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 March 31, 1998
[ ] 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 May 8, 1998
Common stock, $0.01 par value 6,031,437 Shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
(In thousands, except per share amounts)
(Unaudited)
1998 1997
Operating Revenues.......................................................... $ 37,003 $ 31,057
Operating Expenses.......................................................... 36,703 30,122
Operating Income............................................................ 300 935
Nonoperating Income (Expense)
Interest income, net..................................................... 16 215
Other.................................................................... 35 --
Total nonoperating income (expense).................................. 51 215
Income Before Income Taxes.................................................. 351 1,150
Income Tax Provision........................................................ 190 518
Net Income.................................................................. $ 161 $ 632
Basic and Diluted Earnings Per Share........................................ $ 0.03 $ 0.10
Basic Average Shares Outstanding............................................ 6,053 6,375
Diluted Average Shares Outstanding.......................................... 6,124 6,409
<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)
MARCH 31, DECEMBER 31,
1998 1997
ASSETS (Unaudited)
Current Assets:
Cash and temporary cash investments...................................... $ 3,291 $ 4,778
Short-term investments................................................... 525 3,543
Freight accounts receivable, less allowance
for doubtful accounts of $446 and $464............................... 15,793 14,909
Finance accounts receivable, less allowance
for doubtful accounts of $169 and $499............................... 15,576 14,016
Current deferred tax assets.............................................. 1,349 1
Other current assets..................................................... 2,724 1,831
AFS net assets (Note 5).................................................. 6,704 7,993
Total current assets................................................. 45,962 47,071
Operating Property, at Cost:
Revenue equipment........................................................ 34,485 32,275
Land..................................................................... 3,585 3,585
Structures and improvements.............................................. 10,512 10,506
Other operating property................................................. 9,431 9,624
58,013 55,990
Less accumulated depreciation........................................ (22,206) (22,969)
Net operating property........................................... 35,807 33,021
Intangibles, net of accumulated amortization................................ 9,055 9,243
Other Assets................................................................ 799 420
$ 91,623 $ 89,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Cash overdrafts.......................................................... $ 2,436 $ 754
Accounts payable......................................................... 4,350 2,855
Notes payable............................................................ 1,851 2,500
Accrued payroll and fringes.............................................. 6,315 5,956
Claims and insurance accruals............................................ 317 566
Accrued and current deferred income taxes................................ 112 --
Other accrued expenses................................................... 1,432 2,374
Total current liabilities............................................ 16,813 15,005
Deferred Income Taxes....................................................... 2,145 2,265
Shareholders' Equity
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 7,512,672 and 7,509,622 shares................................ 75 75
Paid-in capital.......................................................... 5,600 5,581
Retained earnings........................................................ 79,555 79,394
Treasury stock, 1,481,935 shares, at cost................................ (12,565) (12,565)
Total shareholders' equity........................................... 72,665 72,485
$ 91,623 $ 89,755
<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 THREE MONTHS ENDED MARCH 31,
(In thousands)
(Unaudited)
1998 1997
Cash Flows From Operating Activities
Net income.......................................................... $ 161 $ 632
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization................................... 1,292 1,078
Provision for credit losses..................................... 210 199
Deferred tax provision.......................................... (1,468) 105
Other........................................................... (15) --
Net increase (decrease) from change in other
working capital items affecting operating activities........... 756 (1,249)
936 765
Cash Flows From Investing Activities
Purchase of operating property...................................... (3,875) (3,146)
Origination of finance accounts receivable.......................... (32,295) (31,995)
Sale of finance accounts receivable................................. 20,085 20,512
Collection of owned finance accounts receivable..................... 10,473 9,965
Purchases of short-term investments................................. -- (6,868)
Maturities of short-term investments................................ 3,018 6,732
Other............................................................... (379) 230
(2,973) (4,570)
Cash Flows From Financing Activities
Cash overdrafts........................................................ 1,682 --
Payments to acquire treasury stock.................................. -- (199)
Repayments on credit agreements, net................................ (1,101) --
Other............................................................... (31) --
550 (199)
Net Decrease in Cash and Temporary Cash Investments................... (1,487) (4,004)
Cash and Temporary Cash Investments at beginning of period............ 4,778 9,021
Cash and Temporary Cash Investments at end of period.................. $ 3,291 $ 5,017
Cash Paid During the Period for
Interest............................................................ $ 48 $ --
Income Tax.......................................................... $ -- $ 4
<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, 1996.................. $ 76 $ 5,529 $ 79,242 $(10,286) $ 74,561
Net income.................................... -- -- 1,100 -- 1,100
Fractional shares cancelled in reverse stock
split....................................... (1) -- (948) -- (949)
Issuance of shares under Incentive Stock Plan. -- 52 -- (2) 50
Purchase of 257,099 shares of common stock.... -- -- -- (2,277) (2,277)
Balance at December 31, 1997.................. 75 5,581 79,394 (12,565) 72,485
Net Income.................................... -- -- 161 -- 161
Issuance of shares under Incentive Stock Plan. -- 19 -- -- 19
Balance at March 31, 1998 (unaudited)......... $ 75 $ 5,600 $ 79,555 $(12,565) $ 72,665
<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 AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include TransFinancial Holdings, Inc.
("TransFinancial") and all of its subsidiary companies (the "Company"). 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. The yearend condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. 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 in TransFinancial's Annual Report on Form 10-K, filed with the
SEC on March 30, 1998, 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 in the aforementioned report
on Form 10-K.
As of January 1, 1998, the Company prospectively increased the estimated
remaining lives of certain revenue equipment to reflect the Company's actual
utilization of such equipment. This change decreased depreciation and
amortization and increased operating income by approximately $150,000 for the
first quarter of 1998. Net income was increased by approximately $90,000 or
$.01 per share. This change will decrease depreciation and increase operating
income by approximately $500,000 for the remaining nine months of 1998 from
amounts which would have been recorded had the change not been made.
2. SEGMENT REPORTING
The Company operates in three business segments: transportation, financial
services, and industrial technology. Other items are shown in the table below
for purposes of reconciling to consolidated amounts.
First Operating Operating Total
($ in thousands) Quarter Revenues Income Assets
Transportation 1998 $ 35,547 $ 829 $ 51,304
1997 29,144 791 37,157
Financial Services 1998 1,420 (55) 24,114
1997 1,890 374 25,816
Industrial Technology 1998 -- (193) 691
1997 -- -- --
Total Segments 1998 36,967 581 76,109
1997 31,034 1,165 62,973
General Corporate and Other 1998 36 (281) 15,514
1997 23 (230) 25,221
Consolidated 1998 37,003 300 91,623
1997 31,057 935 88,194
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 will continue
in effect until a replacement of the Collective Bargaining Agreement is reached
between the parties. Crouse has continued to operate under the terms of its
Teamsters union contract which expired March 31, 1998, including the profit
sharing provisions, and is hopeful that the negotiation of a satisfactory
contract will occur in the near future. The accompanying consolidated balance
sheets as of March 31, 1998 include an accrual for profit sharing costs of
$747,000. The accompanying consolidated statements of income include profit
sharing costs of $747,000 and $778,000 for the first quarter of 1998 and 1997.
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. The purchaser permits principal
collections to be reinvested in new financing agreements. The Company had
securitized receivables of $34.1 million and $36.6 million at March 31, 1998 and
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 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 March 31, 1998. The terms of the securitization agreement also
require that UPAC maintain a default reserve at specified levels which serves as
collateral. At March 31, 1998, approximately $5.2 million of owned finance
receivables served as collateral under the default reserve provision.
In January 1998, Crouse entered into a three-year Secured Loan Agreement with
a commercial bank which provides for a $4.5 million working capital line of
credit loan ("Working Capital Line") and a $4.5 million equipment line of credit
loan ("Equipment Line"). There were no borrowings under the Equipment Line in
the quarter ended March 31, 1998. The following table summarizes activity under
the Working Capital Line in the quarter ended March 31, 1998 (in thousands,
except percentages):
First
Quarter
1998
Balance outstanding at end of period.................. $1,851
Average amount outstanding ........................... 1,977
Maximum month end balance outstanding................. 2,752
Interest rate at end of period........................ 8.5%
Weighted average interest rate........................ 8.5%
5. 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 assets were estimated to have net realizable value of $7.1 million
at March 31, 1998. The primary assets include approximately $6.8 million in
cash and investments. There are no material claims outstanding as of March 31,
1998.
On April 24, 1998, the lawsuit against TransFinancial, AFS and certain
directors and officers of those companies by a former employee of AFS was
settled with no material impact on the Company's financial position or results
of operations.
On April 30, 1998, AFS paid a dividend to TransFinancial of substantially all
of its remaining net assets, including approximately $6.5 million of cash and
investments.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
First quarter ended March 31, 1998 compared to the first quarter March 31, 1997
TransFinancial operates primarily in three distinct segments; transportation,
through its subsidiary, Crouse; and financial services, through its subsidiary,
UPAC; and industrial technology, through its subsidiary, Presis.
TRANSPORTATION
Operating Revenue - The changes in transportation operating revenue are
summarized in the following table (in thousands):
Qtr. 1 1998
vs.
Qtr. 1 1997
Increase (decrease) from:
Increase in LTL tonnage........................ $4,399
Increase in LTL revenue per hundredweight...... 249
Increase in truckload revenues................. 1,755
Net increase............................... $6,403
Less-than-truckload ("LTL") operating revenues rose by 18.9% for the first
quarter of 1998, as compared to the same period in 1997. Crouse achieved an
increase of 17.9% in LTL tons for the first quarter of 1998, compared to 1997.
Crouse's LTL revenue yield improved approximately 1.0% from the first quarter of
1997 to the same period of 1998. The first quarter improvement in revenue yield
was the result of a general rate increase placed in effect January 1, 1998 and
negotiated rate increases on certain shipping contracts, offset in part by
reductions or elimination of fuel surcharges in place in the first quarter of
1997 to recover the high cost of diesel fuel in that period.
Truckload operating revenues were more than 38.2% higher in the first quarter
of 1998, on approximately 38% more shipments, reflecting increased strength in
the meat industry.
Operating Expense - A comparative summary of transportation operating expenses
as a percent of transportation operating revenue follows:
Percent of Operating Revenue
First Quarter
1998 1997
Salaries, wages and employee benefits.................... 58.0% 56.6%
Operating supplies and expenses.......................... 11.3% 13.2%
Operating taxes and licenses............................. 2.4% 2.9%
Insurance and claims..................................... 2.0% 2.0%
Depreciation............................................. 2.4% 3.0%
Purchased transportation................................. 21.6% 19.6%
Total operating expenses............................. 97.7% 97.3%
Crouse's operating expenses as a percentage of operating revenue, or operating
ratio, was higher for the first quarter of 1998, as compared to the first
quarter of 1997, as a result of the Company's substantial investments in 1997 to
expand Crouse's service area to include Ohio, Michigan and Kentucky and to
modernize the Company's fleet and management information systems. Crouse's
operating expenses were positively impacted by approximately $150,000 as a
result of a change in accounting estimate of the remaining useful lives of
certain revenue equipment. This change is expected to decrease operating
expenses by approximately $500,000 for the remaining nine months of 1998.
FINANCIAL SERVICES
For the first quarter of 1998, UPAC reported an operating loss of $55,000 on
net financial services revenue of $1.4 million, as compared to operating income
of $374,000 on net financial services revenue of $1.9 million for the first
quarter of 1997. The decrease in net financial services revenue and operating
income was the result of reduced average total receivables outstanding, a lower
average yield on finance contracts and a slight increase in the Company's cost
of funds.
INDUSTRIAL TECHNOLOGY
In the first quarter of 1998, Presis, the Company's start-up industrial
technology business recognized operating expenses of $193,000, primarily in
salaries, wages and employee benefits. In its initial phase Presis 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 generate minimal, if any,
revenues and to incur operating losses in the remainder of 1998, which are
likely to be material in relation to its consolidated results of operations.
OTHER
Net interest income decreased in the first quarter of 1998 as compared to the
first quarter of 1997 as a result of reduced average balances invested and
interest expense on borrowed funds under Crouse's Working Capital Line.
TransFinancial's effective income tax rate for the first quarter of 1998 was 54%
as compared to 45% for the same period of 1997. This increase was the result of
the greater significance of non-deductible intangibles amortization relative to
reduced pre-tax income.
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 has developed a three-year strategic plan with the goals 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 its initial phase Presis 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 generate minimal, if any, revenues and to incur operating losses in
the remainder of 1998, which are likely to be material in relation to its
consolidated results of operations.
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: competition from other regional and national carriers for
freight in the Company's primary operating territory; price pressure; changes in
fuel prices; labor matters; including changes in labor costs, and other labor
contract issues resulting from the negotiation of a new contract to replace the
current contract which expired March 31, 1998, 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; competition from other premium finance
companies and insurance carriers for finance business in the Company's key
operating states resulting adverse changes in interest rates in states in which
the Company operates; greater than expected credit losses; the acquisition and
integration of additional premium finance operations or receivables portfolios;
and, the inability to obtain continued financing at a competitive cost of funds.
Industrial Technology
As described below under the caption "Financial Condition," the Company has
acquired an equity interest in a start-up business formed to develop, sell
and/or finance equipment utilizing an industrial technology for dry particle
processing. This technology is 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 technology, the ability of the venture to market the
technology, the acceptance of such technology in the marketplace, the general
tendency of large corporations to be slow to change from known technology, the
business' reliance on third parties to manufacture the equipment utilizing the
technology, the ability to protect its proprietary information in the 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.
Other Matters
With respect to statements in this Report which relate to the current
intentions of the Company and its subsidiaries or of management of the Company
and its subsidiaries, such statements are subject to change by management at any
time without notice.
With respect to statements in "Financial Condition" regarding the adequacy of
the Company's capital resources, such statements are subject to a number of
risks and uncertainties including, without limitation: the future economic
performance of the Company (which is dependent in part upon the factors
described above); the ability of the Company and its subsidiaries to comply with
the covenants contained in the financing agreements; future acquisitions of
other businesses not currently anticipated by management of the Company; and
other material expenditures not currently anticipated by management.
With respect to statements in "Financial Condition" regarding the adequacy of
the allowances for credit losses, such statements are subject to a number of
risks and uncertainties including, without limitation: greater than expected
defaults by customers, fraud by insurance agents and general economic
conditions.
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 March 31, 1998 with
no long-term debt and more than $3.8 million in cash and investments at the
TransFinancial level, as well as approximately $6.8 million in cash and
investments held in the discontinued operation. Effective April 30, 1998, AFS
paid a dividend to TransFinancial of substantially all of its remaining net
assets, including approximately $6.5 million of cash and investments. In
addition, during the first quarter of 1998, the Company has purchased $3.9
million of operating property and equipment, without incurring any long-term
indebtedness. The Company has additional commitments to purchase operating
property and equipment at a cost of approximately $600,000 for delivery through
May 1998. These purchases are expected to be funded from operating cash flows
and available cash and investments. In addition, the Company expects to acquire
approximately $1.9 million of operating equipment through a long-term operating
lease by December 31, 1998.
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 March 31, 1998, $34.1 million of such
receivables had been securitized.
In January 1998, Crouse entered into a three-year Secured Loan Agreement with
a commercial bank which provides for a $4.5 million working capital line of
credit loan ("Working Capital Line") and a $4.5 million equipment line of
credit loan ("Equipment Line"). There were no borrowings under the Equipment
Line in the quarter ended March 31, 1998. As of March 31, 1998, a balance of
$1.9 million was outstanding under the Working Capital Line.
Effective July 31, 1997, the Company entered into a subscription agreement
with a start-up business, Presis, L.L.C., pursuant to which TransFinancial
committed to a $2.9 million capital contribution over two years in exchange for
the exclusive finance and/or sale rights to equipment produced by, and a
controlling interest in, Presis. Presis owns rights to a proprietary,
industrial technology for dry particle processing. Presis intends to market
equipment utilizing this technology to companies which would benefit from the
use of dry particle processing in their manufacturing processes. Capital
contributions through March 31, 1998 total approximately $1.0 million. In its
initial phase, Presis 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 1998, which are likely to
be material in relation to its consolidated results of operations.
On April 8, 1998, 70% of the voting members of the International Brotherhood
of Teamsters ("Teamsters Union") approved a new national contract effective
April 1, 1998 for five years. The new national contract provides, among other
things, for a first year $750 bonus in lieu of a pay increase and total wage,
pension and health and welfare increases of approximately 2.8% per year.
Crouse, along with certain other regional carriers, has elected to bargain
independently with the Teamsters Union. While the Teamsters Union has not yet
commenced negotiations with Crouse, the Company is hopeful that it will be able
to negotiate a satisfactory contract in the near future. There can be, however,
no assurance that Crouse will be able to negotiate a new contract with the
Teamsters Union, or that work stoppages will not occur, or that the terms of any
such contract, including the profit sharing program, will not be substantially
less favorable than those of the existing contract. If a work stoppage should
occur, Crouse's customer base would be put at risk inasmuch as its competition
would have a continuing operating advantage. Any of these actions could have a
material adverse effect on the Company's business, financial condition,
liquidity or results of operations.
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, 1997.
On April 24, 1998, the lawsuit against TransFinancial, AFS and certain
directors and officers of those companies by a former employee of AFS was
settled with no material impact on the Company's financial position or results
of operations.
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders
(a) Annual Meeting of Shareholders was held on April 27, 1998.
(b) The nominees for the board of directors previously reported to the
Commission in the Company's Proxy Statement were elected.
(c) The matters voted upon at the Annual Meeting were as follows:
(1) The adoption of the TransFinancial Holdings, Inc. 1998 Long-Term
Incentive Plan was approved with 2,639,859 shares voting for, 995,883
shares voting against, 27,767 shares abstaining and 1,729,183 shares
delivered by brokers not voted.
(2) All seven nominees for director were elected as follows:
Shares Voted
Nominees For Withheld
William D. Cox 5,175,426 217,266
Lawrence D. ("Larry") Crouse 5,065,653 327,039
J. Richard Devlin 5,160,065 232,627
Harold C. Hill, Jr. 5,176,841 215,851
Roy R. Laborde 5,061,053 331,639
Timothy P. O'Neil 5,157,713 234,979
Clark D. Stewart 5,171,414 221,278
(3) The selection of Coopers & Lybrand L.L.P. as independent public
accountants was ratified with 5,307,929 shares voting for 70,082 shares
voting against, and 14,681 shares abstaining.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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: May 15, 1998
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
27 Financial Data Schedule.