<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7543
FINOVA CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-1278569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 North Central Ave., P. O. Box 2209, Phoenix, AZ 85002-2209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602/207-6900
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 such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The registrant meets the conditions set forth in General Instructions H (1)(a)
and (b) of Form 10-Q and is therefore filing this form in the reduced
disclosure format.
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 1, 1995, 25,000 shares of Common Stock ($1.00 par value) were
outstanding and were held by an affiliate.
<PAGE> 2
FINOVA CAPITAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION.
Item 1. Financial Statements.
Condensed Consolidated Financial Information:
Condensed Consolidated Balance Sheet - September 30, 1995 and
December 31, 1994 1
Condensed Consolidated Income Statement - Quarter and Nine Months
Ended September 30, 1995 and 1994 2
Condensed Consolidated Statement of Cash Flows - Nine Month Ended
September 30, 1995 and 1994 3
Notes to Interim Condensed Consolidated Financial Information 4 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
PART II OTHER INFORMATION.
Item 4. Submission of Matters to Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11 - 12
SIGNATURES 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINOVA CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS: 1995 1994
---------------- ----------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 20,425 $ 52,753
INVESTMENT IN FINANCING TRANSACTIONS:
Loans and other financing contracts, less unearned income of
$316,834 and $249,550, respectively 4,784,209 4,034,648
Direct financing leases 864,461 774,834
Operating leases 431,297 412,782
Leveraged leases 323,760 287,518
Factored receivables 205,493 157,862
---------------- ---------------
6,609,220 5,667,644
Less reserve for possible credit losses (119,602) (109,245)
---------------- --------------
Investment in financing transactions - net 6,489,618 5,558,399
OTHER ASSETS AND DEFERRED CHARGES 308,638 236,397
---------------- ---------------
$ 6,818,681 $ 5,847,549
================ ===============
LIABILITIES:
Accounts payable and accrued expenses $ 361,126 $ 282,910
Senior debt 5,403,323 4,573,354
Deferred income taxes 217,817 209,299
---------------- ---------------
5,982,266 5,065,563
---------------- ---------------
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value, 100,000 shares
authorized, 25,000 shares issued and outstanding 25 25
Additional capital 677,948 677,947
Retained income 162,810 108,740
Cumulative translation adjustments (4,368) (4,726)
---------------- ---------------
836,415 781,986
---------------- ---------------
$ 6,818,681 $ 5,847,549
================ ===============
</TABLE>
See notes to interim consolidated financial information.
1
<PAGE> 4
FINOVA CAPITAL CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------------------ --------------------------------
1995 1994 1995 1994
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest and income
earned from financing
transactions $ 171,004 $ 129,674 $ 489,335 $ 306,797
Operating lease income 21,283 17,975 62,402 36,704
------------- -------------- ------------ ------------
Total interest and income
earned 192,287 147,649 551,737 343,501
Interest expense 93,136 65,881 267,857 153,391
Depreciation 12,980 11,345 38,891 21,626
------------- -------------- ------------ ------------
Interest margins earned 86,171 70,423 244,989 168,484
Provision for possible
credit losses 10,800 2,215 28,800 10,353
------------- -------------- ------------ ------------
Net interest margins
earned 75,371 68,208 216,189 158,131
Gains on sale of assets 4,646 1,169 11,699 5,672
------------- -------------- ------------ ------------
80,017 69,377 227,888 163,803
Selling, administrative and
other operating expenses 39,583 32,591 112,578 77,796
------------- -------------- ------------ ------------
INCOME BEFORE
INCOME TAXES 40,434 36,786 115,310 86,007
Income taxes 15,284 14,730 44,163 34,838
------------- -------------- ------------ ------------
NET INCOME $ 25,150 $ 22,056 $ 71,147 $ 51,169
============= ============== ============ ============
</TABLE>
See notes to interim consolidated financial information.
2
<PAGE> 5
FINOVA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1995 1994
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 71,147 $ 51,169
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Provision for possible credit losses 28,800 10,353
Depreciation and amortization 50,740 27,911
Gains on securitizations and sale of assets (11,699) (5,672)
Deferred income taxes 8,518 13,376
Change in assets and liabilities, net of effects from subsidiaries
purchased 21,281 (107,836)
------------ -------------
Net cash provided (used) by operating activities 168,787 (10,699)
------------ -------------
INVESTING ACTIVITIES:
Proceeds from sale of assets 48,191 22,840
Proceeds from assets securitized 115,507
Principal collections on financing transactions 770,426 639,340
Expenditures for financing transactions (1,379,847) (973,086)
Net change in short-term financing transactions (311,248) (147,841)
Purchase of Ambassador Factors (246,285)
Purchase of TriCon (344,212)
Purchase of portfolios (127,045)
Other 1,675 1,109
------------ -------------
Net cash used by investing activities (997,848) (932,628)
------------ -------------
FINANCING ACTIVITIES:
Net borrowings under commercial paper 494,292 1,036,915
Long-term borrowings 825,000 827,550
Repayment of long-term borrowings (489,323) (1,125,609)
Net advances and contributions from Parent (22,309) 233,923
Dividends (17,078) (14,342)
Other 6,151 16,760
------------ -------------
Net cash provided by financing activities 796,733 975,197
------------ -------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (32,328) 31,870
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 52,753 2,859
------------ -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 20,425 $ 34,729
============ =============
</TABLE>
See notes to interim consolidated financial information.
3
<PAGE> 6
FINOVA CAPITAL CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
NOTE A BASIS OF PREPARATION
The consolidated financial statements present the financial position,
results of operations and cash flows of FINOVA Capital Corporation (formerly
known as Greyhound Financial Corporation) and its subsidiaries (collectively,
"FINOVA" or the "Company"), including Ambassador Factors ("Ambassador")
acquired on February 14, 1994 and TriCon Capital ("TriCon") acquired on April
30, 1994. Both Ambassador and TriCon were merged into FINOVA Capital in 1994.
Recognizing the substantial increase in the Company's size and scope of
operations and its use of several names in its operations, Greyhound Financial
Corporation changed its name to FINOVA Capital Corporation, a wholly owned
subsidiary of The FINOVA Group Inc. ("FINOVA Group") (formerly known as GFC
Financial Corporation), both name changes effective February 1, 1995.
The interim consolidated financial information is unaudited. In the
opinion of management all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the financial position as of September
30, 1995, the results of operations for the quarter and nine months ended
September 30, 1995 and 1994 and cash flows for the nine months ended September
30, 1995 and 1994, have been included. Interim results of operations are not
necessarily indicative of the results of operations for the full year.
NOTE B SIGNIFICANT ACCOUNTING POLICIES
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 114 "Accounting by Creditors for Impairment of a Loan"
("SFAS 114"), as amended by SFAS No. 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" ("SFAS 118"), as of
January 1, 1995. These statements require that impaired loans be measured
based on the present value of the expected cash flows discounted at the loan's
effective interest rate or the fair value of the collateral, if the loan is
collateral dependent. Under SFAS 114, a loan is considered impaired when,
based on current information and events, it is probable that a creditor will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. These standards do not apply to leasing transactions or to
large groups of smaller balance homogeneous loans. Evaluation for loan
impairment is performed as a part of the portfolio management review process.
When a loan is determined to be impaired, a write-down is taken or an
impairment reserve is established based on the difference between the recorded
balance of the loan ("carrying amount") and the relevant measured value. The
total carrying amount of impaired loans was $98.4 million at September 30,
1995, $18.1 million of which were performing and $80.3 million of which were
nonaccruing. Income is recognized in the same manner as it is on normal
accruing loans. For the nine months ended September 30, 1995, $1.6 million of
income was recognized on the accruing impaired loans. Cash collected on
nonaccruing impaired loans is applied to the carrying amount of the loans.
4
<PAGE> 7
Under SFAS 114, in-substance foreclosed assets are accounted for as
loans. Accordingly, effective January 1, 1995, $12.6 million of performing and
$25.3 million of nonaccruing in-substance foreclosed assets were reclassified
from repossessed assets to loans. The Company has elected to account for
troubled debt restructurings, as defined under SFAS No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings" under SFAS 114.
Accounts are either written-down or written-off when the loss is
considered probable and determinable, after giving consideration to the
customer's financial condition and the value of the underlying collateral,
including any guarantees. Impaired loans were written-down by $11.2 million
during the nine months ended September 30, 1995. Reserve levels (including $12
million of accrued liabilities applicable to securitizations) were not impacted
by the adoption of SFAS 114 on January 1, 1995 and approximated 2.0% of managed
assets and 77.8% of non-earnings at September 30, 1995. Impairment reserves of
$17.3 million were required for $50.8 million of impaired loans, with no
impairment reserve being required for the remaining $47.6 million of impaired
loans. The total reserve for possible credit losses represents management's
estimate of the amount necessary to cover potential losses in the portfolio
considering delinquencies, loss experience and collateral.
NOTE C PORTFOLIO QUALITY
The following table presents a breakdown (by line of business) of the
Company's investment in financing transactions before the reserve for possible
credit losses at the dates indicated.
5
<PAGE> 8
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
SEPTEMBER 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
------------------------------------ ---------------------------------
Repos-
sessed Repos- Leases Total
Original Impaired Assets Impaired sessed & Carrying
Rate (1) (2) (1) Assets Other Amount
------------------------------------ --------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance $ 898,535 $ 15,905 $ $ 11,605 $ 335 $ $ 926,380
Transportation Finance (3) 814,244 814,244
Resort Finance 755,752 11,667 6,346 23,518 797,283
Commercial Real Estate Finance 645,288 2,156 43,596 13,106 19,578 988 724,712
Communications Finance 593,522 2,557 18,135 5,863 620,077
Medical Finance 514,909 105 1,225 516,239
Manufacturer and Dealer Services (4) 407,518 104 23,151 430,773
Commercial Equipment Finance 316,149 3,132 5,177 324,458
Franchise Finance 305,011 7,581 2,359 314,951
Rediscount Finance 303,660 303,660
Commercial Finance 209,254 12,839 222,093
Factoring Services 204,846 647 205,493
Inventory Finance 196,118 414 196,532
Government Finance 105,676 17 105,693
European Finance 63,916 6,075 6,660 76,651
Other 29,761 220 29,981
------------- --------- --------- --------- --------- --------- ------------
TOTAL (4) $ 6,364,159 $ 18,061 $ 57,820 $ 80,309 $ 49,294 $ 39,577 $ 6,609,220
============= ========= ========= ========= ========= ========= ============
- --------------------
</TABLE>
(1) Total recorded carrying amount of impaired loans was $98.4 million at
September 30, 1995. Of the total impaired loans, $18.1 million were
performing and $80.3 million were nonaccruing. For the period ended
September 30, 1995, $1.6 million of income was recognized on these loans.
Under SFAS 114, in-substance foreclosed assets should be accounted for as
loans. Accordingly, effective January 1, 1995, $12.6 million of performing
and $25.3 million of nonaccruing in-substance foreclosed assets were
reclassified from repossessed assets to loans.
(2) The Company earned income totaling $2.7 million on repossessed assets
during 1995, including $2.3 million in Commercial Real Estate Finance,
$0.3 million in Resort Finance and $0.1 million in Communications Finance.
(3) Transportation Finance includes $106 million of new aircraft financing
business booked through the London office.
(4) Excludes $133 million of assets securitized which the Company manages.
--------------------
6
<PAGE> 9
RESERVE AND ACCRUED LIABILITIES FOR POSSIBLE CREDIT LOSSES:
The reserve and accrued liabilities for possible credit losses of $131.6
million at September 30, 1995 represents 2.0% of managed assets (investment in
financing transactions and securitized assets) before deducting such reserve.
Accrued liabilities of $12 million represent a reserve for estimated losses
under certain recourse provisions on $133.1 million of the securitized assets.
Changes in the reserve for possible credit losses were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1995 1994
--------- ---------
(Dollars in Thousands)
<S> <C> <C>
Balance, beginning of period $ 109,245 $ 64,280
Provision for possible credit losses 28,800 10,353
Write-offs (22,868) (19,009)
Recoveries 1,675 1,109
Other 2,750 58,498
--------- ---------
Balance, end of period $ 119,602 $ 115,231
========= =========
</TABLE>
The Company believes that collateral values significantly reduce its
loss exposure and that the reserve for possible credit losses is adequate.
The specific impairment reserve of $17.3 million at September 30, 1995
applies to $50.8 million of the $98.4 million of impaired loans. The remaining
$102.3 million of the reserve for possible credit losses is designated for
general purposes and represents management's estimate of the amount to cover
potential losses in the portfolio considering delinquencies, loss experience and
collateral. Additions to general and specific reserves are reflected in current
operations. Management may transfer reserves between the general and specific
reserves as considered necessary.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1994
The following discussion relates to FINOVA Capital Corporation (formerly
known as Greyhound Financial Corporation) and its subsidiaries (collectively,
"FINOVA" or the "Company"), including Ambassador Factors ("Ambassador") acquired
on February 14, 1994 and TriCon Capital ("TriCon") acquired on April 30, 1994.
Both Ambassador and TriCon were merged into FINOVA Capital in 1994. Recognizing
the substantial increase in the Company's size and scope of operations and its
use of several names in its operations, Greyhound Financial Corporation changed
its name to FINOVA Capital Corporation, a wholly owned subsidiary of The FINOVA
Group Inc. ("FINOVA Group") (formerly known as GFC Financial Corporation), both
name changes effective February 1, 1995.
RESULTS OF OPERATIONS
Net income for the nine months of 1995 was $71.1 million compared to
$51.2 million for the nine months of 1994, a 39% increase in net income.
INTEREST MARGINS EARNED. Interest margins earned, which represent the
difference between (a)
7
<PAGE> 10
interest and income earned from financing transactions and (b) interest expense
and depreciation, increased to $245 million for 1995 from $168.5 million for
1994. This increase was driven by portfolio growth, together with the addition
of TriCon and Ambassador in 1994. The primary source of the portfolio growth was
new business, which totaled $1.7 billion for 1995 compared to $1.1 billion for
1994 (an increase of 51%). Portfolio growth was also helped by the acquisition
of $117 million of consumer rediscount assets during the first quarter of 1995.
Factoring and floor planning volume also increased to $1.3 billion for the first
nine months of 1995, more than double the 1994 volume.
Interest margins earned, measured as a percent of average earning
assets, were 5.8% for the first nine months of 1995 compared to 6.0% for the
1994 period. This reduction in interest margins was expected in 1995 due to the
cost of the hedges that the Company entered into to lock in the spread between
its lending and borrowing rates on $1.5 billion of its floating-rate debt and to
the diminishing ratio of the higher yielding businesses relative to the total
portfolio. Growth in the amount of interest margins more than offset the higher
provisions for possible credit losses and the higher selling, administrative and
other operating expenses in the 1995 period.
NON-INTEREST EXPENSE. Loss provisions, which increase the reserve for
possible credit losses ("reserve"), were greater by $18.4 million during 1995
compared to 1994. The greater loss provisions were consistent with the
requirements of a larger and growing portfolio. Management believes that reserve
coverage (reserve and accrued liabilities/nonaccruing assets) remains adequate
at 77.8% of nonaccruing assets and at 2.0% of funds employed and
securitizations.
Selling, administrative and other operating expenses were higher by
$34.8 million in the 1995 period but, when measured as a percent of interest
margins earned, declined to 46.0% from 46.2% in 1994. The higher operating
expenses are primarily attributable to the additions of TriCon and Ambassador,
as well as to higher incentive accruals related to improved results and the
higher volume of new business added during the year.
GAINS ON SALE OF ASSETS. Gains on sale of assets in 1995 were $6.0
million higher than in 1994 due to the amount and type of assets sold (1994
included a $4 million gain from the securitization of assets).
8
<PAGE> 11
INCOME TAXES. Income taxes for 1995 increased to $44.2 million from
$34.8 million in 1994. Income taxes were higher in 1995 due to an increase in
income before income taxes, which more than offset a lower effective income tax
rate resulting from state income tax adjustments and certain tax credits.
Excluding the tax adjustments and credits, the incremental income tax rate for
the Company is approximately 40%.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The portfolio (funds employed) grew by $0.9 billion to $6.6 billion at
September 30, 1995 from $5.7 billion at December 31, 1994. This increase is
attributable primarily to the addition of $1.8 billion of new assets, partially
offset by approximately $0.9 billion of portfolio run-off.
The reserve and accrued liabilities for possible credit losses at
September 30, 1995 increased by $9.3 million when compared to December 31, 1994.
The increase in the reserve and accrued liabilities consisted of increases due
to loss provisions of $28.8 million which were applicable to portfolio growth
and $2.4 million of reserves acquired with the rediscount portfolio, offset by
write-offs of $22.9 million.
Nonaccruing contracts and repossessed assets increased to $169.2 million
at September 30, 1995 from $168.8 million at December 31, 1994. When measured as
a percent of funds employed and securitizations, nonearning assets declined to
2.5% at September 30, 1995 from 2.9% at December 31, 1994.
The Company had total debt of approximately $5.4 billion or 6.46 times
its equity base of $836.4 million at September 30, 1995. The Company also had
deferred income taxes of $217.8 million, generally used to reduce debt and,
therefore, help finance lending activities. In addition, the Company is
contemplating the securitization of certain assets as a funding source.
Growth in funds employed is generally financed by internally generated
cash flow and additional borrowings. During the first nine months of 1995,
FINOVA Capital issued $825 million in new senior debt, which together with
general corporate funds and net commercial paper borrowings were used to finance
asset additions and redeem or retire $489 million of debt.
On October 25, 1995, FINOVA Capital filed a shelf registration statement
with the Securities and Exchange Commission to offer, from time to time, up to
$1.5 billion aggregate principal amount of its senior debt securities on terms
to be determined at time of sale. The shelf registration statement serves as a
source of funds for future portfolio growth or to repay maturing debt.
RECENT DEVELOPMENTS AND BUSINESS OUTLOOK
Following the Company's spin-off from The Dial Corp in 1992 (the
"Spin-Off"), the Company focused its resources and capital on its domestic
commercial finance activities. The Company embarked on a program of selling or
winding down those businesses included in the Spin-Off that were not associated
with the Company's charter domestic commercial finance activities. The Company
concentrated on redeploying the capital previously invested in such businesses
and raised additional capital to support internal portfolio growth and to make
selected acquisitions to complement the Company's charter operations. This
strategy has resulted in (i) the managed liquidation and sale of the London and
Latin American loan portfolios, (ii) an increase (excluding acquisitions) in
FINOVA's domestic loan portfolio each year, (iii) the acquisition of the asset
based lending activity of U.S. Bancorp, (iv) the sale of the discontinued
mortgage insurance subsidiary, (v) the acquisition of Ambassador and (vi) the
acquisition of TriCon. More recently, on February 27, 1995, FINOVA Capital
acquired substantially all of the rediscount portfolio of the Lender Finance
Division of Transamerica Business Credit Corporation,
9
<PAGE> 12
a wholly owned subsidiary of Transamerica Corporation. The rediscount portfolio
is comprised of secured revolving credit facilities to independent consumer
finance companies. The principal amount of the loans purchased amounted to
approximately $117 million. These activities and the Company's performance were
implicitly recognized in FINOVA Capital's recent increases in credit ratings of
its senior debt by Standard & Poor's Rating Group to BBB+ from BBB and Moody's
Investors Service to Baa1 from Baa2.
NEW ACCOUNTING STANDARDS
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 114 "Accounting by Creditors for Impairment of a Loan"
("SFAS 114"), as amended by SFAS No. 118 "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures" ("SFAS 118"), as of January 1,
1995. These statements require that impaired loans be measured based on the
present value of the expected cash flows discounted at the loan's effective
interest rate or the fair value of the collateral, if the loan is collateral
dependent. Under SFAS 114, a loan is considered impaired when, based on current
information and events, it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan agreement. For
the impact and disclosures of these new standards, see Notes B and C to Interim
Condensed Consolidated Financial Information.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", effective for
years beginning after December 15, 1995. The Company will adopt SFAS No. 121
effective January 1, 1996. This standard applies to property, plant and
equipment, identifiable intangibles and goodwill and requires impairment to be
considered whenever evidence suggests a lack of recoverability. SFAS No. 121
requires that an impairment loss be recognized when the aggregate of estimated
future cash flows (less estimated future cash out flows) to be generated by an
asset is less than the carrying amount of the asset. The impairment loss that
would be recorded would be the difference between the carrying amount of the
asset and its market value (if an active market exists) or the expected future
net cash flows discounted at a rate commensurate with the risk involved. The
Company believes that adoption of this Standard will not materially affect its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
OMITTED.
10
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed herewith:
Exhibit No. Document
----------- --------
10.A Second Amendment, dated as of May 11, 1995, to
Sixth Amendment and Restatement of Credit
Agreement (the "Sixth Amendment") among FINOVA
Capital and the lender and agent parties thereto
(incorporated by reference from The FINOVA Group
Inc. ("FINOVA Group") Quarterly Report on Form
10-Q for the period ended September 30, 1995
(the "FINOVA Group, 10-Q") Exhibit 10.A).
10.B Third Amendment dated as of November 1, 1995 to
the Sixth Amendment (incorporated by reference
from the FINOVA Group 10-Q, Exhibit 10.B).
10.C Second Amendment dated as of May 11, 1995 to the
Credit Agreement (Short-Term Facility) among
FINOVA Capital and the lender and agent parties
reference in 10.A above (incorporated by
reference from the FINOVA Group 10-Q, Exhibit
10.C).
10.D Third Amendment dated as of November 1, 1995 to
Credit Agreement noted in 10.C above
(incorporated by reference from the FINOVA Group
10-Q, Exhibit 10.D).
12 Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends (interim
period).
27 Financial Data Schedule.
(b) Reports on Form 8-K:
A Report on Form 8-K, dated September 19, 1995, was filed by the
Registrant which reported under Item 7 the Underwriting and Pricing
Agreements between Registrant and Goldman Sachs & Co., the Officer's
Certificate, without exhibits, pursuant to Section 2.02 of The Chase
Manhattan Bank, N.A. (the "Chase Indenture") establishing the terms
of the 6.625% Notes due September 1, 2001 and a Specimen Certificate
evidencing the Notes.
A Report on Form 8-K, dated October 5, 1995, was filed by
Registrant, which reported under Item 7 the Underwriting and Pricing
Agreements between the Company and Lehman Brothers, Inc., the
Officers' Certificate, without exhibits, pursuant to Section 2.02 of
the Indenture dated as of September 1, 1992 between the Company and
the Chase Indenture establishing the terms of the Registrant's
6-3/8% Notes due October 15, 2002 and a Specimen Certificate
evidencing the Notes.
A Report on Form 8-K, dated October 18, 1995, was filed by
Registrant which reported under Items 5 and 7 the revenues, net
income and selected financial data and ratios for the third quarter
ended September 30, 1995 (unaudited).
A Report on Form 8-K, dated October 25, 1995, was filed by
Registrant, which reported under Item 7, the Indenture referenced in
Exhibit 4.A above and the Distribution Agreement, dated as of
October 25, 1995 among FINOVA Capital and various agents with
respect to FINOVA Capital's Medium-Term Notes, Series C.
11
<PAGE> 14
FINOVA CAPITAL CORPORATION
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.
FINOVA CAPITAL CORPORATION
(Registrant)
Dated: November 1, 1995 By: /s/ Bruno A. Marszowski
-----------------------------
Bruno A. Marszowski, Senior Vice President - Chief
Financial Officer and Controller
Principal Accounting Officer/Authorized Officer
12
<PAGE> 15
FINOVA CAPITAL CORPORATION
COMMISSION FILE NUMBER 1-7543
EXHIBIT INDEX
SEPTEMBER 30, 1995 FORM 10-Q
Exhibit No. Document
- ----------- ---------------------------------------------------------------
10.A Second Amendment, dated as of May 11, 1995, to Sixth Amendment
and Restatement of Credit Agreement (the "Sixth Amendment")
among FINOVA Capital and the lender and agent parties thereto
(incorporated by reference from The FINOVA Group Inc. ("FINOVA
Group") Quarterly Report on Form 10-Q for the period ended
September 30, 1995 (the "FINOVA Group 10-Q") Exhibit 10.A)).
10.B Third Amendment dated as of November 1, 1995 to the Sixth
Amendment (incorporated by reference from the FINOVA Group 10-Q
Exhibit 10.B).
10.C Second Amendment dated as of May 11, 1995 to the Credit
Agreement (Short-Term Facility) among FINOVA Capital and the
lender and agent parties reference in 10.A above (incorporated
by reference from the FINOVA Group 10-Q Exhibit 10.C).
10.D Third Amendment dated as of November 1, 1995 to Credit
Agreement noted in 10.C above (incorporated by reference from
the FINOVA Group 10-Q Exhibit 10.D).
12 Computation of Ratio of Income to Combined Fixed Charges and
Preferred Stock Dividends (interim period).
27 Financial Data Schedule.
13
<PAGE> 1
EXHIBIT 12
FINOVA CAPITAL CORPORATION
Computation of Ratio of Income to Combined Fixed Charges
and Preferred Stock Dividends
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
-------------------- --------------------------------
1995 1994 1994 1993 1992
-------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
Net income before income
taxes $115,310 $ 86,007 $123,755 $ 64,123 $ 50,593
Add fixed charges:
Interest expense 267,857 153,391 222,929 126,152 136,107
One-third rentals 1,844 1,597 2,041 1,387 1,498
-------- -------- -------- -------- --------
Total fixed charges 269,701 154,988 224,970 127,539 137,605
-------- -------- -------- -------- --------
Net income as adjusted $385,011 $240,995 $348,725 $191,662 $188,198
-------- -------- -------- -------- --------
Ratio of income to fixed
charges 1.43 1.55 1.55 1.50 1.37
======== ======== ======== ======== ========
Preferred stock dividends
on a pre-tax basis $ $ 930 $ 930 $ 3,682 $ 2,826
Total combined fixed
charges and preferred
stock dividends $269,701 $155,918 $225,900 $131,221 $140,431
-------- -------- -------- -------- --------
Ratio of income to combined
fixed charges and preferred
stock dividends 1.43 1.55 1.54 1.46 1.34
======== ======== ======== ======== ========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,425
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,609,220
<ALLOWANCE> 119,602
<TOTAL-ASSETS> 6,818,681
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 578,943
<LONG-TERM> 5,403,323
<COMMON> 25
0
0
<OTHER-SE> 836,390
<TOTAL-LIABILITIES-AND-EQUITY> 6,818,681
<INTEREST-LOAN> 551,737
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 306,748
<INTEREST-INCOME-NET> 244,989
<LOAN-LOSSES> 28,800
<SECURITIES-GAINS> 11,699
<EXPENSE-OTHER> 112,578
<INCOME-PRETAX> 115,310
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,147
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.8
<LOANS-NON> 169,180
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 122,233
<CHARGE-OFFS> 22,868
<RECOVERIES> 1,675
<ALLOWANCE-CLOSE> 131,564
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
