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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: July 20, 1999
(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 July 20, 1999, Heller Financial, Inc. (the "Registrant") issued a press
release announcing its earnings for the quarter ended June 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: July 20, 1999
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 Sequentially
Number Numbered Pages
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99 Heller Financial, Inc. - Press Release 4-10
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Exhibit 99
Heller Financial Reports Record 1999 Second Quarter Net Income,
Continued Revenue, Margin, and Efficiency Improvement
Chicago--(July 20, 1999)--Heller Financial, Inc. (NYSE: HF) today reported
record net income of $58 million for the second quarter of 1999, an increase of
14 percent over second quarter 1998. For the six months ended June 30, 1999, net
income was a record $115 million, an increase of 16 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, 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 $51 million for the quarter and
$101 million for the six months, increases over the prior year periods of 11
percent and 13 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 $.57 for the second quarter and $1.12 for the six months, 12
percent and 13 percent increases, respectively.
"This quarter's performance builds on our long track record of delivering
on our commitments to our clients and shareholders," said Chairman and Chief
Executive Officer Richard J. Almeida. "Our second quarter performance is also
impressive in light of a particularly strong second quarter in 1998. Our
strategies are generating the results that we expected, and Heller has excellent
momentum going in to the remainder of 1999."
Highlights included:
New business volume totaled $1.8 billion for the quarter and $3.0 billion
year-to-date. Exclusive of Real Estate CMBS volume, Heller's new business volume
grew 11 percent for the quarter and seven percent for the year vs. the prior
year periods. New business for the quarter was particularly strong in Heller
Corporate Finance, Heller Small Business, and Heller Leasing Services. As of
June 30, Heller's total lending assets and investments grew to $14.6 billion, an
eight percent increase over December 31, 1998, and a 14 percent increase over
June 30, 1998. Factoring volume increased five percent for the quarter over the
prior year period due in part to the strong performance of Factofrance, whose
factoring volume increased 11 percent compared to the second quarter of 1998.
Year-to-date, factoring volume was up seven percent.
Operating revenues for the quarter were $225 million, a 16 percent increase
over second quarter 1998. Year-to-date operating revenues were $448 million, up
18 percent over the same period in 1998. The strong growth in operating revenue
was fueled by increases in net interest income and fees and other income. Net
interest income increased 12 percent for the quarter and 13 percent for the
first half 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.
Net interest margin for the second quarter and first half of 1999 was 3.7
percent, in line with the prior year's quarter and up from the 1998 first half
margin of 3.6 percent. Heller's operating margin improved to 7.0 percent for the
quarter and 7.2 percent for the first half, up from 6.9 percent and 6.8 percent
for the respective prior year periods.
Credit quality in Heller's portfolio remained strong. Net writedowns
totaled $23 million during the quarter, or 0.7 percent of average lending assets
on an annualized basis. Year-to-date net writedowns totaled $45 million, or 0.7
percent of average lending assets on an annualized basis. Write-down levels for
both the second quarter and first half are consistent with Heller's target
levels. Heller's nonearning assets declined to 1.7 percent of total lending
assets, and remain favorable to Heller's target range of two to four percent.
The Company's loan loss
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reserve at the end of the quarter was 2.2 percent of receivables, and remains in
excess of 100 percent of nonearning receivables.
Operating expenses totaled $107 million for the second quarter and $215
million for the first half of 1999, increases of eight percent and 11 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. Excluding
the effect of the acquisition, operating expenses were down $4 million for the
quarter and $1 million for the first half. Heller's efficiency ratio for the
quarter and the half was 48 percent vs. 51 percent for the prior year periods,
in line with the Company's stated 1999 goal.
Heller Financial, Inc. is a worldwide commercial finance company providing
a broad range of financing solutions to middle-market and small business
clients. With over $14 billion in owned and managed assets, Heller offers
equipment financing and leasing, vendor and sales finance programs, factoring
and working capital loans, collateral- and cash flow-based financing, and
financing for commercial real estate. Heller 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's website
is http://www.hellerfin.com.
Certain statements made herein are or may be deemed to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. No assurances can be given
that any predicted results will actually be achieved and actual results could
differ materially from those predicted as the result of the factors discussed in
the Company's periodic reports filed with the Securities and Exchange
Commission.
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HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
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(unaudited) (audited)
<S> <C> <C>
Cash and cash equivalents.................... $ 840 $ 529
Receivables.................................. 12,796 11,854
Less: Allowance for losses of receivables.... 285 271
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Net receivables......................... 12,511 11,583
Investments.................................. 1,525 1,338
Investments in international joint ventures.. 217 235
Other assets................................. 685 681
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Total assets............................ $15,778 $14,366
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Senior debt
Commercial paper and short-term borrowings..... $ 4,291 $ 3,681
Notes and debentures........................... 7,590 6,768
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Total senior debt.......................... 11,881 10,449
Credit balances of factoring clients............ 1,292 1,441
Other payables and accruals..................... 578 504
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Total liabilities.......................... 13,751 12,394
Minority interest............................... 9 10
Stockholders' equity
Preferred stock............................... 400 400
Common stockholders' equity................... 1,618 1,562
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Total stockholders' equity................. 2,018 1,962
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Total liabilities and stockholders' equity. $15,778 $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 Six Months Ended
June 30, June 30,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Interest Income............................................ $ 274 $ 252 $ 536 $ 506
Interest Expense........................................... 156 147 305 302
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Net interest income..................................... 118 105 231 204
Fees and other income...................................... 69 50 143 103
Factoring commissions...................................... 30 32 58 59
Income of international joint ventures..................... 8 7 16 14
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Operating revenues...................................... 225 194 448 380
Operating expenses......................................... 107 99 215 193
Provision for losses....................................... 30 17 59 32
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Income before income taxes and minority interest........ 88 78 174 155
Income tax provision....................................... 29 26 58 53
Minority interest.......................................... 1 1 1 3
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Net income.............................................. $ 58 $ 51 $ 115 $ 99
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Dividends on preferred stock............................ $ 7 $ 5 $ 14 $ 10
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Net income applicable to common stock................ $ 51 $ 46 $ 101 $ 89
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Basic and diluted net income applicable to
common stock per share (1)......................... $0.57 $0.60 $1.12 $1.39
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Pro forma basic and diluted net income
applicable to common stock per share (1)........... $0.57 $0.51 $1.12 $0.99
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</TABLE>
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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 Six Months
(dollars in millions) Ended June 30, Ended June 30,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Profitability:
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Pro forma net income applicable to
common stock per share (1):
Basic $0.57 $0.51 $1.12 $0.99
Diluted 0.57 0.51 1.12 0.99
Net income applicable to common
stock per share (actual) (1):
Basic 0.57 0.60 1.12 1.39
Diluted 0.57 0.60 1.12 1.39
Return on average common
stockholders' equity (2) 12.8% 14.3% 12.8% 14.1%
Return on AFE (3) 1.8 1.8 1.9 1.8
Net interest income as a percentage of
AFE (3) 3.7 3.7 3.7 3.6
Non-interest operating revenues as a
percentage of AFE (3) 3.3 3.2 3.5 3.2
Total operating revenues as a
percentage of AFE (3) 7.0 6.9 7.2 6.8
Operating expenses as a percentage of
AFE (3) 3.3 3.5 3.5 3.4
Operating expenses to operating revenues 47.6 51.0 48.0 50.8
Operating expenses to AMA (4) 3.0 3.2 3.1 3.1
Gross writedowns $ 25 $ 23 $ 52 $ 43
Gross recoveries $ 2 $ 22 $ 7 $ 27
</TABLE>
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<TABLE>
<CAPTION>
June 30, December 31, June 30,
1999 1998 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Credit Quality:
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Ratio of earning loans delinquent 60 days or
more to receivables 1.5% 1.6% 1.5%
Ratio of total nonearning assets to total lending
assets 1.7 1.8 1.3
Ratio of net writedowns to average lending
assets (annualized) 0.7 0.7 0.3
Ratio of allowance for losses of receivables to
receivables 2.2 2.3 2.4
Ratio of allowance for losses of receivables to
nonearning receivables 136% 130% 188%
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1999 1998 1998
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Leverage:
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<S> <C> <C> <C>
Ratio of debt (net of short-term investments) to
total stockholders' equity 5.6x 5.2x 5.5x
Ratio of commercial paper and short-term
borrowings to total debt 36% 35% 35%
Other: (dollars in millions)
Total lending assets and investments $14,550 $13,430 $12,780
Average lending assets 12,250 11,506 10,959
Total common stockholders' equity 1,618 1,562 1,489
Average common stockholders' equity 1,590 1,392 1,269
Funds employed (3) 13,258 11,989 11,516
Average funds employed (3) 12,512 11,814 11,331
Managed assets (4) 14,434 13,664 12,714
Average managed assets (4) 13,924 13,007 12,439
</TABLE>
(1) Based on 90,067,000 basic and 90,127,000 diluted weighted average shares of
common stock outstanding for the quarter ended June 30, 1999 and 90,072,000
basic and 90,109,000 diluted weighted average shares of common stock outstanding
for the six months ended June 30, 1999. The diluted weighted average shares as
of June 30, 1999, include the effect of 2.3 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.
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<TABLE>
<CAPTION>
LENDING ASSETS AND INVESTMENTS
June 30, December 31, June 30,
BY BUSINESS SEGMENT 1999 1998 1998
(dollars in millions) ----------------- ----------------- -----------------
<S> <C> <C> <C>
Domestic Commercial Finance Segment
Corporate Finance $ 4,439 $ 3,784 $ 3,744
Leasing Services 3,110 2,840 2,469
Real Estate Finance 1,919 2,044 2,142
Small Business Finance 1,047 1,013 760
Commercial Services 922 401 454
Other 569 687 774
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Total Domestic Commercial Finance Segment $12,006 $10,769 $10,343
International Factoring and Asset Based
Finance Segment 2,544 2,661 2,437
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Total lending assets and investments $14,550 $13,430 $12,780
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</TABLE>
<TABLE>
<CAPTION>
FEES AND OTHER INCOME
(dollars in millions) For the Three Months For the Six Months
Ended June 30, Ended June 30,
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1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Factoring commissions $ 30 $ 32 $ 58 $ 59
Income of international joint ventures 8 7 16 14
Fees and other income:
Fee income and other 48 41 89 66
Net investment gains 11 5 44 22
Securitization income 10 4 10 15
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Total fees and other income $ 69 $ 50 $ 143 $ 103
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Total non-interest income $ 107 $ 89 $ 217 $ 176
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</TABLE>
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