<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: October 20, 1998
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(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)
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Item 5. Other Events
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On October 20, 1998, Heller Financial, Inc. (the "Registrant") issued a press
release announcing its earnings for the quarter ending September 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: October 21, 1998
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HELLER FINANCIAL, INC.
By: /s/ Lauralee E. Martin
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Lauralee E. Martin
Title: Executive Vice President and
Chief Financial Officer
2
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Numbered Pages
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<S> <C> <C>
99 Heller Financial, Inc. - Press Release
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3
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Heller Financial Reports 18 Percent Increase in 1998 Third Quarter
Net Income On Continued Strong New Business Volume
and Excellent Credit Quality
(Chicago, IL, October 20, 1998) -- Heller Financial, Inc. (NYSE: HF) today
reported net income of $47 million for the third quarter of 1998, an increase of
18 percent over third quarter 1997. For the nine months ended September 30,
1998, Heller's net income was a record $146 million, an increase of 19 percent
over the prior year period. The earnings growth for the third quarter and first
nine months of the year was driven by continued strong new business volume and
continued excellent performance in the credit quality of the Company's
portfolio.
Net income applicable to common stock was $42 million for the quarter and
$131 million for the year. Pro forma diluted earnings per share, adjusted for
the impact of Heller's May 1, 1998 initial public offering of common stock, were
$.47 for the quarter and $1.45 for the nine months, 18 percent and 16 percent
increases over the prior year periods.
Heller's new business volume remained strong, totaling $2.0 billion for the
third quarter and a record $5.7 billion year to date, increases of 35 percent
and 42 percent respectively. New business growth was strongest in Corporate
Finance, Real Estate, Small Business Lending, and Heller's vendor leasing
business. As of September 30, Heller's total lending assets and investments had
grown 18 percent since the end of 1997 to $14.1 billion.
Factoring volume increased 20 percent for the quarter over the prior year
period, due to the strong performance of Factofrance, whose factoring volume
increased 39 percent compared to the third quarter of 1997. Year to date,
Heller's U.S. factoring volume increased ten percent over the prior year period.
Including the impact of the consolidation of Factofrance for nine months in 1998
vs. six months in 1997, factoring volume was up 47 percent.
Operating revenues for the third quarter were $196 million, up two percent
from the prior year. Year to date, operating revenues were $576 million, an
eight percent increase over the same period in 1997. Growth in operating
revenues was driven primarily by increases in net interest income, fees and
other income, and factoring commissions. Net interest income for the third
quarter increased five percent over the third quarter of 1997, and increased
three percent year to date over the prior year period, largely as a result of
growth in Heller's lending assets.
Credit quality of Heller's portfolio remained excellent across all lines of
business. Net writedowns for the first nine months of 1998 totaled only $11
million or 0.1 percent of average lending assets, compared to $90 million or 1.3
percent for the same period in 1997. During the quarter, Heller recognized
recoveries totaling $33 million, $20 million of which related to a pre-1990
account, resulting in net recoveries of $5 million for the third quarter,
compared to net write-offs of $41 million for the third quarter of 1997. During
the quarter, Heller increased its loan loss reserves due to growth in its
receivables, and the Company believes that its reserves are adequate to address
any impact related to a possible securitization of its Real Estate CMBS
portfolio. Heller's nonearning assets remained at 1.3 percent of total lending
assets, the lowest level in ten years. The Company's loan loss reserve was 2.4
percent of receivables and 199 percent of nonearning receivables.
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Operating expenses for the third quarter increased only seven percent over
the third quarter of 1997. Year to date, excluding the impact of the Factofrance
consolidation, operating expenses were up 11 percent over the prior year period.
These increases are primarily due to investment in lower-risk businesses,
information technology expenses including year 2000 compliance, and investment
in Heller's national brand building marketing campaign.
"I'm delighted with Heller's outstanding performance during the third
quarter and year to date," said Chairman and Chief Executive Officer Richard J.
Almeida. "We remain focused on maintaining our disciplined credit standards
while providing high-value financing to our clients, and we are committed to
delivering strong earnings growth and improving returns to our shareholders."
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 20
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
September 30, December 31,
1998 1997
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(unaudited)
<S> <C> <C>
Cash and cash equivalents ........................... $ 486 $ 821
Receivables ......................................... 12,789 10,722
Less: Allowance for losses of receivables ........... 312 261
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Net receivables ............................. 12,477 10,461
Investments ......................................... 1,096 994
Investments in international joint ventures ......... 228 198
Other assets ........................................ 485 387
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Total assets ................................ $14,772 $12,861
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LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt
Commercial paper and short-term borrowings ...... $ 3,847 $ 3,432
Notes and debentures ............................ 7,192 6,004
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Total senior debt ........................... 11,039 9,436
Credit balances of factoring clients ................ 1,383 1,255
Other payables and accruals ......................... 551 405
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Total liabilities ........................... 12,973 11,096
Minority interest ................................... 8 87
Stockholders' equity
Preferred stock ................................. 275 275
Common stockholders' equity ......................... 1,516 1,403
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Total stockholders' equity .................. 1,791 1,678
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Total liabilities and stockholders' equity .. $14,772 $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>
Three Months Ended Nine Months Ended
September 30, September 30,
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1998 1997 1998 1997
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(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income..................................... $ 270 $ 233 $ 776 $ 679
Interest expense.................................... 161 129 463 376
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Net interest income............................... 109 104 313 303
Fees and other income............................... 48 53 151 132
Factoring commissions............................... 31 28 90 71
Income of international joint ventures.............. 8 8 22 27
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Operating revenues................................ 196 193 576 533
Operating expenses.................................. 97 91 290 243
Provision for losses................................ 27 48 59 104
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Income before income taxes and minority interest.. 72 54 227 186
Income tax provision................................ 25 12 78 57
Minority interest................................... - 2 3 6
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Net income........................................ $ 47 $ 40 $ 146 $ 123
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Dividends on preferred stock...................... $ 5 $ 4 $ 15 $ 10
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Net income applicable to common stock............. $ 42 $ 36 $ 131 $ 113
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Basic and diluted net income applicable
to common stock per share...................... $ .47 $ .71 $1.80 $2.21
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Pro forma basic net income
applicable to common stock per share (1)....... $ .47 $ .40 $1.46 $1.26
===== ===== ===== =====
Pro forma diluted net income
applicable to common stock per share (2)....... $ .47 $ .40 $1.45 $1.25
===== ===== ===== =====
</TABLE>
(1) Based on 89,743,781 and 89,701,766 weighted average shares of common stock
outstanding for the three and nine months ended September 30, 1998,
respectively.
(2) Based on 90,070,775 and 90,088,373 weighted average shares of common stock
outstanding for the three and nine months ended September 30, 1998,
respectively, which include the effect of 1,235,750 stock options issued to
management of the Company.
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(unaudited)
<TABLE>
<CAPTION>
SELECTED DATA AND RATIOS For the Three Months For the Nine Months
(dollars in millions) Ended September 30, Ended September 30,
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1998 1997 1998 1997
<S> <C> <C> <C> <C>
Profitability:
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Pro forma net income applicable to common stock per share:
Basic (1) $0.47 $0.40 $1.46 $1.26
Diluted (2) $0.47 $0.40 $1.45 $1.25
Net income applicable to common stock per share (actual):
Basic $0.47 $0.71 $1.80 $2.21
Diluted $0.47 $0.71 $1.80 $2.21
Return on average common stockholder's equity (3) 10.9% 10.4% 12.9% 11.1%
Return on AFE (4) 1.5% 1.5% 1.7% 1.7%
Net interest income as a percentage of AFE (4) 3.5% 4.1% 3.6% 4.1%
Non-interest operating revenues as a percentage of AFE (4) 2.9% 3.4% 3.0% 3.1%
Total operating revenues as a percentage of AFE (4) 6.4% 7.5% 6.6% 7.2%
Operating expenses as a percentage of AFE (4) 3.1% 3.5% 3.3% 3.3%
Operating expenses to operating revenues 49.5% 47.2% 50.3% 45.6%
Operating expenses to AMA (5) 2.9% 3.3% 3.0% 3.1%
Gross writedowns $ 28 $ 44 $ 70 $ 103
Gross recoveries 33 3 59 13
</TABLE>
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<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
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<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% 1.7%
Ratio of total nonearning assets to
total lending assets 1.3% 1.4% 2.3%
Ratio of net writedowns to average
lending assets (annualized) 0.1% 1.5% 1.3%
Ratio of allowance for losses of
receivables to receivables 2.4% 2.4% 2.5%
Ratio of allowance for losses of
receivables to nonearning
receivables 199% 185% 122%
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
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<S> <C> <C> <C>
Leverage:
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Ratio of debt (net of short-term
investments) to total stockholder's
equity 6.0x 5.2x 5.1x
Ratio of commercial paper and
short-term borrowings to total debt 35% 36% 46%
Other: (dollars in millions)
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Total lending assets and investments $14,118 $11,928 $11,501
Total common stockholder's equity 1,516 1,403 1,389
Funds employed (4) 12,735 10,673 10,381
Average funds employed (4) 11,623 10,081 9,883
Managed assets (5) 13,594 11,800 11,092
Average managed assets (5) 12,739 10,687 10,457
</TABLE>
(1) Based on 89,743,781 and 89,701,766 weighted average shares of common stock
outstanding for the three and nine months ended September 30, 1998,
respectively.
(2) Based on 90,070,775 and 90,088,373 weighted average shares of common stock
outstanding for the three and nine months ended September 30, 1998,
respectively, which includes the effect of 1,235,750 stock options issued to
management of the Company.
(3) Return on average common stockholders' equity is computed as net income
less preferred stock dividends paid, divided by average total common
stockholders' equity.
(4) Funds employed include lending assets and investments, less credit balances
of factoring clients.
(5) Total managed assets include funds employed, plus receivables previously
securitized or sold and currently managed by the Company. At September 30, 1998,
managed assets includes approximately $140 million from the 1997 equipment
securitization in which the Company has not retained any credit risk, $390
million of loans which are fully guaranteed by the U.S. Government through a
Small Business Administration Program and $237 million from the sale of factored
accounts receivable.
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LENDING ASSETS AND INVESTMENTS
<TABLE>
<CAPTION>
September 30, June 30, December 31, September 30,
BY BUSINESS GROUP 1998 1998 1997 1997
(dollars in millions) ---- ---- ---- ----
<S> <C> <C> <C> <C>
Asset Based Finance
Equipment Finance and
Leasing $ 1,459 $ 1,453 $ 1,316 $ 1,187
Sales Finance 1,324 1,366 1,228 1,075
Business Credit 1,027 1,063 1,025 1,080
Small Business Lending 866 760 766 677
Current Asset Management 877 510 391 965
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Total Asset Based $ 5,553 $ 5,152 $ 4,726 $ 4,984
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Corporate Finance $ 2,889 $ 2,625 $ 2,010 $ 2,060
Real Estate Finance 2,565 1,893 2,093 1,573
International Group 2,532 2,437 2,361 2,009
Project Finance 128 151 144 150
Pre-1990 Portfolio 295 398 492 663
Other 156 124 102 62
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Total lending assets and
investments $14,118 $12,780 $11,928 $11,501
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</TABLE>
<TABLE>
<CAPTION>
FEES AND OTHER INCOME
(dollars in millions) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Factoring commissions $ 31 $ 28 $ 90 $ 71
Income of international
joint ventures 8 8 22 27
Fees and other income:
Fee income and other 33 25 98 73
Net investment gains 15 26 38 33
Securitization income - 2 15 26
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Total fees and other income $ 48 $ 53 $ 151 $ 132
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Total non-interest income $ 87 $ 89 $ 263 $ 230
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