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): October 15, 1999
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THE FINOVA GROUP INC.
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(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, 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. On October 15, 1999, The FINOVA Group Inc. announced revenues, net
income and selected financial data and ratios for the third quarter
ended September 30, 1999 (unaudited).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
Exhibits Title
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99 Press Release, issued by The FINOVA Group Inc.
dated October 15, 1999.
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: October 15, 1999 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 99
CONTACT: Stuart Tashlik Embargo until
Senior V.P. - Planning & Communications 8:00 a.m. E.D.T.
602/207-5355
THE FINOVA GROUP INC.
ANNOUNCES 31% INCREASE AND RECORD THIRD QUARTER NET INCOME
THIRD QUARTER 1999 HIGHLIGHTS:
* Record net income up 31% from 1998
* Record diluted earnings per share up 21% from 1998
* Managed assets of $12.5 billion reflect 27% annualized portfolio growth
for the quarter and 25% year to date
* New business originations of $1.3 billion represent the fifth consecutive
quarter in excess of $1 billion; year-to-date new business up 25% over
1998
Third Quarter Year to Date
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1999 1998 1999 1998
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Net income (in millions) $ 54.9 $ 41.8 $ 158.6 $ 122.1
Diluted earnings per
common share $ 0.86 $ 0.71 $ 2.52 $ 2.05
Diluted cash earnings
per common share* $ 1.36 $ 1.12 $ 3.72 $ 2.98
Operating margin 6.0% 6.2% 5.8% 6.3%
Efficiency ratio 35.1% 37.7% 36.8% 39.1%
* Cash earnings exclude goodwill, non-cash loss provisions and non-cash
taxes.
PHOENIX, ARIZ., OCT. 15, 1999 -- The FINOVA Group Inc. (NYSE: FNV) today
announced record net income of $54.9 million ($0.86 per diluted share) for the
quarter ended Sept. 30, 1999, compared to a restated $41.8 million ($0.71 per
diluted share) in the third quarter of 1998, a 31% increase in net income and a
21% increase in diluted earnings per share. (Earnings per share in 1999 included
a higher average share count.)
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Net income for the nine months ended Sept. 30, 1999 was a record $158.6
million ($2.52 per diluted share) compared to $122.1 million of net income
($2.05 per diluted share) for the first nine months of 1998, a 30% increase in
net income and a 23% increase in diluted earnings per share.
"Our 31% increase in earnings and 27% annualized portfolio growth
resulted in an outstanding quarter for the company," said Sam Eichenfield,
FINOVA's chairman and chief executive officer. "Business has been robust as new
loan and lease originations for the year thus far have exceeded 1998 by 25% with
backlog growing to an all-time high of $2.4 billion. This tremendous inflow of
new business was due in part to the success of our initiatives in promoting
cross-selling across all of our lines of business," Eichenfield added.
Annualized portfolio growth for the third quarter and the first nine
months of 1999 was 27% and 25%, respectively, compared to 20% and 16%, for the
same quarter and year to date periods of 1998. The portfolio growth was due to
new business originations (leases and loans) of $1.3 billion and $3.4 billion,
respectively, for the third quarter and first nine months of 1999 which compares
to $1.3 billion and $2.7 billion for the same periods a year ago. Fee-based
volume for the third quarter of 1999 was $1.8 billion up from $1.6 billion for
the third quarter of 1998 and for the year to date period in 1999 was $4.8
billion, down from $5.4 billion for the same period last year.
Portfolio quality, measured by nonaccruing assets as a percent of
managed assets, was 2.3% at Sept. 30, 1999 compared to 2.0% at Sept. 30, 1998.
Net write-offs in 1999 were $14.9 million in the third quarter and $39.6 million
year to date compared to $9.9 million and $36.9 million, respectively, for the
same periods a year ago. At 0.50% of average managed assets for the third
quarter of 1999 and 0.46% for the first nine months of 1999, write-offs
approximated the company's expected range of 0.50% to 0.60%.
Interest margins earned increased by 27% and rose to $149.1 million in
the third quarter of 1999 from $117.5 million in the third quarter of 1998 due
to the growth of the portfolio. Interest margins earned as a percentage of
average earning assets increased to 5.5% in the third quarter of 1999 from 5.4%
in the third quarter of 1998 due primarily to lower leverage and higher-yielding
transactions in the Mezzanine Capital portfolio.
Operating margin, which includes volume-based fees, grew 22% to $163.4
million in the third quarter of 1999 from $134.2 million in the comparable 1998
period, but as a percent of average earning assets, declined to 6.0% for the
third quarter of 1999 from 6.2% in the third quarter of 1998 due to lower rates
earned on fee-based volume in 1999.
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Gains on disposal of assets were $14.9 million in the third quarter of
1999, down from $18.8 million in the second quarter and up from $6.5 million in
the third quarter of 1998. These gains were generated by several lines of
business through the sale of assets including assets coming off lease.
Operating efficiency, which is measured by comparing operating expenses
to operating margin and gains, was 35.1% in the third quarter of 1999, an
improvement from the 37.7% for the third quarter of 1998. Operating expenses
were $62.5 million in the third quarter of 1999, up from $53.0 million in the
third quarter of 1998. The $9.5 million increase in operating expenses primarily
consisted of personnel costs related to the addition of 155 employees (mainly
through acquisitions) during the 12 months ended Sept. 30, 1999.
"The results for the first nine months of 1999 included solid
performances by all three of FINOVA's business segments, providing the impetus
for another record year in 1999," concluded Eichenfield.
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. FINOVA was
recently named one of FORTUNE'S "Best 100 Companies To Work For In America." For
more information, visit the company's website at www.finova.com.
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The FINOVA Group Inc.
and Consolidated Subsidiaries
Summary of Consolidated Income
(Unaudited)
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
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1998 1998
1999 Restated 1999 Restated
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<S> <C> <C> <C> <C>
Interest earned from financing transactions $ 289,160 $ 229,290 $ 801,360 $ 644,104
Operating lease income 29,528 24,019 86,249 88,107
Interest expense (150,142) (121,937) (420,478) (346,909)
Operating lease depreciation (19,435) (13,875) (53,381) (51,540)
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Interest margins earned 149,111 117,497 413,750 333,762
Volume-based fees 14,317 16,687 38,316 57,946
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Operating margin 163,428 134,184 452,066 391,708
Provision for credit losses (25,550) (19,000) (52,050) (44,500)
Gains on disposal of assets 14,880 6,471 46,010 15,429
Operating expenses (62,500) (53,047) (183,338) (159,132)
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Income before income taxes 90,258 68,608 262,688 203,505
Income taxes (34,407) (25,824) (101,226) (78,554)
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Income before preferred dividends 55,851 42,784 161,462 124,951
Preferred dividends, net of tax (946) (946) (2,837) (2,837)
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Net Income $ 54,905 $ 41,838 $ 158,625 $ 122,114
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Basic earnings per share $ 0.90 $ 0.75 $ 2.66 $ 2.18
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Basic average shares outstanding 60,860,000 56,032,000 59,540,000 56,143,000
============ ============ ============ ============
Diluted earnings per share $ 0.86 $ 0.71 $ 2.52 $ 2.05
============ ============ ============ ============
Average shares outstanding assuming dilution 65,024,000 60,683,000 64,103,000 60,944,000
============ ============ ============ ============
Dividends declared per common share $ 0.18 $ 0.16 $ 0.50 $ 0.44
============ ============ ============ ============
</TABLE>
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The FINOVA Group Inc.
Selected Consolidated Financial Data and Ratios (Unaudited) (A)
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of September 30 As of December 31
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FINANCIAL POSITION: 1999 1998 Restated 1998 Restated
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<S> <C> <C> <C>
Ending funds employed $11,973,767 $ 9,420,544 $10,020,221
Securitizations and participations sold (B) 530,538 516,019 537,596
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Total managed assets 12,504,305 9,936,563 10,557,817
Reserve for credit losses 248,290 187,161 207,618
Nonaccruing assets 285,454 199,367 205,233
Nonaccruing assets as % of managed assets (C) 2.3% 2.0% 2.0%
Reserve for credit losses as a % of:
Ending managed assets (C) (D) 2.1% 2.0% 2.0%
Nonaccruing assets 87.0% 93.9% 101.2%
Total assets $12,722,965 $ 9,847,769 $10,441,236
Total debt 10,289,419 7,891,283 8,394,578
Preferred securities 111,550 111,550 111,550
Common shareowners' equity 1,591,699 1,147,218 1,167,231
Backlog 2,411,905 2,189,168 1,935,106
Common shares repurchased 1,815,000 1,017,450 1,299,207
Leverage (debt to common and
preferred equity) 6.0x 6.3x 6.6x
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
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PERFORMANCE HIGHLIGHTS: 1999 1998 Restated 1999 1998 Restated
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Average managed assets $12,041,613 $ 9,619,056 $11,497,458 $ 9,241,650
Average earning assets (E) 10,891,760 8,655,498 10,393,071 8,311,176
New business 1,291,676 1,294,649 3,431,211 2,740,462
Fee-based volume 1,823,488 1,635,697 4,840,247 5,400,311
Net write-offs 14,933 9,941 39,585 36,928
Net write-offs (annualized) as a
% of average managed assets (C) 0.50% 0.42% 0.46% 0.54%
Operating margin (annualized) as
a % of average earning assets 6.0% 6.2% 5.8% 6.3%
Interest margins earned (annualized)
as a % of average earning assets 5.5% 5.4% 5.3% 5.4%
Operating expenses as a % of
operating margin plus gains 35.1% 37.7% 36.8% 39.1%
Return (annualized) on average
common equity 14.0% 14.5% 14.6% 14.4%
</TABLE>
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(A) Averages for the periods presented are based on month-end balances.
(B) Securitizations are assets sold under securitization agreements and managed
by the Company.
(C) Excludes participations sold in which the Company has transferred credit
risk.
(D) Excludes financing contracts held for sale.
(E) Average earning assets equal average funds employed less average deferred
taxes on leveraged leases and average nonaccruing assets.
