UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-12321
TRANSFINANCIAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 46-0278762
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8245 Nieman Road, Suite 100
Lenexa, Kansas 66214
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 859-0055
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.
Class Outstanding at November 7, 1997
Common stock, $0.01 par value 6,042,587 Shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per share amounts)
(Unaudited)
1997 1996
Operating Revenues.......................................................... $ 35,208 $ 30,041
Operating Expenses.......................................................... 34,342 29,332
Operating Income............................................................ 866 709
Nonoperating Income (Expense)
Interest income.......................................................... 148 278
Other.................................................................... 33 19
Total nonoperating income (expense).................................. 181 297
Income Before Income Taxes.................................................. 1,047 1,006
Income Tax Provision........................................................ 478 501
Net Income.................................................................. $ 569 $ 505
Average Common Shares Outstanding (Note 5).................................. 6,111 6,609
Net Income Per Share........................................................ $ 0.09 $ 0.08
<FN>
The accompanying notes to consolidated financial statements are an
integral
part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per share amounts)
(Unaudited)
1997 1996
Operating Revenues.......................................................... $ 99,372 $ 83,604
Operating Expenses.......................................................... 96,507 82,275
Operating Income............................................................ 2,865 1,329
Nonoperating Income (Expense)
Interest income.......................................................... 538 886
Other.................................................................... 73 45
Total nonoperating income (expense).................................. 611 931
Income Before Income Taxes.................................................. 3,476 2,260
Income Tax Provision........................................................ 1,571 1,040
Net Income.................................................................. $ 1,905 $ 1,220
Average Common Shares Outstanding (Note 5).................................. 6,268 6,878
Net Income Per Share........................................................ $ 0.30 $ 0.18
<FN>
The accompanying notes to consolidated financial statements are an
integral
part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (Unaudited)
Current Assets:
Cash and temporary cash investments...................................... $ 5,283 $ 9,021
Short-term investments................................................... 3,252 9,957
Freight accounts receivable, less allowance
for doubtful accounts of $444 and $419, respectively................. 12,540 9,233
Finance accounts receivable, less allowance
for doubtful accounts of $514 and $769, respectively................. 16,157 14,554
Current deferred tax assets.............................................. -- 618
Other current assets..................................................... 2,587 1,965
AFS net assets (Note 6).................................................. 8,194 7,570
Total current assets................................................. 48,013 52,918
Operating Property, at Cost:
Revenue equipment........................................................ 29,766 24,373
Land..................................................................... 3,585 3,489
Structures and improvements.............................................. 10,420 10,087
Other operating property................................................. 8,845 5,328
52,616 43,277
Less accumulated depreciation........................................ (21,982) (19,887)
Net operating property........................................... 30,634 23,390
Intangibles, net of accumulated amortization................................ 9,446 9,497
Other Assets................................................................ 401 1,007
$ 88,494 $ 86,812
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 2,749 $ 2,980
Accrued payroll and fringes.............................................. 7,218 5,533
Claims and insurance accruals............................................ 209 246
Accrued and current deferred income taxes................................ 191 --
Other accrued expenses................................................... 1,893 2,289
Total current liabilities............................................ 12,260 11,048
Deferred Income Taxes....................................................... 2,179 1,203
Other Non-Current Liabilities and Minority Interest......................... 469 --
Shareholders' Equity (Note 5)
Preferred stock with $0.01 par value, authorized 1,000,000 shares,
none outstanding..................................................... -- --
Common stock with $0.01 par value, authorized 13,000,000 shares,
issued 7,508,022 and 7,605,570 shares, respectively.................. 75 76
Paid-in capital.......................................................... 4,625 5,529
Retained earnings........................................................ 81,147 79,242
Treasury stock, 1,448,735 and 1,224,661 shares, respectively, at cost.... (12,261) (10,286)
Total shareholders' equity........................................... 73,586 74,561
$ 88,494 $ 86,812
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands)
(Unaudited)
1997 1996
Cash Flows From Operating Activities
Net income.......................................................... $ 1,905 $ 1,220
Adjustments to reconcile net income to
cash provided by operating activities
Gain on sale of operating property, net......................... (55) (64)
Depreciation and amortization................................... 3,404 2,616
Provision for credit losses..................................... 722 611
Deferred tax provision.......................................... 1,697 697
Net increase (decrease) from change in other
working capital items affecting operating activities........... (3,997) (644)
3,676 4,436
Cash Flows From Investing Activities
Purchase of finance subsidiaries (Note 2)........................... -- (11,979)
Purchase of operating property...................................... (8,792) (6,370)
Origination of finance accounts receivable.......................... (95,626) (88,206)
Sale of finance accounts receivable................................. 62,871 30,140
Collection of owned finance accounts receivable..................... 30,520 59,711
Purchases of short-term investments................................. (10,411) (17,454)
Maturities of short-term investments................................ 17,116 39,628
Other............................................................... (743) (351)
(5,065) 5,119
Cash Flows From Financing Activities
Payments to acquire treasury stock.................................. (1,973) (4,982)
Payments for fractional shares from reverse stock split............. (427) --
Borrowings (repayments) on credit agreements, net................... 8 (335)
Other............................................................... 43 70
(2,349) (5,247)
Net Increase (Decrease) in Cash and Temporary Cash Investments........ (3,738) 4,308
Cash and Temporary Cash Investments at beginning of period............ 9,021 6,617
Cash and Temporary Cash Investments at end of period.................. $ 5,283 $ 10,925
Cash Paid During the Period for
Interest............................................................ $ -- $ 854
Income Tax.......................................................... $ 35 $ 92
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Total
Share
Common Paid-In Retained Treasury holders'
Stock Capital Earnings Stock Equity
Balance at December 31, 1995.................. $ 76 $ 5,357 $ 78,390 $ (3,543) $ 80,280
Net income.................................... -- -- 852 -- 852
Issuance of shares under Incentive Stock Plan. -- 172 -- (87) 85
Purchase of 797,341 shares of common stock.... -- -- -- (6,656) (6,656)
Balance at December 31, 1996.................. 76 5,529 79,242 (10,286) 74,561
Net income.................................... -- -- 1,905 -- 1,905
Fractional shares cancelled in reverse stock
split....................................... (1) (949) -- -- (950)
Issuance of shares under Incentive Stock Plan. -- 45 -- (2) 43
Purchase of 223,899 shares of common stock.... -- -- -- (1,973) (1,973)
Balance at September 30, 1997 (unaudited)..... $ 75 $ 4,625 $ 81,147 $(12,261) $ 73,586
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include TransFinancial Holdings, Inc.
("TransFinancial") and all of its subsidiary companies (the "Company").
Pursuant to the approval of shareholders the Company changed its name from
Anuhco, Inc. to TransFinancial Holdings, Inc. effective June 30, 1997. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The condensed financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") and have not been examined or reviewed by independent public
accountants. In the opinion of management, all adjustments necessary to fairly
present the results of operations have been made.
Pursuant to SEC rules and regulations, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from these statements unless significant changes have taken place since the end
of the most recent fiscal year. TransFinancial believes that the disclosures
contained herein, when read in conjunction with the financial statements and
notes included, or incorporated by reference, in TransFinancial's Form 10-K/A-3,
filed with the SEC on May 5, 1997, are adequate to make the information
presented not misleading. It is suggested, therefore, that these statements be
read in conjunction with the statements and notes included, or incorporated by
reference, in the aforementioned report on Form 10-K/A-3.
2. ACQUISITION OF PREMIUM FINANCE SUBSIDIARIES
On March 29, 1996, TransFinancial completed the acquisition of all of the
issued and outstanding stock of Universal Premium Acceptance Corporation and
UPAC of California, Inc. (together referred to as "UPAC"). UPAC and Agency
Premium Resource, Inc. ("APR"), the Company's other finance subsidiary, offer
short-term collateralized financing of commercial and personal insurance
premiums through approved insurance agencies throughout the United States. At
March 31, 1996, UPAC had outstanding net finance receivables of approximately
$30 million. This transaction was accounted for as a purchase. TransFinancial
utilized a portion of its available cash and short-term investments to
consummate the purchase at a price of approximately $12 million. The terms of
the acquisition and the purchase price resulted from negotiations between
TransFinancial and William H. Kopman, the former sole shareholder of UPAC. In
connection with the purchase of UPAC, the Company has recorded goodwill of $6.6
million, which is being amortized on the straight-line basis over 25 years.
In addition to the Stock Purchase Agreement by which TransFinancial acquired
all of the UPAC stock, the Company entered into a consulting agreement with Mr.
Kopman. Under the consulting agreement, TransFinancial is entitled to consult
with Mr. Kopman on industry developments as well as UPAC operations through
December 31, 1998. In addition to retaining the services of Mr. Kopman under a
consulting agreement, certain executive management personnel of UPAC were
retained under multiyear employment agreements.
The unaudited pro forma operating results of TransFinancial for the nine
months ended September 30, 1996, assuming the acquisition occurred as of the
beginning of the period, were operating revenues of $84,837,000, net income of
$1,205,000, and net income per share of $0.18. The pro forma results of
operations are not necessarily indicative of the actual results that would have
been obtained had the acquisition been made at the beginning of the period, or
of results which may occur in the future.
3. PROFIT SHARING
In September 1988, the employees of Crouse Cartage Company ("Crouse"), a
wholly owned subsidiary of TransFinancial, approved the establishment of a
profit sharing plan ("the Plan"). The Plan is structured to allow all employees
(union and non-union) to ratably share 50% of Crouse's income before income
taxes (excluding extraordinary items and gains or losses on the sale of assets)
in return for a 15% reduction in their wages. Plan distributions are made on a
quarterly basis. The Plan was recertified in 1991 and 1994, and shall continue
in effect through March 31, 1998, or until a replacement of the Collective
Bargaining Agreement is reached between the parties, whichever is later. The
accompanying consolidated balance sheets as of September 30, 1997 include an
accrual for profit sharing costs of $986,000. The accompanying consolidated
statements of income include profit sharing costs of $986,000 and $953,000 for
the third quarter of 1997 and 1996, and $2,812,000 and $2,142,000 for the first
nine months of 1997 and 1996.
4. FINANCING AGREEMENTS
In December, 1996, TransFinancial, UPAC and APR Funding Corporation (a wholly-
owned subsidiary) entered into an extendible three year securitization agreement
whereby undivided interests in a designated pool of accounts receivable can be
sold on an ongoing basis. The maximum allowable amount of receivables to be
sold under the agreement is $50,000,000. This agreement replaced a similar
securitization agreement with another financial institution that was entered
into in October, 1995 and UPAC's secured credit agreement, dated July, 1994.
The purchaser permits principal collections to be reinvested in new financing
agreements. The Company had securitized receivables of $34.8 million at
September 30, 1997. The cash flows from the sale of receivables are reported as
investing activities in the accompanying consolidated statement of cash flows.
The securitized receivables are reflected as sold in the accompanying balance
sheet. The proceeds from the initial securitization of the receivables were
used to purchase previous securitized receivables under the prior agreement and
to pay off the secured note payable under UPAC's secured credit agreement.
The terms of the agreement require UPAC to maintain a minimum tangible net
worth of $5 million and contain restrictions on the payment of dividends by UPAC
to TransFinancial without prior consent of the financial institution. The terms
of the agreement also require the Company to maintain a minimum consolidated
tangible net worth of $50 million. The Company was in compliance with all such
provisions at September 30, 1997. The terms of the securitization agreement
also require that UPAC maintain a default reserve at specified levels which
serves as collateral. At September 30, 1997, approximately $5.5 million of
owned finance receivables served as collateral under the default reserve
provision.
Effective January 1, 1997, the Company adopted the requirements of Statement
of Financial Accounting Standards No. 125 ("SFAS No. 125"), "Accounting for the
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,"
for transfers occurring after December 31, 1996. The adoption of SFAS No. 125
did not have a material impact on the net income of the Company.
In September 1988, Crouse entered into a multi-year credit agreement with a
commercial bank which provided for maximum borrowings equaling the lesser of
$2,500,000 or the borrowing base, as defined in such agreement. In September,
1996 the term of this agreement was extended to June 30, 1998. There was no
outstanding balance on this revolving line of credit at September 30, 1997.
5. SHAREHOLDERS' EQUITY
Income per share is based on the average number of common shares outstanding
during each period. The average number of common shares so computed was
6,110,841 and 6,609,287 for the quarters ended September 30, 1997 and 1996, and
6,267,549 and 6,877,995 for the first nine months of 1997 and 1996.
On June 26, 1995, the Company adopted a program to repurchase up to 10% of its
outstanding shares of common stock. During the second quarter of 1996, the
Company completed this initial repurchase program and expanded the number of
shares authorized to be repurchased by an additional 10% of its then outstanding
shares. During the third quarter and first nine months of 1997, the Company
repurchased an additional 93,848 shares and 223,899 shares of common stock,
bringing the total shares repurchased to 1,438,340 shares, or 19.0% of
outstanding shares before initiating the program, at a total cost of
$12,173,000.
On June 26, 1997, the shareholders of the Company approved a 1-for-100 reverse
stock split followed by a 100-for-1 forward stock split. These stock splits
were effected on July 1, 1997. The result of this transaction was the
cancellation of approximately 107,000 shares of common stock held by holders of
fewer than 100 shares at a market price of $8.89 per share.
6. AFS NET ASSETS
Under the provisions of a Joint Plan of Reorganization ("the Joint Plan"), AFS
is responsible for the administration of pre-July 12, 1991 creditor claims and
conversion of assets owned before that date. As claims were allowed and cash
was available, distributions to the creditors occurred. The Joint Plan also
provided for distributions to TransFinancial as unsecured creditor distributions
occurred in excess of 50% of allowed claims. TransFinancial also will receive
the full benefit of any remaining assets of AFS through its ownership of AFS
stock, after unsecured creditors received distributions, including interest,
equivalent to 130% of their claims.
AFS has made full payment of all its resolved claims and liabilities. The
remaining AFS net assets are estimated to have net realizable value of $8.2
million. The primary assets include approximately $6.7 million in cash and
investments. There are no material claims outstanding as of September 30, 1997.
The remaining AFS assets are recorded at their estimated net realizable value.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Third quarter and nine months ended September 30, 1997 compared to the third
quarter and nine months ended September 30, 1996
With the acquisition of APR on May 31, 1995, and UPAC on March 29, 1996,
TransFinancial now operates in two distinct industries; transportation, through
its subsidiary, Crouse; and financial services, through its subsidiaries, APR
and UPAC.
TRANSPORTATION
Operating Revenue - The changes in transportation operating revenue are
summarized in the following table (in thousands):
Qtr. 3 1997 Nine Months 1997
vs. vs.
Qtr. 3 1996 Nine Months 1996
Increase (decrease) from:
Increase in LTL tonnage........................ $3,485 $10,725
Increase in LTL revenue per hundredweight...... 1,623 3,100
Increase in truckload revenues................. 245 856
Net increase............................... $5,353 $14,681
Less-than-truckload ("LTL") operating revenues rose by 22.1% and 18.7% for the
third quarter and first nine months of 1997, as compared to the same periods in
1996. Crouse achieved increases of 15.0% and 16.6% in LTL tons for the third
quarter and first nine months of 1997, compared to 1996. Third quarter LTL
revenues, tons and shipments were increased during the recent Teamster strike
against UPS as Crouse met customers' needs for small parcel shipments. Crouse's
LTL revenue yield improved approximately 7.0% and 4.8%, from the third quarter
and first nine months of 1996 to the same periods of 1997. The third quarter
improvement in revenue yield was impacted substantially by the additional volume
of small parcel shipments handled. These improvements were also the result of a
general rate increase placed in effect January 1, 1997, negotiated rate
increases on certain shipping contracts and fuel surcharges to pass-through to
customers the continuing high cost of diesel fuel.
Truckload operating revenues were more than 5.2% and 6.3% higher in the third
quarter and nine months of 1997, on approximately 9% more shipments, offset by
slight declines in revenue per shipment.
Operating Expense - A comparative summary of transportation operating expenses
as a percent of transportation operating revenue follows:
Percent of Operating Revenue
Third Quarter Nine Months
1997 1996 1997 1996
Salaries, wages and employee benefits................... 57.0% 56.2% 56.8% 55.9%
Operating supplies and expenses.......................... 11.9% 12.1% 12.3% 12.8%
Operating taxes and licenses............................. 2.5% 2.6% 2.7% 2.8%
Insurance and claims..................................... 2.4% 2.0% 2.1% 2.0%
Depreciation............................................. 2.9% 2.5% 3.0% 2.5%
Purchased transportation................................. 20.3% 21.1% 20.0% 21.2%
Total operating expenses............................. 97.0% 96.5% 96.9% 97.2%
Crouse's operating expenses as a percentage of operating revenue, or operating
ratio, for the third quarter of 1997, was adversely impacted in three areas.
Crouse incurred unusually high insurance and claims costs on accidents and cargo
damage in the quarter. Crouse operating and administrative personnel devoted
significant man-hours, primarily on an overtime basis, in training and preparing
for the transition to the Crouse's new computer system. The transition to the
new system is expected to be complete by year-end. Lastly, Crouse incurred
incrementally greater variable costs due to the different handling
characteristics of the small parcel shipments (UPS strike impact) as compared to
the freight Crouse typically handles.
In spite of the above factors, Crouse's operating ratio improved for the first
nine months of 1997 as compared to 1996. An increase in the proportion of LTL
tons and revenues of total tons and revenues resulted in the increases in
salaries, wages and employee benefits and depreciation and the decrease in
purchased transportation as a percent of revenues. The improvement in the year-
to-date 1997 operating ratio is the result of spreading the fixed component of
the Company's operating expenses over increased operating revenues.
FINANCIAL SERVICES
In the third quarter and first nine months of 1997, APR and UPAC financed
$31.4 million and $94.8 million, respectively, in insurance premiums at average
annual yields of 14.1% and 14.4%. These operations generated net operating
income of $208,000 and $869,000, on net finance charges, fees and other income
earned of $1.9 million and $6.2 million for the third quarter and first nine
months of 1997. These results compare to third quarter and first nine months of
1996 financings of $32.3 million and $82.4 million at average annual yields of
14.9% and 14.5%, which produced an operating loss of $14,000 and operating
income of $73,000 on net finance charges, fees and other income earned
of $2.1 million and $5.1 million for the third quarter and first nine months of
1996, respectively. The increases in premium financed, net finance charges,
fees and other income are primarily the result of the Company's acquisition of
UPAC effective March 29, 1996, operating income was positively impacted by the
integration of the administrative operations of UPAC and APR. Also,
contributing to the increased operating income was the impact of the Company's
new securitization agreement and an increase in gain recognized on receivables
sold through that agreement by the inclusion of UPAC receivables. See Note 4 -
Financing Agreements in the Notes to Consolidated Financial Statements. UPAC's
operating income for the third quarter of 1997 was adversely impacted by a high
level of provision for credit losses in the quarter.
OTHER
Primarily as a result of its utilization of cash and short-term investments
for the acquisition of UPAC and the stock repurchase program since the first
quarter of 1996, TransFinancial recorded a substantial decrease in interest
income for the periods ended September 30, 1997, from the corresponding period
of 1996. TransFinancial's effective tax rate decreased for the third quarter
and first nine months of 1997, to 45% from 50% and 46% for the same periods of
1996.
Outlook
The following statements are forward-looking statements, within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and as such
involve risks and uncertainties which are detailed below under the caption
"Forward-Looking Statements".
The Company's three-year strategic plan includes the goal of continuing the
growth of each of its business segments, and making the financial services
segment a more equal contributor to the Company's earnings per share. In the
transportation segment, the plan calls for the Company to continue to provide
and improve upon its already superior service to its customers in its primary
operating territory, while extending its operations throughout the Midwest. As
the Company makes the strategic investments necessary to support this expansion,
the Company intends to continue to improve the efficiency and effectiveness of
its existing base of operations.
The financial services segment will also focus on increasing its market
penetration in certain states with substantial population and industrial base.
The additional volumes of premium finance contracts is expected to be handled
within the Company's existing administrative operations without incurring
significant additional fixed costs.
In addition to the expansion of its existing operations in each of its
business segments, the Company continues to consider potential acquisitions
which would complement these operations.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q which are
not statements of historical fact constitute forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
including, without limitation, the statements specifically identified as
forward-looking statements in this Form 10-Q. In addition, certain statements
in future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases, and in oral statements made by or with the
approval of an authorized executive officer of the Company which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Act. Examples of forward-looking statements include, but are not
limited to (i) projections of revenues, income or loss, earnings or loss per
share, capital expenditures, the payment or non-payment of dividends,
capital structure and other financial items, (ii) statements of plans and
objectives of the Company or its management or Board of Directors, including
plans or objectives relating to the products or services of the Company, (iii)
statements of future economic performance, and (iv) statements of assumptions
underlying the statements described in (i), (ii) and (iii). These forward-
looking statements involve risks and uncertainties which may cause actual
results to differ materially from those anticipated in such statements. The
following discussion identifies certain important factors that could affect the
Company's actual results and actions and could cause such results or actions to
differ materially from any forward-looking statements made by or on behalf of
the Company that related to such results or actions. Other factors, which are
not identified herein, could also have such an effect.
Transportation
Certain specific factors which may affect the Company's transportation
operation include: increasing competition from other regional and national
carriers for freight in the Company's primary operating territory; increasing
price pressure; changes in fuel prices; labor matters; including changes in
labor costs, and other labor contract issues; and, environmental matters.
Financial Services
Certain specific factors which may affect the Company's financial services
operation include: the performance of financial markets and interest rates; the
performance of the insurance industry; increasing competition from other premium
finance companies and insurance carriers for finance business in the Company's
key operating states; the successful acquisition and integration of additional
premium finance operations or receivables portfolios; and, the inability to
obtain continued financing at a competitive cost of funds.
New Venture
As described below under the caption "Financial Condition," the Company has
acquired an equity interest in a start-up venture formed to develop, lease
and/or sell equipment utilizing a new technology for particle reduction. This
venture and technology are subject to risks and uncertainties in addition to
those generally applicable to the Company's operations described herein. These
additional risks and uncertainties include the efficacy and commercial viability
of the new technology, the ability of the venture to market the new technology,
the acceptance of such technology in the marketplace, the general tendency of
large corporations to be slow to change from known technology to emerging new
technology, the venture's reliance on third parties to manufacture the equipment
utilizing the technology, the ability of the venture to protect its proprietary
information in the new technology and potential future competition from third
parties developing equivalent or superior technology. As result of these and
other risks and uncertainties, the future results of operations of the venture
are difficult to predict, and such results may be materially better or worse
than expected or projected.
General Factors
Certain general factors which could affect any or all of the Company's
operations include: changes in general business and economic conditions; changes
in governmental regulation, and; tax changes. Expansion of these businesses
into new states or markets is substantially dependent on obtaining sufficient
business volumes from existing and new customers in these new markets at
compensatory rates.
The cautionary statements made pursuant to Section 21E of the Securities
Exchange Act of 1934, as amended, are made as of the date of this Report and are
subject to change. The cautionary statements set forth in this Report are not
intended to cover all of the factors that may affect the Company's businesses in
the future. Forward-looking information disseminated publicly by the Company
following the date of this Report may be subject to additional factors hereafter
published by the Company.
FINANCIAL CONDITION
The Company's financial condition remained strong at September 30, 1997 with
more than $8.5 million in cash and investments at the TransFinancial level, as
well as approximately $6.7 million in cash and investments held in the
discontinued operation. In addition, during the first nine months of 1997, the
Company has purchased $8.8 million of operating property and equipment, without
incurring any significant long term indebtedness. Crouse has additional
commitments to purchase operating property and equipment at a cost of
approximately $5 million for delivery through first quarter 1998. These
purchases are expected to be funded from operating cash flows and available cash
and investments.
A substantial portion of the capital required for UPAC's insurance premium
finance operations has been provided through the sale of undivided interests in
a designated pool of receivables on an ongoing basis under receivables
securitization agreements. The current securitization agreement, which matures
December 31, 1999, currently provides for the sale of a maximum of $50 million
of eligible receivables. As of September 30, 1997, $34.8 million of such
receivables had been securitized.
On June 26, 1995, the Company adopted a program to repurchase up to 10% of its
outstanding shares of common stock. During the second quarter of 1996 the
Company completed this program and expanded the program to include an additional
10% of its then outstanding shares. During the first nine months of 1997, the
Company repurchased 223,899 shares of common stock bringing the total shares
repurchased to 1,438,340, or 19.0% of outstanding shares before initiating the
program, at a total cost of $12,173,000. This program is being funded from
available cash and investments.
On June 26, 1997, the shareholders of the Company approved a 1-for-100 reverse
stock split followed by a 100-for-1 forward stock split. These stock splits
were effected on July 1, 1997. The result of this transaction was the
cancellation of about 107,000 shares of common stock held by holders of fewer
than 100 shares at a market price of $8.89 per share.
Effective July 31, 1997, the Company entered into a subscription agreement
with a start-up venture, pursuant to which TransFinancial committed to a $2.9
million capital contribution over two years in exchange for the exclusive lease
and/or sale rights to equipment produced by, and a controlling interest in, the
venture. The venture owns rights to a proprietary, new technology for particle
reduction. The venture intends to market equipment utilizing this technology to
companies which would benefit from the use of sub-micron materials in their
manufacturing processes. Capital contributions through September 30, 1997 total
approximately $500,000. The initial phase of this venture will focus on
continued research, product development, establishing sources of supply,
recruiting and training personnel, developing markets and contracting for
production. The Company expects this operation to incur initial operating
losses during the remainder of 1997, and in 1998, which may be significant in
relation to its consolidated results of operations.*
*This is a forward-looking statement which involves risks and uncertainties that
are detailed under the caption "Forward-Looking Statements".
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Reference is made to Item 3 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996.
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(b)* Restated By-Laws of the Registrant
19(a)* Report to Shareholders for the Third Quarter, 1997, dated
November 12, 1997.
27* Financial Data Schedule.
* Filed herewith.
(b) Reports on Form 8-K -- None
(SIGNATURE)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TransFinancial Holdings, Inc.
Registrant
By: /s/Timothy P. O'Neil
Timothy P. O'Neil, President &
Chief Executive Officer
By: /s/ Mark A. Foltz
Mark A. Foltz
Vice President, Finance and
Secretary
Date: November 12, 1997
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
3(b) Restated By-Laws of the Registrant.
19(a) Report to Shareholders for the Third Quarter, 1997, dated November 12,
1997.
27 Financial Data Schedule.