TRANSFINANCIAL HOLDINGS, INC.
THIRD QUARTER 1997
REPORT TO SHAREHOLDERS
Our third quarter highlights included continued improvement in profitability
compared to 1996 by Crouse Cartage Company ("Crouse"), TransFinancial's general
commodities motor carrier, and Universal Premium Acceptance Corporation
("UPAC"), TransFinancial's insurance premium finance operation. For the third
quarter of 1997, TransFinancial increased net income to $569,000, or $0.09 per
share, on operating revenues of $35.2 million, compared to net income of
$505,000, or $0.08 per share on operating revenues of $30.0 million for the
third quarter of 1996.
Crouse earned operating income of $989,000 on revenues of $33.3 million in third
quarter 1997, compared to operating income of $981,000 on revenues of $27.9
million for third quarter 1996. This improvement was principally the result of
a 15% increase in less-than-truckload ("LTL") tons handled. In addition, Crouse
achieved a 7.0% increase in revenue yield on LTL freight through the combination
of a reduction in average shipment size due to the Teamster strike against UPS,
a general rate increase, negotiated increases in contracted rates and the
implementation of fuel surcharges. These improvements in revenues were offset
in part by increased insurance and claims costs due to accidents and cargo
damage during the quarter, increased overtime pay incurred in connection with
the transition to a new computer system and increased variable costs required to
handle the volume of small parcel shipments moved for customers during the
recent strike against UPS.
UPAC reported operating income of $208,000 on net finance charges, fees and
other income earned of $1.9 million, compared to an operating loss of $14,000 on
net finance charges, fees and other income earned of $2.1 for the third quarter
of 1996. The primary factors contributing to the improved profitability were
increased gain recognized on the sale of receivables through the new
securitization agreement and the integrated administrative operations.
We believe each of our operating segments made important progress toward its
strategic goals during the third quarter. Crouse continued to develop and
increase its operations in its expansion markets while meeting the challenge of
handling a substantial increase in small parcel shipments from existing
customers during the recent Teamster strike against UPS. UPAC maintained its
focus on providing superior customer service and increasing the productivity and
efficiency of its operations.
Effective July 31, 1997, we acquired the exclusive lease and/or sale rights to
equipment produced by, and a controlling interest in, a start-up venture in
exchange for a $2.9 million capital contribution over two years. 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. We expect this
operation to incur initial operating losses during the remainder of 1997, and in
1998, which may be significant in relation to consolidated results of
operations.
TransFinancial continues to maintain a strong balance sheet with cash and
investments of $8.5 million, excluding an additional $6.7 million included in
net assets of discontinued operations, and book value of $12.14 per share at
September 30, 1997. TransFinancial acquired 224,000 shares in the first nine
months of 1997 under its stock repurchase program.
Timothy P. O'Neil William D. Cox
President Chairman
November 12, 1997
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995
The Company's 1997 outlook and all other statements in this report other than
historical facts are forward-looking statements that involve risks and
uncertainties and are subject to change at any time. The Company derives its
forward-looking statements from forecasts which are based upon assumptions about
many important factors such as the relationship of demand and capacity in the
freight market, the performance of finance and insurance markets, prevailing
short-term interest rates, the risks and uncertainties inherent in a start-up
venture, general market conditions and competitive activities. While the
Company believes that its assumptions are reasonable, it cautions that there are
inherent difficulties in predicting the impact of certain factors, which could
cause actual results to differ materially from anticipated results. These
factors, as and when applicable, are discussed in the Company's filings with the
Securities and Exchange Commission, in particular its most recent Form 10-Q.
TRANSFINANCIAL HOLDINGS, INC.
UNAUDITED SUMMARY FINANCIAL STATEMENTS
(in thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME
Third Quarter and Nine Months Ended September 30, 1997 and 1996
Third Quarter Nine Months
1997 1996 1997 1996
Operating Revenues.............. $35,208 $30,041 $99,372 $ 83,604
Operating Expenses.............. 34,342 29,332 96,507 82,275
Operating Income................ 866 709 2,865 1,329
Nonoperating Income............. 181 297 611 931
Income Before Income Taxes...... 1,047 1,006 3,476 2,260
Income Tax Provision............ 478 501 1,571 1,040
Net Income...................... $ 569 $ 505 $ 1,905 $ 1,220
Net Income Per Share............ $ 0.09 $ 0.08 $ 0.30 $ 0.18
Average Common Shares Outstanding 6,111 6,609 6,268 6,878
CONSOLIDATED BALANCE SHEETS
09/30/97 12/31/96
ASSETS
Cash and Short-Term Investments. $ 8,535 $18,978
Finance Accounts Receivable, net 16,157 14,554
Freight Accounts Receivable, net 12,540 9,233
Other Current Assets............ 10,781 10,153
Total Current Assets.......... 48,013 52,918
Operating Property, net......... 30,634 23,390
Intangible and Other Assets..... 9,847 10,504
$88,494 $86,812
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Current Liabilities....... $12,260 $11,048
Deferred Income Taxes and
Other Liabilities............. 2,468 1,203
Shareholders' Equity............ 73,586 74,561
$88,494 $86,812
TransFinancial Holdings, Inc., 8245 Nieman Road, Suite 100, Lenexa, Kansas 66214
(913) 859-0055