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): January 19, 1998
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THE FINOVA GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11011 86-0695381
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1850 NORTH CENTRAL AVENUE, P. O. BOX 2209, PHOENIX, ARIZONA 85004-2209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602/207-6900
<PAGE>
Item 5. Other Events.
A. The FINOVA Group Inc. announced revenues, net income and
selected financial data and ratios for the fourth quarter
ended December 31, 1997 (unaudited).
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
Exhibits Title
28 Press Release of The FINOVA Group Inc. dated January
19, 1998
1
<PAGE>
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: January 23, 1998 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
2
EXHIBIT 28
Robert J. Fitzsimmons Embargo until
602/ 207-5759 8:00 a.m. (E.S.T.)
The FINOVA Group Inc.
Announces 19% Increase in Net Income
For 1997
PHOENIX, Ariz., Jan. 19, 1998 - The FINOVA Group Inc. (NYSE: FNV) today
announced record net income of $139.1 million for the year ended December 31,
1997, a 19% increase over the $117.0 million reported in 1996.
For the fourth quarter of 1997, income from continuing operations
increased by 28% to $38.8 million from $30.4 million in the fourth quarter of
1996 and net income increased by 21% to $38.8 million in 1997 from $32.0 million
in 1996.
The results for 1997, expressed as primary earnings per share under
previous accounting standards, were $2.47 for 1997 compared to $2.09 for 1996,
an increase of 18%. These results exceeded analysts' expectations as reported by
IBES International. The improvement in EPS is after issuing approximately 1.7
million common shares in October 1997 for the previously announced acquisition
of Belgravia Capital Corporation. Under new accounting guidelines effective for
year-end 1997, basic earnings per share for 1997 were $2.56 compared to $2.15 in
1996, a 19% increase, and diluted earnings per share increased by 16% to $2.42
in 1997 from $2.09 in 1996.
Sam Eichenfield, chairman and chief executive officer of FINOVA,
commented, "while it is gratifying to see the results of our past efforts, it is
even more exciting to notice that recent strategic decisions are already paying
off. Even without Belgravia, both our funded new business and our fee-based
volume each exceeded the $1 billion level for the first time in the fourth
quarter. Including Belgravia, fee-based volume totaled $1.9 billion." For the
year, funded new business was a record $3.3 billion and fee based volume
exceeded $4.5 billion.
--more--
<PAGE>
Interest margins earned for the fourth quarter of 1997 rose to an
all-time high of 6.6% compared to 5.8% in 1996 and for the year 1997 were 6.2%
compared to 5.8% in 1996. Interest margins were helped by the addition of
Belgravia's fee-based business in the fourth quarter of 1997.
According to Eichenfield, "we were able to grow the portfolio by more
than 15% for the year, including an annualized growth rate of 19% in the fourth
quarter, while maintaining portfolio quality well within our target levels."
Nonaccruing assets were 2.1% of managed assets and write-offs as a percentage of
average managed assets were 0.56% for the year. "Even so, we have bolstered our
reserve by providing for credit losses at 152% of write-offs for the year,"
added Eichenfield. At December 31, 1997, the reserve for credit losses
represented 2.0% of managed assets and 94.5% of nonaccruing assets.
"The company continues to hold operating costs in line, even as we
reward our people for their contribution to the company's performance," said
Eichenfield. Selling, administrative and other operating expenses as a percent
of interest margins earned were 41.2% and 41.8% for the quarter and annual
periods of 1997, respectively, compared to 44.9% and 41.9% for the comparable
1996 periods.
"1997 was a rewarding year for our shareowners," Eichenfield concluded.
"The company's stock price rose 54.7% during the year, return on shareowners'
equity continued to climb, and the board of directors increased the dividend by
16.7% and effected a two-for-one stock split." FINOVA's return on equity was
14.7% for the fourth quarter of 1997 and for the full year improved to 14.3%
from 13.3% in 1996.
The FINOVA Group Inc., through its principal operating subsidiary,
FINOVA Capital Corporation, is one of the nation's leading financial services
companies focused on providing a range of capital solutions to midsize business.
FINOVA is headquartered in Phoenix with business development offices throughout
the U.S. and in London, U.K.
###
<PAGE>
The FINOVA Group Inc.
and Consolidated Subsidiaries
Summary of Consolidated Income
(Unaudited)
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest earned from
Financing transactions $ 230,048 $ 185,229 $ 827,804 $ 702,117
Operating lease income 31,756 24,446 116,920 95,817
Interest expense (111,446) (96,972) (416,093) (366,543)
Operating lease depreciation (21,203) (15,136) (72,989) (62,286)
------------ ------------ ------------ ------------
Interest margins earned 129,155 97,567 455,642 369,105
Provision for credit losses (20,900) (10,587) (69,200) (41,751)
Gains on sale of assets 7,854 4,507 30,261 12,949
Selling, administrative and
Other operating expenses (53,262) (43,837) (190,525) (154,481)
------------ ------------ ------------ ------------
Income before income taxes 62,847 47,650 226,178 185,822
Income taxes (23,134) (17,254) (83,088) (69,329)
------------ ------------ ------------ ------------
Income from continuing operations before
preferred dividends 39,713 30,396 143,090 116,493
Preferred dividends, net of tax (945) (3,992)
------------ ------------ ------------ ------------
Income from continuing operations 38,768 30,396 139,098 116,493
Income and gain from discontinued operations -- 1,599 -- 507
------------ ------------ ------------ ------------
Net Income $ 38,768 $ 31,995 $ 139,098 $ 117,000
============ ============ ============ ============
Basic earnings per share
Income from continuing operations $ 0.70 $ 0.56 $ 2.56 $ 2.14
Income and gain from discontinued
Operations $ -- $ 0.03 $ -- $ 0.01
------------ ------------ ------------ ------------
Net Income $ 0.70 $ 0.59 $ 2.56 $ 2.15
============ ============ ============ ============
Average shares outstanding 55,673,000 54,639,000 54,405,000 54,508,000
============ ============ ============ ============
Diluted earnings per share*
Income from continuing operations $ 0.66 $ 0.53 $ 2.42 $ 2.08
Income and gain from discontinued $ -- $ 0.03 $ -- $ 0.01
------------ ------------ ------------ ------------
Operations
Net Income $ 0.66 $ 0.56 $ 2.42 $ 2.09
============ ============ ============ ============
Average shares outstanding* 60,552,000 56,824,000 59,161,000 56,051,000
============ ============ ============ ============
Dividends per common share $ 0.14 $ 0.12 $ 0.52 $ 0.46
============ ============ ============ ============
</TABLE>
*Diluted earnings per share give effect to the dilutive potential of options,
restricted stock and convertible preferred stock.
<PAGE>
The FINOVA Group Inc.
Selected Consolidated Financial Data and Ratios (Unaudited) (1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of December 31,
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FINANCIAL POSITION: 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Ending funds employed (2) $ 8,399,456 $ 7,298,759 $ 6,348,079
Securitizations and participations sold (3) 457,967 364,546 200,000
----------- ----------- -----------
Total managed assets (2) 8,857,423 7,663,305 6,548,079
Reserve for credit losses (2) 177,088 148,693 129,077
Nonaccruing assets (2) 187,356 155,505 143,127
Nonaccruing assets as % of managed assets (4) 2.1% 2.0% 2.2%
Reserve for credit losses as a % of:
Ending managed assets (4) 2.0% 2.0% 2.0%
Nonaccruing assets 94.5% 95.6% 90.2%
Total debt $ 6,764,581 $ 5,850,223 $ 5,649,368
Preferred securities 111,550 111,550 --
Common shareowners' equity 1,090,454 929,591 825,184
Backlog 1,601,218 1,477,239 1,070,573
<CAPTION>
For the Quarter Ended For the Year Ended
December 31, December 31,
------------------------ ------------------------
PERFORMANCE HIGHLIGHTS: 1997 1996 1997 1996
---------- ---------- ---------- ----------
Average managed assets (2) $8,636,826 $7,516,588 $8,153,076 $7,041,708
Average earning assets (2) (5) 7,806,934 6,757,732 7,356,845 6,324,545
New business (2) 1,000,383 873,659 3,311,105 2,740,353
Fee-based volume 1,860,586 819,293 4,532,494 2,937,311
Write-offs (2) 14,224 7,999 45,487 32,017
Write-offs (annualized) as a % of
average managed assets (4) 0.67% 0.43% 0.56% 0.46%
Interest margins earned
(annualized) as a % of average
earning assets 6.6% 5.8% 6.2% 5.8%
Selling, administrative and other
operating expenses as a % of
interest margins earned 41.2% 44.9% 41.8% 41.9%
Return (annualized) on average
equity 14.7% 13.3% 14.3% 13.3%
</TABLE>
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(1) Averages for the periods presented are based on month-end balances.
(2) Excludes discontinued operations disposed of during 1996.
(3) Securitizations are assets sold under securitization agreements and
managed by the Company.
(4) Excludes participations sold in which the company has transferred
credit risk.
(5) Average earning assets equal average funds employed less average
deferred taxes on leveraged leases and average nonaccruing assets.
