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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, 1999
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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, 1999, Heller Financial, Inc. (the "Registrant") issued a press
release announcing its earnings for the quarter ended September 30, 1999. 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, 1999
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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
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EXHIBIT INDEX
Exhibit
Number Description
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99 Heller Financial, Inc. - Press Release
3
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Heller Financial Reports Record Third Quarter Net Income,
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17% Increase in Diluted EPS
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Chicago--(October 20, 1999)--Heller Financial, Inc. (NYSE: HF) today reported
record net income of $59 million for the third quarter of 1999, an increase of
26 percent over third quarter 1998. For the nine months ended September 30,
1999, net income was a record $175 million, an increase of 20 percent over the
prior year period. The earnings growth for the third quarter and first nine
months of the year was driven by strong new business volume, improvement in net
margins, continued focus on operational efficiency, and continued strong
performance in the credit quality of Heller's portfolio.
Net income applicable to common stock was $52 million for the quarter and
$154 million for the nine months, increases over the prior year periods of 24
percent and 18 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 $.55 for the third quarter and $1.68 for the nine months, 17
percent and 16 percent increases, respectively.
"Heller Financial continues to deliver on its commitments to the
marketplace," said Chairman and Chief Executive Officer Richard J. Almeida.
"Our strategies continue to deliver results that exceed our goals, and our
company is very well positioned for the future."
Highlights included:
New business volume totaled $2.4 billion for the quarter and $5.4 billion
year-to-date. Exclusive of Real Estate CMBS volume, Heller's new business volume
grew 60 percent for the quarter and 24 percent for the nine months vs. the prior
year periods, with particular strength in Heller Corporate Finance, Heller Real
Estate Finance, and Heller Leasing Services. As of September 30, 1999 Heller's
total lending assets and investments grew to $16.5 billion, a 23 percent
increase over December 31, 1998. The acquisition of HealthCare Financial
Partners contributed $587 million to the increase in lending assets and
investments. Factoring volume increased 7 percent for the quarter and for the
nine months over the prior year periods due to the strong performance of
Factofrance, whose factoring volume increased 15 percent compared to the third
quarter of 1998.
Operating revenues for the quarter were $239 million, a 22 percent increase
over third quarter 1998. Year-to-date operating revenues were $688 million, up
19 percent over the same period in 1998. The strong growth in operating
revenues was fueled by increases in both interest and non-interest income. Net
interest income increased 22 percent for the quarter and 17 percent for the
first nine months compared to the prior year periods, due to improvement in
Heller's net interest margins and growth in the Company's portfolio of lending
assets. Increases in non-interest income were driven by increases in net
investment gains and fees and other income.
Net interest margin improved to 3.7 percent for the third quarter and 3.8
percent for the first nine months, increases over the prior year periods of 3.5
percent and 3.6 percent, respectively. Heller's operating margin improved to
6.7 percent for the quarter
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and 7.1 percent for the first nine months, up from 6.4 percent and 6.6 percent
for the respective prior year periods.
Credit quality in Heller's portfolio remained strong. Net writedowns
totaled $22 million during the quarter, or 0.6 percent of average lending assets
on an annualized basis. Year-to-date net writedowns totaled $67 million, or 0.7
percent of average lending assets on an annualized basis. Write-down levels for
both the third quarter and first nine months of 1999 are within Heller's target
levels. Heller's nonearning assets were 1.6 percent of total lending assets,
down from 1.8 percent at December 31, 1998, and favorable to Heller's target
range of two to four percent. The Company's loan loss reserve at the end of the
quarter was 2.1 percent of receivables, and remains in excess of 100 percent of
nonearning receivables.
Operating expenses totaled $110 million for the third quarter and $326
million for the first nine months of 1999, increases of 13 percent and 12
percent respectively. Expense growth was primarily related to Heller's fourth
quarter 1998 acquisition of certain assets from the Dealer Products Group of
Dana Commercial Credit, now part of Heller's Global Vendor Finance unit, and
Heller's third quarter 1999 acquisition of HealthCare Financial Partners.
Excluding the effect of the acquisitions, operating expenses decreased four
percent for the quarter and one percent for the first nine months, as compared
with prior year periods. Heller's efficiency ratio was 46 percent for the third
quarter and 47 percent for the nine months, slightly better than the Company's
1999 goal of 48 percent.
Heller Financial, Inc., is a worldwide commercial finance company providing
a broad range of financing solutions to middle-market and small business
clients. With approximately $17 billion in total assets, Heller offers
equipment financing and leasing, sales finance programs, collateral- and cash
flow-based financing, financing for healthcare companies and financing for
commercial real estate. The company also offers trade finance, factoring, asset-
based lending, leasing and vendor finance products and programs to clients in
Europe, Asia, Australia and Latin America. Heller's common stock is listed as
``HF'' on the New York and Chicago Stock Exchanges. Heller can be found on the
World Wide Web at http://www.hellerfinancial.com.
The statements made by the Company in this news release may include certain
forward-looking statements that reflect the Company's current expectations
regarding its future growth, results and performance. These forward-looking
statements are subject to a variety of risks and uncertainties, which could
cause the Company's future growth, results and performance to differ materially
from those expressed in, or implied by, these statements. Information
concerning these risks and uncertainties is contained in the quarterly and
annual reports that Company files with the Securities and Exchange Commission.
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
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(unaudited) (audited)
<S> <C> <C>
Cash and cash equivalents.................... $ 649 $ 529
Receivables.................................. 14,591 11,854
Less: Allowance for losses of receivables.... 310 271
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Net receivables......................... 14,281 11,583
Investments.................................. 1,638 1,338
Investments in international joint ventures.. 225 235
Other assets................................. 900 681
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Total assets............................ $17,693 $14,366
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Senior debt
<S> <C> <C>
Commercial paper and short-term borrowings...... $ 5,159 $ 3,681
Notes and debentures............................ 8,253 6,768
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Total senior debt........................... 13,412 10,449
Credit balances of factoring clients............. 1,385 1,441
Other payables and accruals...................... 624 504
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Total liabilities........................... 15,421 12,394
Minority interest................................ 11 10
Stockholders' equity
Preferred stock................................ 400 400
Common stockholders' equity.................... 1,861 1,562
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Total stockholders' equity.................. 2,261 1,962
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Total liabilities and stockholders' equity.. $17,693 $14,366
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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)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income............................................ $ 309 $ 270 $ 846 $ 776
Interest Expense........................................... 176 161 481 463
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Net interest income...................................... 133 109 365 313
Fees and other income...................................... 66 48 209 151
Factoring commissions...................................... 31 31 89 90
Income of international joint ventures..................... 9 8 25 22
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Operating revenues....................................... 239 196 688 576
Operating expenses......................................... 110 97 326 290
Provision for losses....................................... 37 27 95 59
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Income before income taxes and minority 92 72 267 227
interest......................................
Income tax provision....................................... 33 25 91 78
Minority interest.......................................... - - 1 3
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Net income............................................... $ 59 $ 47 $ 175 $ 146
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Dividends on preferred stock............................. $ 7 $ 5 $ 21 $ 15
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Net income applicable to common stock.................. $ 52 $ 42 $ 154 $ 131
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Basic and diluted net income applicable to
common stock per share (1)........................... $ .55 $0.47 $1.68 $1.80
===== ===== ===== =====
Pro forma basic net income applicable to
common stock per share (1)........................... $ .55 $0.47 $1.68 $1.46
===== ===== ===== =====
Pro forma diluted net income applicable to
common stock per share (1)........................... $ .55 $0.47 $1.68 $1.45
===== ===== ===== =====
</TABLE>
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(unaudited)
<TABLE>
<CAPTION>
SELECTED DATA AND RATIOS Three Months Ended Nine Months Ended
(dollars in millions) September 30, September 30,
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1999 1998 1999 1998
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Profitability:
- ----------------------------------------------
Pro forma net income applicable to common
stock per share (1):
<S> <C> <C> <C> <C>
Basic $0.55 $0.47 $1.68 $1.46
Diluted 0.55 0.47 1.68 1.45
Net income applicable to common stock per
share (actual) (1):
Basic and Diluted 0.55 0.47 1.68 1.80
Return on average common stockholders'
equity (2) 11.6% 10.9% 12.5% 12.9%
Return on AFE (3) 1.7 1.5 1.8 1.7
Net interest income as a percentage of AFE
(3) 3.7 3.5 3.8 3.6
Non-interest operating revenues as a
percentage of AFE (3) 3.0 2.9 3.3 3.0
Total operating revenues as a percentage of
AFE (3) 6.7 6.4 7.1 6.6
Operating expenses as a percentage of
AFE (3) 3.1 3.1 3.3 3.3
Operating expenses to operating revenues 46.0 49.5 47.4 50.3
Operating expenses to AMA (4) 2.9 2.9 3.0 3.0
Gross writedowns $ 29 $ 28 $ 80 $ 70
Gross recoveries $ 7 $ 33 $ 13 $ 59
</TABLE>
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<TABLE>
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Credit Quality:
- ---------------------------------------------------
Ratio of earning loans delinquent 60 days or more
to receivables 1.3% 1.6% 1.5%
Ratio of total nonearning assets to total lending
assets 1.6 1.8 1.3
Ratio of net writedowns to average lending assets
(annualized) 0.7 0.7 0.1
Ratio of allowance for losses of receivables to
receivables 2.1 2.3 2.4
Ratio of allowance for losses of receivables to
nonearning receivables 143% 130% 199%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1999 1998 1999 1998
----------------- ----------------- ---------------- --------------
Leverage:
- ---------
<S> <C> <C> <C> <C>
Ratio of debt (net of short-term investments) to
total stockholders' equity 5.7x 6.0x 5.7x 6.0x
Ratio of commercial paper and short-term
borrowings to total debt 38% 35% 38% 35%
Other: (dollars in millions)
- ----------------------------
Total lending assets and investments $16,467 $14,118 $16,467 $14,118
Average lending assets 13,706 12,123 12,839 11,765
Total common stockholders' equity 1,861 1,516 1,861 1,516
Average common stockholders' equity 1,775 1,528 1,649 1,355
Funds employed (3) 15,082 12,735 15,082 12,735
Average funds employed (3) 14,100 12,234 13,047 11,623
Managed assets (4) 16,429 13,594 16,429 13,594
Average managed assets (4) 15,285 13,296 14,383 12,739
(1) Based on 95,059,000 basic and 95,282,000 diluted weighted average shares of common stock outstanding for the
quarter ended September 30, 1999 and 91,753,000 basic and 91,852,000 diluted weighted average shares of common stock
outstanding for the nine months ended September 30, 1999. The diluted weighted average shares as of September 30,
1999, include the effect of 3.2 million stock options issued to management of the Company.
(2) Return on average common stockholders' equity is computed as net income less preferred stock dividends paid,
divided by average total common stockholders' equity.
(3) Funds employed include lending assets and investments, less credit balances of factoring clients.
(4) Managed assets include funds employed plus receivables previously securitized or sold and currently managed by the
Company.
</TABLE>
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<TABLE>
<CAPTION>
LENDING ASSETS AND INVESTMENTS September 30, December 31, September 30,
BY BUSINESS SEGMENT 1999 1998 1998
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<S> <C> <C> <C>
(dollars in millions)
Domestic Commercial Finance Segment
Corporate Finance $ 4,871 $ 3,784 $ 3,989
Leasing Services 3,110 2,840 2,461
Real Estate Finance 2,479 2,044 2,797
Small Business Finance 1,165 1,013 866
Commercial Services* 977 401 808
Healthcare 587 - -
Other 516 687 665
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Total Domestic Commercial Finance Segment $13,705 $10,769 $11,586
International Factoring and Asset Based
Finance Segment 2,762 2,661 2,532
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Total lending assets and investments $16,467 $13,430 $14,118
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* On October 4, 1999, we entered into an agreement to sell our Commercial Services unit to The
CIT Group. This sale is expected to close during the fourth quarter of 1999.
</TABLE>
<TABLE>
<CAPTION>
FEES AND OTHER INCOME
(dollars in millions) Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Factoring commissions $ 31 $ 31 $ 89 $ 90
Income of international joint ventures 9 8 25 22
Fees and other income:
Fee income and other 32 33 121 98
Net investment gains 33 15 77 38
Securitization income 1 - 11 15
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Total fees and other income $ 66 $ 48 $ 209 $ 151
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Total non-interest income $ 106 $ 87 $ 323 $ 263
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</TABLE>
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