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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C, 20549
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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): April 18, 1995
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THE FINOVA GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11011 86-0695381
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1850 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602/207-6900
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Item 5. Other Events.
The FINOVA Group Inc. (formerly known as GFC Financial Corporation) today
announced revenues, net income and selected financial data and ratios for
the first quarter ended March 31, 1995 (unaudited).
Item 7. Financial Statements and Exhibits.
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(c) Exhibits:
Exhibits Title
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28 Press Release of The FINOVA Group Inc.
dated April 18, 1995
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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 FINOVA GROUP INC.
(Registrant)
Dated: April 18, 1995 By /s/ Bruno A. Marszowski
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Bruno A. Marszowski, Senior Vice President,
Chief Financial Officer and Controller
Principal Financial Officer/Authorized Officer
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EXHIBIT 28
Robert Fitzsimmons Embargo until
602/ 207-5759 8:00 a.m. (E.D.T.)
THE FINOVA GROUP INC.
ANNOUNCES AN INCREASE OF 43% IN EARNINGS PER SHARE
FOR 1995 FIRST QUARTER
PHOENIX, Arizona, April 18, 1995 -- The FINOVA Group Inc. (formerly known as
GFC Financial Corporation) (NYSE:FNV) today reported net income of $22.4 million
($0.80 per common share) for the first quarter of 1995 compared to $11.4 million
($0.56 per common share) for the first quarter of 1994, a 96% increase in net
income and a 43% increase in earnings per share. In the 1995 period, the
Company's average outstanding shares were 37% higher than in the 1994 period.
Sam Eichenfield, Chairman and Chief Executive Officer of FINOVA, said
he was encouraged by the amount of new business added during the first quarter
and the build up of the backlog of new business to just under $1 billion. During
the first quarter, the Company generated $478 million of new loan and lease
business (up 87% from 1994), as well as $381 million of factoring volume, almost
double the 1994 level. This new business activity plus $117 million of assets
acquired during the quarter resulted in net portfolio growth of $322 million or
an annualized growth rate of 23%.
Interest margins earned contributed significantly to the performance
for the quarter but, as a percent of average earning assets, declined from 5.9%
for the fourth quarter of 1994 to 5.7% for the first quarter of 1995. "This
slight decline in interest margins earned is not indicative of any trend, but is
relative more to the fact that growth of funds employed occurred late in the
quarter without the full benefit of related interest margins earned on assets
for the three month period", Mr. Eichenfield said. A substantial portion of the
growth in funds
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employed during the quarter occurred in March. As a result, the interest margin
for the first quarter of 1995 includes only a fraction of the interest margin
expected to be earned on the assets added during the quarter. While strong,
interest margins for the quarter were expected to decline slightly from the 6%
level reported for the full year 1994. In addition to the timing of new
business, the expected margin decline resulted, in part, from the cost of
interest rate hedging activities during the first quarter of 1995. The Company
helped protect its margins on floating-rate transactions by hedging an
additional $750 million of floating- rate debt to lock in the spread between the
Company's lending and borrowing rates. With these agreements, the Company has
protected its margins on $1.5 billion of floating-rate transactions (or
approximately 50% of its floating-rate liabilities) during the respective hedge
terms. Growth in interest margins more than offset the higher provisions for
possible credit losses and the higher selling, administrative and other
operating expenses ("operating expenses") in the 1995 period.
The Company recorded a greater loss provision in 1995 due to the
increased size of the portfolio. Reserves and accrued liabilities for possible
credit losses at March 31, 1995 represented 2.0% of managed assets and 70.9% of
nonearning assets.
The higher operating expenses are primarily attributable to the
additions of TriCon Capital, acquired on April 30, 1994, and Ambassador Factors,
acquired on February 14, 1994, as well as to expenses incurred in connection
with the higher volume of new business added during the quarter. The running
rate of these expenses, measured as a percent of interest margins earned, was
47.2% (for the combined entities) in 1995, an increase over 44.5% in 1994. It
should be noted that the ratio relative to operating expenses was also impacted
by the fact that a full quarter's spread was not reflected for the volume of
business added during the period.
Income taxes were higher in the first quarter of 1995 due to an
increase in income before income taxes and to a higher tax rate in effect during
the first quarter of 1995 (40.3% in 1995 vs. 37.8% in 1994).
The FINOVA Group Inc. is a Phoenix-based major domestic commercial
finance company providing secured financing and leasing products to small and
medium sized businesses from $500,000 to $35 million. FINOVA also offers
inventory and sales financing programs to manufacturers, distributors and
dealers nationwide.
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THE FINOVA GROUP INC.
AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF CONSOLIDATED INCOME
(UNAUDITED)
(Dollars in Thousands, except per share data)
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Three Months Ended
March 31,
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1995 1994
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Interest earned from financing transactions $ 174,757 $ 73,961
Interest expense 84,524 33,133
Depreciation 12,743 1,957
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Interest margins earned 77,490 38,871
Provision for possible credit losses 6,400 3,250
Gains on sale of assets 2,980 3
Selling, administrative and other operating expenses 36,575 17,303
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Income before income taxes 37,495 18,321
Income taxes 15,127 6,932
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Net Income $ 22,368 $ 11,389
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Earnings per common and equivalent share $ 0.80 $ 0.56
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Dividends declared per common share $ 0.20 $ 0.18
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Average outstanding common and equivalent shares 27,894,000 20,362,000
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THE FINOVA GROUP INC.
SELECTED CONSOLIDATED FINANCIAL DATA AND RATIOS (UNAUDITED) (1)
(Dollars in Thousands)
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Year
Three Months Ended Ended
or at or at
March 31, December 31,
1995 1994 1994
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FINANCIAL DATA:
Average funds employed (AFE) and
securitizations (2) $6,060,470 $3,059,227 $4,629,578
Ending funds employed (EFE) 5,989,461 3,271,882 5,667,644
Securitizations (2) 210,448 253,386
Average earning assets (3) 5,430,923 2,723,183 4,064,971
Reserve and accrued liabilities (4) for
possible credit losses 122,953 73,057 122,233
Nonaccruing assets 173,493 122,707 168,761
Total debt 4,847,273 2,510,590 4,573,354
Stockholders' equity 787,197 511,451 770,252
New business 477,791 254,701 1,799,331
Backlog (includes lines of credit) 955,656 486,242 764,326
Factoring volume 381,294 130,749 1,129,936
Write-offs 8,885 5,106 35,127
RATIOS:
Write-offs (annualized) as a % of AFE and
average securitizations (2) 0.6% 0.7% 0.8%
Nonaccruing assets as a % of EFE and
securitizations (2) 2.8% 3.8% 2.9%
Reserve and accrued liabilities (4) for possible
credit losses as a % of:
Ending funds employed and securitizations (2) 2.0% 2.2% 2.1%
Nonaccruing assets 70.9% 59.5% 72.4%
Interest margins earned (annualized) as a %
of average earning assets (3) 5.7% 5.7% 6.0%
Selling, administrative and other operating
expenses as a % of interest margins earned 47.2% 44.5% 46.2%
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(1) Includes financial results from Ambassador and TriCon subsequent to their
acquisitions on February 14, 1994 and April 30, 1994, respectively.
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(2) Securitizations are assets sold under securitization agreements and
managed by the Company. Average contracts securitized were $232 million
and $183 million for March 31, 1995 and December 31, 1994, respectively.
(3) Average earning assets equal AFE less average deferred taxes on leveraged
leases ($227 million, $223 million and $225 million for March 31, 1995
and 1994 and December 31, 1994, respectively) and average nonaccruing
assets ($171 million, $113 million and $157 million for March 31, 1995
and 1994 and December 31, 1994, respectively).
(4) Accrued liabilities of $13 million at March 31, 1995 and December 31,
1994 represent an allowance for estimated losses under certain recourse
provisions of securitizations.
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