-----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, PNaiEjgVmHes/5EN9OHHs7qsVHSC968vsqudys7mPsqsIsLa9xuTxFdNnseESuQ4 Hxhl9L2ZPzItY6LauijxIw== 0000912057-01-529254.txt : 20010817 0000912057-01-529254.hdr.sgml : 20010817 ACCESSION NUMBER: 0000912057-01-529254 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010816 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYCO INTERNATIONAL LTD /BER/ CENTRAL INDEX KEY: 0000833444 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] STATE OF INCORPORATION: D0 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13836 FILM NUMBER: 1716967 BUSINESS ADDRESS: STREET 1: 90 PITTS BAY ROAD STREET 2: THE ZURICH CENTRE SECOND FLOOR CITY: PEMROKE HM 08 BERMU STATE: D0 BUSINESS PHONE: 4412928674 MAIL ADDRESS: STREET 1: C/O TYCO INTERNATIONAL (US) INC STREET 2: ONE TYCO PARK CITY: EXETER STATE: NH ZIP: 03833 FORMER COMPANY: FORMER CONFORMED NAME: ADT LIMITED DATE OF NAME CHANGE: 19930601 8-K 1 a2057333z8-k.txt FORM 8-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 16, 2001 001-13836 (COMMISSION FILE NUMBER) ------------------------ TYCO INTERNATIONAL LTD. (Exact name of registrant as specified in its charter) BERMUDA NOT APPLICABLE (Jurisdiction of Incorporation) (I.R.S. Employer Identification Number)
THE ZURICH CENTRE, SECOND FLOOR, 90 PITTS BAY ROAD, PEMBROKE, HM 08, BERMUDA (Address of registrant's principal executive office) 441-292-8674 (Registrant's telephone number) ------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 5. OTHER EVENTS As previously reported, on June 1, 2001, a subsidiary of Tyco International Ltd. ("Tyco") consummated the acquisition of The CIT Group, Inc. ("CIT"). Tyco is accounting for this acquisition as a purchase. This Form 8-K includes as an exhibit (i) Unaudited Consolidated Financial Statements of The CIT Group, Inc. and subsidiaries as of June 30, 2001 and December 31, 2000 and for the six months ended June 30, 2001 and 2000, as filed in CIT's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 and (ii) Tyco and CIT unaudited pro forma combined financial information for the nine months ended June 30, 2001 and for the year ended September 30, 2000. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (C) EXHIBITS
EXHIBIT NUMBER TITLE - --------------------- ------------------------------------------------------------ 99.1........ Unaudited Consolidated Financial Statements of The CIT Group, Inc. and subsidiaries as of June 30, 2001 and December 31, 2000 and for the six months ended June 30, 2001 and 2000, as filed in CIT's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 99.2........ Tyco and CIT unaudited pro forma combined financial information for the nine months ended June 30, 2001 and for the year ended September 30, 2000.
1 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. TYCO INTERNATIONAL LTD. By: /s/ MARK H. SWARTZ ----------------------------------------- Mark H. Swartz EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER)
Date: August 16, 2001 2 EXHIBIT INDEX
EXHIBIT NUMBER - --------------------- 99.1 Unaudited Consolidated Financial Statements of The CIT Group, Inc. and subsidiaries as of June 30, 2001 and December 31, 2000 and for the six months ended June 30, 2001 and 2000, as filed in CIT's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 99.2 Tyco and CIT unaudited pro forma combined financial information for the nine months ended June 30, 2001 and for the year ended September 30, 2000.
3 EX-99.1 3 a2057333zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
JUNE 30, DECEMBER 31, 2001 2000 ----------- ------------- (UNAUDITED) (SUCCESSOR) (PREDECESSOR) ASSETS Financing and leasing assets: Loans and leases: Commercial.............................................. $28,085.0 $29,304.0 Consumer................................................ 2,780.7 4,193.5 --------- --------- Finance receivables....................................... 30,865.7 33,497.5 Reserve for credit losses................................. (463.8) (468.5) --------- --------- Net finance receivables................................... 30,401.9 33,029.0 Operating lease equipment, net............................ 7,182.4 7,190.6 Finance receivables held for sale......................... 2,073.9 2,698.4 Cash and cash equivalents................................... 900.2 812.1 Goodwill and other intangible assets, net................... 6,101.7 1,964.6 Other assets................................................ 4,932.8 2,995.1 --------- --------- TOTAL ASSETS................................................ $51,592.9 $48,689.8 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Debt: Commercial paper.......................................... $ 9,155.8 $ 9,063.5 Variable rate senior notes................................ 9,856.3 11,130.5 Fixed rate senior notes................................... 17,646.6 17,571.1 Subordinated fixed rate notes............................. 100.0 200.0 --------- --------- Total debt.................................................. 36,758.7 37,965.1 Credit balances of factoring clients........................ 1,945.3 2,179.9 Accrued liabilities and payables............................ 2,403.3 2,287.6 --------- --------- Total liabilities........................................... 41,107.3 42,432.6 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the Company............................................ 260.0 250.0 Shareholder's equity: Parent company investment................................. 10,159.7 -- Common stock.............................................. -- 2.7 Paid-in capital........................................... -- 3,527.2 Retained earnings......................................... 71.2 2,603.3 Treasury stock, at cost................................... -- (137.7) --------- --------- 10,230.9 5,995.5 Accumulated other comprehensive (loss) income............. (5.3) 11.7 --------- --------- Total shareholder's equity.................................. 10,225.6 6,007.2 --------- --------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................. $51,592.9 $48,689.8 ========= =========
See accompanying notes to consolidated financial statements (unaudited). 1 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (UNAUDITED) (IN MILLIONS)
APRIL 1 THROUGH JUNE 2 THROUGH THREE MONTHS JUNE 1, 2001 JUNE 30, 2001 ENDED JUNE 30, 2000 --------------- -------------- ------------------- (PREDECESSOR) (SUCCESSOR) (PREDECESSOR) FINANCE INCOME................................ $922.0 $417.9 $1,301.8 Interest expense.............................. 397.0 161.8 630.9 ------ ------ -------- Net finance income............................ 525.0 256.1 670.9 Depreciation on operating lease equipment..... 241.7 110.0 311.7 ------ ------ -------- Net finance margin............................ 283.3 146.1 359.2 Other revenue, net............................ 25.9 95.9 232.3 ------ ------ -------- OPERATING REVENUE............................. 309.2 242.0 591.5 ------ ------ -------- Salaries and general operating expenses....... 182.5 83.0 257.5 Provision for credit losses................... 148.1 18.6 64.0 Goodwill amortization......................... 15.3 14.4 20.6 Acquisition related costs..................... 54.0 -- -- ------ ------ -------- OPERATING EXPENSES............................ 399.9 116.0 342.1 ------ ------ -------- (Loss) income before income taxes............. (90.7) 126.0 249.4 Benefit (provision) for income taxes.......... 13.8 (53.9) (95.0) Minority interest in subsidiary trust holding solely debentures of the Company, after tax... (1.9) (0.9) (3.0) ------ ------ -------- NET (LOSS) INCOME............................. $(78.8) $ 71.2 $ 151.4 ====== ====== ========
See accompanying notes to consolidated financial statements (unaudited). 2 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (UNAUDITED) (IN MILLIONS)
JANUARY 1 THROUGH JUNE 2 THROUGH SIX MONTHS ENDED JUNE 1, 2001 JUNE 30, 2001 JUNE 30, 2000 ----------------- -------------- ---------------- (PREDECESSOR) (SUCCESSOR) (PREDECESSOR) FINANCE INCOME............................... $2,298.8 $417.9 $2,530.6 Interest expense............................. 1,022.7 161.8 1,202.8 -------- ------ -------- Net finance income........................... 1,276.1 256.1 1,327.8 Depreciation on operating lease equipment.... 588.1 110.0 619.5 -------- ------ -------- Net finance margin........................... 688.0 146.1 708.3 Other revenue, net........................... 237.5 95.9 470.5 -------- ------ -------- OPERATING REVENUE............................ 925.5 242.0 1,178.8 -------- ------ -------- Salaries and general operating expenses...... 446.0 83.0 525.7 Provision for credit losses.................. 216.4 18.6 125.6 Goodwill amortization........................ 37.8 14.4 41.1 Acquisition related costs.................... 54.0 -- -- -------- ------ -------- OPERATING EXPENSES........................... 754.2 116.0 692.4 -------- ------ -------- Income before income taxes................... 171.3 126.0 486.4 Provision for income taxes................... (85.1) (53.9) (184.8) Minority interest in subsidiary trust holding solely debentures of the Company, after tax........................................ (4.9) (0.9) (6.3) -------- ------ -------- NET INCOME................................... $ 81.3 $ 71.2 $ 295.3 ======== ====== ========
See accompanying notes to consolidated financial statements (unaudited). 3 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED) (IN MILLIONS)
ACCUMULATED PARENT OTHER TOTAL COMPANY COMMON PAID-IN TREASURY RETAINED COMPREHENSIVE SHAREHOLDER'S INVESTMENT STOCK CAPITAL STOCK EARNINGS INCOME (LOSS) EQUITY ---------- -------- --------- -------- --------- ------------- ------------- CIT (predecessor) balance, December 31, 2000 $ -- $ 2.7 $ 3,527.2 $(137.7) $ 2,603.3 $ 11.7 $ 6,007.2 --------- Net income................. 81.3 81.3 Foreign currency translation adjustments.............. (33.7) (33.7) Cumulative effect of new accounting principle..... (146.5) (146.5) Change in fair values of derivatives qualifying as cash flow hedges......... 0.6 0.6 --------- Total comprehensive loss... (98.3) --------- Cash dividends............. (52.9) (52.9) Issuance of treasury stock.................... 27.6 27.6 Restricted common stock grants................... 12.4 12.4 --------- ----- --------- ------- --------- ------- --------- CIT (predecessor), June 1, 2001..................... -- 2.7 3,539.6 (110.1) 2,631.7 (167.9) 5,896.0 Recapitalization at acquistion............... 3,539.6 -- (3,539.6) -- -- -- -- Effect of push-down accounting of Tyco's purchase price on CIT's net assets............... 5,945.1 (2.7) -- 110.1 (2,631.7) 167.9 3,588.7 --------- ----- --------- ------- --------- ------- --------- CIT (successor), June 1, 2001 9,484.7 -- -- -- -- -- 9,484.7 --------- Net income................. 71.2 71.2 Foreign currency translation adjustments.............. 13.0 13.0 Change in fair values of derivatives qualifying as cashflow hedges.......... (18.3) (18.3) --------- Total comprehensive income................... 65.9 --------- Capital contribution from Parent................... 675.0 675.0 --------- ----- --------- ------- --------- ------- --------- CIT (successor), June 30, 2001..................... $10,159.7 $ -- $ -- $ -- $ 71.2 $ (5.3) $10,225.6 ========= ===== ========= ======= ========= ======= =========
See accompanying notes to consolidated financial statements (unaudited). 4 THE CIT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS)
JANUARY 1 THROUGH JUNE 2 THROUGH SIX MONTHS JUNE 1, 2001 JUNE 30, 2001 JUNE 30, 2000 ----------------- -------------- ------------- (PREDECESSOR) (SUCCESSOR) (PREDECESSOR) CASH FLOWS FROM OPERATIONS Net income........................................ $ 81.3 $ 71.2 $ 295.3 Adjustments to reconcile net income to net cash flows from operations: Provision for credit losses..................... 216.4 18.6 125.6 Depreciation and amortization................... 642.4 127.9 686.2 Non-recurring charges........................... 78.1 -- -- (Benefit) provision for deferred federal income taxes......................................... (20.2) 23.3 69.8 Gains on equipment, receivable and investment sales......................................... (96.3) (47.8) (192.8) Decrease (increase) in other assets............. 69.9 (183.9) (64.5) Increase (decrease) in accrued liabilities and payables...................................... 55.7 (136.1) (89.0) Other........................................... 34.9 (17.4) 11.7 ---------- --------- ---------- Net cash flows provided by (used for) operations...................................... 1,062.2 (144.2) 842.3 ---------- --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Loans extended.................................... (20,803.0) (4,223.1) (24,203.2) Collections on loans.............................. 18,520.2 3,457.4 20,395.9 Proceeds from asset and receivable sales.......... 2,879.6 1,782.5 3,004.5 Purchases of assets to be leased.................. (694.0) (237.2) (946.3) Net (increase) decrease in short-term factoring receivables..................................... (131.0) 21.2 (217.0) Purchase of finance receivable portfolios......... -- -- (870.7) Other............................................. (24.4) (2.3) (12.6) ---------- --------- ---------- Net cash flows (used for) provided by investing activities...................................... (252.6) 798.5 (2,849.4) ---------- --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of variable and fixed rate notes....... (6,491.5) (1,482.0) (5,294.8) Proceeds from the issuance of variable and fixed rate notes...................................... 6,246.6 -- 6,883.7 Net increase (decrease) in commercial paper....... 813.6 (721.2) 382.2 Capital contribution from Parent.................. -- 275.0 -- Net (repayments) collection of non-recourse leveraged lease debt............................ (8.7) 17.7 (90.5) Cash dividends paid............................... (52.9) -- (53.3) Treasury stock issued (purchased)................. 27.6 -- (48.0) ---------- --------- ---------- Net cash flows provided by (used for) financing activities............................ 534.7 (1,910.5) 1,779.3 ---------- --------- ---------- Net increase (decrease) in cash and cash equivalents..................................... 1,344.3 (1,256.2) (227.8) Cash and cash equivalents, beginning of period.... 812.1 2,156.4 1,073.4 ---------- --------- ---------- Cash and cash equivalents, end of period.......... $ 2,156.4 $ 900.2 $ 845.6 ========== ========= ========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: Push-down of purchase price by Parent (Notes 1 and 2)................................. $ 9,484.7 $ -- $ -- ========== ========= ==========
See accompanying notes to consolidated financial statements (unaudited). 5 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION--The unaudited financial statements presented herein include the consolidated accounts of The CIT Group, Inc. and its subsidiaries ("CIT" or "the Company"). On June 1, 2001 CIT was acquired by a wholly-owned subsidiary of Tyco International Ltd. ("Tyco" or "Parent") in a purchase business combination (see Note 2). As a new wholly-owned subsidiary of Tyco, CIT will continue to operate its business independently within Tyco and will continue to report its results separately. In accordance with the guidelines for accounting for business combinations, the purchase price paid by Tyco plus related purchase accounting adjustments have been "pushed-down" and recorded in CIT's financial statements for the period subsequent to June 1, 2001. This resulted in a new basis of accounting reflecting the fair market value of its assets and liabilities for the "successor" period beginning June 2, 2001. Information for all "predecessor" periods prior to the acquisition is presented using CIT's historical basis of accounting. These financial statements have been prepared in accordance with the instructions to Form 10-Q, do not include all of the information and note disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with CIT's Annual Report on Form 10-K for the year ended December 31, 2000. These financial statements have not been examined by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly CIT's financial position and results of operations. ACCOUNTING PRONOUNCEMENTS--During September 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a replacement of FASB Statement No. 125." SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures for fiscal years ending after December 15, 2000. We have adopted the disclosures required under this statement and we do not expect the adoption of this standard to affect the accounting for, or the structure of, our securitization transactions. In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. In addition, companies will be required to review goodwill and intangible assets reported in connection with prior acquisitions, possibly disaggregate and report separately previously identified intangible assets and possibly reclassify certain intangible assets into goodwill. SFAS No. 142 establishes new guidelines on accounting for goodwill and other intangible assets. CIT expects to implement SFAS No. 142 at its earliest allowable adoption date, October 1, 2001. Upon adoption, existing goodwill will no longer be amortized, but instead will be assessed for impairment at least as often as annually. Goodwill resulting from acquisitions, if any, initiated after June 30, 2001 will be immediately subject to the nonamortization provisions of SFAS No. 142. The Company is currently assessing the impact of these new standards. Goodwill amortization expense was $37.8 million and $14.4 million for the periods January 1 through June 1, 2001 and June 2 through June 30, 2001, respectively. 6 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 2--ACQUISITION BY TYCO INTERNATIONAL LTD. The purchase price paid by Tyco plus related purchase accounting adjustments was valued at approximately $9.5 billion and is presented as "Parent company investment" as of June 1, 2001 in the Consolidated Statement of Changes in Shareholder's Equity. The $9.5 billion value consisted of the following: the exchange of approximately 192.5 million outstanding CIT common shares (including exchangeable shares) for Tyco common shares at 0.6907 per share valued at $6,650.4 million; the purchase of 71 million common shares from The Dai-Ichi Kangyo Bank, Limited at $35.02 per share for $2,486.4 million in cash; the estimated fair value of stock options of $318.6 million; and $29.2 million in acquisition related costs incurred by Tyco. As of the acquisition date, CIT recorded each asset and liability at its estimated fair value, which amount is subject to future adjustment when appraisal or other valuation data are obtained. Approximately $4.2 billion of incremental goodwill and other intangible assets were recorded, which represents the excess of the transaction purchase price over the fair value of CIT's net assets and purchase accounting liabilities. Goodwill and other intangible assets are being amortized on a straight-line basis over periods ranging from 5 to 40 years. As part of CIT's integration with Tyco, the Company has begun to formulate workforce reduction and exit plans. As of June 30, 2001, management determined that approximately 350 employees would be terminated and announced the benefit arrangements to those employees. As a result, $39.1 million in severance costs and other related exit costs were accrued. At June 30, 2001, a total of $48.3 million in purchase accounting reserves remained in the Consolidated Balance Sheet. The total consists of $39.1 million related to the integration of CIT and Tyco and $9.2 million related to lease termination costs associated with CIT's acquisition of Newcourt in 1999. NOTE 3--DERIVATIVE FINANCIAL INSTRUMENTS The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which became effective for CIT on January 1, 2001. SFAS No. 133 was amended by SFAS No. 137 and SFAS No. 138. Under SFAS No. 133, as amended, all derivative instruments are recognized in the balance sheet at their fair values and changes in fair value are recognized immediately in earnings, unless the derivatives qualify as hedges of future cash flows. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in shareholder's equity, and contractual cash flows, along with the related impact of the hedged items, continue to be recognized in earnings. Any ineffective portion of a hedge is reported in earnings as it occurs. The ineffective portion of changes in fair values of hedge positions reported in earnings for the predecessor period April 1 through June 1, 2001, amounted to $0.6 million before income taxes, or $0.4 million after taxes, and was recorded as an increase to interest expense. The ineffective portion of changes in fair values of hedge positions included in earnings for the successor period June 2 through June 30, 2001 was $0.5 million before income taxes, or $0.3 million after taxes. On January 1, 2001, CIT recorded a $146.5 million, net of tax, cumulative effect adjustment to Accumulated Other Comprehensive Loss, a separate component of shareholder's equity, for derivatives qualifying as hedges of future cash flows to reflect the new accounting standard for derivatives. As described in Note 1, in conjunction with the Tyco acquisition, "push-down" accounting for business combinations was implemented as of the June 1, 2001 acquisition date. Accordingly, the cumulative 7 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 3--DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) effect adjustment, as well as all other components of the Accumulated Other Comprehensive Loss account was eliminated as of the acquisition date. The components of the adjustment to Accumulated Other Comprehensive Loss for derivatives qualifying as hedges of future cash flows at January 1, 2001 and the balance outstanding at June 1, 2001 and June 30, 2001 are presented in the following table ($ in millions):
ADJUSTMENT OF FAIR VALUE OF INCOME TAX TOTAL DERIVATIVES EFFECTS UNREALIZED LOSS ------------- ---------- --------------- Balance at January 1, 2001............................. $236.2 $(89.7) $146.5 Changes in values of derivatives qualifying as cash flow hedges.......................................... (1.0) 0.4 (0.6) ------ ------ ------ Balance at June 1, 2001 (predecessor).................. 235.2 (89.3) 145.9 Effect of push-down accounting......................... (235.2) 89.3 (145.9) ------ ------ ------ Balance at June 1, 2001 (successor).................... -- -- -- Changes in values of derivatives qualifying as cash flow hedges.......................................... 29.5 (11.2) 18.3 ------ ------ ------ Balance at June 30, 2001 (successor)................... $ 29.5 $(11.2) $ 18.3 ====== ====== ======
The unrealized losses presented in the preceding table reflect our use of interest rate swaps to convert variable-rate debt to fixed-rate debt. These losses were caused by market interest rates that declined during the respective periods. During the period April 1 through June 1, 2001, approximately $10.8 million, net of tax, was reflected in earnings for the interest differential on our interest rate swaps and for the period June 2 through June 30, 2001 approximately $7.7 million, net of tax, was recorded. Assuming no change in interest rates, we expect approximately $13.2 million, net of tax, of Accumulated Other Comprehensive Loss to be reclassified to earnings over the next twelve months. This amount will change as interest rates change in the future. The Accumulated Other Comprehensive Loss (along with the corresponding swap liability) will be re-measured as market interest rates change over the remaining life of the swaps. CIT uses derivatives for hedging purposes only, and does not enter into derivative financial instruments for trading or speculative purposes. As part of managing the exposure to changes in market interest rates, CIT, as an end-user, enters into various interest rate swap transactions, all of which are transacted in over-the-counter markets, with other financial institutions acting as principal counterparties. To ensure both appropriate use as a hedge and hedge accounting treatment, all derivatives entered into are designated according to a hedge objective against a specified liability, including senior notes and commercial paper. CIT's primary hedge objectives include the conversion of variable-rate liabilities to fixed-rates, and the conversion of fixed-rate liabilities to variable-rates. The notional amounts, rates, indices and maturities of CIT's derivatives are required to closely match the related terms of CIT's hedged liabilities. 8 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 3--DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) The following table presents the notional amounts of interest rate swaps by class and the corresponding hedged liability position at June 30, 2001 ($ in millions):
INTEREST RATE SWAPS NOTIONAL AMOUNT DESCRIPTION - ------------------- --------------- ----------- Floating to fixed-rate swaps.......... $6,843.0 Converts the interest rate on an equivalent amount of commercial paper and variable-rate senior notes to a fixed-rate. These swaps have maturities ranging from 2001-2027. Fixed to floating-rate swaps.......... 1,344.8 Converts the interest rate on an equivalent amount of fixed-rate senior notes to a variable-rate. These swaps have maturities ranging from 2003-2008. -------- Total interest rate swaps............. $8,187.8 ========
CIT also utilizes foreign currency exchange forward contracts to hedge its net investments in foreign operations and cross currency interest rate swaps to hedge foreign debt. At June 30, 2001, CIT was party to foreign currency exchange forward contracts with notional amounts of $3.5 billion and maturities ranging from 2001 to 2004. These contracts are used to hedge foreign currency risk. CIT was also party to cross currency interest rate swaps with a notional amount of $1.7 billion and maturities ranging from 2002 to 2027. These swaps hedge foreign currency risk as well as variability in the fair value. NOTE 4--BUSINESS SEGMENT INFORMATION The following table presents reportable segment information and the reconciliation of segment balances to the consolidated financial statement totals and the consolidated managed assets totals at or for the six month periods ended June 30, 2001 and 2000. The financial information included in the following table combines January 1 to June 1, 2001 (the "predecessor period") and June 2 to June 30, 2001 (the "successor period") in order to present "combined" financial results for the six months ended June 30, 2001. Goodwill and other intangible assets amortization is allocated to Corporate for purposes of the table. For the predecessor period January 1 through June 1, 2001, Corporate recorded a non-recurring charge of $221.6 million ($158.0 million after-tax) consisting of the following: provision of $89.5 million for certain non-strategic and under-performing equipment leasing and loan portfolios, primarily in the telecommunications industry, which the Company expects to dispose; write-downs of $78.1 million for certain equity investments in the telecommunications industry and e-commerce markets which the Company plans to dispose; and transaction costs of $54.0 million associated with Tyco's acquisition of CIT. The transaction costs are presented separately in our Consolidated Income Statement, while the remaining charges have been included in Other revenue, net and in Provision for credit losses. During the three months ended March 31, 2001, we transferred financing and leasing assets from Equipment Financing to Specialty Finance. Prior year segment balances have not been restated to conform to the current year asset transfers as it is impractical to do so. In addition, Vendor Technology 9 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 4--BUSINESS SEGMENT INFORMATION (CONTINUED) Finance was combined into Specialty Finance consistent with how activities are reported internally to management effective as of June 30, 2001. We have reclassified our comparative prior period information to reflect this change.
EQUIPMENT FINANCING SPECIALTY COMMERCIAL STRUCTURED TOTAL CONSOLIDATED ($ IN MILLIONS) AND LEASING FINANCE FINANCE FINANCE(1) SEGMENTS CORPORATE TOTAL - --------------- ----------- --------- ---------- ---------- ---------- --------- ------------ AS AT AND FOR THE COMBINED SIX MONTHS ENDED JUNE 30, 2001 Operating revenue.............. $ 404.5 $ 503.2 $ 248.7 $ 61.5 $ 1,217.9 $ (50.4) $ 1,167.5 Net income..................... 142.4 122.7 87.8 20.8 373.7 (221.2) 152.5 Total managed assets........... 21,927.1 18,377.2 7,776.0 3,007.6 51,087.9 -- 51,087.9 AS AT AND FOR THE SIX MONTHS ENDED JUNE 30, 2000 Operating revenue.............. $ 338.4 $ 516.1 $ 241.8 $ 104.5 $ 1,200.8 $ (22.0) $ 1,178.8 Net income..................... 133.1 100.0 74.3 54.7 362.1 (66.8) 295.3 Total managed assets........... 19,835.9 23,730.4 7,581.8 2,222.8 53,370.9 -- 53,370.9
- -------------------------- (1) The June 30, 2000 balances are conformed to include Equity Investments in Structured Finance, which had previously been reported within Corporate. NOTE 5--SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES The following table shows summarized consolidated financial information for CIT Holdings LLC and its wholly-owned subsidiary, Capita Corporation (formerly AT&T Capital Corporation). The financial information included in the following table combines the predecessor period and the successor period in order to present "combined" results for the six months ended June 30, 2001. CIT has guaranteed on a full and unconditional basis the existing registered debt securities and certain other indebtedness of these subsidiaries. Therefore, CIT has not presented related financial statements or other information for these subsidiaries on a stand-alone basis. 10 THE CIT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 5--SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES (CONTINUED) The following summarized consolidated financial information reflects balance sheet and income statement results as of and for the combined six months ended June 30, 2001, including the transfer of various subsidiaries to other CIT entities ($ in millions):
COMBINED SIX MONTHS ENDED JUNE 30, 2001 ------------------------------------- CIT HOLDINGS LLC CAPITA CORPORATION ---------------- ------------------ OPERATING REVENUE................................... $ 302.7 $ 201.8 Operating expenses.................................. 259.9 194.9 -------- -------- Income before income taxes.......................... $ 42.8 $ 6.9 -------- -------- NET LOSS............................................ $ (12.2) $ (31.2) -------- -------- AT JUNE 30, 2001 ------------------------------------- ASSETS Cash and cash equivalents........................... $ 192.3 $ 106.3 Financing and leasing assets........................ 6,331.4 4,705.2 Receivables from affiliates and other assets........ 1,083.4 192.8 -------- -------- TOTAL ASSETS........................................ $7,607.1 $5,004.3 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Debt............................................ $3,908.0 $3,354.1 Other........................................... 398.4 317.4 -------- -------- Total liabilities................................... 4,306.4 3,671.5 Total shareholder's equity.......................... 3,300.7 1,332.8 -------- -------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.......... $7,607.1 $5,004.3 ======== ========
NOTE 6--RELATED PARTY TRANSACTION In June 2001, the Company received a capital contribution of $675 million from Tyco, of which $275 million was paid in cash, and $400 million was in the form of a note receivable from Tyco. The note did not bear interest and has since been paid. This note receivable is included in Other assets in the Consolidated Balance Sheet at June 30, 2001. 11 EX-99.2 4 a2057333zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 TYCO AND CIT UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The accompanying unaudited pro forma combined financial information relates to the merger of The CIT Group, Inc. with and into Tyco Acquisition Corp. XIX (NV), a wholly-owned subsidiary of Tyco International Ltd, which was consummated on June 1, 2001. In the merger, each share of CIT common stock, other than shares owned by The Dai-Ichi Kangyo Bank Limited, was exchanged for 0.6907 of a Tyco common share. Shares of CIT common stock owned by Dai-Ichi (which constitute 71 million of the outstanding shares) were purchased by Tyco Acquisition immediately prior to the merger for $35.02 per share in cash. In addition to the CIT common stock, there were outstanding shares of exchangeable stock issued by CIT Exchangeco Inc., an indirect subsidiary of CIT. Each exchangeable share outstanding was exchangeable for one share of CIT common stock. Each exchangeable share is now exchangeable for 0.6907 of a Tyco common share. The merger is being accounted for in accordance with the purchase method of accounting. Accordingly, the accompanying unaudited pro forma combined financial information gives effect to the transaction in accordance with the purchase method of accounting. Pursuant to Rule 11-02 of Regulation S-X, the unaudited pro forma combined financial information excludes extraordinary items and cumulative effect of accounting changes. The unaudited pro forma combined financial information should be read in conjunction with: 1. Tyco's audited Consolidated Financial Statements, including the accounting policies and notes thereto, included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2000, 2. Tyco's unaudited Consolidated Financial Statements and notes thereto included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001, 3. CIT's audited Consolidated Financial Statements, including the notes thereto, included in its Annual Report on Form 10-K for the year ended December 31, 2000, and 4. CIT's unaudited Consolidated Financial Statements and notes thereto included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001. The following unaudited pro forma combined financial information sets forth the combined results of operations for the fiscal year ended September 30, 2000 and the nine months ended June 30, 2001, as if the merger had occurred at the beginning of fiscal 2000. Prior to the merger, CIT had a December 31 year end, which differs from Tyco's September 30 fiscal year end. The unaudited pro forma combined statements of continuing operations for the fiscal year ended September 30, 2000 and the nine months ended June 30, 2001 include the historical results of operations for CIT for the year ended December 31, 2000 and the eight months ended June 1, 2001, respectively. Accordingly, the results for the quarter ended December 31, 2000 for CIT have been included in the operating results for the year ended September 30, 2000 and in the operating results for the eight months ended June 1, 2001. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have actually occurred if the acquisition had been consummated as of the beginning of the periods presented, nor is it necessarily indicative of future operating results. 1 UNAUDITED PRO FORMA COMBINED STATEMENTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2001 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA TYCO CIT ADJUSTMENTS(2) COMBINED --------- -------- -------------- --------- REVENUES Net revenue..................................... $25,695.2 $ -- $ -- $25,695.2 Finance income.................................. 417.9 3,690.0 4,107.9 Other income.................................... 95.9 454.8 550.7 Net gain on sale of shares of subsidiary........ 64.1 -- 64.1 Net gain on sale of businesses and investments................................... 276.6 -- 276.6 --------- -------- ------- --------- Total revenues.............................. 26,549.7 4,144.8 -- 30,694.5 COSTS AND EXPENSES Cost of revenue................................. 15,901.1 -- -- 15,901.1 Selling, general, administrative expenses and other costs and expenses...................... 4,962.7 1,760.9 55.2 (3) 6,774.0 (4.8) Interest and other financial charges, net....... 736.1 1,674.9 96.1 (4) 2,507.1 Provision for credit losses..................... 18.6 280.2 -- 298.8 Merger, restructuring and other non-recurring charges, net.................................. 8.1 -- -- 8.1 Write-off of purchased in-process research and development................................... 184.3 -- -- 184.3 Charges for the impairment of long-lived assets........................................ 27.9 -- -- 27.9 --------- -------- ------- --------- Total costs and expenses.................... 21,838.8 3,716.0 146.5 25,701.3 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST................... 4,710.9 428.8 (146.5) 4,993.2 Income taxes.................................... (1,294.2) (182.5) 31.8 (5) (1,444.9) Minority interest............................... (40.0) (4.9) (3.0) (47.9) --------- -------- ------- --------- INCOME FROM CONTINUING OPERATIONS............... $ 3,376.7 $ 241.4 $(117.7) $ 3,500.4 ========= ======== ======= ========= Income from continuing operations per common share(1): Basic......................................... $ 1.91 $ 1.86 Diluted....................................... $ 1.89 $ 1.83 Weighted-average number of common shares(1): Basic......................................... 1,764.2 1,882.4 Diluted....................................... 1,790.1 1,908.3
See notes to unaudited pro forma combined financial information. 2 UNAUDITED PRO FORMA COMBINED STATEMENTS OF CONTINUING OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA TYCO CIT ADJUSTMENTS(2) COMBINED --------- -------- -------------- --------- REVENUES Net revenue..................................... $28,931.9 $ -- $ -- $28,931.9 Finance income.................................. -- 5,248.4 -- 5,248.4 Other income.................................... -- 912.0 -- 912.0 Net gain on issuance of common shares by subsidiary.................................... 1,760.0 -- -- 1,760.0 --------- -------- ------- --------- Total revenues.............................. 30,691.9 6,160.4 -- 36,852.3 COSTS AND EXPENSES Cost of revenue................................. 17,931.2 -- -- 17,931.2 Selling, general, administrative expenses and other costs and expenses...................... 5,252.0 2,422.0 86.5 (3) 7,741.3 (19.2) Interest and other financial charges, net....... 769.6 2,497.7 160.8 (4) 3,428.1 Provision for credit losses..................... -- 255.2 -- 255.2 Merger, restructuring and other non-recurring charges, net.................................. 175.3 -- -- 175.3 Charges for the impairment of long-lived assets........................................ 99.0 -- -- 99.0 --------- -------- ------- --------- Total costs and expenses.................... 24,227.1 5,174.9 228.1 29,630.1 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST................... 6,464.8 985.5 (228.1) 7,222.2 Income taxes.................................... (1,926.0) (373.9) 49.0 (5) (2,250.9) Minority interest............................... (18.7) -- (11.9) (30.6) --------- -------- ------- --------- INCOME FROM CONTINUING OPERATIONS............... $ 4,520.1 $ 611.6 $(191.0) $ 4,940.7 ========= ======== ======= ========= Income from continuing operations per common share(1): Basic......................................... $ 2.68 $ 2.71 Diluted....................................... $ 2.64 $ 2.68 Weighted-average number of common shares(1): Basic......................................... 1,688.0 1,821.0 Diluted....................................... 1,713.2 1,846.2
See notes to unaudited pro forma combined financial information. 3 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (1) The unaudited pro forma combined per share amounts are based on the pro forma combined weighted-average number of common shares which equals Tyco's weighted-average number of common shares outstanding for the period plus the total number of Tyco common shares that were delivered to CIT stockholders in the merger and may be delivered upon the exchange of CIT's exchangeable shares, weighted for the period they were not outstanding. CIT Exchangeco exchangeable shares were exchangeable for shares of CIT common stock on a 1:1 basis. The number of shares delivered in the merger and that may be delivered upon the exchange of the exchangeable shares is based on the CIT stockholders and holders of the exchangeable shares receiving 0.6907 Tyco common shares for each share of CIT common stock or exchangeable share held. Immediately prior to the consummation of the merger, a subsidiary of Tyco purchased 71 million shares of CIT from Dai-Ichi Kangyo Bank Limited for $35.02 per share in cash. For purposes of the unaudited pro forma combined financial information, the actual number of Tyco common shares issued plus the number of Tyco common shares that may be delivered upon exchange of the exchangeable shares was used. This amount is 132,970,380 Tyco common shares. (2) There were no material transactions between Tyco and CIT during any of the periods presented. Minority interest expense has been reclassified on CIT's statements of operations in the unaudited pro forma combined financial statements on a basis consistent with Tyco's financial statements. (3) For purposes of the unaudited pro forma combined financial information, the excess of the purchase price over the book value of net assets acquired of CIT has been recorded as goodwill and other intangible assets, which are amortized over estimated useful lives of 5 to 40 years. (4) The increase in interest expense reflects the purchase of 71 million shares for $35.02 per share funded with Tyco's commercial paper program. (5) The income tax benefit relates to the assumed increase in interest expense, slightly offset by the tax effect of the minority interest reclassification. 4 -----END PRIVACY-ENHANCED MESSAGE-----