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): January 20, 2000
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.)
4800 NORTH SCOTTSDALE ROAD, SCOTTSDALE, ARIZONA 85251-7623
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 480/636-4800
<PAGE>
ITEM 5. OTHER EVENTS.
A. On January 20, 2000, The FINOVA Group Inc. announced revenues, net income
and selected financial data and ratios for the fourth quarter and year
ended December 31, 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 January 20, 2000.
<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 20, 2000 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
EXHIBIT 99
CONTACT: Stuart Tashlik Embargo until January 20, 2000
Senior V.P.-Planning & Communications 8:00 a.m. E.S.T.
480/636-5355
THE FINOVA GROUP INC.
ANNOUNCES 34% INCREASE AND RECORD NET INCOME FOR 1999
SCOTTSDALE, ARIZ., JAN. 20, 2000 - The FINOVA Group Inc. (NYSE: FNV) today
announced record net income of $215.2 million ($3.41 per diluted share) for the
year ended Dec. 31, 1999, compared to $160.3 million ($2.70 per diluted share)
in 1998, a 34% increase in net income and a 26% increase in diluted earnings per
share. (Earnings per share in 1999 included a higher average share count.)
1999 HIGHLIGHTS:
+ Record net income up 34% from 1998
+ Record diluted earnings per share up 26% from 1998
+ Managed assets increased 29% to $13.6 billion
+ Three acquisitions totaling $1.1 billion successfully closed
+ New business originations reach $4.9 billion, a 22% increase over 1998
+ Fee-based volume declines to $6.3 billion, a 13% reduction from 1998
+ FINOVA and J.P. Morgan form "Preferred Partner Program" to originate and
securitize commercial mortgage backed securities (CMBS loans)
Fourth Quarter Year
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1999 1998 1999 1998
---- ---- ---- ----
Net income (in millions) $56.6 $38.2 $215.2 $160.3
Diluted earnings per
common share $0.89 $0.65 $ 3.41 $ 2.70
Diluted cash earnings
per common share* $1.34 $1.20 $ 5.06 $ 4.18
Operating margin 5.7% 6.3% 5.8% 6.3%
Efficiency ratio 37.5% 36.4% 37.0% 38.3%
* Cash earnings exclude goodwill amortization, non-cash loss provisions and
non-cash taxes.
- more -
<PAGE>
Net income for the fourth quarter of 1999 was a record $56.6 million ($0.89
per diluted share) compared to $38.2 million of net income ($0.65 per diluted
share) for the fourth quarter of 1998, a 48% increase in net income and a 37%
increase in diluted earnings per share.
Sam Eichenfield, FINOVA Chairman and CEO, said, "I am very pleased with
FINOVA's performance in 1999. Our accomplishments included three acquisitions
that rounded out certain product lines of the company; a Preferred Partner
Program with J. P. Morgan to free our balance sheet of the CMBS product; record
new business volume and portfolio growth; a significant increase in earnings;
and, recognition for once again being one of the best companies in America to
work. In light of these accomplishments, my major disappointment has been the
performance of FINOVA stock, which has not tracked the company's overall
performance."
The company culminated the year with a record $1.4 billion of new business
in the fourth quarter, the sixth consecutive quarter it exceeded $1 billion in
new lease and loan business. New business for the year was $4.9 billion, an
increase of $886 million over the $4.0 billion generated in 1998. This new
business, combined with acquired assets of $1.1 billion, resulted in managed
assets growing by $3.0 billion to $13.6 billion at Dec. 31, 1999 from $10.6
billion at the end of 1998, a 29% increase. Excluding acquired assets, managed
assets grew by $1.9 billion, or 18% during 1999. FINOVA's backlog of new
business increased to $2.0 billion at Dec. 31, 1999, from $1.9 billion at Dec.
31, 1998, but declined from $2.4 billion at the end of the third quarter due to
the changes made at FINOVA Realty Capital wherein new CMBS deals will be funded
by our partner J.P. Morgan and not flow through FINOVA's backlog.
Interest margins earned improved by $108 million in 1999, a 24% increase
primarily due to portfolio growth. As a percent of average earning assets,
interest margins earned declined to 5.3% for both the fourth quarter and
full-year 1999 from 5.4% for the comparable 1998 periods. The reduction is
attributable to an increase in FINOVA's cost of funds, resulting from efforts to
extend maturities on short-term borrowings over year-end 1999, thereby avoiding
liquidity issues in connection with Y2K concerns, and to higher cost fixed-rate
debt raised in November 1999.
Volume-based fees were down by $8.0 million in the fourth quarter of 1999
when compared to the fourth quarter of 1998 ($11.8 million in 1999 vs $19.8
million in 1998) and down by $27.6 million for the full year ($50.1 million in
1999 vs $77.7 million in 1998) due to lower fee-based volume in 1999 and returns
on that volume that were lower by 0.27% (0.80% in 1999 vs 1.07% in 1998).
Fee-based volumes were down $382 million in the fourth quarter of 1999 when
compared to 1998's fourth quarter ($1.475 billion compared to $1.857 billion)
and down by $942 million for the full year ($6.315 billion compared to $7.257
billion) principally due to lower volume originated by FINOVA Realty Capital.
- more -
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Portfolio quality, measured by nonaccruing assets as a percent of managed
assets, was 2.2% at Dec. 31, 1999 up from 2.0% at Dec 31, 1998, but down from
2.3% at Sept. 30, 1999. Nonaccruing assets at Dec. 31, 1999 were $295 million
compared to $205 million a year ago. Net write-offs for the full year in 1999
were approximately the same as in 1998 at $56.9 million but down slightly for
the fourth quarter ($17.3 million in 1999 compared to $19.8 million in 1998). As
a percent of average managed assets, net write-offs in 1999 were 0.48% compared
to 0.60% in 1998. Reserves for credit losses were 2.0% of ending managed assets
at the end of both 1998 and 1999. Loss provisions were lower in 1999 for both
the fourth quarter ($24.8 million in 1999 compared to $37.7 million in 1998) and
the full year ($76.8 million in 1999 vs $82.2 million in 1998). Changes in the
reserve and resulting loss provisions are impacted by net write-offs, changes in
the portfolio and acquisitions.
Gains on disposal of assets were $22.0 million in the fourth quarter of
1999, up from $12.5 million for the comparable 1998 period, and for the year
were $68.0 million in 1999 compared to $27.9 million in 1998. Gains in 1999
included $21 million from the sale of residuals coming off lease, $35 million
from sale of investments and $12 million of CMBS gains.
Operating efficiency, which is the ratio of operating expenses to operating
margin and gains, was 37.0% in 1999, an improvement from the 38.3% in 1998.
Operating expenses were $253.8 million in 1999, up from $216.7 million in 1998
primarily due to higher personnel costs related to acquisitions in 1999 and
higher sales incentive compensation related to the increased new business
levels.
"In summary, FINOVA enjoyed another fine year in 1999 and is well
positioned for 2000 and the future," Eichenfield said.
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 Scottsdale, Ariz. with business development
offices throughout the U.S. and in London, U.K., and Toronto, Canada. FINOVA was
once again 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.
###
<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,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest earned from financing transactions $ 312,821 $ 247,467 $ 1,114,181 $ 891,571
Operating lease income 28,213 28,095 114,462 116,202
Interest expense (172,380) (131,268) (592,858) (478,177)
Operating lease depreciation (14,606) (18,541) (67,987) (70,081)
------------ ------------ ------------ ------------
Interest margins earned 154,048 125,753 567,798 459,515
Volume-based fees 11,764 19,777 50,080 77,723
------------ ------------ ------------ ------------
Operating margin 165,812 145,530 617,878 537,238
Provision for credit losses (24,750) (37,700) (76,800) (82,200)
Gains on disposal of assets 22,010 12,483 68,020 27,912
Operating expenses (70,416) (57,521) (253,754) (216,653)
------------ ------------ ------------ ------------
Income before income taxes 92,656 62,792 355,344 266,297
Income taxes (35,092) (23,620) (136,318) (102,174)
------------ ------------ ------------ ------------
Income before preferred dividends 57,564 39,172 219,026 164,123
Preferred dividends, net of tax (945) (945) (3,782) (3,782)
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Net Income $ 56,619 $ 38,227 $ 215,244 $ 160,341
============ ============ ============ ============
Basic earnings per share $ 0.93 $ 0.69 $ 3.59 $ 2.87
============ ============ ============ ============
Basic average shares outstanding 60,888,000 55,358,000 59,880,000 55,946,000
============ ============ ============ ============
Diluted earnings per share $ 0.89 $ 0.65 $ 3.41 $ 2.70
============ ============ ============ ============
Average shares outstanding assuming dilution 64,860,000 59,848,000 64,300,000 60,705,000
============ ============ ============ ============
Dividends declared per common share $ 0.18 $ 0.16 $ 0.68 $ 0.60
============ ============ ============ ============
</TABLE>
<PAGE>
The FINOVA Group Inc.
Selected Consolidated Financial Data and Ratios (Unaudited) (A)
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of December 31,
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FINANCIAL POSITION: 1999 1998 1997
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<S> <C> <C> <C>
Ending funds employed $13,121,977 $10,020,221 $8,420,462
Securitizations and participations sold (B) 483,397 537,596 457,967
----------- ----------- ----------
Total managed assets 13,605,374 10,557,817 8,878,429
Reserve for credit losses 264,983 207,618 177,088
Nonaccruing assets 295,123 205,233 187,356
Nonaccruing assets as % of managed assets (C) 2.2% 2.0% 2.1%
Reserve for credit losses as a % of:
Ending managed assets (C) (D) 2.00% 2.03% 2.02%
Nonaccruing assets 89.8% 101.2% 94.5%
Total assets $14,050,293 $10,441,236 $8,724,626
Total debt 11,407,767 8,394,578 6,764,581
Preferred securities 111,550 111,550 111,550
Common shareowners' equity 1,663,381 1,167,231 1,092,254
Backlog 2,025,867 1,935,106 1,601,218
Common shares repurchased 1,833,241 1,299,207 1,035,800
Leverage (debt to common and preferred equity) 6.4x 6.6x 5.6x
</TABLE>
<TABLE>
<CAPTION>
For the Quarter Ended For the Year Ended
December 31, December 31,
------------------------- -----------------------
PERFORMANCE HIGHLIGHTS: 1999 1998 1999 1998
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average managed assets $12,874,560 $10,314,440 $11,845,460 $9,502,823
Average earning assets (E) 11,673,692 9,287,136 10,718,941 8,546,715
New business 1,434,538 1,238,803 4,865,746 3,979,265
Fee-based volume 1,475,049 1,856,692 6,315,296 7,257,003
Net write-offs 17,269 19,830 56,854 56,758
Net write-offs (annualized) as a % of
average managed assets (C) 0.54% 0.78% 0.48% 0.60%
Operating margin (annualized) as
a % of average earning assets 5.7% 6.3% 5.8% 6.3%
Interest margins earned (annualized) as a
% of average earning assets 5.3% 5.4% 5.3% 5.4%
Operating expenses as a % of
operating margin plus gains 37.5% 36.4% 37.0% 38.3%
Return (annualized) on average common
equity 14.0% 13.3% 14.4% 14.1%
</TABLE>
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(A) Averages for the periods presented are based on month-end balances except
for the weighting of acquisitions, which are based on days outstanding.
(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.
