<PAGE>
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: July 20, 1998
(Date of earliest event reported)
HELLER FINANCIAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-6157 36-1208070
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(Commission File Number) (IRS Employer Identification Number)
500 West Monroe Street, Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
(312) 441-7000
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(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
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On July 20, 1998, Heller Financial, Inc. (the "Registrant") issued a press
release announcing its earnings for the quarter ending June 30, 1998. A copy of
the press release is attached.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
99 Heller Financial, Inc. - Press Release
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: July 21, 1998
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HELLER FINANCIAL, INC.
By: /s/ Lawrence G. Hund
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Lawrence G. Hund
Title: Executive Vice President and
Controller
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EXHIBIT INDEX
Exhibit Sequentially
Number Numbered Pages
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99 Heller Financial, Inc. - Press Release 1-6
3
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Heller Financial, Inc. Reports Significant Increases in 1998 Second Quarter
Net Income and New Business Volume;
Continued Strong Credit Quality
Chicago--(July 20, 1998)--Heller Financial, Inc. (NYSE: HF) today reported net
income of $51 million for the second quarter of 1998, an increase of 16 percent
over second quarter 1997, said Chairman and Chief Executive Officer Richard J.
Almeida. For the six months ended June 30, 1998, net income was a record $99
million, an increase of 19 percent over the prior year period. The earnings
growth for the second quarter and first half of the year was driven by strong
new business volume and continued excellent performance in the credit quality of
the Company's portfolio.
Net income applicable to common stock was $46 million for the quarter and
$89 million for the six months, increases over the prior year periods of 12
percent and 16 percent, respectively. Pro forma diluted earnings per share,
adjusted for the impact of Heller's May 1, 1998 initial public offering of
common stock, were $.51 for the second quarter and $.99 for the six months, 13
percent and 16 percent increases, respectively.
Highlights included:
New business volume totaled $2.0 billion for the quarter and $3.7 billion
year-to-date, increases of 29 percent and 49 percent over the respective 1997
periods. New business growth was strong across nearly all of Heller's business
lines, most notably in Corporate Finance and Real Estate's Commercial Mortgage
Backed Securities unit (CMBS), which originates fixed rate commercial mortgages
for ultimate securitization. As of June 30, Heller's total lending assets and
investments grew 7 percent to $12.8 billion since the end of 1997.
Factoring volume increased 25 percent for the quarter over the prior year
period due in part to the strong performance of Factofrance, whose factoring
volume increased 38 percent compared to the second quarter of 1997, and to
Heller's domestic factoring business, whose factoring volume increased 14
percent in the second quarter. Year-to-date, including the impact of the
consolidation of Factofrance during the second quarter of 1997, factoring volume
was up 67 percent.
Operating revenues year-to-date were $380 million, a 12 percent increase
over the same period in 1997. The strong growth in operating revenue was fueled
by increases in fees and other income, as well as increased factoring
commissions, which reflects the consolidation of Factofrance. Operating revenues
for the second quarter rose compared to the first quarter, but were down
slightly compared to the prior year period due to the strength of the second
quarter of 1997, which included $24 million in income from a securitization of
CMBS assets. Net interest income for the second quarter increased slightly over
the first quarter, and increased slightly for the first half compared to the
prior year period due to growth in the Company's portfolio of lending assets.
1
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Credit quality remained excellent across all lines of business. Net
writedowns totaled only $1 million during the quarter due to continued low
levels of writedowns and strong recoveries. Year-to-date net writedowns totaled
$16 million, or 0.3 percent of average lending assets on an annualized basis,
down over 70 percent from the prior year. Heller's nonearning assets declined to
$149 million, or 1.3 percent of total lending assets, the lowest level in ten
years. The Company's loan loss reserve remained at 2.4 percent of receivables
and was 188 percent of nonearning receivables.
Excluding the impact of the Factofrance consolidation, operating expenses
increased 10 percent for the quarter and 13 percent for the first six months.
Expense growth was primarily related to continued investment in developing
leadership positions in asset based finance and the Real Estate CMBS business,
information technology expenditures including Year 2000 compliance, and
investment in Heller's national brand-building marketing campaign.
"The Company's originations and credit performance for both the quarter and
the first six months of the year reaffirm the strength of the strategies that we
have put in place over the past months and years," said Almeida. "Our growth in
new business volume reflects our client orientation and the leadership positions
that we have built in many of our businesses. At the same time, we continue to
emphasize credit discipline as a means to maintain a high quality portfolio."
Heller Financial, Inc., a worldwide commercial financial services
organization, is listed as "HF" on the New York and Chicago Stock Exchanges.
Heller provides U.S.-based clients with equipment financing and leasing,
factoring and working capital loans, asset based financing, cash flow financing,
real estate financing, small business lending, and project financing. The
Company also operates through joint ventures and subsidiaries located in 19
countries in Europe, Asia/Pacific, and Latin America. These companies specialize
in factoring, asset based financing, acquisition financing, leasing, vendor
financing, and trade finance. On May 1, 1998, Heller successfully completed an
initial public offering of 38.5 million shares of Class A Common Stock,
representing approximately 42 percent of the Company's shares.
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
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(unaudited)
<S> <C> <C>
Cash and cash equivalents........................ $ 380 $ 821
Receivables...................................... 11,449 10,722
Less: Allowance for losses of receivables........ 277 261
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Net receivables............................. 11,172 10,461
Investments...................................... 1,124 994
Investments in international joint ventures...... 205 198
Other assets..................................... 467 387
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Total assets................................ $13,348 $12,861
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LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt
Commercial paper and short-term borrowings...... $ 3,470 $ 3,432
Notes and debentures............................ 6,359 6,004
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Total senior debt........................... 9,829 9,436
Credit balances of factoring clients............. 1,264 1,255
Other payables and accruals...................... 484 405
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Total liabilities........................... 11,577 11,096
Minority interest................................ 7 87
Stockholders' equity
Preferred stock................................ 275 275
Common stockholders' equity...................... 1,489 1,403
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Total stockholders' equity.................. 1,764 1,678
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Total liabilities and stockholders' equity.. $13,348 $12,861
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</TABLE>
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in millions, except per share information)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30,
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1998 1997 1998 1997
------------- ------ ------------ -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income..................................... $ 252 $ 238 $ 506 $ 446
Interest expense.................................... 147 131 302 247
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Net interest income............................... 105 107 204 199
Fees and other income............................... 50 53 103 79
Factoring commissions............................... 32 30 59 43
Income of international joint ventures.............. 7 9 14 19
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Operating revenues................................ 194 199 380 340
Operating expenses.................................. 99 90 193 152
Provision for losses................................ 17 34 32 56
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Income before income taxes and minority interest.. 78 75 155 132
Income tax provision................................ 26 28 53 45
Minority interest................................... 1 3 3 4
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Net income........................................ $ 51 $ 44 $ 99 $ 83
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Dividends on preferred stock...................... $ 5 $ 3 $ 10 $ 6
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Net income applicable to common stock............. $ 46 $ 41 $ 89 $ 77
===== ===== ===== =====
Basic and diluted net income applicable
to common stock per share...................... $ .60 $ .80 $1.39 $1.51
===== ===== ===== =====
Pro forma basic net income applicable
to common stock per share (1).................. $ .51 $ .46 $ .99 $ .85
===== ===== ===== =====
Pro forma diluted net income applicable
to common stock per share (2).................. $ .51 $ .45 $ .99 $ .85
===== ===== ===== =====
</TABLE>
(1) Pro forma basic net income applicable to common stock per share is computed
based on net income applicable to common stock divided by 90,070,775 shares
of common stock outstanding after the Company's initial public offering.
(2) Pro forma diluted net income applicable to common stock per share is
computed based on net income applicable to common stock divided by
90,123,570 shares of common shares outstanding after the offering including
the impact of stock options issued to management of the Company.
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SELECTED DATA AND RATIOS For the Quarter For the Six Months
Ended June 30, Ended June 30,
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1998 1997 1998 1997
<S> <C> <C> <C> <C>
Profitability:
- - --------------
Pro forma net income applicable to common
stock per share (1):
Basic $0.51 $0.46 $0.99 $0.85
Diluted $0.51 $0.45 $0.99 $0.85
Net income applicable to common stock per
share (actual):
Basic $0.60 $0.80 $1.39 $1.51
Diluted $0.60 $0.80 $1.39 $1.51
Return on average common stockholder's
equity (2) 14.3% 12.1% 14.1% 11.5%
Return on AFE (3) 1.8% 1.7% 1.8% 1.7%
Net interest income as a percentage of
AFE (3) 3.7% 4.2% 3.6% 4.1%
Non-interest operating revenues as a
percentage of AFE (3) 3.2% 3.6% 3.2% 3.0%
Total operating revenues as a percentage of
AFE (3) 6.9% 7.8% 6.8% 7.1%
Salaries and general operating expenses as
a percentage of AFE (3) 3.5% 3.5% 3.4% 3.2%
Operating expenses to operating revenues 51.0% 45.2% 50.8% 44.7%
Operating expenses to AMA 3.2% 3.4% 3.1% 3.0%
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Credit Quality:
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Ratio of earning loans delinquent 60
days or more to receivables 1.5% 1.4% 1.8%
Ratio of total nonearning assets to
total lending assets 1.3% 1.4% 2.9%
Ratio of net writedowns to average
lending assets (annualized) 0.3% 1.5% 1.1%
Ratio of allowance for losses of
receivables to receivables 2.4% 2.4% 2.5%
Ratio of allowance for losses to net
write-offs 8.6x 1.8x 2.5x
Ratio of allowance for losses of
receivables to nonearning
receivables 188% 185% 97%
</TABLE>
5
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<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Leverage:
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Ratio of debt (net of short-term
investments) to total stockholder's equity 5.5x 5.2x 5.0x
Ratio of commercial paper and
short-term borrowings to total debt 35% 36% 45%
Other: (dollars in millions)
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Total lending assets and investments $12,780 $11,928 $11,214
Total common stockholder's equity 1,489 1,403 1,368
Funds employed (3) 11,516 10,673 10,101
Average funds employed (3) 11,331 10,081 9,693
Managed assets (4) 12,714 11,800 10,614
Average managed assets (4) 12,439 10,687 10,227
</TABLE>
(1) Pro forma basic eps is based upon 90,070,775 shares of stock outstanding at
6/30/98. Pro forma diluted eps is based on 90,123,570 shares outstanding at
6/30/98 including the impact of stock options issued to management.
(2) Return on average common stockholder's equity is computed as net income
less preferred stock dividends paid, divided by average total stockholders'
equity net of preferred stock.
(3) Funds employed include lending assets and investments, less credit balances
of factoring clients.
(4) Total managed assets include funds employed, plus receivables previously
securitized or sold and currently managed by the Company. Managed assets
includes approximately $150 million from the 1997 equipment securitization in
which the Company has not retained any credit risk, and $300 million of loans
which are fully guaranteed by the U.S. Government through a Small Business
Administration Program.
<TABLE>
<CAPTION>
LENDING ASSETS AND INVESTMENTS
BY BUSINESS GROUP June 30, March 31, December 31, June 30,
1998 1998 1997 1997
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<S> <C> <C> <C> <C>
(dollars in millions)
Asset Based Finance
Equipment Finance and
Leasing $ 1,453 $ 1,291 $ 1,316 $ 1,166
Sales Finance 1,366 1,248 1,228 1,231
Business Credit 1,063 1,137 1,025 1,005
Small Business Lending 760 823 766 576
Current Asset Management 510 529 391 839
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Total Asset Based $ 5,152 $ 5,028 $ 4,726 $ 4,817
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Real Estate Finance $ 1,893 $ 1,532 $ 2,093 $ 1,251
Corporate Finance 2,625 2,375 2,010 2,137
International Group 2,437 2,312 2,361 2,002
Project Finance 151 154 144 150
Pre-1990 Portfolio 398 444 492 790
Other 124 110 102 67
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Total lending assets and
investments $12,780 $11,955 $11,928 $11,214
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</TABLE>
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