-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PDxj358fJDWUhUdYeBCTaBS3T3Jqo2Q88ByC/RoN7AShcFB/YVIO/BrUpWjSmUrd cNX9ypWMgBzn+xS7kaCBoQ== 0000950147-99-000762.txt : 19990722 0000950147-99-000762.hdr.sgml : 19990722 ACCESSION NUMBER: 0000950147-99-000762 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990715 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINOVA GROUP INC CENTRAL INDEX KEY: 0000883701 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 860695381 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11011 FILM NUMBER: 99668180 BUSINESS ADDRESS: STREET 1: 1850 N CENTRAL AVE STREET 2: P O BOX 2209 CITY: PHOENIX STATE: AZ ZIP: 85002-2209 BUSINESS PHONE: 6022076900 MAIL ADDRESS: STREET 1: 1850 N CENTRAL AVE STREET 2: P O BOX 2209 CITY: PHOENIZ STATE: AZ ZIP: 85044-2209 FORMER COMPANY: FORMER CONFORMED NAME: GFC FINANCIAL CORP DATE OF NAME CHANGE: 19930328 8-K 1 CURRENT REPORT OF THE FINOVA GROUP INC. 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): July 15, 1999 ------------- 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 85002-2209 - ----------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 602/207-6900 ------------ ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT. The FINOVA Group Inc. ("FINOVA") and FINOVA Capital Corporation ("FINOVA Capital") have dismissed their independent auditors, Deloitte & Touche LLP, effective July 15, 1999. On that date they appointed Ernst & Young LLP as independent auditors. These actions were approved by FINOVA's Board of Directors upon recommendation of its Audit Committee. The change was also approved by the Board of Directors of FINOVA Capital. The selection of Ernst & Young was approved by FINOVA and FINOVA Capital after an extended evaluation process initiated by FINOVA's Audit Committee. Neither company sought the advice of Ernst & Young on specific audit issues relating to their financial statements prior to engagement of that firm. The change in independent auditors did not occur due to any existing or previous accounting disagreements with Deloitte & Touche, and Deloitte & Touche has expressed no disclaimer of opinion, adverse opinion, qualification or limitation regarding the financial statements of FINOVA or FINOVA Capital or the audit process, for the years ended December 31, 1998 or 1997, or the interim periods ended March 31, 1999 or June 30, 1999. Neither have there been any accounting disagreements or reportable events within the meaning of Item 304 of SEC Regulation S-K for those periods. Deloitte & Touche has stated in its attached letter addressed to the SEC its concurrence with the foregoing statements in this paragraph. ITEM 5. OTHER EVENTS. On July 15, 1999, The FINOVA Group Inc. announced revenues, net income and selected financial data and ratios for the second quarter and first six months ended June 30, 1999 (unaudited). ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits: Exhibits Title -------- ----- 16 Letter re Change in Certifying Accountant 99 Press Release, issued by The FINOVA Group Inc. dated July 15, 1999 2 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 21, 1999 By /s/ Jill C. Richling -------------- ----------------------------------- Jill C. Richling Vice President -- Controller 3 EX-16 2 LETTER FROM DELOITTE & TOUCHE LLP [LETTERHEAD OF DELOITTE & TOUCHE LLP] July 21, 1999 Securities and Exchange Commission Mail Stop 9-5 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs/Madams: We have read Item 4 of Form 8-K of FINOVA Group Inc. dated July 15, 1999 and we agree with the comments in the first sentence of the first paragraph and with the third paragraph. We have no basis to agree or disagree with the comments in the second, third and fourth sentences of the first paragraph or with the second paragraph. Very truly, /s/ Deloitte & Touche LLP EX-99 3 EARNINGS PRESS RELEASE DATED 7/15/99 CONTACT: Stuart Tashlik Embargo until Senior Vice President 8:00 a.m. (E.D.T.) 602/ 207-5355 THE FINOVA GROUP INC. ANNOUNCES RECORD NET INCOME, UP 32%, FOR SECOND QUARTER OF 1999 PHOENIX, Ariz., July 15, 1999 -- The FINOVA Group Inc. (NYSE: FNV) today announced net income of $53.7 million ($0.83 per diluted share) for the quarter ended June 30, 1999, compared to a restated $40.5 million ($0.68 per diluted share) earned in the second quarter of 1998, a 32% increase in net income and a 22% increase in earnings per share. The 1999 earnings per share computation includes a higher average share count primarily due to the 6.3 million additional shares issued in connection with acquisitions in the first quarter of 1999. Net income for the six months ended June 30, 1999 was $103.7 million ($1.66 per diluted share) compared to a restated $80.3 million of net income ($1.34 per diluted share) for the first six months of 1998, a 29% increase in net income and a 24% increase in earnings per share. Sam Eichenfield, chairman and chief executive officer of FINOVA, said "The second quarter was a solid quarter, which produced a significant increase in earnings, a rebound in interest margins, the fourth consecutive quarter of $1 billion plus new lease and loan originations and the continued portfolio quality the company has been accustomed to." New lease and loan business for the second quarter of 1999 was $1.1 billion, up 43%, compared to $754 million for the second quarter of 1998 with the backlog of new business at June 30, 1999 increasing from $2.0 billion in the first quarter of 1999 to $2.2 billion. Fee-based volume for the second quarter of 1999 declined to $1.5 billion from $2.0 billion in second quarter of 1998 due primarily to a reduction in volume originated by FINOVA Realty Capital. Portfolio growth year over year was 24% and an annualized 22% for the first six months of 1999. The annualized growth rate of 3% during the second quarter of 1999 was lower and somewhat unusual, in view of the significant new business generated, and was due to an unusually high amount of prepayments and asset sales during the period ($600 million in the second quarter of 1999 vs $185 million in the first quarter of 1999 and $297 million in the second quarter of 1998). Portfolio quality, measured by nonaccruing assets as a percent of managed assets, remained consistent at 2.1% at June 30, 1999 and 1998. Net write-offs were $16.2 million in the second quarter of 1999 compared to $13.9 million for the second quarter of 1998, but at 0.56% of managed assets, remained within the company's targeted range of 0.50% to 0.60%. Interest margins earned increased by 26% and rose to $140.0 million in the second quarter of 1999 from $110.9 million in the second quarter of 1998. Interest margins earned as a percentage of average earning assets were 5.3% in the second quarter of 1999, slightly down from the 5.4% reported for the second quarter of 1998, but up from 5.1% in the first quarter of 1999. The rebound in interest margins earned from the first quarter of 1999 was due to a reduction in the company's leverage and lower cost of funds resulting from a contraction in abnormally high interest rate spreads on short-term borrowings, in the first quarter of 1999. Operating margin, which includes volume-based fees, grew 16% to $151.2 million in the second quarter of 1999 from $130.0 million in the comparable 1998 period, but as a percent of average earning assets, declined to 5.8% for the second quarter of 1999 from 6.3% in the second quarter of 1998. This decrease was due to the lower amount of fee-based volume ($1.5 billion vs $2.0 billion) and a reduced average rate earned on that volume (0.73% vs 0.97%). Gains on disposal of assets were $18.8 million in the second quarter of 1999 compared to $7.4 million in the second quarter of 1998 and included $7.6 million from the sale of commercial mortgage backed securities and $11.2 million from the sale of assets coming off lease and other assets. Operating efficiency, which is measured by comparing operating expenses to operating margins and gains, was 37.3% in the second quarter of 1999, an improvement on the 38.7% for the second quarter of 1998. Operating expenses were $63.3 million in the second quarter of 1999, up from $53.2 million in the second quarter of 1998. The $10.1 million increase in operating expenses was due to company growth including the addition of 177 employees (primarily through acquisitions) during the 12 months ended June 30, 1999. "I am pleased with FINOVA's second quarter and six-month results, which included solid contributions from the company's recent acquisitions as well as its core businesses and which positions FINOVA to have a strong second half of 1999," Eichenfield concluded. 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. ### The FINOVA Group Inc. and Consolidated Subsidiaries Summary of Consolidated Income (Unaudited) (Dollars in Thousands, except per share data)
Quarter Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1998 1999 Restated 1999 Restated ----------- ----------- ----------- ----------- Interest earned from financing transactions $ 266,978 $ 214,643 $ 512,201 $ 414,813 Operating lease income 28,868 31,425 56,721 64,088 Interest expense (139,153) (114,696) (270,336) (224,975) Operating lease depreciation (16,720) (20,495) (33,947) (37,665) ----------- ----------- ----------- ----------- Interest margins earned 139,973 110,877 264,639 216,261 Volume-based fees 11,264 19,104 23,999 41,259 ----------- ----------- ----------- ----------- Operating margin 151,237 129,981 288,638 257,520 Provision for credit losses (17,000) (16,000) (26,500) (25,500) Gains on disposal of assets 18,760 7,432 31,130 8,957 Operating expenses (63,339) (53,207) (120,839) (106,085) ----------- ----------- ----------- ----------- Income before income taxes 89,658 68,206 172,429 134,892 Income taxes (35,050) (26,729) (66,819) (52,729) ----------- ----------- ----------- ----------- Income before preferred dividends 54,608 41,477 105,610 82,163 Preferred dividends, net of tax (945) (945) (1,891) (1,891) ----------- ----------- ----------- ----------- Net Income $ 53,663 $ 40,532 $ 103,719 $ 80,272 =========== =========== =========== =========== Basic earnings per share $ 0.87 $ 0.72 $ 1.76 $ 1.43 =========== =========== =========== =========== Basic average shares outstanding 61,412,000 56,230,000 58,869,000 56,189,000 =========== =========== =========== =========== Diluted earnings per share $ 0.83 $ 0.68 $ 1.66 $ 1.34 =========== =========== =========== =========== Average shares outstanding assuming dilution 66,042,000 61,138,000 63,693,000 61,092,000 =========== =========== =========== =========== Dividends declared per common share $ 0.16 $ 0.14 $ 0.32 $ 0.28 =========== =========== =========== ===========
The FINOVA Group Inc. Selected Consolidated Financial Data and Ratios (Unaudited) (A) (Dollars in Thousands)
As of June 30 As of December 31 ---------------------------- ----------------- FINANCIAL POSITION: 1999 1998 Restated 1998 Restated ----------- ------------- ------------- Ending funds employed $11,195,666 $8,950,838 $10,020,221 Securitizations and participations sold (B) 512,382 502,032 537,596 ----------- ---------- ----------- Total managed assets 11,708,048 9,452,870 10,557,817 Reserve for credit losses 237,602 178,070 207,618 Nonaccruing assets 249,607 196,824 205,233 Nonaccruing assets as % of managed assets (C) 2.1% 2.1% 2.0% Reserve for credit losses as a % of: Ending managed assets (C) (D) 2.1% 2.0% 2.0% Nonaccruing assets 95.2% 90.5% 101.2% Total assets $11,856,532 $9,295,181 $10,441,236 Total debt 9,523,630 7,345,194 8,394,578 Preferred securities 111,550 111,550 111,550 Common shareowners' equity 1,552,927 1,154,062 1,167,231 Backlog 2,223,421 2,263,504 1,935,106 Common shares repurchased 1,525,000 196,207 1,299,207 Leverage (debt to common and preferred equity) 5.7x 5.8x 6.6x For the Quarter Ended For the Six Months Ended June 30, June 30, ---------------------------- --------------------------- PERFORMANCE HIGHLIGHTS: 1999 1998 Restated 1999 1998 Restated ----------- ------------- ----------- ------------- Average managed assets $11,598,293 $9,214,128 $11,216,596 $9,056,164 Average earning assets (E) 10,497,813 8,277,580 10,135,121 8,138,041 New business 1,078,047 753,733 2,139,535 1,445,813 Fee-based volume 1,544,062 1,960,182 3,016,759 3,764,614 Net write-offs 16,249 13,881 24,652 26,987 Net write-offs (annualized) as a % of average managed assets (C) 0.56% 0.61% 0.44% 0.60% Operating margin (annualized) as a % of average earning assets 5.8% 6.3% 5.7% 6.3% Interest margins earned (annualized) as a % of average earning assets 5.3% 5.4% 5.2% 5.3% Operating expenses as a % of operating margin 41.9% 40.9% 41.9% 41.2% Operating expenses as a % of operating margin plus gains 37.3% 38.7% 37.8% 39.8% Return (annualized) on average common equity 13.8% 14.2% 14.8% 14.3%
- ---------- A) Averages for the periods presented are based on month-end balances except for the weighting of the Sirrom acquisition, which was added in as of the acquisition date. 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. -----END PRIVACY-ENHANCED MESSAGE-----