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) September 8, 2004
CIT GROUP INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-1861 65-1051192
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1 CIT Drive
Livingston, New Jersey 07039
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(Address of registrant's principal executive office)
Registrant's telephone number, including area code (973) 740-5000
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01. Entry Into a Material Definitive Agreement.
CIT conducts vendor financing programs with Dell Inc. ("Dell") in the
United States and certain international locations. The Dell financing
relationship, currently CIT's largest vendor financing relationship, originated
in the United States in April 1997 (with a company acquired by CIT in 1999). The
Dell financing relationship subsequently expanded into Canada, Europe, and more
recently, Asia and the South Pacific. The U.S. program is structured as a joint
venture operating as Dell Financial Services L.P. ("DFS"), whereas the
international private label programs (collectively, the "International Program")
are financed directly by CIT.
CIT owns a 30% interest and Dell owns a 70% interest in DFS, which
provides sales financing programs (other than credit card accounts and short
term trade terms) to Dell's consumer and business customers in the United
States. The U.S. DFS joint venture was to run until October 2005, at which time
Dell had an option to purchase CIT's 30% interest in DFS. On September 8, 2004,
CIT and Dell executed the 2004 Extension and Funding Agreement and the Amended
and Restated DFS Limited Partnership Agreement (collectively the "Extension
Agreements") to extend and modify the terms of the DFS joint venture and related
U.S.-based vendor finance program. As a result of the Extension Agreements, the
term of the U.S. Dell vendor finance program was extended to January 29, 2010.
Under the Extension Agreements, CIT has the right to purchase a minimum
percentage of DFS's finance receivables, beginning at 75% during the DFS fiscal
year ending February 3, 2006, and declining annually each fiscal year thereafter
during the balance of the term to 65%, 50%, 35% and 25%, respectively. Dell has
the option to purchase the balance of the DFS receivables on the same terms and
conditions as CIT. Previously, Dell had the right to purchase a minimum
percentage of DFS's finance receivables, although historically Dell did not
exercise its right and CIT purchased substantially all of such receivables.
Under the Extension Agreements, Dell has the right to purchase CIT's
interest in DFS (i) on February 1, 2008 at Dell's election and (ii) at any time
until January 29, 2010, upon the occurrence of certain termination events. The
buyout price for CIT's 30% interest (the "Buyout Price") would be calculated
based on a formula tied to the profitability of DFS; provided that the minimum
Buyout Price would be $100 million and the maximum Buyout Price would be $345
million. If Dell exercises its right to purchase CIT's interest in DFS, other
than in the event of a change in control of CIT, as described below, CIT's right
to purchase DFS's receivables for subsequent years through January 29, 2010,
will be unaffected. If on January 29, 2010, Dell has not exercised its purchase
option and the parties have not agreed to an extension or dissolution of DFS,
then Dell would be obligated to purchase CIT's 30% interest by payment of the
Buyout Price as described above.
Similar to the prior agreement, the Extension Agreements contain customary
early termination provisions including upon CIT's failure to maintain a
long-term unsecured credit rating of at least investment grade or in the event
of a change in control of CIT in which the controlling party provides a
significant volume of financing services in the United States to a competitor of
Dell or has a credit rating of "A-" or lower from S&P or A3 or lower from
Moody's.
Per the Extension Agreement, CIT and Dell have agreed to engage in
negotiations to: (1) extend the terms of the Canadian and European vendor
financing programs to be coterminous with DFS and (2) establish formal exclusive
vendor finance programs in New Zealand, Australia, and parts of Asia.
DFS is not consolidated in CIT's financial statements and is accounted for
under the equity method. This accounting treatment continues under the terms of
the Extension Agreements. In addition to earnings related to the receivables CIT
purchases, CIT receives 30% of the profits earned by DFS and CIT's
responsibility for DFS's losses, if any, is limited to 30% (down from 100%).
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At June 30, 2004, CIT's financing and leasing assets related to the U.S.
DFS vendor financing program (included in the CIT consolidated balance sheet)
were $2.0 billion and securitized receivables included in managed assets were
$2.2 billion. Although securitized receivables are not included in CIT's
consolidated balance sheet, they are included in managed assets because CIT
retains certain risks related to assets that are funded through securitizations.
Additionally, at June 30, 2004, there were $1.3 billion of financing and leasing
assets (included in the CIT consolidated balance sheet) from the Dell
International Program. Returns (i.e., net income as a percentage of average
managed assets) for the six months ended June 30, 2004, on each of the DFS U.S.
relationship and the International Program, were slightly in excess of CIT's
consolidated return. Any significant reduction in origination volume from the
Dell financing relationship could have a material impact on CIT's asset and net
income levels.
Notwithstanding potential decreases in the percentage of DFS's receivables
that CIT is contractually permitted to purchase under the Extension Agreements,
CIT anticipates that our asset levels related to the Dell financing programs
should not decline through December 31, 2007, based on (a) Dell's historical
global sales growth trends, (b) the ability to increase financing penetration
rates, and (c) efforts to expand the International Program.
Forward-Looking Statements:
This Form 8-K contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All forward-looking
statements (including statements regarding future financial and operating
results) involve risks, uncertainties and contingencies, many of which are
beyond CIT's control, which may cause actual results, performance, or
achievements to differ materially from anticipated results, performance, or
achievements. All statements contained in this release that are not clearly
historical in nature are forward-looking, and the words "anticipate", "believe",
"expect", "estimate", "plan" and similar expressions are generally intended to
identify forward-looking statements. Economic, business, funding market,
competitive and/or regulatory factors, among others, affecting CIT's businesses
are examples of factors that could cause actual results to differ materially
from those described in the forward-looking statements. More detailed
information about these factors are described in CIT's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2003. CIT is under no obligation to (and expressly
disclaims any such obligation to) update or alter its forward-looking
statements, whether as a result of new information, future events or otherwise.
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Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
10.1: 2004 Extension and Funding Agreement, dated September 8, 2004, by and
among Dell Financial Services L.P., Dell Credit Company L.L.C., DFS-SPV
L.P., DFS-GP, Inc., Dell Inc., Dell Gen. P. Corp., Dell DFS Corporation,
CIT Group Inc., CIT Financial USA, Inc., CIT DCC Inc., CIT DFS Inc., CIT
Communications Finance Corporation, and CIT Credit Group USA Inc.
10.2*: Amended and Restated Agreement of Limited Partnership of Dell Financial
Services L.P., dated September 8, 2004, by and among Dell Credit
Company, L.L.C., as general partner, and Dell DFS Corporation and CIT
DFS Inc., as limited partners.
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 hereunto duly authorized.
CIT GROUP INC.
(Registrant)
By: /s/ William J. Taylor
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William J. Taylor
Executive Vice President &
Controller
Dated: September 9, 2004
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* Portions of this exhibit have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities
and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
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