UNITED STATES
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 - May 29, 1998
TRANSFINANCIAL HOLDINGS, INC.
State of Incorporation - Delaware
Commission File No. - 0-12321
IRS Employer Identification No. - 46-0278762
8245 Nieman Road, Suite 100
Lenexa, Kansas 66214
(Address of Principal Executive Offices)
Telephone Number - (913) 859-0055
ITEM 2. ACQUISITION OR DISPOSITON OF ASSETS
On May 29, 1998, TransFinancial Holdings, Inc. ("TransFinancial" or "the
Company") announced that Universal Premium Acceptance Corporation ("UPAC"), its
insurance premium finance subsidiary, had completed the acquisition of all of
the issued and outstanding stock of Oxford Premium Finance, Inc. ("Oxford").
Oxford offers short-term collateralized financing of commercial insurance
premiums through approved insurance agencies in 17 states throughout the United
States. At March 31, 1998, Oxford had outstanding net finance receivables of
approximately $21.7 million. This transaction will be accounted for as a
purchase. UPAC sold an additional $4.2 million of its receivables under its
receivable securitization agreement to obtain funds to consummate the purchase.
Concurrently with the closing of the acquisition, UPAC amended its receivables
securitization agreement to increase the maximum allowable amount of receivables
to be sold under the agreement from $50 million to $65 million and to permit the
sale of Oxford's receivables under the agreement. Effective on May 29, 1998,
Oxford sold approximately $19 million of its receivables under the
securitization agreement using the proceeds to repay the balance outstanding
under its prior financing arrangement. The terms of the acquisition and the
purchase price resulted from negotiations between UPAC and Oxford Bank & Trust
Company, the former sole shareholder of Oxford.
In addition to the stock purchase agreement, UPAC entered into employment
agreements with certain marketing and operating personnel of Oxford to ensure
continuity of service and relationships with Oxford's key insurance agencies.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
INDEX TO FINANCIAL STATEMENTS
Page
(a) Historical Financial Statements of Oxford Premium
Finance, Inc. (business acquired)
Condensed Interim Financial Statements (Unaudited)
Condensed Balance Sheet as of March 31, 1998 4
Condensed Statement of Income for the three months
ended March 31, 1998 5
Condensed Statement of Cash Flows for the three months
ended March 31, 1998 6
Notes to Condensed Interim Financial Statements 7
Annual Financial Statements
Independent Auditor's Report 8
Balance Sheet as of December 31, 1997 9
Statement of Income for the year ended
December 31, 1997 10
Statement of Changes in Stockholder's Equity for the
year ended December 31, 1997 11
Statement of Cash Flows for the year ended
December 31, 1997 12
Notes to Financial Statements 13
(b) Condensed Pro Forma Financial Statements (Unaudited)
Description of Pro Forma Financial Statements 16
Condensed Pro Forma Balance Sheet as of March 31, 1998 17
Condensed Pro Forma Statement of Income for the year ended
December 31, 1997 18
Condensed Pro Forma Statement of Income for the three months
ended March 31, 1998 19
(c) Exhibits
2(a) Stock Purchase Agreement by and between Universal
Premium Acceptance Corporation and Oxford Bank and
Trust Company, dated April 29, 1998.
10(a)Amendment No. 4 to Receivables Purchase Agreement by
and among APR Funding Corporation, Universal Premium
Acceptance Corporation, TransFinancial Holdings, Inc.,
EagleFunding Capital Corporation and BankBoston, N.A.,
dated May 29, 1998.
OXFORD PREMIUM FINANCE, INC.
CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(Unaudited)
(in thousands)
ASSETS
Current Assets
Finance accounts receivables $21,708
Other 60
Total current assets 21,768
Net Operating Property 79
Total Assets $21,847
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities -
Accounts payable $ 640
Line of credit, related party 18,463
Other current liabilities 13
Total current liabilities 19,116
Shareholder's Equity 2,731
Total Liabilities and Shareholder's Equity $21,847
<FN>
The accompanying notes to condensed financial statements are an integral part of this statement.
OXFORD PREMIUM FINANCE, INC.
CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(in thousands)
Interest and Other Fees $ 634
Interest Expense 342
Net interest income before provision for loan loses 292
Provision for Loan Losses 24
Net interest income 268
Operating and Administrative Expenses:
Salaries, wages & employee benefits 124
Operating supplies & expenses 95
Depreciation & amortization 11
Total operating and administrative expenses 230
Income Before Income Taxes 38
Income Tax Provision 12
Net Income $ 26
<FN>
The accompanying notes to condensed financial statements are an integral part of this statement.
OXFORD PREMIUM FINANCE, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(in thousands)
Cash Flows From Operating Activities
Net income $ 26
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11
Provision for loan losses 24
Other 66
NET CASH PROVIDED BY OPERATING ACTIVITIES 127
Cash Flows From Investing Activities
Purchase of furniture and equipment (6)
Insurance premium finance loans made to customers
net of principal collections and amounts due to
insurance companies and insured (314)
NET CASH USED IN INVESTING ACTIVITIES (320)
Cash Flows From Financing Activities
Net advances on line of credit 193
NET CASH PROVIDED BY FINANCING ACTIVITIES 193
Net increase in cash -
Cash:
Beginning -
Ending $ -
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 342
<FN>
The accompanying notes to condensed financial statements are an integral part of this statement.
OXFORD PREMIUM FINANCE INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) Condensed Financial Statements:
The condensed financial statements of Oxford Premium Finance Inc. ("Oxford")
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 present fairly 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. In the opinion of management the disclosures contained
herein, when read in conjunction with financial statements and notes included in
Oxford's 1997 audited financial statements filed herewith 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 with
those financial statements.
(2) Acquisition:
Oxford, a premium finance company was a wholly-owned subsidiary of Oxford Bank &
Trust Company ("Oxford Bank"). On April 29, 1998 Oxford Bank entered into an
agreement for the sale of 100% of the issued and outstanding shares of common
stock of Oxford to Universal Premium Acceptance Corporation, a wholly-owned
subsidiary of TransFinancial Holdings Inc.
The accompanying financial statements do not reflect the costs associated with
the sale.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Oxford Premium Finance, Inc.
Addison, Illinois
We have audited the accompanying balance sheet of Oxford Premium Finance, Inc.
as of December 31, 1997, and the related statements of income, changes in
stockholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oxford Premium Finance, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ McGLADREY & PULLEN LLP
Schaumburg, Illinois
January 9, 1998
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Insurance premium finance receivables, net $ 21,387,468
Deferred tax assets 12,000
Prepaid expenses and other assets 117,294
Furniture and equipment 287,097
Less accumulated depreciation 203,467
83,630
TOTAL ASSETS $ 21,600,392
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Line of credit, related party $ 18,269,759
Amounts due to insurance companies and insured 609,466
Accrued expenses 16,193
Income taxes payable 102
18,895,520
Stockholder's Equity
Common stock, no par value, 10,000 shares authorized;
100 shares issued and outstanding 100
Additional paid-in capital 2,165,000
Retained earnings 539,772
2,704,872
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 21,600,392
<FN>
See Notes to Financial Statements.
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
Interest and other fees $ 2,555,475
Interest expense 1,407,095
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 1,148,380
Provision for loan losses 92,300
NET INTEREST INCOME 1,056,080
Other expenses:
Salaries and employee benefits 544,451
Depreciation 44,848
Other 389,764
979,063
INCOME BEFORE INCOME TAXES 77,017
Income tax expense 19,180
NET INCOME $ 57,837
<FN>
See Notes to Financial Statements.
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1997
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earning
Balance, December 31, 1996 100 $ 100 $ 2,165,000 $ 481,935
Net income - - - 57,837
Balance, December 31, 1997 100 $ 100 $ 2,165,000 $ 539,772
<FN>
See Notes to Financial Statements.
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
Cash Flows From Operating Activities
Net income $ 57,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 44,848
Provision for loan losses 92,300
(Increase) in prepaid expenses and deposits (8,631)
(Decrease) in income taxes payable (49,768)
Increase (decrease) in accrued expenses 12,650
NET CASH PROVIDED BY OPERATING ACTIVITIES 149,236
Cash Flows From Investing Activities
Purchases of furniture and equipment (11,435)
Insurance premium finance loans made to customers,
net of principal collections and amounts due to
insurance companies and insured (653,137)
NET CASH (USED IN) INVESTING ACTIVITIES (664,572)
Cash Flows From Financing Activities
Net (repayments) advances on line of credit
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 515,336
NET INCREASE IN CASH -
Cash:
Beginning -
Ending $ -
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 1,407,095
<FN>
See Notes to Financial Statements.
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Oxford Premium Finance, Inc. finances insurance premiums for businesses located
primarily in the midwest or southeastern United States. The Company maintains
its corporate and main sales office in Addison, Illinois, and has a sales office
in Atlanta, Georgia.
Oxford Bank & Trust (the Bank), which is a wholly owned subsidiary of Oxford
Financial Corporation, is the sole stockholder of Oxford Premium Finance, Inc.
Significant accounting policies are as follows:
Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the year. Actual results could differ from those estimates.
Insurance premium finance receivables: The receivables are reported at the
amount of unpaid principal. Unearned finance charges are reported separately as
a reduction of the receivable balance. Finance charges are recognized as income
over the term of the receivable using the sum-of-the-months digits method, which
approximates the interest method. Late fees are reported as income when
collected.
The allowance for finance receivable losses is maintained at a level considered
adequate to provide for potential finance receivable losses. The Company
estimates its allowance for finance receivable losses based upon industry and
its own historical charge-off trends as well as a case-by-case analysis of
specific receivables. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions.
Furniture and equipment: Furniture and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets of five to seven years.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
NOTES TO FINANCIAL STATEMENTS
NOTE 2. INSURANCE PREMIUM FINANCE RECEIVABLES
The insurance premium finance receivables are generally for terms of nine
months, with a down payment of at least twenty percent of the total premium paid
to the insurance carrier at the time the policy is written. If the customer
becomes delinquent on the contract, the Company notifies the insurance company,
the insurance is canceled and the unearned premium is refunded to the Company.
Generally the unearned premium refunded is equal to or greater than the balance
due on the contract. The Company, however, could incur a loss if the insurance
company is not timely notified on policy cancellations. Also, a loss can occur
if the unearned premium refund is less than the balance due on the contract and
the shortfall is not recovered from the customer.
The Company has a significant amount of credit exposure to the insurance
industry. Diversification of the premium finance receivables by insurance
carrier tends to reduce the overall risk by minimizing the adverse impact of any
single event or set of occurrences.
The composition of receivables is as follows as of December 31, 1997:
Insurance premium finance receivables $21,860,320
Less:
Unearned finance charges (392,707)
Allowance for loan losses (80,145)
Insurance premium finance receivables, net $21,387,468
Changes in the allowance for loan losses for the year ended December 31, 1997,
are summarized as follows:
Balance, beginning $ 80,000
Provision charged to operations 92,300
Loans charged off (98,246)
Recoveries 6,091
Balance, ending $ 80,145
OXFORD PREMIUM FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF OXFORD BANK & TRUST)
NOTES TO FINANCIAL STATEMENTS
NOTE 3. LINE OF CREDIT
The line of credit is unsecured and is due on demand to Oxford Bank & Trust.
Interest is at the Bank's prime lending rate less .75%. The prime lending rate
at December 31, 1997, was 8.5%.
The loan arrangement with Oxford Bank & Trust provides that, as checks issued by
the Company are presented for payment, the bank automatically honors the checks
with advances under the line of credit. At December 31, 1997, outstanding
checks of $389,548 are included in the amount due under the line of credit.
NOTE 4. RELATED PARTY TRANSACTIONS
Oxford Financial Corporation's majority stockholder also owns 100% of a company
placing business with the Company. The total finance charges from business
placed by this related party were $200,117 in 1997.
The Company is provided office space and certain administrative support by
Oxford Bank & Trust at no charge.
NOTE 5. INCOME TAX MATTERS
The deferred tax asset results primarily from differences in the basis of
equipment and the allowance for loan losses.
No valuation allowance was considered necessary.
For the year ended December 31, 1997, $19,180 in income tax expense is currently
paid or payable.
NOTE 6. PROFIT- SHARING PLAN
The Company has a defined contribution 401(k) plan which covers substantially
all employees. Participants make tax deferred contributions. The Company matches
contributions equal to 50% of each participant's contribution up to 6% of wages.
Contributions to the plan were $10,795 for the year ended December 31, 1997.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
DESCRIPTION OF CONDENSED PRO FORMA FINANCIAL STATEMENTS
On May 29, 1998 TransFinancial Holdings, Inc. ("TransFinancial") through its
wholly-owned subsidiary, Universal Premium Acceptance Corporation ("UPAC")
completed the acquisition of all of the issued and outstanding stock of Oxford
Premium Finance, Inc. ("Oxford"). The purchase price was approximately $4.2
million. This transaction will be accounted for as a purchase.
The entities involved in the pro forma financial statements are TransFinancial
and Oxford. TransFinancial's and Oxford's normal fiscal year is a calendar year
ending December 31.
The pro forma balance sheet was prepared using the historical balance sheets of
TransFinancial and Oxford as of March 31, 1998 assuming the acquisition occurred
on that date. TransFinancial previously reported its information on Form 10-Q.
The fiscal year ending December 31, 1997 and three months ending March 31, 1998
pro forma income statements were prepared using the historical income statements
of TransFinancial and Oxford for the year ended December 31, 1997 and three
months ended March 31, 1998, assuming the acquisition occurred on January 1,
1997, and January 1, 1998, respectively. TransFinancial's historical
information was previously reported on Form 10-K and Form 10-Q, respectively.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(Unaudited)
(in thousands)
Historical Pro Forma Pro Forma
TransFinancial Oxford Combined Adjustments Combined
Current Assets
Cash & short term investments $ 3,816 $ - $ 3,816 $ - $ 3,816
Finance accounts receivable 15,576 21,708 37,284 (262) (1) 14,380
(18,463) (2)
(4,179) (3)
Freight accounts receivable 15,793 - 15,793 15,793
Current deferred tax asset 1,349 - 1,349 285 (1) 1,634
Other current assets 2,724 60 2,784 (23) (1) 2,761
AFS net assets 6,704 - 6,704 - 6,704
Total current assets 45,962 21,768 67,730 (22,642) 45,088
Net Operating Property 35,807 79 35,886 (65) (1) 35,821
Intangibles and Other Assets 9,854 - 9,854 428 (1) 11,730
1,448 (3)
$ 91,623 $ 21,847 $ 113,470 $ (20,831) $ 92,639
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash overdrafts $ 2,436 $ - $ 3,055 $ - $ 2,436
Accounts payable 4,350 640 4,990 4,990
Secured notes payable 1,851 18,463 19,695 (18,463) (2) 1,851
Other accrued expenses 8,176 13 8,189 363 (1) 8,552
Total current liabilities 16,813 19,116 35,929 (18,100) 17,829
Deferred Income Taxes 2,145 - 2,145 2,145
Shareholders' Equity 72,665 2,731 75,396 (2,731) (3) 72,665
$ 91,623 $ 21,847 $ 113,470 $ (20,831) $ 92,639
<FN>
This proforma balance sheet should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial
Statements and the Registrant's financial statements contained in its Form 10-Q and Form 10-K filings.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
(in thousands, except per share amounts)
Historical Pro Forma Pro Forma
TransFinancial Oxford Combined Adjustments Combined
Operating Revenue $ 133,687 $ 1,148 $ 134,835 $ 24 (3) $ 134,859
Operating Expenses:
Salaries, wages & employee
benefits 74,622 544 75,166 (202) (2) 74,964
Operating supplies & expenses 19,605 390 19,995 19,995
Provision for credit losses 950 92 1,042 1,042
Operating taxes & licenses 3,324 3,324 3,324
Insurance & claims 3,051 3,051 3,051
Depreciation & amortization 4,758 45 4,803 125 (1) 4,888
(40) (2)
Purchased transportation 25,441 25,441 25,441
Total operating expenses 131,751 1,071 132,822 (117) 132,705
Operating Income 1,936 77 2,013 141 2,154
Nonoperating Income (Expense) 689 - 689 - 689
Income Before Income Taxes 2,625 77 2,702 141 2,843
Income Tax Provision 1,525 19 1,544 107 (4) 1,651
Net Income $ 1,100 $ 58 $ 1,158 $ 34 $ 1,192
Basic Average
Shares Outstanding 6,214 6,214
Basic Earnings Per Share $ 0.18 $ 0.19
Diluted Average
Shares Outstanding 6,266 6,266
Diluted Earnings Per Share $ 0.18 $ 0.19
<FN>
This pro forma statement of income should be read in conjunction with the related Description and Notes to Condensed Pro Forma
Financial Statements and the Registrant's financial statements contained in its Form 10-Q and Form 10-K filings with the Commission.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(in thousands, except per share amounts)
Historical Pro Forma Pro Forma
TransFinancial Oxford Combined Adjustments Combined
Operating Revenue $ 37,003 $ 292 $ 37,295 $ 4 (3) $ 37,299
Operating Expenses:
Salaries, wages & employee
benefits 21,647 124 21,771 (50) (2) 21,721
Operating supplies & expenses 5,002 95 5,097 5,097
Provision for credit losses 93 24 117 117
Operating taxes & licenses 845 - 845 845
Insurance & claims 746 746 746
Depreciation & amortization 1,292 11 1,303 31 (1) 1,324
(10) (2)
Purchased transportation 7,078 - 7,078 7,078
Total operating expenses 36,703 254 36,957 (29) 36,928
Operating Income 300 38 338 33 371
Nonoperating Income (Expense) 51 - 51 - 51
Income Before Income Taxes 351 38 389 33 422
Income Tax Provision 190 12 202 26 (4) 228
Net Income $ 161 $ 26 $ 187 $ 7 $ 194
Basic Average
Shares Outstanding 6,053 6,053
Basic Earnings Per Share $ 0.03 $ 0.03
Diluted Average
Shares Outstanding 6,124 6,124
Diluted Earnings Per Share $ 0.03 $ 0.03
<FN>
This pro forma statement of income should be read in conjunction with the related Description and Notes to Condensed Pro Forma
Financial Statements and the Registrant's financial statements contained in its Form 10-Q and Form 10-K filings with the Commission.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
1. These Notes to Condensed Pro Forma Financial Statements are not intended to
disclose all data of significance related to the historical financial statements
of the entities. The Notes and the related Condensed Pro Forma Financial
Statements should be read in conjunction with the historical interim and annual
financial statements of TransFinancial Holdings, Inc. ("TransFinancial") filed
with the Commission on Forms 10-Q and 10-K. TransFinancial knows of no material
non-recurring credits or charges from the acquisition of Oxford Premium Finance,
Inc. ("Oxford") from Oxford Bank & Trust Company that will be included in
TransFinancial's statement of income subsequent to May 29, 1998 (the date of
acquisition).
2. Pro Forma balance sheet adjustments
See Description of Condensed Pro Forma Financial Statements for a
description of the historical balance sheets used to prepare the Condensed Pro
Forma Balance Sheet. The following descriptions correspond to the numbering of
the adjustments set forth on the Condensed Pro Forma Balance Sheet.
(1) The historical carrying values of certain assets and liabilities have
been adjusted to the estimated fair value of such assets and liabilities as
follows; the finance accounts receivables of Oxford were adjusted to their
estimated fair market value; a reserve had been provided for the fair value of
furniture and other equipment; deferred tax assets relating to reserves
provided; and, liabilities have been established at fair value for certain
compensation and benefits payable to employees of Oxford and other commitments
resulting from the acquisition.
(2) Concurrent with the closing of the acquisition, UPAC amended its
receivable securitization agreement to permit the sale of Oxford's finance
receivables under the arrangement. Effective at closing Oxford sold a portion
of its receivables with the proceeds utilized to repay the balance outstanding
under its former line of credit.
(3) To record the acquisition as follows:
(in thousands)
Purchase price paid to Oxford shareholder $ 4,178
Fair value of assets acquired and liabilities assumed 2,302
Intangibles acquired, including goodwill $ 1,876
UPAC sold additional eligible receivables under its securitization agreement
with the proceeds utilized to pay the purchase price to Oxford's sole
shareholder.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
3. Pro Forma income statement adjustments.
See Description of Condensed Pro Forma Financial Statements for a description of
the historical income statements used to prepare the Condensed Pro Forma
Income Statements. For consistency of presentation, the historical operating
revenues of Oxford are shown net of interest expense on borrowings secured by
finance receivables. The following descriptions correspond to the numbering of
the adjustments and eliminations set forth on the Condensed Pro Forma Income
Statements.
(1) Amortization of intangibles, including goodwill, arising in the
acquisition using the straight-line method of amortization over an estimated
useful life of 15 years.
(2) Adjustment to reflect the elimination of the salary benefits of the
former president of Oxford, who retired effective on the acquisition date and
the adjustment of depreciation on fixed assets recorded at fair market value.
Not reflected in the above adjustments are the elimination of salaries,
wages and employee benefits and certain operating expenses which the Company
expects to realize as Oxford's operations are integrated into UPAC's.
(3) Adjustment to reflect the elimination of interest expense on Oxford's
former line of credit, which was terminated and repaid under the terms of the
Stock Purchase Agreement, and the costs of selling an additional $4.2 million of
UPAC's receivables and approximately $18 million of Oxford's receivables under
UPAC's securitization agreement.
(4) Adjustment to record an income tax provision for the net pro forma
adjustments to income before income taxes at TransFinancial's combined federal
and state tax rate, adjusted for the non-deductibility of goodwill and
intangibles amortization.
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
TRANSFINANCIAL HOLDINGS, INC.
By: /s/ Timothy P. O'Neil
Timothy P. O'Neil, President and
Chief Executive Officer
Date: June 12, 1998
EXHIBIT INDEX
Exhibit
No. Description
2(a) Stock Purchase Agreement by and between Universal Premium
Acceptance Corporation and Oxford Bank & Trust Company dated
April 29, 1998.
10(a) Amendment No. 4 to Receivables Purchase Agreement by
and among APR Funding Corporation, Universal Premium
Acceptance Corporation, TransFinancial Holdings, Inc.,
EagleFunding Capital Corporation and BankBoston, N.A.,
dated May 29, 1998.