basic share $0.60 $0.53 $1.77 $1.55 Net income per diluted share $0.60 $0.53 $1.76 $1.54
See accompanying notes to condensed consolidated financial statements. 3 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Amounts in Millions) Nine Months Ended September 30, ------------------------------------ 1999 1998 -------------- --------------- (unaudited) Balance, January 1 $2,701.6 $2,432.9 Net income 285.1 251.5 Dividends declared (48.6) (32.6) Treasury stock purchased (29.2) (16.2) Other 5.7 4.0 -------- -------- Balance, September 30 $2,914.6 $2,639.6 ======== ======== See accompanying notes to condensed consolidated financial statements. 4 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Millions)
Nine Months Ended September 30, -------------------------------- 1999 1998 ---- ---- (unaudited) CASH FLOWS FROM OPERATIONS Net income $ 285.1 $ 251.5 Adjustments to reconcile net income to net cash flows from operations: Provision for credit losses 77.9 75.0 Depreciation and amortization 202.1 140.5 Provision for deferred federal income taxes 118.3 74.0 Gains on asset and receivable sales (74.0) (60.3) Increase in other assets (67.0) (37.3) Increase in accrued liabilities and payables 37.8 47.0 Other 28.6 9.3 ----------- ----------- Net cash flows provided by operations 608.8 499.7 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Loans extended (25,908.5) (25,877.1) Collections on loans 24,404.6 23,627.9 Proceeds from asset and receivable sales 2,078.1 984.4 Purchases of assets to be leased (1,221.6) (645.5) Net increase in short-term factoring receivables (552.6) (427.4) Purchase of loan portfolios (516.6) (477.9) Purchases of investment securities (33.0) (28.9) Proceeds from sales of assets received in satisfaction of loans 32.4 35.7 Other (13.2) (24.8) ----------- ----------- Net cash flows used for investing activities (1,730.4) (2,833.6) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of variable and fixed rate notes 6,199.5 4,384.2 Repayments of variable and fixed rate notes (4,136.9) (3,411.5) Net (decrease) increase in commercial paper (671.5) 1,519.5 Repayments of nonrecourse leveraged lease debt (123.9) (116.5) Proceeds from nonrecourse leveraged lease debt 1.6 42.0 Cash dividends paid (48.6) (32.6) Purchase of treasury stock (29.2) (16.2) ----------- ----------- Net cash flows provided by financing activities 1,191.0 2,368.9 ----------- ----------- Net increase in cash and cash equivalents 69.4 35.0 Cash and cash equivalents, beginning of period 73.6 140.4 ----------- ----------- Cash and cash equivalents, end of period $ 143.0 $ 175.4 =========== =========== Supplemental disclosures Interest paid $ 790.9 $ 726.1 Federal and state and local income taxes paid $ 47.1 $ 57.9
See accompanying notes to condensed consolidated financial statements. 5 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1--Basis of Presentation We believe all adjustments (all of which are normal recurring accruals) necessary for a fair statement of financial position and results of operations for these periods have been made. Results for interim periods are not necessarily indicative of results for a full year and are subject to year-end audit adjustments. Note 2--Earnings Per Share The reconciliation of the numerator and denominator of basic earnings per share ("EPS") with that of diluted EPS is presented below.
- ------------------------------------------------------------------------------------------------------------------------ For the Three Months Ended September 30, --------------------------------------------------------------------------------------------- 1999 1998 --------------------------------------------- -------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ------------- --------------- ---------- ------------- --------------- ----------- Dollar Amounts in Millions (except per share amounts) Basic EPS: Income available to common shareholders $96.9 160,512,433 $0.60 $86.1 162,143,304 $0.53 ============= ============ Effect of Dilutive Securities: Restricted shares - 951,992 - 934,401 Stock options - - - 226,620 -------------- -------------- ------------- -------------- Diluted EPS $96.9 161,464,425 $0.60 $86.1 163,304,325 $0.53 ============== ============== ============= ============= ============== ============ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ For the Nine Months Ended September 30, --------------------------------------------------------------------------------------------- 1999 1998 --------------------------------------------- -------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ------------- --------------- ---------- ------------- --------------- ----------- Dollar Amounts in Millions (except per share amounts) Basic EPS: Income available to common shareholders $285.1 160,850,093 $1.77 $251.5 162,197,469 $1.55 ============= ============ Effect of Dilutive Securities: Restricted shares - 958,748 - 941,161 Stock options - 189,000 - 350,059 -------------- -------------- ------------- -------------- Diluted EPS $285.1 161,997,841 $1.76 $251.5 163,488,689 $1.54 ============== ============== ============= ============= ============== ============ - ------------------------------------------------------------------------------------------------------------------------
6 Note 3 - Business Segment Information The following table presents reportable segment information and the reconciliation to the consolidated totals as of September 30, 1999 and 1998.
- --------------------------------------------------------------------------------------------------------------------- Equipment Financing Commercial Total Corporate Consolidated and Leasing Finance Consumer Segments and Other Total ------------- ------------ ----------- -------------- ------------ --------------- (Dollars in Millions) September 30, 1999 Operating revenue $ 555.3 $ 301.9 $ 184.6 $ 1,041.8 $ 1.2 $ 1,043.0 Net income 177.1 101.1 47.1 325.3 (40.2) 285.1 Total managed assets 14,326.0 6,615.3 7,556.6 28,497.9 115.8 28,613.7 September 30, 1998 Operating revenue 452.9 255.2 168.1 876.2 35.1 911.3 Net income 145.1 86.7 36.5 268.3 (16.8) 251.5 Total managed assets 12,587.1 5,357.5 7,392.0 25,336.6 87.3 25,423.9 - ---------------------------------------------------------------------------------------------------------------------
Note 4 - Pending Acquisitions We obtained the authorizations from the Federal Reserve Board and the Canadian regulatory authorities for our acquisition of all of the outstanding voting shares of Newcourt Credit Group Inc. ("Newcourt"). Additionally, on October 26, 1999, our stockholders, as well as Newcourt's, voted in favor of the acquisition. As a result, the acquisition is anticipated to close on or about November 15, 1999. On October 4, 1999, we also announced our intention to purchase the domestic factoring operations of Heller Finance Inc. The transaction, which has been approved by the Federal Reserve Board, is scheduled to close prior to year end. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK OVERVIEW Net income for the quarters ended September 30, 1999 and 1998 totaled $96.9 million and $86.1 million, respectively. Nine month net income totaled $285.1 million and $251.5 million for 1999 and 1998, respectively. Earnings per diluted share for the third quarter of 1999 increased 13.2% to $0.60 from $0.53 in 1998. Nine month earnings per diluted share increased 14.3% to $1.76 from $1.54. The strong 1999 earnings were driven by double digit revenue growth, solid asset growth from the commercial finance and equipment segments, consistent credit quality, and continued improvements in operating efficiency. Return on equity for the third quarter of 1999 was 13.5%, improved from 13.2% for the same period in 1998, and was 13.6% for the first nine months of 1999, improved from 13.2% for the same period in 1998. Return on average earning assets ("AEA") for the third quarter of 1999 was 1.63% compared to 1.67% for the third quarter of 1998. Return on AEA for the nine months ended September 30, 1999 was 1.64% compared to 1.68% for the same period in 1998. Managed assets, comprised of financing and leasing assets and consumer finance receivables previously securitized that we continue to manage, totaled a record $28.6 billion at September 30, 1999, an increase of 12.5% from $25.4 billion at September 30, 1998 and up 9.1% from $26.2 billion at December 31, 1998. Financing and leasing assets increased 13.6% to $25.9 billion at September 30, 1999 from $22.8 billion at September 30, 1998, and increased 9.1% from $23.7 billion at December 31, 1998. 8 NET FINANCE INCOME A comparison of 1999 and 1998 net finance income is set forth below.
- -------------------------------------------------------------------------------------------------------------------- Three Months Ended ------------------------------------------------------------------------- September 30, Increase ------------------------------------- ------------------------------- 1999 1998 Amount Percent ----------------- ----------------- -------------- ------------- (Dollar Amounts in Millions) Finance income $ 583.9 $ 510.6 $ 73.3 14.4% Interest expense 304.1 263.8 40.3 15.3% ----------------- ----------------- -------------- ------------- Net finance income $ 279.8 $ 246.8 $ 33.0 13.4% ================= ================= ============== ------------- AEA $23,818.5 $20,669.9 $3,148.6 15.2% ================= ================= ============== ============= Net finance income as a % of AEA 4.70% 4.78% ================= ================= - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Nine Months Ended ------------------------------------------------------------------------- September 30, Increase ------------------------------------- ------------------------------- 1999 1998 Amount Percent ----------------- ----------------- -------------- ------------- (Dollar Amounts in Millions) Finance income $ 1,679.8 $ 1,481.4 $ 198.4 13.4% Interest expense 858.2 766.2 92.0 12.0% ----------------- ----------------- -------------- ------------- Net finance income $ 821.6 $ 715.2 $ 106.4 14.9% ================= ================= ============== ------------- AEA $23,213.9 $19,946.7 $3,267.2 16.4% ================= ================= ============== ============= Net finance income as a % of AEA 4.72% 4.78% ================= ================= - --------------------------------------------------------------------------------------------------------------------
Finance income for the three months ended September 30, 1999 increased $73.3 million or 14.4% from the comparable 1998 period. Finance income for the nine month period ended September 30, 1999 increased $198.4 million or 13.4% from the same period in 1998. As a percentage of AEA, finance income (excluding interest income relating to short-term interest-bearing deposits) was 9.60% and 9.50% for the quarter and nine months ended September 30, 1999, respectively, as compared to 9.74% and 9.76% for the respective corresponding periods in 1998. The decline in yield was primarily due to lower prevailing market interest rates on average during 1999. 9 Interest expense for the three months ended September 30, 1999 increased $40.3 million or 15.3% from the comparable 1998 period, and for the nine month period ended September 30, 1999 increased $92.0 million or 12.0% from the same period in 1998. As a percentage of AEA, interest expense (excluding interest expense relating to short-term interest-bearing deposits and dividends related to the Company's preferred capital securities) for the third quarter of 1999 decreased to 4.90% from 4.97% in the comparable 1998 period, and for the nine month periods ended September 30, 1999 and 1998, decreased to 4.78% from 4.98%, respectively. The decline from the comparable period of 1998 reflects lower market rates. We seek to mitigate interest rate risk by matching the repricing characteristics of our assets with our liabilities. This portfolio risk management is, in part, accomplished through the use of interest rate swaps. A comparative analysis of the weighted average principal outstanding and interest rates paid on our debt for the three and nine month periods ended September 30, 1999 and 1998, before and after giving effect to interest rate swaps, is shown in the following tables. - -------------------------------------------------------------------------------- Three Months Ended September 30, 1999 ------------------------------------------- Before Swaps After Swaps ------------------ --------------------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $ 11,413.2 5.33% $ 8,747.6 5.33% Fixed rate senior and subordinated notes 8,930.5 6.20% 11,596.1 6.25% ----------- ----------- Composite interest rate paid $ 20,343.7 5.71% $ 20,343.7 5.86% =========== =========== Three Months Ended September 30, 1998 ------------------------------------------- Before Swaps After Swaps ------------------ --------------------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $ 9,952.1 5.61% $ 7,322.7 5.55% Fixed rate senior and subordinated notes 7,074.4 6.29% 9,703.8 6.38% ----------- ----------- Composite interest rate paid $ 17,026.5 5.89% $ 17,026.5 6.02% =========== =========== - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- Nine Months Ended September 30, 1999 ------------------------------------------- Before Swaps After Swaps ------------------ --------------------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $ 10,984.8 5.09% $ 8,521.4 5.08% Fixed rate senior and subordinated notes 8,758.0 6.19% 11,221.4 6.26% ----------- ----------- Composite interest rate paid $ 19,742.8 5.58% $ 19,742.8 5.75% =========== =========== Nine Months Ended September 30, 1998 ------------------------------------------- Before Swaps After Swaps ------------------ --------------------- (Dollar Amounts in Millions) Commercial paper and variable rate senior notes $ 9,343.8 5.62% $ 6,756.0 5.57% Fixed rate senior and subordinated notes 7,062.7 6.35% 9,650.5 6.43% ----------- ----------- Composite interest rate paid $ 16,406.5 5.93% $ 16,406.5 6.08% =========== =========== - -------------------------------------------------------------------------------- Our interest rate swaps principally convert floating rate debt to fixed interest rates. We do not enter into derivative financial instruments for trading or speculative purposes. The weighted average composite interest rate after swaps increased from the weighted average composite interest rate before swaps in each period, primarily because a larger proportion of our debt, after giving effect to interest rate swaps, was subject to a fixed interest rate. However, the weighted average interest rates before swaps do not necessarily reflect the interest expense that would have been incurred had we chosen to manage interest rate risk without the use of such swaps. FEES AND OTHER INCOME For the three months ended September 30, 1999, fees and other income totaled $81.9 million, compared to $69.0 million for the third quarter of 1998. For the nine months ended September 30, 1999 and 1998, fees and other income totaled $221.4 million and $196.1 million, respectively. Increased lending fees in our commercial finance and equipment financing businesses, strong commissions from the factoring business bolstered by an acquisition, and 11 gains on sales of leasing equipment and certain consumer finance receivables were partially offset by lower gains on venture capital investments and securitizations. The following table sets forth the components of fees and other income.
- ------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (Dollar Amounts in Millions) Factoring commissions $ 31.1 $ 24.8 $ 84.1 $ 70.4 Fees and other income 36.2 24.8 87.5 69.0 Gains on sales of leasing equipment 14.6 11.5 44.5 35.2 Gains on securitizations - 7.3 5.3 12.5 Gains on sales of venture capital investments - 0.6 - 9.0 ------------ ------------ ------------ ------------ $ 81.9 $ 69.0 $ 221.4 $ 196.1 ============ ============ ============ ============ - -------------------------------------------------------------------------------------------------------------------
SALARIES AND GENERAL OPERATING EXPENSES Salaries and general operating expenses increased by $9.8 million or 9.3% to $115.1 million in the third quarter of 1999 from $105.3 million in the comparable 1998 period. For the nine month period ended September 30, 1999, salaries and general operating expenses increased $26.1 million or 8.4% to $337.1 million from $311.0 million for the same period in 1998. The increase in expenses reflects a factoring acquisition, product expansion in the equipment financing and leasing businesses, certain incremental costs relating to the restructuring of our sales finance business, and normal expense increases, partially offset by productivity gains in the consumer segment. 12 Management monitors productivity via the efficiency ratio and the ratio of salaries and general operating expenses to average managed assets ("AMA"). These ratios are set forth in the following table.
- ----------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ----------------------------- 1999 1998 1999 1998 ------------ ------------ ------------- ------------- Efficiency ratio 39.0% 39.2% 39.6% 40.1% Salaries and general operating expenses as a percentage of AMA 1.72% 1.82% 1.73% 1.86% - -----------------------------------------------------------------------------------------------------------------
The improvement in the ratios reflects the success of continuing productivity initiatives and our ability to leverage our existing operating structure, particularly in our consumer and factoring businesses. RESERVE AND PROVISION FOR CREDIT LOSSES/CREDIT QUALITY The reserve for credit losses is periodically reviewed for adequacy considering economic conditions, collateral values and credit quality indicators, including charge-off experience and levels of past due loans and nonperforming assets. The reserve increased by $20.1 million to $283.8 million (1.33% of finance receivables) at September 30, 1999 from $263.7 million (1.33%) at December 31, 1998 principally as a result of portfolio growth. A measure of reserve adequacy and strength used by us and in our industry is the ratio of the balance sheet reserve for credit losses to trailing twelve-month net credit losses. This ratio, 3.21 times at September 30, 1999, was relatively unchanged from 3.35 times at December 31, 1998. The relationship of the reserve for credit losses to nonaccrual finance receivables was 123.1% at September 30, 1999 compared to 124.7% at December 31, 1998. 13 The provision for credit losses for the third quarter of 1999 was $32.2 million, up from $30.6 million in the third quarter of 1998 and the nine month total of $77.9 million was up from $75.0 million for the nine months ended September 30, 1998. For the quarter ended September 30, 1999, net credit losses were $25.3 million (0.48% of average finance receivables) as compared to $21.6 million (0.46%) for the same period last year. Net credit losses for the nine months ended September 30, 1999 were $67.5 million (0.44%) compared to $58.0 million (0.42%) for the same period of 1998. The following table sets forth net credit losses as a percentage of average finance receivables (annualized), excluding consumer finance receivables held for sale.
- ------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ----------------------------- ---------------------------- 1999 1998 1999 1998 ------------- ------------- ------------ ------------ Equipment Financing and Leasing 0.23 % 0.21 % 0.16 % 0.25 % Commercial Finance 0.44 % 0.47 % 0.42 % 0.21 % ------------- ------------- ------------ ------------ Total Commercial Segments 0.31 % 0.30 % 0.25 % 0.24 % Consumer Segment 1.17 % 1.08 % 1.16 % 1.12 % ------------- ------------- ------------ ------------ Total 0.48 % 0.46 % 0.44 % 0.42 % ============= ============= ============ ============ - -------------------------------------------------------------------------------------------------------------------
For the nine months ended September 30, 1999, Equipment Financing and Leasing net credit losses declined on continued good credit quality. The year to date increase in Commercial Finance net credit losses was primarily due to large recoveries in 1998. As a percentage of average consumer managed finance receivables, consumer net credit losses were 1.01% during the third quarter of 1999 compared to 0.87% for the same period in 1998, 14 and for the nine months ended September 30, 1999 and 1998, were 1.01% and 0.89%, respectively. PAST DUE AND NONPERFORMING ASSETS The following table sets forth certain information concerning past due and total nonperforming assets (and the related percentages of finance receivables) at September 30, 1999 and December 31, 1998.
- ------------------------------------------------------------------------------------------------------------------- At September 30, 1999 At December 31, 1998 ----------------------------- --------------------------- (Dollar Amounts in Millions) Finance receivables, past due 60 days or more: Equipment Financing and Leasing $ 163.8 1.54% $ 149.9 1.41% Commercial Finance 51.0 0.77% 32.1 0.64% ------------- ------------- ------------ ------------ Total Commercial Segments 214.8 1.24% 182.0 1.17% Consumer Segment 170.5 4.19% 166.0 3.89% ------------- ------------- ------------ ------------ Total $ 385.3 1.81% $ 348.0 1.75% ============= ============= ============ ============ Total nonperforming assets: Equipment Financing and Leasing $ 120.1 1.13% $ 135.2 1.27% Commercial Finance 23.9 0.36% 14.5 0.29% ------------- ------------- ------------ ------------ Total Commercial Segments 144.0 0.83% 149.7 0.96% Consumer Segment 144.1 3.54% 129.0 3.02% ------------- ------------- ------------ ------------ Total $ 288.1 1.35% $ 278.7 1.40% ============= ============= ============ ============ - -------------------------------------------------------------------------------------------------------------------
Nonperforming assets reflect both finance receivables on nonaccrual status and assets received in satisfaction of loans. From time to time, financial or operational difficulties may adversely affect future payments relating to certain operating lease equipment. Such operating lease equipment is not included in the totals for past due and nonperforming assets. At September 30, 1999, operations at an oil 15 refinery were subject to such difficulties. The aggregate carrying value of this asset was approximately $20.3 million. We do not believe these difficulties will have a material adverse effect on our consolidated financial position or results of operations. OPERATING LEASE EQUIPMENT The operating lease equipment portfolio was $3.7 billion at September 30, 1999, up 32.6% from December 31, 1998 and up 53.4% from September 30, 1998, driven primarily by growth in rail transport, commercial aircraft equipment, and construction equipment. Depreciation for the quarter ended September 30, 1999 was $61.6 million, up from $42.7 million for the same period in 1998, and for the nine months ended September 30, 1999, depreciation was $176.9 million, up from $121.4 million in the same period in 1998 due to growth in the portfolio. INCOME TAXES The effective income tax rates for the third quarters of 1999 and 1998 were 34.5% and 35.0%, and for the nine month periods ended September 30, 1999 and 1998, were 34.7% and 35.4%, respectively. The decrease in the 1999 effective tax rate was primarily the result of lower state and local income taxes. 16 FINANCING AND LEASING ASSETS Managed assets grew $2.4 billion (9.1%) to $28.6 billion during the first nine months of 1999, and financing and leasing assets increased $2.2 billion (9.1%) to $25.9 billion, as presented in the following table.
- ------------------------------------------------------------------------------------------------------------------ At September 30, At December 31, Change 1999 1998 Amount Percent -------------- ------------- ------------- ---------- (Dollar Amounts in Millions) Equipment Financing: Finance receivables $ 8,745.9 $ 8,497.6 $ 248.3 2.9% Operating lease equipment, net 849.9 765.1 84.8 11.1 -------------- ------------- ------------- ---------- Total 9,595.8 9,262.7 333.1 3.6 -------------- ------------- ------------- ---------- Capital Finance: Finance receivables 1,598.3 1,655.4 (57.1) (3.4) Operating lease equipment, net (1) 2,807.0 1,982.0 825.0 41.6 -------------- ------------- ------------- ---------- 4,405.3 3,637.4 767.9 21.1 Liquidating portfolio(1) (2) 324.9 466.9 (142.0) (30.4) -------------- ------------- ------------- ---------- Total 4,730.2 4,104.3 625.9 15.2 -------------- ------------- ------------- ---------- Total Equipment Financing and Leasing 14,326.0 13,367.0 959.0 7.2 -------------- ------------- ------------- ---------- Commercial Services 3,714.8 2,481.8 1,233.0 49.7 Business Credit 1,726.9 1,477.9 249.0 16.8 Credit Finance 1,173.6 1,036.5 137.1 13.2 -------------- ------------- ------------- ---------- Total Commercial Finance 6,615.3 4,996.2 1,619.1 32.4 -------------- ------------- ------------- ---------- Total Commercial Segments 20,941.3 18,363.2 2,578.1 14.0 -------------- ------------- ------------- ---------- Other - Equity Investments 115.8 81.9 33.9 41.4 -------------- ------------- ------------- ---------- Consumer Finance 2,229.3 2,244.4 (15.1) (0.7) Sales Financing 2,577.3 3,009.9 (432.6) (14.4) -------------- ------------- ------------- ---------- Total Consumer Segment 4,806.6 5,254.3 (447.7) (8.5) -------------- ------------- ------------- ---------- Total Financing and Leasing Assets 25,863.7 23,699.4 2,164.3 9.1 -------------- ------------- ------------- ---------- Finance receivables previously securitized: Consumer Finance 464.0 607.6 (143.6) (23.6) Sales Financing 2,286.0 1,909.3 376.7 19.7 -------------- ------------- ------------- ---------- Total 2,750.0 2,516.9 233.1 9.3 -------------- ------------- ------------- ---------- Total Managed Assets - Consumer Segment 7,556.6 7,771.2 (214.6) (2.8) -------------- ------------- ------------- ---------- Total Managed Assets $ 28,613.7 $ 26,216.3 $ 2,397.4 9.1% ============== ============= ============= ========== - ------------------------------------------------------------------------------------------------------------------
(1) Operating lease equipment, net, of $20.3 million and $27.0 million are included in the liquidating portfolios at September 30, 1999 and December 31, 1998, respectively. (2) Consists primarily of oceangoing maritime and project finance. 17 Strong originations in rail transport, commercial aircraft equipment, and construction equipment resulted in 1999 growth in the Equipment Financing and Leasing operating lease portfolios. The growth in the Commercial Finance segment resulted from solid 1999 new business generation, reduced liquidations and a factoring acquisition. Consumer managed assets decreased to $7.6 billion at September 30, 1999 from $7.8 billion at December 31, 1998, due to sales of certain lower returning receivables during the third quarter as a result of ongoing risk and return management strategies. Financing and Leasing Assets Composition Our ten largest financing and leasing asset accounts at September 30, 1999 in the aggregate accounted for 4.9% of the total financing and leasing assets, all of which are commercial accounts secured by equipment, accounts receivable or inventories. Geographic Composition The following table presents financing and leasing assets by customer location.
- ------------------------------------------------------------------------------------------------------------------- At September 30, 1999 At December 31, 1998 ------------------------------- ------------------------------- Amount Percent Amount Percent ---------------- ----------- ----------------- ----------- (Dollar Amounts in Millions) United States West $ 5,846.9 22.6% $ 5,583.2 23.6% Northeast 5,630.5 21.8 5,143.9 21.7 Midwest 5,465.6 21.1 4,895.3 20.7 Southeast 3,735.9 14.4 3,492.3 14.7 Southwest 3,308.0 12.8 2,993.3 12.6 Foreign (principally commercial aircraft) 1,876.8 7.3 1,591.4 6.7 ---------------- ----------- ----------------- ----------- Total $25,863.7 100.0% $23,699.4 100.0% ================ =========== ================= =========== - -------------------------------------------------------------------------------------------------------------------
18 Our managed asset geographic diversity does not differ significantly from our owned asset geographic diversity. Additionally, our financing and leasing asset portfolio is diversified by state. At September 30, 1999, state concentrations in excess of 5.0% of financing and leasing assets were limited to California (12.1%), Texas (8.9%), and New York (8.1%). Industry Composition The following table presents financing and leasing assets by major industry class.
- -------------------------------------------------------------------------------------------------------------------- At September 30, 1999 At December 31, 1998 ---------------------------------- ---------------------------------- Amount Percent Amount Percent ----------------- ------------- ---------------- ------------ (Dollar Amounts in Millions) Manufacturing(1) $ 5,752.8 22.2% $ 5,117.0 21.6% Retail 2,822.9 10.9 1,882.1 7.9 Commercial airlines(2) 2,596.7 10.0 2,325.4 9.8 Construction equipment 2,348.5 9.1 1,947.4 8.2 Home mortgage(3) 2,229.3 8.6 2,244.4 9.5 Transportation(4) 2,089.9 8.1 1,777.6 7.5 Manufactured housing(5) 1,664.8 6.4 1,417.5 6.0 Other(6)(7) 6,358.8 24.7 6,988.0 29.5 ----------------- ------------- ---------------- ------------ Total $25,863.7 100.0% $23,699.4 100.0% ================= ============= ================ ============ - --------------------------------------------------------------------------------------------------------------------
(1) Includes various categories of manufacturers, including steel and metal products, textiles and apparel, printing and paper products and other industries. No individual category is greater than 4.1% of total financing and leasing assets. (2) Commercial airlines were 9.1% of managed assets at September 30, 1999. See "--Concentrations" below for a discussion of the commercial airline portfolio. (3) On a managed asset basis, home mortgage outstandings were $2.7 billion or 9.4% of managed assets at September 30, 1999 as compared with $2.9 billion or 10.9% at December 31, 1998. (4) Includes rail, bus, over-the-road trucking and business aircraft. (5) On a managed asset basis, manufactured housing outstandings were $1.9 billion or 6.6% of managed assets at September 30, 1999 as compared to $1.7 billion or 6.5% at December 31, 1998. (6) Includes various categories, none of which is greater than 4.1% of total financing and leasing assets. (7) On a managed asset basis, recreation vehicle outstandings were $1.9 billion or 6.6% of managed assets at September 30, 1999 as compared to $1.9 billion or 7.2% at December 31, 1998. On a managed asset basis, recreational boat outstandings were $0.8 billion or 3.0% of managed assets at September 30, 1999 as compared to $1.0 billion or 4.0% of managed assets at December 31, 1998. 19 Concentrations Commercial Airline Industry Commercial airline financing and leasing assets totaled $2.6 billion (10.0% of total financing and leasing assets) at September 30, 1999, up from $2.3 billion (9.8%) at December 31, 1998. These financing and leasing assets relate to commercial aircraft and ancillary equipment. Over the past few years, we have been growing this portfolio, and more recently we decided to expand our product offerings to include newly manufactured commercial aircraft. During 1999, we entered into agreements with both Airbus Industries and the Boeing Company to purchase a total of 40 aircraft, with options to acquire additional units. Deliveries of these new aircraft are scheduled to take place over a five year period starting in the fourth quarter of 2000. The following table presents information about the commercial airline portfolio. See also "Operating Lease Equipment".
- ------------------------------------------------------------------------------------------------------------------- At September 30, 1999 At December 31, 1998 ----------------------------- ------------------------------ (Dollar Amounts in Millions) Finance Receivables Amount outstanding(1) $1,209.3 $1,230.7 Number of obligors 54 54 Operating Lease Equipment, net Net carrying value $1,387.4 $1,094.7 Number of obligors 36 33 Total $2,596.7 $2,325.4 Number of obligors(2) 73 65 Number of aircraft(3) 193 206 - -------------------------------------------------------------------------------------------------------------------
(1) Includes accrued rents on operating leases that are classified as finance receivables in the Consolidated Balance Sheets. (2) Certain obligors are obligors under both finance receivable and operating lease transactions. (3) Regulations established by the Federal Aviation Administration (the "FAA") limit the maximum permitted noise an aircraft may make. A Stage III aircraft meets a more restrictive noise level requirement than a Stage II aircraft. The FAA has issued rules that phase out the use of Stage II aircraft in the United States by the year 2000. Similar restrictions in Europe phase out the use of Stage II aircraft by the year 2001. At September 30, 1999, the portfolio consisted of Stage III aircraft of $2,544.7 million (98.0%) and Stage II aircraft of $34.1 million (1.3%), versus Stage III aircraft of $2,246.0 million (96.6%) and Stage II aircraft of $55.9 million (2.4%) at year-end 1998. 20 We continue to reduce our Stage II commercial aircraft exposure and increase our Stage III aircraft exposure because FAA rules phase out the use of Stage II aircraft by the year 2000 in the United States. At September 30, 1999, Stage II aircraft declined to 1.3% of our commercial aircraft portfolio, about 75% of which represents collateral for full pay out debt obligations and the remaining represents aircraft on operating leases. Foreign Outstandings Our foreign exposures are limited mainly to the commercial airline industry. Financing and leasing assets to foreign obligors are U.S. dollar denominated and totaled $1.9 billion at September 30, 1999 and $1.6 billion at December 31, 1998. The largest exposures at September 30, 1999 were to obligors in England, $150.5 million (0.58% of financing and leasing assets), Canada, $145.7 million (0.56%), Belgium, $138.7 million (0.54%), France, $134.0 million (0.52%), and Spain, $110.0 million (0.42%). The remaining foreign exposure was geographically dispersed, with no other individual country exposure greater than $110 million. Highly Leveraged Transactions ("HLTs") We use the following criteria to classify a buyout financing or recapitalization which equals or exceeds $20 million as an HLT: o The transaction at least doubles the borrower's liabilities and results in a leverage ratio (as defined) higher than 50%, or o The transaction results in a leverage ratio higher than 75%, or o The transaction is designated as an HLT by a syndication agent. HLTs that we originated and in which we participated totaled $678.6 million (2.6% of financing and leasing assets) at September 30, 1999 as compared to $561.1 million (2.4%) at December 21 31, 1998. The increase in HLT outstandings during the first nine months of 1999 was due to new originations. Our HLT outstandings are generally secured by collateral, as distinguished from HLTs that rely primarily on cash flows from operations. Unfunded commitments to lend in secured HLT situations were $394.0 million at September 30, 1999, compared with $287.6 million at year-end 1998. LIQUIDITY We manage liquidity risk by monitoring the relative maturities of assets and liabilities and by borrowing funds, primarily in the U.S. money and capital markets. We use such cash 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, medium-term notes, and other term debt securities, supplemented by asset-backed securitizations. During the first nine months of 1999, commercial paper outstanding decreased to $5.5 billion at September 30, 1999 from $6.1 billion at December 31, 1998. During this period, we issued $4.4 billion of variable rate term debt and $1.8 billion of fixed rate term debt. The decrease in commercial paper and corresponding increase in term debt reflects, in part, our strategy to prefund asset growth in light of Year 2000. Repayments of debt totaled $4.1 billion for the first nine months of 1999. At September 30, 1999, $18.6 billion of registered, but unissued, debt securities remained available under shelf registration statements, including $2.0 billion of European Medium-Term Notes. 22 At September 30, 1999, commercial paper borrowings were supported by $5.5 billion of committed revolving credit-line facilities, representing 99.8% of operating commercial paper outstanding (commercial paper outstanding less short-term interest-bearing deposits). As part of our continuing program of accessing the public and private asset-backed securitization markets as an additional liquidity source, $1.0 billion of recreation vehicle and recreational boat finance receivables were securitized during the first nine months of 1999. At September 30, 1999, $2.1 billion of registered, but unissued, securities were available under shelf registration statements relating to our asset-backed securitization program. CAPITALIZATION The following table presents information regarding our capital structure.
- --------------------------------------------------------------------------------------------------------------------- At September 30, At December 31, 1999 1998 ---------------- ----------------- (Dollar Amounts in Millions) Commercial paper $ 5,472.6 $ 6,144.1 Term debt 14,569.9 12,507.3 ---------------- ----------------- Total debt 20,042.5 18,651.4 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company 250.0 250.0 Stockholders' equity 2,914.6 2,701.6 ---------------- ----------------- Total capitalization $23,207.1 $21,603.0 ================ ================= Total debt to stockholders' equity and Company- obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company 6.33x 6.32x Total debt and Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company to stockholders' equity 6.95x 7.00x - ---------------------------------------------------------------------------------------------------------------------
23 We believe we are well capitalized and that our capital structure is adequate to support current operations and anticipated growth. YEAR 2000 COMPLIANCE Institutions around the world are reviewing and modifying their computer systems to ensure they are Year 2000 compliant. The issue, in general terms, is that many existing computer systems, both information technology systems and non-information technology systems, contain date-based functions which use only two digits to identify a year in the date field with the assumption that the first two digits of the year are always "19". Consequently, on January 1, 2000, systems that are not Year 2000 compliant may read the year as 1900. Systems that calculate, compare or sort using the incorrect date may malfunction. We continue to address the Year 2000 issue as it relates to our systems and business. We have developed a comprehensive Year 2000 project to remediate our information technology ("IT") systems and to address Year 2000 issues in our non-IT systems. The process of remediation includes the following phases: o Planning o Assessing o Designing (as necessary) o Programming (as necessary) o Testing and validation We have categorized our IT systems as high, medium or low priority with respect to our ability to conduct business. As of September 30, 1999, we completed the entire Year 2000 process for 24 all of our high and medium priority IT systems and for 99% of all our IT systems. We will complete the Year 2000 process for all of our IT systems during the fourth quarter of 1999. A majority of the software used in our IT systems is provided by outside vendors. As of September 30, 1999, all vendor-provided software or software upgrades for our high and medium priority systems has been designated by the software vendors as Year 2000 compliant. We formulated a contingency plan for business continuation in the event of Year 2000 systems failures. This contingency plan is based upon our existing disaster recovery and business continuity plans with modifications for Year 2000 risks. We completed our Year 2000 contingency plan by August 31, 1999, and have substantially tested these contingency plans as of September 30, 1999. Our non-IT systems used to conduct business at our facilities consist primarily of office equipment (other than computer and communications equipment) and other equipment at our leased office facilities. We have inventoried our non-IT systems and have sent Year 2000 questionnaires to our office equipment vendors and landlords to determine the status of their Year 2000 readiness. Since 1997, we have been actively communicating with third parties concerning the status of their Year 2000 readiness by, among other things, sending written Year 2000 inquiries. These third parties include our borrowers, obligors, banks, investment banks, investors, vendors, manufacturers, landlords and suppliers of telecommunication services and other utilities. As part of the process of evaluating our options and attempting to mitigate third party risks, we continue 25 to collect and analyze information from third parties. It is difficult to predict the effect of any such third party non-readiness on our business. Significant Year 2000 failures in our systems or in the systems of third parties (or third parties upon whom they depend) could have a material adverse effect on our financial condition and results of operations. We believe that our reasonably likely worst case Year 2000 scenario is (i) a material increase in our credit losses due to Year 2000 problems for our borrowers and obligors and (ii) disruption in financial markets causing liquidity stress to us. The amount of these potential credit losses or the degree of disruption cannot be determined at this time. The total cost of our Year 2000 project is expected to be approximately $7 million, of which approximately $6.4 million has been incurred through September 30, 1999. This amount includes the costs of additional hardware, software and technology consultants, as well as the cost of our systems professionals dedicated to achieving Year 2000 compliance for IT systems. We have included the cost of the Year 2000 project in our annual budgets for information technology. We have postponed some non-Year 2000 IT expenditures and initiatives until after 2000 in order to concentrate resources on the Year 2000 issue. We do not expect that this will have a material adverse effect on our financial condition and results of operations. All Year 2000 information provided herein is a "Year 2000 Readiness Disclosure" as defined in the Year 2000 Information and Readiness Disclosure Act and is subject to the terms thereof. This Year 2000 information is provided pursuant to securities law requirements and it may not be taken as a form of covenant, warranty, representation or guarantee of any kind. 26 STATISTICAL DATA The following table presents components of net income as a percentage of AEA, along with other selected financial data.
- ------------------------------------------------------------------------------------------------------------------ Nine Months Ending September 30, -------------------------------------- 1999 1998 -------------- -------------- Finance income(1) 9.50% 9.76% Interest expense(1) 4.78 4.98 -------------- -------------- Net finance income 4.72 4.78 Fees and other income 1.27 1.31 -------------- -------------- Operating revenue 5.99 6.09 -------------- -------------- Salaries and general operating expenses 1.94 2.08 Provision for credit losses 0.44 0.50 Depreciation on operating lease equipment 1.02 0.81 Minority interest in subsidiary trust holding solely debentures of the Company 0.08 0.10 -------------- -------------- Operating expenses 3.48 3.49 -------------- -------------- Income before provision for income taxes 2.51 2.60 Provision for income taxes 0.87 0.92 -------------- -------------- Net income 1.64% 1.68% ============== ============== Average earning assets (in millions) $23,213.9 $19,946.7 ============== ============== - ------------------------------------------------------------------------------------------------------------------
(1) Excludes interest income and interest expense relating to short-term interest-bearing deposits. 27 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of Stockholders was held on September 8, 1999. The following individuals, comprising all of the directors of CIT, were elected to the Board of Directors, each with the number of votes shown, to serve until the next annual meeting of stockholders, or until he is succeeded by another qualified director who has been elected: DIRECTORS FOR AGAINST - --------- --- ------- Hisao Kobayashi 148,183,447 1,382,248 Albert R. Gamper, Jr. 148,184,866 1,380,829 Daniel P. Amos 149,216,410 349,285 Anthea Disney 147,549,048 2,016,647 Takasuke Kaneko 132,019,477 17,546,218 William M. O'Grady 148,184,539 1,381,156 Joseph A. Pollicino 148,184,606 1,381,089 Paul N. Roth 148,185,340 1,380,355 Peter J. Tobin 149,217,347 348,348 Tohru Tonoike 148,181,268 1,384,427 Keiji Torii 146,532,760 3,032,935 Alan R. White 149,218,214 347,481 In addition to electing the Board of Directors, the stockholders also ratified the appointment of KPMG LLP as independent accountants to examine the financial statements of CIT and its subsidiaries for the year ending December 31, 1999, with 149,502,414 votes for, 25,776 votes against, and 37,505 votes abstaining and approved CIT's Employee Stock Purchase Plan with 141,578,856 votes for, 7,273,004 votes against, 50,017 votes abstaining and 663,818 broker non-votes. 28 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 July 30, 1999 was filed with the SEC reporting CIT's declaration of a dividend for the quarter ended June 30, 1999. A Form 8-K report dated August 5, 1999 was filed with the SEC reporting CIT's announcement of an amended and restated agreement to acquire Newcourt Credit Group Inc. and additionally announcing the financial results for the Quarter ended June 30, 1999. A Form 8-K report dated August 18, 1999 was filed with the SEC containing the pro forma financial statements prepared by CIT and Newcourt Credit Group Inc. A Form 8-K report dated September 22, 1999 was filed with the SEC containing the unaudited consolidated financial statements of Newcourt Credit Group Inc. for the six months ended June 30, 1999 and the audited consolidated financial statements of Newcourt for each of the two year periods ended December 31, 1998 and 1997. 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The CIT Group, Inc. --------------------------------- (Registrant) BY /s/ J. M. Leone --------------------------------- J. M. Leone Executive Vice President and Chief Financial Officer (duly authorized and principal accounting officer) DATE: November 9, 1999 30 EX-12 2 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES EXHIBIT 12 THE CIT GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar Amounts In Millions)
Nine Months Ended September 30, ----------------------------------- 1999 1998 --------------- -------------- Net income $ 285.1 $ 251.5 Provision for income taxes 151.6 138.0 --------------- -------------- Earnings before provision for income taxes 436.7 389.5 --------------- -------------- Fixed Charges: Interest and debt expense on indebtedness 858.2 766.2 Minority interest in subsidiary trust holding solely debentures of the Company 14.4 14.4 Interest factor - one third of rentals on real and personal properties 6.7 7.4 --------------- -------------- Total fixed charges 879.3 788.0 --------------- -------------- Total earnings before provision for income taxes and fixed charges $ 1,316.0 $ 1,177.5 =============== ============== Ratio of earnings to fixed charges 1.50x 1.49x =============== ==============
EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets and Consolidated Income Statements and is qualified in its entirety by reference to such financial statements. 1,000,000 3-Mos DEC-31-1999 JUL-01-1999 SEP-30-1999 143 0 21,333 284 0 0 0 0 26,739 0 14,570 250 0 2 2,913 26,739 0 666 0 115 65 32 304 148 51 97 0 0 0 96 0.60 0.60
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