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): July 28, 1998
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THE FINOVA GROUP INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-11011 86-0695381
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
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1850 NORTH CENTRAL AVENUE, P. O. BOX 2209, PHOENIX, ARIZONA 85004-2209
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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.
A. The FINOVA Group Inc. announced revenues, net income and selected
financial data and ratios for the second quarter ended June 30,
1998 (unaudited).
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
Exhibits Title
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28 Press Release of The FINOVA Group Inc.
dated July 28, 1998
1
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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: July 31, 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
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EXHIBIT 28
Meilee Smythe Embargo until
Senior Vice President - Treasurer 8:00 a.m. (E.D.T.)
602/ 207-2664
The FINOVA Group Inc.
Announces Record Second Quarter Net Income
22% Increase
PHOENIX, Ariz., July 28, 1998 -- The FINOVA Group Inc. (NYSE: FNV) today
announced record net income of $41.0 million for the second quarter of 1998, a
22% increase over net income of $33.8 million a year ago. Net income for the
first six months of 1998 increased to $80.1 million, also up 22% from 1997.
Diluted earnings per share for the three months ended June 30, 1998
increased by 17% to $0.69 compared to $0.59 for the second quarter of 1997. For
the first six months of 1998, diluted earnings per share were $1.34 compared to
$1.15 for the six months ended June 30, 1997, also an increase of 17%. The 1998
period includes 1.7 million additional shares issued in the fourth quarter of
1997 to purchase the business of FINOVA Realty Capital (formerly Belgravia
Capital Corp.).
"FINOVA continues to increase its profitability as the company develops
new programs to meet the needs of its dynamic middle market customers,"
commented FINOVA Chairman and CEO Sam Eichenfield. Annualized operating margins
as a percentage of average earning assets widened to 6.5% for the three months
ended June 30, 1998 from 6.0% in the comparable 1997 quarter as the interest
margin component remained relatively constant and volume-based fees more than
doubled to $19.1 million compared to $8.6 million one year ago.
In addition to the 15% growth in managed assets from a year ago,
backlog surged to $2.3 billion at June 30, 1998 from $1.4 billion at the end of
the second quarter of 1997 (and $1.8 billion at March 31, 1998). New business
and fee-based volume totaled $2.7 billion and $5.2 billion for the three and six
months ended June 30, 1998, respectively, and were significantly greater than
the $1.8 billion and $3.2 billion for the comparable periods.
"FINOVA continues to maintain portfolio quality," Eichenfield added.
Non-accruing assets were 2.1% of managed assets at June 30, 1998 compared to
2.1% at year-end 1997 and 2.0% at June 30, 1997. The provision for credit losses
for the
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second quarter of 1998 was $16.0 million, compared to $18.3 million in 1997, and
represented 115% of net write-offs for the period.
"The addition to FINOVA's national marketing force of over 80 business
development officers from the FINOVA Realty Capital acquisition is already
beginning to pay off, not only in commercial mortgage banking, but also in
cross-selling results," continued Eichenfield. "Even with the addition of these
business development officers and their support staff, operating expenses remain
in check." For the quarter ended June 30, 1998, operating expenses were 43.4% of
operating margins compared to 42.8% one year ago, and for the six months ended
June 30, 1998, the operating expense ratio remained constant with the prior year
at 43.5%. Excluding the acquisition of the former Belgravia Capital Corp.,
FINOVA's operating expense ratio would have been 41.2% and 41.6% for the three
and six months ended June 30, 1998, respectively.
Income taxes were higher for the second quarter of 1998 than the same
period a year ago due to the increase in pre-tax income and certain tax credits
which were realized in 1997.
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 broad range of capital solutions primarily to
midsize business. FINOVA is headquartered in Phoenix with business development
offices throughout the U.S. and in London, U.K., and Toronto, Canada.
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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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<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Interest earned from financing transactions $ 218,199 $ 190,958 $ 421,935 $ 374,286
Operating lease income 31,425 28,946 64,088 54,911
Interest expense (114,987) (101,883) (225,559) (199,055)
Operating lease depreciation (20,495) (17,610) (37,665) (34,059)
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Interest margins earned 114,142 100,411 222,799 196,083
Volume-based fee income 19,103 8,583 41,259 16,367
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Operating margin 133,245 108,994 264,058 212,450
Provision for credit losses (16,000) (18,300) (25,500) (26,300)
Gains on disposal of assets 9,582 10,468 10,805 13,701
Selling, administrative and other operating
expenses (57,779) (46,612) (114,737) (92,490)
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Income before income taxes 69,048 54,550 134,626 107,361
Income taxes (27,068) (19,853) (52,623) (39,851)
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Income before preferred dividends 41,980 34,697 82,003 67,510
Preferred dividends, net of tax (945) (946) (1,891) (2,101)
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Net Income $ 41,035 $ 33,751 $ 80,112 $ 65,409
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Basic earnings per share $ 0.73 $ 0.62 $ 1.43 $ 1.21
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Basic average shares outstanding 56,230,000 54,006,000 56,189,000 53,965,000
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Diluted earnings per share $ 0.69 $ 0.59 $ 1.34 $ 1.15
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Average shares outstanding assuming dilution 61,138,000 58,561,000 61,092,000 58,598,000
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Dividends declared per common share $ 0.14 $ 0.12 $ 0.28 $ 0.24
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The FINOVA Group Inc.
Selected Consolidated Financial Data and Ratios (Unaudited) (1)
(Dollars in Thousands)
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<CAPTION>
As of
As of June 30 December 31
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FINANCIAL POSITION: 1998 1997 1997
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<S> <C> <C> <C>
Ending funds employed (EFE) $ 8,928,644 $ 7,826,196 $ 8,399,456
Securitizations and participations sold (2) 502,032 394,025 457,967
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Total managed assets 9,430,676 8,220,221 8,857,423
Reserve for credit losses 178,070 159,747 177,088
Nonaccruing assets 196,824 165,885 187,356
Nonaccruing assets as % of managed assets (4) 2.1% 2.0% 2.1%
Reserve for credit losses as a % of:
Ending managed assets (4) (5) 2.0% 2.0% 2.0%
Nonaccruing assets 90.5% 96.3% 94.5%
Total debt $ 7,345,194 $ 6,338,122 $ 6,764,581
Preferred securities 111,550 111,550 111,550
Common shareowners' equity 1,152,097 948,595 1,090,454
Backlog 2,263,504 1,440,831 1,601,218
For the Six Months
For the Quarter Ended Ended
June 30, June 30,
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PERFORMANCE HIGHLIGHTS: 1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Average managed assets $ 9,192,567 $ 8,023,255 $ 9,034,792 $ 7,881,895
Average earning assets (3) 8,252,855 7,235,636 8,113,431 7,099,386
New business 753,733 951,236 1,445,813 1,562,870
Fee-based volume 1,960,182 862,442 3,764,614 1,677,673
Net write-offs 13,881 11,135 26,987 15,224
Net write-offs (annualized) as a % of
average managed assets (4) 0.61% 0.56% 0.61% 0.39%
Operating margin (annualized) as
a % of average earning assets 6.5% 6.0% 6.5% 6.0%
Interest margins earned
(annualized) as a % of average
earning assets 5.5% 5.6% 5.5% 5.5%
Selling, administrative and other
operating expenses as a % of
operating margin 43.4% 42.8% 43.5% 43.5%
Return (annualized) on average common
equity 14.4% 14.4% 14.3% 14.0%
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(1) Averages for the periods presented are based on month-end balances.
(2) Securitizations are assets sold under securitization agreements and
managed by the Company.
(3) Average earning assets equal average funds employed less average
deferred taxes on leveraged leases and average nonaccruing assets.
(4) Excludes participations sold in which the Company has transferred
credit risk.
(5) Excludes financing contracts held for sale.
