<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1995 PURSUANT TO SECTION 13
- --- OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission file number 1-6157
HELLER FINANCIAL, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 36-1208070
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 W. Monroe Street, Chicago, Illinois 60661
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(312) 441-7000
--------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
100 shares of Common Stock, $.25 par value, outstanding at May 4, 1995.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions, except for information on shares)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1995 1994
---------- ------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents........................................ $ 61 $ 99
Receivables (Note 2)
Commercial loans
Term loans..................................................... 2,755 2,786
Revolving loans................................................ 1,467 1,071
Real estate loans................................................ 1,939 2,031
Equipment loans and leases....................................... 1,013 943
Factored accounts receivable..................................... 866 785
------ ------
Total receivables........................................... 8,040 7,616
Less: Allowance for losses of receivables (Note 2)............... 240 231
------ ------
Net receivables............................................. 7,800 7,385
Investments...................................................... 679 634
Investments in international joint ventures...................... 215 174
Other assets..................................................... 198 184
------ ------
$8,953 $8,476
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt
Commercial paper and short-term borrowings...................... $2,701 $2,451
Notes and debentures (Note 3)................................... 4,089 3,930
------ ------
Total debt.................................................. 6,790 6,381
Credit balances of factoring clients............................. 498 452
Other payables and accruals...................................... 266 274
------ ------
Total liabilities........................................... 7,554 7,107
Minority interest in equity of Heller International Group, Inc... 42 39
Stockholders' equity
Cumulative Perpetual Senior Preferred Stock, Series A
($.01 Par Value; stated value, $25; 8.125%;
5,000,000 shares authorized and outstanding).................. 125 125
Cumulative Convertible Preferred Stock, Series D
(No Par Value; 1/2% under prime; 1,000 shares
authorized and outstanding)................................... 25 25
Common Stock ($.25 Par Value; 1,000 shares authorized;
100 shares outstanding) and additional paid-in capital........ 663 663
Retained earnings.............................................. 544 517
------ ------
Total stockholders' equity.................................. 1,357 1,330
------ ------
$8,953 $8,476
====== ======
</TABLE>
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
1
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in millions)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1995 1994
------------ ------
(unaudited)
<S> <C> <C>
Interest income.................................................. $ 206 $ 151
Interest expense................................................. 112 69
----- -----
Net interest income............................................ 94 82
Fees and other income............................................ 44 53
Income of international joint ventures........................... 8 5
----- -----
Operating revenues............................................. 146 140
Operating expenses............................................... 50 44
Provision for losses............................................. 50 50
----- -----
Income before taxes and minority interest in income of
Heller International Group, Inc................................ 46 46
Income tax provision............................................. 15 17
Minority interest in income of Heller International Group, Inc... 1 1
----- -----
Net income....................................................... $ 30 $ 28
===== =====
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN RETAINED EARNINGS
(in millions)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------
1995 1994
------------- -------
(unaudited)
<S> <C> <C>
Retained earnings at the beginning of the periods..................... $ 517 $ 440
Net income......................................................... 30 28
Common stock dividends............................................. (10)
Preferred stock dividends.......................................... (3) (3)
Changes in unrealized net gains on securities available for sale,
net of tax.......................................................... 5 (3)
Deferred translation adjustment, net of tax........................ 5 (3)
----- -----
Retained earnings at March 31, 1995 and 1994.......................... $ 544 $ 459
===== =====
</TABLE>
The retained earnings balance includes deferred foreign currency translation
adjustments of $(12) and $(15) and unrealized net gains on securities
available for sale of $10 and $6 at March 31, 1995 and 1994, respectively.
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
2
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------
1995 1994
-------- -------
(unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................... $ 30 $ 28
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses......................................... 50 50
Loans originated for resale.................................. (17) (16)
Net proceeds from sales of loans originated for resale....... 19 17
Decrease in net deferred tax asset........................... 10
Decrease in accounts payable and accrued liabilities......... (10) (3)
Undistributed income of international joint ventures......... (8) (5)
Decrease in interest payable................................. (2) (11)
Other........................................................ 7 4
----- ------
Net cash provided by operating activities.................. 69 74
INVESTING ACTIVITIES
Longer-term loans funded...................................... (720) (685)
Collections of principal...................................... 491 419
Sales of longer-term loans.................................... 148 65
Net increase in short-term loans and
advances to factoring clients................................ (386) (231)
Investment in equity interests, equipment on lease,
and other investments........................................ (39) (8)
Sales of investments and equipment on lease................... 7 28
Other......................................................... (25) 4
----- ------
Net cash used for investing activities..................... (524) (408)
FINANCING ACTIVITIES
Senior note issues............................................ 228 42
Retirement of notes and debentures............................ (70) (220)
Increase in commercial paper and other short-term borrowings.. 250 422
Net decrease (increase) in advances to affiliates............. 22 (3)
Dividends paid on common and preferred stock.................. (13) (3)
----- ------
Net cash provided by financing activities.................. 417 238
----- ------
Decrease in cash and cash equivalents......................... (38) (96)
Cash and cash equivalents at the beginning of the period...... 99 170
----- ------
Cash and cash equivalents at the end of the period............ $ 61 $ 74
===== ======
</TABLE>
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
3
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
These consolidated condensed financial statements should be read with the
financial statements and notes included in the annual report on Form 10-K of
Heller Financial, Inc. (the "Company") for the year ended December 31, 1994. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included in these financial statements and were of a
normal, recurring nature.
(2) Impaired Receivables and Repossessed Assets
The Company does not recognize interest and fee income on impaired receivables
classified as nonearning and on repossessed assets, which are set forth in the
following table:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
(in millions)
Impaired receivables...................................... $ 265 $ 284
Repossessed assets........................................ 62 19
----- -----
Total nonearning assets.................................. $ 327 $ 303
===== =====
Ratio of total nonearning assets to total lending assets.. 4.0% 4.0%
===== =====
</TABLE>
Effective January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" and the related disclosure requirements of SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure." These pronouncements require that impaired receivables be measured
based on the present value of expected future cash flows discounted at the
receivable's effective interest rate. Impairment may also be measured based on
the receivable's observable market price or based on the fair value of the
collateral if the receivable is collateral dependent. When the recorded balance
of an impaired receivable exceeds the relevant measure of value, impairment is
recorded through an increase in the provision for the allowance for losses of
receivables.
The Company had previously measured receivable impairment using methods
consistent with those prescribed in SFAS No. 114. Accordingly, upon adoption of
these statements, there was no effect to total nonearning assets nor to the
total allowance for losses as previously reported at December 31, 1994.
SFAS Nos. 114 and 118 also require changes in the presentation and disclosure
of certain impaired receivables. Receivables that were considered in-substance
repossessions of collateral are now presented as impaired receivables until the
underlying collateral is physically possessed or legally foreclosed. Upon
adoption, this provision was retroactively applied resulting in the
reclassification of $31 million of in-substance repossessed assets to impaired
receivables and $4 million of related valuation allowance to the allowance for
losses of receivables at December 31, 1994. The average recorded investment in
nonearning impaired receivables was $295 million for the first quarter of 1995.
4
<PAGE>
Loan Modifications--
At March 31, 1995 and December 31, 1994, respectively, the Company had $37
million and $54 million of loans that are considered troubled debt restructures.
On February 28, 1995, the Company completed a loan modification which resulted
in an $18 million receivable earning a market rate of interest. Interest income
of $167,000 has been recorded on this receivable under the modified terms,
compared to cash interest collections of the same amount. At March 31, 1995, the
Company was not committed to lend significant additional funds under these
restructured agreements.
Allowance for Losses--
During the quarter, the changes in the allowance for losses of receivables
included an additional provision of $48 million and gross writedowns of $39
million. Nonearning impaired receivables with identified reserve requirements
and other nonearning impaired receivables, respectively, were $195 million and
$70 million at March 31, 1995 and $195 million and $89 million at December 31,
1994.
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -------------
(in millions)
<S> <C> <C>
Identified reserve requirement for impaired receivables.................... $ 58 $ 66
Additional allowance for losses of receivables............................. 182 165
----- -----
Total allowance for losses of receivables................................. $ 240 $ 231
===== =====
Ratio of allowance for losses of receivables to total nonearning
impaired receivables...................................................... 91% 81%
===== =====
Valuation allowance for repossessed assets................................. $ 8 $ 6
===== =====
(3) Debt
The Company issued and retired the following notes and debentures during the first three months of
1995 (excluding unamortized premium):
Principal
Amount
------------
Issuances: (in millions)
Senior Debt - Notes and Debentures
4 1/2% Eurobonds denominated in Japanese yen due June 16, 2000................... $100
Variable rate series F medium-term notes due on various dates ranging
from March 28, 1997 to March 29, 2000........................................... 128
----
$228
====
Retirements:
Senior Debt - Notes and Debentures
9.1% medium-term notes due on various dates ranging from February 6, 1995 to
February 16, 1995............................................................... $ 60
6.45% notes due February 15, 1995................................................ 10
----
$ 70
====
</TABLE>
The Company entered into several derivative instruments during the first three
months of 1995 to more closely match the interest rate and currency
characteristics of its debt and assets. The Company employed cross currency
interest rate swap agreements to convert the 4 1/2% Eurobonds denominated in
Japanese yen to $100 million with interest based on the six month London Inter-
bank Offered Rate
5
<PAGE>
("LIBOR"). The Company also entered into swap agreements which had the effect of
converting $18 million of variable rate medium-term notes based on various
floating rate indices to rates based on three month LIBOR.
In April, the Company replaced its existing bank credit facilities with a new
agreement that provides $2.2 billion of liquidity support at more favorable
terms to the Company. The terms of these facilities primarily include reduced
pricing, an increase in the term for $1.1 billion of the facilities to five
years, required stockholders' equity of $900 million, and the elimination of any
funding covenant based on possible material adverse change in the financial
condition of the Company.
(4) Subsequent Event
On May 3, 1995 the Company and Fuji Bank agreed to extend the term of the
Keep Well Agreement for an additional 2 years from December 31, 2000 to December
31, 2002.
(5) Statement of Cash Flows
There were certain noncash investing activities which occurred during the
three month period ended March 31, 1995. A $41 million receivable was
classified as a repossessed asset and $31 million of in-substance repossessed
assets were classified as impaired receivables in accordance with SFAS No. 114.
During the comparable 1994 period, $23 million of accounts receivable were
classified as repossessed assets and an $88 million repossessed asset was
converted to an equity investment. Income taxes of $13 million were paid during
the first quarter of 1995.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS For the Three Months Ended
March 31,
--------------------------
Percent
1995 1994 Change
------ --------- -------
(dollars in millions)
<S> <C> <C> <C>
Interest income.................................................. $ 206 $ 151 36%
Interest expense................................................. 112 69 62
----- -----
Net interest income............................................. 94 82 15
Fees and other income............................................ 44 53 (17)
Income of international joint ventures........................... 8 5 60
----- -----
Operating revenues.............................................. 146 140 4
Operating expenses............................................... 50 44 14
Provision for losses............................................. 50 50 --
----- -----
Income before taxes and minority interest....................... 46 46 --
Income tax provision............................................. 15 17 (12)
Minority interest in income of Heller International Group, Inc... 1 1 --
----- -----
Net income...................................................... $ 30 $ 28 7%
===== =====
</TABLE>
Net income rose $2 million or 7%, reflecting growth in net interest income,
higher income of international joint ventures and a lower income tax provision.
These factors offset lower gains from equity interests and investments, which
were particularly strong in 1994, and continued increases in spending for
developing businesses.
Net interest income increased 15% to $94 million due to growth of 9% in the
level of average earning funds and an increase in net interest margin. Rates
charged on 81% of average earning funds were based on floating indices such as
the average three month London Inter-bank Offered Rate, which increased to 6.3%
from 3.5%. Interest expense increased as a result of the rise in the average
borrowing rate to 7.0% from 4.6% and the higher level of debt used to finance
portfolio growth.
Income of international joint ventures increased due to the weaker U.S. dollar
and growth primarily in earnings from European joint ventures.
Fees and other income decreased $9 million or 17% due to reduced gains from
sales of equity interests and investments compared to the prior year's strong
gains on several equity transactions. This reduction was partially offset by
higher revenues from various real estate activities.
Operating expenses were higher principally due to increased spending on
developing businesses in the asset based product category, although asset based
operating expenditures as a percentage of average funds employed by these
businesses decreased from the prior year period. Management expects the rate of
increase in total operating expenditures to slow during the remainder of the
year.
The provision for losses showed no change from the prior year three month
period as marginally lower net writedowns were offset by an increase in the
provision for new funds growth. The allowance for losses of receivables was
maintained at 3% of total receivables even as the performance of new financings
over the past five years remained strong.
The Company's effective tax rate decreased to 33% from 38% in the prior year
due to certain state tax adjustments.
7
<PAGE>
PORTFOLIO COMPOSITION
During the first three months of 1995, lending assets and investments
increased $553 million or 7% as the Company continued to make progress in
diversifying its assets and sources of income. The asset based finance category
includes factoring, equipment loans and leases, working capital finance and
small business finance activities.
<TABLE>
<CAPTION>
Lending Assets and Investments as of
March 31, December 31,
------------- ------------------
1995 Percent 1994 Percent
------- --------- ------- ---------
BY PRODUCT CATEGORY: (dollars in millions)
<S> <C> <C> <C> <C>
Corporate finance........................................... $3,434 38% $3,309 39%
Asset based finance......................................... 2,476 28 2,103 25
Real estate finance......................................... 2,170 24 2,152 25
Specialized finance and investments......................... 500 6 505 6
International factoring and asset based finance............. 416 4 374 5
------ --- ------ ---
Total lending assets and investments....................... $8,996 100% $8,443 100%
====== === ====== ===
Lending assets include receivables and repossessed assets.
BY ASSET TYPE:
Receivables................................................. $8,040 89% $7,616 91%
Repossessed assets.......................................... 62 1 19 --
------ --- ------ ---
Total lending assets....................................... $8,102 90% $7,635 91%
Investments................................................. 679 8 634 7
International joint ventures................................ 215 2 174 2
------ --- ------ ---
Total investments.......................................... $ 894 10% $ 808 9%
------ --- ------ ---
Total lending assets and investments....................... $8,996 100% $8,443 100%
====== === ====== ====
</TABLE>
Total revenues include interest income, fees and other income from wholly-owned
domestic and international operations, and the Company's share of the net income
of its international joint ventures.
<TABLE>
<CAPTION>
Total Revenues
For the Three Months Ended March 31,
--------------------------------------
1995 Percent 1994 Percent
------ ---------- ------ ----------
(dollars in millions)
<S> <C> <C> <C> <C>
Corporate finance................................ $104 40% $101 48%
Asset based finance.............................. 65 25 46 22
Real estate finance.............................. 61 24 46 22
Specialized finance and investments.............. 15 6 7 4
International factoring and asset based finance.. 13 5 9 4
----- --- ----- ---
Total revenues.................................. $258 100% $209 100%
===== === ===== ===
</TABLE>
Asset based finance became the second largest product category during the
first quarter increasing $373 million to 28% of total lending assets and
investments. This increase is due primarily to growth in each asset based
business as well as the seasonal increase in factored receivables. Corporate
finance and real estate finance lending assets and investments continued to
decrease as a percent of the overall portfolio. Total revenues increased $49
million or 23% from the prior year principally reflecting an increase in market
interest rates and growth in assets.
The Company funded $407 million of corporate financings during the first
quarter compared to $418 million in the prior year period while maintaining
strong credit disciplines on average hold size and debt
8
<PAGE>
multiples. The average retained transaction size remained at $18 million at
March 31, 1995. The Company was contractually committed at March 31, 1995 to
finance an additional $913 million to new and existing corporate finance
borrowers generally contingent upon the maintenance of specific credit standards
by the borrowers. Corporate financings are generally considered by certain
regulatory agencies as highly leveraged transactions.
PORTFOLIO QUALITY
Nonearning assets remained at 4.0% of total lending assets, the ratio of
allowance for losses of receivables to receivables was maintained at prior
year levels, and net writedowns were marginally lower during the first three
months of 1995.
<TABLE>
<CAPTION>
March 31, December 31, Percent
1995 1994 Change
--------- ------------ -------
<S> <C> <C> <C>
Lending Assets and Investments: (dollars in millions)
Receivables................................................ $8,040 $7,616
Repossessed assets......................................... 62 19
------ ------
Total lending assets.................................... 8,102 7,635 6%
====
Investments................................................ 894 808
------ ------
Total lending assets and investments.................... $8,996 $8,443 7%
====== ====== ====
Nonearning Assets:
Impaired receivables....................................... $ 265 $ 284
Repossessed assets......................................... 62 19
------ ------
Total nonearning assets................................. $ 327 $ 303
====== ======
Ratio of nonearning impaired receivables to
receivables............................................. 3.3% 3.7%
====== ======
Ratio of total nonearning assets to total
lending assets.......................................... 4.0% 4.0%
====== ======
Allowances for Losses:
Allowance for losses of receivables........................ $ 240 $ 231 4%
====
Valuation allowance for repossessed assets................. 8 6
------ ------
Total allowance for losses.............................. $ 248 $ 237
====== ======
Ratio of allowance for losses of receivables to:
Receivables............................................. 3.0% 3.0%
====== ======
Nonearning impaired receivables......................... 91% 81%
====== ======
Delinquencies:
Earning loans delinquent 60 days or more................... $ 107 $ 103
====== ======
Ratio of earning loans delinquent 60 days
or more to receivables.................................. 1.3% 1.4%
====== ======
</TABLE>
<TABLE>
<CAPTION>
For The Three Months Ended
March 31,
1995 1994
------ ------
<S> <C> <C>
Writedowns: (dollars in millions)
Net writedowns on receivables.............................. $ 37 $ 36
Net writedowns on repossessed assets....................... 1 4
------ ------
Total net writedowns.................................... $ 38 $ 40
====== ======
</TABLE>
Total repossessed assets increased as one large pre-1990 apartment complex
loan previously classified as a nonearning receivable was repossessed. Total
nonearning assets principally consist of corporate finance and real estate
accounts originated prior to 1990.
9
<PAGE>
The Company maintained the allowance for losses of receivables at 3% of
receivables although the performance of new financings over the last five years
remained strong. Loans considered troubled debt restructures decreased to $37
million from $54 million in the prior year. In addition, the Company modified a
loan resulting in an $18 million receivable earning a market rate of interest.
Total net writedowns decreased marginally for the quarter but remained at a
high level as the Company continued its efforts to address troubled accounts.
Net writedowns for troubled real estate accounts increased but were offset by
lower net writedowns in other product areas.
Effective January 1, 1995, The Company adopted the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," and the related disclosure requirements of SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure." These pronouncements require that impaired receivables be measured
based on the present value of expected future cash flows discounted at the
receivable's effective interest rate. Impairment may also be measured based on
the receivable's observable market price or based on the fair value of the
collateral if the receivable is collateral dependent. The Company had previously
measured impairment using methods similar to those prescribed in SFAS No. 114.
Accordingly, there was no effect to total nonearning assets nor to the total
allowance for losses as previously reported at December 31, 1994.
SFAS No. 114 also requires that receivables that were previously classified as
repossessed assets under in-substance repossession rules now be presented as
impaired receivables until the collateral is physically possessed or legally
foreclosed. This provision was retroactively applied resulting in the
reclassification of $31 million of in-substance repossessed assets to nonearning
impaired receivables and the transfer of $4 million from the related valuation
allowance to the allowance for losses of receivables at December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1995, the Company increased lending assets
and investments by $553 million, retired $70 million of senior notes and paid
$13 million in dividends to common and preferred stockholders. To meet these
funding requirements, the Company supplemented its cash flow from operations by
issuing $228 million of senior notes and debentures and increasing commercial
paper and short-term borrowings by $250 million.
Leverage and the level of commercial paper and short-term borrowings continue
to remain within ranges targeted by the Company to maintain a strong financial
position. The ratio of commercial paper and short-term borrowings to total debt
was 40% at March 31, 1995 compared with 38% at December 31, 1994. Leverage was
5.0x at quarter end and 4.8x at December 31, 1994 principally due to the 7%
growth in lending assets and investments.
At March 31, 1995, the Company had unused bank credit facilities of $2.3
billion, liquidity support of $500 million from Fuji Bank under the Keep Well
Agreement and $494 million available under the factored accounts receivable sale
program, all of which provide the Company with an aggregate amount of $3,294
million of committed credit and sale facilities representing 122% of outstanding
commercial paper and short-term borrowings. Committed credit and sale
facilities from unaffiliated financial institutions represent 102% of
outstanding commercial paper and short-term borrowings at March 31, 1995. The
liquidity provided by the bank credit facilities and the Keep Well Agreement
remain unused at March 31, 1995.
10
<PAGE>
In April, the Company replaced its existing bank credit facilities with a new
agreement that provides $2.2 billion of liquidity support at more favorable
terms to the Company. The terms of these facilities primarily include reduced
pricing, an increase in the term for $1.1 billion of the facilities to five
years, required stockholders' equity of $900 million, and the elimination of any
funding covenant based on possible material adverse change in the financial
condition of the Company.
On May 3, 1995 the Company and Fuji Bank agreed to extend the term of the Keep
Well Agreement for an additional 2 years from December 31, 2000 to December 31,
2002.
RISK MANAGEMENT
The Company maintains a conservative currency and interest rate risk posture
by using derivatives as an integral part of its asset/liability management
program to reduce its overall level of financial risk. These derivatives,
particularly interest rate swap agreements, are used to lower funding costs,
diversify sources of funding or alter interest rate exposure arising from
mismatches between assets and liabilities.
The Company invests in and operates commercial finance companies throughout
the world. Over the course of time, reported amounts of the operations and
investments in foreign countries may fluctuate in response to exchange rate
movements in relation to the U.S. dollar. While the Western European operations
and investments are the largest areas of the Companies activities, reported
amounts will also be influenced by the exchange rate movements in the currencies
of other countries in which our subsidiaries and investments are located. To
minimize the effect of movements in exchange rates on financial results, the
Company will periodically enter into forward currency exchange contracts which
serve as hedges of translation of foreign currency income and investment amounts
to U.S. dollars.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) First Amendment to Amended and Restated Keep Well Agreement
(12) Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(27) Financial Data Schedule
(b) Reports on Form 8-K
On January 30, 1995, the Company filed with the U.S. Securities and Exchange
Commission a Current Report on Form 8-K, dated January 27, 1995, to announce
the Company's earnings for the year ended December 31, 1994.
On April 26, 1995, the Company filed with the U.S. Securities and Exchange
Commission a Current Report on Form 8-K, dated April 26, 1995, to announce the
Company's earnings for the quarter ended March 31, 1995.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
HELLER FINANCIAL, INC.
By: Richard J. Almeida
---------------------------------
Richard J. Almeida
Executive Vice President and
Chief Financial Officer
By: Anthony O'B. Beirne
--------------------------------------
Anthony O'B. Beirne
Senior Vice President, Controller and
Chief Accounting Officer
Date: May 4, 1995
13
<PAGE>
FIRST AMENDMENT TO AMENDED AND
RESTATED KEEP WELL AGREEMENT
This First Amendment to the Amended and Restated Keep Well Agreement, dated as
of May 3, 1995 (this "Amendment") is between The Fuji Bank, Limited, a Japanese
banking corporation ("Fuji"), acting by and through its New York Branch
(formerly known as its New York Agency) and Heller Financial, Inc., a Delaware
corporation ("Finance").
RECITALS
A. Fuji and Finance are parties to that certain Amended and Restated Keep Well
Agreement, dated as of August 28, 1992 ( the "Keep Well Agreement"). Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in the Keep Well Agreement.
B. The parties hereto wish to amend the Keep Well Agreement to extend its
termination date until December 31, 2002.
NOW THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Amendment to the Keep Well Agreement. The Keep Well Agreement is hereby
amended as follows:
(a) The first sentence of Section 8(b) of the Keep Well Agreement is hereby
amended in its entirety as follows:
"This Agreement may not be terminated for any reason by either party hereto,
and shall continue in full force and effect, until December 31, 2002."
(b) Each reference to the date "December 31, 2000" contained in Section 8 of
the Keep Well Agreement is hereby deleted and replaced with "December 31, 2002".
2. Miscellaneous.
(a) Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Binding Effect; Successors. This Amendment shall be binding upon, and
inure to the benefit of, Fuji and Finance and their respective successors and
assigns.
(c) Continued Effectiveness. Except as expressly amended hereby, the terms and
conditions of the Keep Well Agreement remain in full force and effect.
(d) Counterparts. This Amendment may be executed in counterparts, each of
which shall be deemed to be an original, but all of such counterparts shall
together constitute but one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
14
<PAGE>
EXHIBIT (12)
HELLER FINANCIAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(dollars amounts in millions)
<TABLE>
<CAPTION>
For The Three
Months Ended
March 31, 1995
--------------
<S> <C>
Net income before income taxes and minority interest in
income of Heller International Group, Inc. ................................. $ 46
Add-Fixed charges
Interest and debt expense................................................... 112
One-third of rentals........................................................ 2
-----
Total fixed charges.................................................. 114
-----
Net income, as adjusted......................................................... $160
-----
Ratio of earnings to fixed charges.............................................. 1.40x
=====
Preferred stock dividends on a pre-tax basis....................................
Total combined fixed charges and preferred stock dividends........... $ 4
-----
Ratio of earnings to combined fixed charges and
preferred stock dividends................................................... 1.36x
=====
</TABLE>
For purposes of computing the ratio of earnings to combined fixed charges and
preferred stock dividends, "earnings" includes income before income taxes, the
minority interest in Heller International Group, Inc. income and fixed charges.
"Combined fixed charges and preferred stock dividends" includes interest on all
indebtedness, one third of annual rentals (approximate portion representing
interest) and preferred stock dividends on a pre-tax basis.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE HELLER FINANCIAL, INC. QUARTERLY REPORT FORM 10Q FOR THE PERIOD
ENDING MARCH 31, 1995 PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 0
<INT-BEARING-DEPOSITS> 61
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 20
<INVESTMENTS-HELD-FOR-SALE> 93
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,040
<ALLOWANCE> (240)
<TOTAL-ASSETS> 8,953
<DEPOSITS> 0
<SHORT-TERM> 2,701
<LIABILITIES-OTHER> 764
<LONG-TERM> 4,089
<COMMON> 663
0
150
<OTHER-SE> 544
<TOTAL-LIABILITIES-AND-EQUITY> 8,953
<INTEREST-LOAN> 206
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 206
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 112
<INTEREST-INCOME-NET> 94
<LOAN-LOSSES> 46<F3>
<SECURITIES-GAINS> 0<F1>
<EXPENSE-OTHER> 54
<INCOME-PRETAX> 46
<INCOME-PRE-EXTRAORDINARY> 30
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30<F4>
<EPS-PRIMARY> 0.00<F2>
<EPS-DILUTED> 0.00<F2>
<YIELD-ACTUAL> 4.97
<LOANS-NON> 265
<LOANS-PAST> 76
<LOANS-TROUBLED> 37
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 231
<CHARGE-OFFS> 39
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 240
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 240
<FN>
<F1> The Company is a finance company whose normal operations do not include the
trading of investment securities.
<F2> Earnings per share information not provided as Heller Financial, Inc. has
only one common shareholder.
<F3> Includes provision for losses on receivables of $48 million and transfers
and other of $(2) million.
<F4> Net income is net of $15 million income tax provision and $1 million of
minority interest in international income.
</FN>
</TABLE>
