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, 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 November 13, 1998
Common stock, $0.01 par value 3,932,372 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)
1998 1997
Operating Revenues.......................................................... $ 39,614 $ 35,100
Operating Expenses.......................................................... 43,645 34,234
Operating Income (Loss)..................................................... (4,031) 866
Nonoperating Income
Interest income, net..................................................... 106 142
Other.................................................................... 68 39
Total nonoperating income............................................ 174 181
Income (Loss) Before Income Taxes........................................... (3,857) 1,047
Income Tax Provision (Benefit).............................................. (1,383) 478
Net Income (Loss)........................................................... $ (2,474) $ 569
Basic and Diluted Earnings (Loss) Per Share................................. $ (0.50) $ 0.09
Basic Average Shares Outstanding............................................ 4,964 6,111
Diluted Average Shares Outstanding.......................................... 4,980 6,178
<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)
1998 1997
Operating Revenues.......................................................... $ 113,652 $ 98,670
Operating Expenses.......................................................... 117,117 95,805
Operating Income (Loss)..................................................... (3,465) 2,865
Nonoperating Income
Interest income, net..................................................... 192 525
Other.................................................................... 163 86
Total nonoperating income............................................ 355 611
Income (Loss) Before Income Taxes........................................... (3,110) 3,476
Income Tax Provision (Benefit).............................................. (973) 1,571
Net Income (Loss)........................................................... $ (2,137) $ 1,905
Basic and Diluted Earnings (Loss) Per Share................................. $ (0.38) $ 0.30
Basic Average Shares Outstanding............................................ 5,684 6,268
Diluted Average Shares Outstanding.......................................... 5,715 6,332
<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,
1998 1997
ASSETS (Unaudited)
Current Assets:
Cash and temporary cash investments...................................... $ 3,390 $ 4,778
Short-term investments................................................... 517 3,543
Freight accounts receivable, less allowance
for credit losses of $419 and $464................................... 13,727 14,909
Finance accounts receivable, less allowance
for credit losses of $791 and $499................................... 13,109 14,016
Current deferred tax assets.............................................. 2,877 1
Other current assets..................................................... 2,669 1,831
AFS net assets........................................................... 218 7,993
Total current assets................................................. 36,507 47,071
Operating Property, at Cost:
Revenue equipment........................................................ 31,064 32,275
Land..................................................................... 3,681 3,585
Structures and improvements.............................................. 10,831 10,506
Other operating property................................................. 9,876 9,624
55,452 55,990
Less accumulated depreciation........................................ (23,407) (22,969)
Net operating property........................................... 32,045 33,021
Intangibles, net of accumulated amortization................................ 9,922 9,243
Other Assets................................................................ 834 420
$ 79,308 $ 89,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Cash overdrafts.......................................................... $ 862 $ 754
Accounts payable......................................................... 3,899 2,855
Line of credit payable................................................... -- 2,500
Accrued payroll and fringes.............................................. 7,480 5,956
Other accrued expenses................................................... 4,301 2,940
Total current liabilities............................................ 16,542 15,005
Long-Term Debt.............................................................. 10,000 --
Deferred Income Taxes....................................................... 1,802 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 7,593,592 and 7,509,622 shares................................ 76 75
Paid-in capital.......................................................... 6,090 5,581
Retained earnings........................................................ 77,257 79,394
Treasury stock, 3,661,220 and 1,481,935 shares, at cost.................. (32,459) (12,565)
Total shareholders' equity........................................... 50,964 72,485
$ 79,308 $ 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 NINE MONTHS ENDED SEPTEMBER 30,
(In thousands)
(Unaudited)
1998 1997
Cash Flows From Operating Activities
Net income (loss)................................................... $ (2,137) $ 1,905
Adjustments to reconcile net income (loss) to cash provided by operating activities
Depreciation and amortization..................................... 5,053 3,404
Provision for credit losses....................................... 1,033 722
Deferred income tax provision (benefit)........................... (3,047) 1,697
Net increase (decrease) from change in other
working capital items affecting operating activities........... 3,459 (4,052)
4,361 3,676
Cash Flows From Investing Activities
Proceeds from discontinued operations .............................. 6,345 --
Purchase of finance subsidiary...................................... (4,178) --
Purchase of operating property, net................................. (2,415) (8,792)
Origination of finance accounts receivable.......................... (117,599) (95,626)
Sale of finance accounts receivable................................. 92,078 62,871
Collection of owned finance accounts receivable..................... 28,749 30,520
Purchases of short-term investments................................. (2,998) (10,411)
Maturities of short-term investments................................ 6,024 17,116
Other............................................................... (329) (743)
5,677 (5,065)
Cash Flows From Financing Activities
Borrowings on Long-Term Note Payable................................ 10,000 --
Payments to acquire treasury stock.................................. (18,847) (1,973)
Borrowing (repayments) on line of credit agreements, net............ (2,500) 8
Other............................................................... (79) (384)
(11,426) (2,349)
Net Increase (Decrease) in Cash and Temporary Cash Investments........ (1,388) (3,738)
Cash and Temporary Cash Investments at beginning of period............ 4,778 9,021
Cash and Temporary Cash Investments at end of period.................. $ 3,390 $ 5,283
Cash Paid During the Period for
Interest............................................................ $ 62 $ --
Income Tax.......................................................... $ 363 $ 35
<FN>
Supplemental Schedule of Noncash Investing and Financing Activities
On May 29, 1998, the Company acquired all of the capital stock of Oxford Premium Finance, Inc. ("Oxford") for approximately
$4,178,000. In conjunction with the acquisition, liabilities were assumed as follows:
1998
Fair Value of Assets acquired $ 22,338
Cash paid for capital stock and acquisition expenses (4,178)
Intangibles 1,876
Liabilities assumed $ 20,036
In connection with the acquisition of Oxford, $19.0 million of its finance accounts receivables were sold under the securitization
agreement. The proceeds of the sale were paid directly to Oxford's former line of credit bank to repay the balance outstanding
under the line at the date of acquisition.
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 loss...................................... -- -- (2,137) -- (2,137)
Issuance of shares under Incentive Stock Plan. 1 509 -- (591) (81)
Purchase of 2,115,472 shares of common stock.. -- -- -- (19,303) (19,303)
Balance at September 30, 1998 (unaudited)..... $ 76 $ 6,090 $ 77,257 $(32,459) $ 50,964
<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 useful lives of certain revenue equipment to reflect the Company's
actual utilization of such equipment. This change decreased depreciation and
increased operating income by approximately $160,000 for the third quarter and
$470,000 for the first nine months of 1998. Net income was increased by
approximately $96,000 or $0.02 per share for the third quarter and $282,000 or
$0.05 per share for the first nine months of 1998. This change will decrease
depreciation and increase operating income by approximately $328,000 for the
remaining three months of 1998 from amounts which would have been recorded had
the change not been made.
As of July 1, 1998, the Company prospectively decreased the estimated
remaining useful life of certain purchased software to reflect the Company's
plan to substantially revise and replace the software. This change increased
amortization expense in the third quarter by $333,000 and decreased net income
by approximately $200,000 or $0.04 per share. This change will decrease
amortization expense and increase operating income by approximately $50,000 for
the remaining three months of 1998 from amounts which would have been recorded
had the change not been made.
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. An evaluation of certain equipment and intangible assets of
the Company's industrial technology operation resulted in the determination that
these assets were impaired. The impaired assets were written down by $525,000
effective September 30, 1998. Fair value was based on estimated discounted
future cash flows to be generated by these assets and management's estimate of
the value realizable from sale of the assets. This writedown is included in
"Depreciation and Amortization" in the Consolidated Statement of Income.
2. SEGMENT REPORTING
The Company operates in three business segments: transportation, financial
services, and industrial technology. Other items are shown in the table below
for purposes of reconciling to consolidated amounts.
Third Quarter Nine Months
Operating Operating
Operating Income Operating Income Total
($ in thousands) Revenues (Loss) (1) Revenues (Loss) (1) Assets
Transportation 1998 $ 37,666 $ (812) $ 108,440 $ 675 $46,564
1997 33,274 989 93,110 2,850 43,386
Financial Services 1998 1,914 (886) 5,107 (826) 25,312
1997 1,772 207 5,459 868 26,171
Industrial Technology 1998 -- (926) -- (1,388) 195
1997 -- (71) -- (71) 665
Total Segments 1998 39,580 (2,624) 113,547 (1,539) 72,071
1997 35,046 1,125 98,569 3,647 70,222
General Corporate and Other 1998 34 (1,407) 105 (1,926) 7,237
1997 54 (259) 101 (782) 18,272
Consolidated 1998 39,614 (4,031) 113,652 (3,465) 79,308
1997 35,100 866 98,670 2,865 88,494
<FN>
(1) A failed attempt at a hostile takeover of the Company, together with other events, led the Company to record charges for
management and personnel restructuring, asset and liability valuation adjustments, and transaction costs and other expenses related
to the takeover attempt. These charges are included in operating results for the third quarter and nine months of 1998 of the
Company's business segments as follows: $1,544,000 for transportation; $1,075,000 for financial services and $769,000 for
industrial technology, as well as $1,200,000 in general corporate.
3. ACQUISITION OF PREMIUM FINANCE SUBSIDIARY
On May 29, 1998, TransFinancial Holdings, Inc. ("TransFinancial" or "the
Company") through Universal Premium Acceptance Corporation ("UPAC"), its
insurance premium finance subsidiary, completed the acquisition of all of the
issued and outstanding stock of Oxford Premium Finance, Inc. ("Oxford") for
approximately $4.2 million. Oxford offers short-term collateralized financing
of commercial insurance premiums through approved insurance agencies in 17
states throughout the United States. At May 29, 1998, Oxford had outstanding
net finance receivables of approximately $22.5 million. This transaction was
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 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 connection with the purchase
of Oxford, based on a preliminary allocation of the purchase price,
TransFinancial has recorded goodwill of $1.9 million, which will be amortized on
the straight-line basis over 15 years.
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.
The operating results of Oxford are included in the consolidated operating
results of TransFinancial after May 29, 1998. The following reflects the
consolidated operating results of TransFinancial for the third quarter ended
September 30, 1997, and the nine months ended September 30, 1998 and 1997,
assuming the acquisition occurred as of the beginning of each of the respective
periods:
PRO FORMA OPERATING RESULTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Third
Quarter Nine Months
1997 1998 1997
Operating Revenues............... $35,376 $114,125 $ 99,489
Net Income (Loss)................ $ 590 $ (2,104) $ 1,942
Basic and Diluted
Earnings (Loss) Per Share $ 0.10 $ (0.37) $ 0.31
The pro forma results of operations are not necessarily indicative of the
actual results that would have been obtained had the acquisitions been made at
the beginning of the respective periods, or of results which may occur in the
future.
4. 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 agreement ("the Agreement"). The Agreement was 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. Distributions
were made on a quarterly basis. The Agreement was recertified in 1991 and 1994,
and continued in effect until a replacement of the Collective Bargaining
Agreement was reached between the parties. Crouse continued to operate under
the terms of its Teamsters union contract which expired March 31, 1998,
including the profit sharing provisions, through October 3, 1998. On October 4,
1998, a newly ratified collective bargaining agreement became effective for
approximately 80% of Crouse's union employees. The new agreement did not
continue the provisions of the profit sharing agreement, substituting instead a
separate wage reduction provision. The accompanying consolidated balance sheets
as of September 30, 1998 include an accrual for profit sharing costs of
$677,000. The accompanying consolidated statements of income include profit
sharing expenses of $677,000 and $989,000 for the third quarter and $2,013,000
and $2,812,000 for the first nine months of 1998 and 1997.
5. FINANCING AGREEMENTS
Securitization of Receivables
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. Effective September 11, 1998, the securitization
agreement was amended to modify the definition of eligible receivables under the
securitization agreement and to increase the maximum allowable amount of
receivables to be sold under the agreement to $85.0 million. The purchaser
permits principal collections to be reinvested in new financing agreements. The
Company had securitized receivables of $64.8 million and $34.8 million at
September 30, 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 $5.0 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 $40.0 million. The Company was in compliance
with all such provisions at September 30, 1998. The terms of the securitization
agreement also require that UPAC maintain a default reserve at specified levels
which serves as collateral. At September 30, 1998, approximately $7.1 million
of owned finance receivables served as collateral under the default reserve
provision.
Secured Loan Agreements
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 or nine months ended September 30, 1998. The following table
summarizes activity under the Working Capital Line in the quarter and nine
months ended September 30, 1998 (in thousands, except percentages):
Third Nine
Quarter Months
1998 1998
Balance outstanding at end of period.................. $ -- $ --
Average amount outstanding ........................... -- 773
Maximum month end balance outstanding................. -- 2,752
Interest rate at end of period........................ 8.25% 8.25%
Weighted average interest rate........................ 8.50% 8.50%
In September 1998, the Company entered into a two-year secured loan agreement
with a commercial bank which enabled the Company to borrow $10.0 million (the
"Loan"), secured by freight accounts receivable and a second lien on revenue
equipment. The Loan bears interest at the bank's prime rate, 8.25% at September
30, 1998 The terms of the Loan provide for monthly payments of interest only
through September 30, 1999, with monthly principal payments thereafter of
$100,000 plus interest through maturity on September 30, 2000.
The terms of the Loan require the Company to maintain a minimum tangible net
worth of $40 million, a ratio of current assets to current liabilities of 1.25
to 1.00, a ratio of total liabilities to tangible net worth of 1.0 to 1.0, and
contain restrictions on the payment of dividends without prior consent of the
Lender. The Company was in compliance with all such provisions at September 30,
1998. The proceeds of the Loan were used to repurchase shares of the Company's
common stock (see Note 8 of Notes to Consolidated Financial Statements).
Operating Leases
In the third quarter of 1998, the Company entered into long-term operating
leases for certain new and used tractors and new trailers. The terms of such
leases are five to seven years. The minimum future rental payments under these
leases total $5.4 million at September 30, 1998. Additionally, the Company has
commitments to acquire more new tractors and trailers in the fourth quarter of
1998 under operating leases with future minimum rentals of approximately $3.2
million.
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.
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 $6.3 million of cash and
investments.
AFS has made full payment of all its resolved claims and liabilities. There
are no material claims outstanding against AFS as of September 30, 1998.
7. SHAREHOLDER RIGHTS PLAN
On July 14, 1998, the Board of Directors adopted a Shareholder Rights Plan by
declaring a dividend distribution of one Preferred Stock Purchase Right for
each outstanding share of TransFinancial Common Stock.
The Shareholder Rights Plan was adopted by the Board of Directors in part in
response to the announcement by TJS Partners, L.P. ("TJSP") of its intention to
increase its beneficial ownership of shares of Common Stock of the Company to
approximately 35% of outstanding shares by purchasing substantially all of the
shares owned by the Crouse family and to solicit the written consent of
shareholders to remove the existing Board of Directors (other than Larry Crouse)
and replace the Board with designees of TJSP. The Board of Directors determined
that the proposed hostile takeover of the Company by TJSP was not in the best
interests of the Company and its stockholders.
Under the Shareholder Rights Plan, Rights were issued on July 27, 1998 to
shareholders of record as of that date and will expire in ten years, unless
earlier redeemed or exchanged by the Company. The distribution of Rights was
not taxable to the Company or its shareholders.
The Rights become exercisable only if a person or entity is an "Acquiring
Person" (as defined in the Plan) or announces a tender offer, the consummation
of which would result in any person or group becoming an "Acquiring Person."
Each Right initially entitles the holder to purchase one one-hundredth of a
newly issued share of Series A Preferred Stock of the Company at an exercise
price of $50.00. If, however, a person or group becomes an "Acquiring Person",
each Right will entitle its holder, other than an Acquiring Person and its
affiliates, to purchase, at the Right's then current exercise price, a number of
shares of the Company's common stock having a market value of twice the Right's
exercise price.
In addition, if after a person or group becomes an Acquiring Person, the
Company is acquired in a merger or other business combination transaction, or
sells 50% or more of its assets or earning power, each Right will entitle its
holder, other than an Acquiring Person and its affiliates, to purchase, at the
Right's then current exercise price, a number of shares of the acquiring
company's common stock having a market value at the time of twice the Right's
exercise price.
Under the Shareholder Rights Plan, an "Acquiring Person" is any person or
entity which, together with any affiliates or associates, beneficially owns 15%
or more of the shares of Common Stock of the Company then outstanding. The
Shareholder Rights Plan contains a number of exclusions from the definition of
Acquiring Person. The Shareholders Rights Plan will not apply to a Qualifying
Offer, which is a cash tender offer to all shareholders satisfying certain
conditions set forth in the Plan.
The Company's Board of Directors may redeem the Rights at any time prior to a
person or entity becoming an Acquiring Person. Under the Shareholders Rights
Plan, for a period of one-hundred eighty (180) days after July 14, 1998, and for
a period of one-hundred eighty (180) days after the time any Person becomes an
Acquiring Person, the Board of Directors may redeem the rights or take any other
action with respect to the Rights only if a majority of the members of the Board
of Directors are Continuing Directors (as defined in the Plan) and the action is
approved by a majority of such Continuing Directors.
8. STOCK REPURCHASE
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company repurchased 2,115,422 shares of its common stock held by the Crouse
family, including 881,550 shares registered in the name of TJS Partners, LP, all
at a price of $9.125 per share. In addition, the Company paid $350,000 of legal
and other expenses which the Crouse family incurred in connection with the
takeover attempt. All but $456,000 of the total purchase price for the stock of
approximately $19.3 million was paid on September 30, 1998. The Company funded
the payment out of available cash and short-term investments, the proceeds from
the sale and leaseback of approximately $4.2 million of revenue equipment and
the proceeds from the $10.0 million secured loan from one of the Company's
existing bank lenders.
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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Third quarter ended September 30, 1998 compared to the third quarter ended
September 30, 1997 and nine months ended September 30, 1998 compared to the nine
months ended September 30, 1997.
TransFinancial operates primarily in three distinct segments; transportation,
through its subsidiary, Crouse; 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. 3 1998Nine Months 1998
vs. vs.
Qtr. 3 1997Nine Months 1997
Increase (decrease) from:
Increase in LTL tonnage........................ $2,830 $10,493
Increase (decrease) in LTL revenue per hundredweight (84) 156
Increase in truckload revenues................. 1,646 4,681
Net increase............................... $4,392 $15,330
Less-than-truckload ("LTL") operating revenues rose by 9.7% and 13.6% for the
third quarter and first nine months of 1998, as compared to the same periods in
1997. Crouse achieved increases of 10.0% and 13.4% in LTL tons for the third
quarter and first nine months of 1998, compared to 1997. Crouse's LTL revenue
yield has been relatively flat overall in 1998 as compared to 1997. The effects
of a softening in the economy, a slowing in the growth of LTL tons and an
increase in competitive pressures on freight rates, were substantially offset by
additional, high yield freight handled as a result of the Company's partnership
with a southeastern regional carrier which was initiated in the third quarter.
Truckload operating revenues were more than 32.9% and 32.3% higher in the
third quarter and first nine months of 1998, on approximately 35.3% and 35.2%
more shipments, primarily reflecting continued strength in the meat industry.
Operating Expenses - A comparative summary of transportation operating expenses
as a percent of transportation operating revenue follows:
Percent of Operating Revenue
Third Quarter Nine Months
1998(1) 1997 1998(1) 1997
Salaries, wages and employee benefits.................... 57.7% 57.0% 57.4% 56.8%
Operating supplies and expenses.......................... 13.6% 11.9% 12.5% 12.3%
Operating taxes and licenses............................. 2.6% 2.5% 2.6% 2.7%
Insurance and claims..................................... 3.3% 2.4% 2.4% 2.1%
Depreciation............................................. 2.3% 2.9% 2.3% 3.0%
Purchased transportation................................. 22.7% 20.3% 22.2% 20.0%
Total operating expenses............................. 102.2% 97.0% 99.4% 96.9%
<FN>
(1) In connection with the failed takeover attempt by certain shareholders, an in-depth evaluation was performed on each of the
Company's business enterprises utilizing both internal and external resources. As a result of this process the Company effected
certain changes in its management team and corporate structure, and recorded valuation adjustments to certain assets and
liabilities. The resulting charges relative to the Company's transportation business are included in operating expenses for the
third quarter and nine months of 1998 as follows: $494,000 in Salaries, Wages and Employee Benefits; $450,000 in Operating Supplies
and Expenses; and $600,000 in insurance and claims.
Crouse's operating expenses as a percentage of operating revenue, or operating
ratio, excluding the charges discussed above, was 98.1% and 98.0% for the third
quarter and nine months ended September 30, 1998, which was higher than the same
periods of 1997, as a result of the Company's substantial investments in market
expansion; the replacement and modernization of its fleet; and the development
of management information systems for the 21st century. The effects of these
investments will continue to impact Crouse's operating ratio into 1999.
Crouse's operating expenses were positively impacted by approximately $160,000
and $310,000 for the third quarter and nine months of 1998 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 $328,000 for the remaining three months of 1998.
FINANCIAL SERVICES
As a result of the in-depth evaluation of the Company's business enterprises,
changes in its management team and adjustments to certain assets and liabilities
discussed in "Transportation - Operating Expenses", the Company recorded charges
relative to its financial services business in the third quarter and nine months
ended September 30, 1998. These charges include $392,000 relative to management
and personnel costs and $683,000 of charges related to adjustments in asset
values, including $333,000 of additional depreciation related to the change in
estimated useful life for purchased software (See Note 1 of Notes to
Consolidated Financial Statements).
For the third quarter and first nine months of 1998 UPAC reported operating
income, excluding the charges discussed above, of $189,000 and $249,000 on net
financial services revenue of $1.9 million and $5.1 million, as compared to
operating income of $207,000 and $868,000 on net financial services revenue of
$1.8 million and $5.5 million for the comparable periods of 1997. The decrease
in net financial services revenue and operating income was the result of reduced
average total receivables outstanding, an increase in the percentage of finance
contracts originated which were sold under the securitization agreement, a lower
average yield on finance contracts and a slight increase in the Company's cost
of funds. On May 29, 1998, UPAC acquired Oxford Premium Finance, Inc., an
insurance premium finance business serving the Chicago area and the industrial
Midwest, as part of the Company's strategy to build revenue and profitability by
increasing the financing volumes handled by UPAC's existing administrative
infrastructure.
INDUSTRIAL TECHNOLOGY
As a result of the in-depth evaluation of the Company's business enterprises,
changes in its management team and adjustments to certain assets and liabilities
discussed previously, the Company recorded charges related to its industrial
technology investment in the third quarter and nine months ended September 30,
1998. These charges include $244,000 related to management and consulting
contracts and $525,000 resulting from the adjustment of the carrying value of
certain equipment and intangibles to fair value (see Note 1 of Notes to
Consolidated Financial Statements).
In the third quarter and first nine months of 1998, Presis, the Company's
start-up industrial technology business incurred operating expenses, excluding
the charges discussed above, of $157,000 and $619,000, primarily in salaries,
wages and employee benefits as compared to operating expenses of $71,000 for the
third quarter and nine months ended September 30, 1997. In its initial phase
Presis has focused on continued research and testing of its technology. The
Company expects this operation to incur operating losses in the remainder of
1998, which are likely to be material in relation to its consolidated results of
operations.
OTHER
In connection with the failed takeover attempt, the Company incurred $500,000
in transaction costs and expenses which are included in general corporate
expenses in the third quarter and nine months of 1998. Additionally, general
corporate charges of $700,000 were recorded relative to lawsuits filed by the
Company against an environmental engineering firm to recover certain excess
costs incurred to remove contaminated soil from a site formerly owned by the
Company and against an excess loss insurance carrier to recover costs incurred
to settle workers' compensation claims. The Company has not recorded the
benefit of any anticipated recovery pursuant to these lawsuits.
Net interest income decreased in the third quarter and first nine months of
1998 as compared to the third quarter and first nine months 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
rates for the third quarter and nine months of 1998 were 35.9% and 31.3% as
compared to 45.2% and 45.7% for the same periods of 1997. The effective income
tax rates for the periods of 1998 are lower due to the impact of non-deductible
intangibles amortization and non-deductible meals and entertainment expenses,
which reduce the tax benefit of pre-tax losses in 1998, as compared to the
impact of these items on pre-tax income for the periods of 1997.
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 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, 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 volume of premium finance contracts is expected to be handled
within the Company's existing administrative operations without incurring
significant additional fixed costs.
The industrial technology operation will focus on continued research and
testing and product development. The Company expects this operation to incur
operating losses in the remainder of 1998, which are likely to be material in
relation to its consolidated results of 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 and ratification of new contracts
to replace current contracts, covering certain office, shop and terminal
employees, 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; 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
Presis is 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; tax changes; and the ability of the Company and its
major service providers, vendors, suppliers and customers to adequately address
the year 2000 issue. 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, 1998 with
more than $3.9 million in cash and investments. The Company's current ratio was
2.2 to 1.0 and its ratio of total liabilities to tangible net worth was 0.7 to
1.0. Effective April 30, 1998, AFS paid a dividend to TransFinancial of
substantially all of its remaining net assets, including approximately $6.3
million of cash and investments. During the first nine months of 1998, the
Company has purchased $2.4 million, net, of operating equipment using operating
cash flows. In addition, the Company has entered into long-term operating
leases of revenue equipment with minimum future rental payments of $5.4 million
and has committed to additional leases with $3.2 million of minimum rentals.
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 $85.0 million
of eligible receivables. As of September 30, 1998, $64.8 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 and nine months September 30, 1998. As of September
30, 1998, no borrowings were outstanding under the Working Capital Line.
The Company has a controlling interest in Presis, L.L.C., and the exclusive
finance and/or sale rights to equipment produced by 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. 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.
Crouse has achieved ratification of new five year pacts with the
International Brotherhood of Teamsters covering in excess of 80% of its union
employees. The new contracts, which became effective October 4, 1998, provide
for all of the terms of the National Master Freight Agreement with a separate
addendum for wages. Crouse will continue to maintain its past work rules,
practices and flexibility within its operating structure. Crouse continues to
negotiate with union locals representing the remaining employees. There can be,
however, no assurance that Crouse's remaining union employees will ratify new
contracts acceptable to both the Company and the union, or that work stoppages
will not occur. 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.
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company repurchased 2,115,422 shares of its common stock held by the Crouse
family, including 881,550 shares registered in the name of TJS Partners, LP, all
at a price of $9.125 per share. Also pursuant to the Stock Purchase Agreement,
the Company reimbursed the Crouse family for $350,000 of legal and other
expenses incurred in connection with the takeover attempt. All but $456,000 of
the total purchase price for the stock of approximately $19.3 million was paid
on September 30, 1998. The Company funded the payment out of available cash and
short-term investments, the proceeds from the sale and leaseback of
approximately $4.2 million of revenue equipment and the proceeds from a $10.0
million secured loan from one of the Company's existing bank lenders (see Note 5
of Notes to Consolidated Financial Statements).
Year 2000 Issues
The Year 2000 Issue is the result of computer programs being written using two
digits to represent years rather than four digits, which include the century
designation. Without corrective action, it is possible that the Company's
computer programs, or its major service providers, vendors, suppliers, partners
or customers that have date-sensitive software could recognize a date using "00"
as the year 1900 rather than the year 2000. Additionally, certain other assets
may contain embedded chips that include date functions that could be affected by
the transition to the year 2000. In some systems this could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has developed and is executing a Year 2000 Compliance Strategic
Plan ("Year 2000 Plan") to enable management of TransFinancial Holdings, Inc.
and each of its business operations to ensure that each of its critical business
systems are "Year 2000 Compliant". The Company considers a business system to
be Year 2000 Compliant if it is able to transition into the year 2000 without
significant disruption to the Company's internal operations or those of its key
business partners. The Year 2000 Plan encompasses the Company's information
technology assets, including computer hardware and software ("IT assets") and
non-information technology assets, goods and services, including assets
utilizing embedded chip technology and significant customer and vendor
relationships ("non-IT assets").
The Company's Year 2000 Plan includes three principal sections: (1) mainframe
computer and personal computer hardware and software utilized by the Company's
transportation operations ("Transportation IT assets"); (2) desktop computer
applications, embedded chips, significant business partners of the
transportation operations ("Transportation non-IT assets"); and (3) personal
computer hardware and software, desktop computer applications, embedded chips,
significant business partners of the financial services operations ("Financial
Services IT and non-IT assets"). The general phases common to all sections are:
(1) inventorying, assessing and assigning priorities to Year 2000 items
("Inventory Phase"); (2) taking corrective actions to modify, repair or replace
items that are determined not to be Year 2000 Compliant ("Corrective Action
Phase"); (3) testing material items ("Testing Phase"); and (4) developing and
implementing contingency plans for each organization and location ("Contingency
Planning Phase"). The Company intends to utilize primarily internal personnel
and resources to execute its Year 2000 Plan but may utilize external consultants
as needed in certain phases.
Transportation IT assets
With regard to the Transportation IT assets section, the Inventory Phase is
substantially completed. The Company has identified its computer applications,
programs and hardware and is in the processing of assessing the Year 2000 risk
associated with each item. The Company has begun executing the Corrective
Action Phase by modifying or upgrading items that are not Year 2000 compliant.
This phase is expected to be complete by the end of the first quarter of 1999.
The Testing Phase is ongoing as corrective actions are completed. The Testing
Phase is anticipated to be complete in the second quarter of 1999. The
Contingency Planning Phase will begin in the first quarter of 1999 and be
completed in the second quarter of 1999.
Transportation non-IT assets
With regard to the Transportation non-IT assets section, the Inventory Phase
is substantially completed. The Company has identified assets that may contain
embedded chip technologies and has contacted the related vendors to gain
assurance of Year 2000 status on each item. The Company has also identified its
significant business relationships and has contacted key vendors, suppliers and
customers to attempt to reasonably determine their Year 2000 status. The
Company is in the process of effecting the Corrective Action Phase, which is
anticipated to be complete by the end of the first quarter of 1999. The Testing
Phase is ongoing as corrective actions are completed. This phase is anticipated
to be complete in the first quarter of 1999. The Contingency Planning Phase
will begin in the first quarter of 1999 and be completed in the third quarter of
1999.
Financial Services IT and non-IT assets
With regard to the Financial Services IT and non-IT assets section, the
Inventory Phase is completed. The Company has identified its computer
applications, programs and hardware and non-IT assets and has assessed the Year
2000 risk associated with each item. The Company has also identified its
significant business relationships and has contacted key vendors, suppliers and
customers to attempt to reasonably determine their Year 2000 status. The
Company has substantially completed the Corrective Action Phase. The Company's
financial services' database, operating systems and computer applications have
been upgraded or modified to address the Year 2000. The Testing Phase has been
ongoing as corrective actions were completed and is anticipated to be complete
in the fourth quarter of 1998. The Contingency Planning Phase will begin in the
first quarter of 1999 and be completed in the second quarter of 1999.
Costs
It is currently estimated that the aggregate cost of the Company's Year 2000
efforts will be approximately $150,000 to $200,000, of which approximately
$40,000 has been spent. These costs are being expensed as they are incurred and
are being funded out of operating cash flow. These amounts do not include
approximately $100,000 of costs to be capitalized as the Company replaces
certain non-IT assets, in part to address the Year 2000 issue, as part of the
Company's normal capital replacement and upgrades. These amounts also do not
include any costs associated with the implementation of contingency plans that
will be developed in 1999.
Risks
The failure to correct a material Year 2000 issue could result in an
interruption in, or failure of, certain normal business operations. Such
failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 issue, resulting in part from the uncertainty of the
Year 2000 readiness of third-party vendors, suppliers and customers, the Company
is unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on the Company's results of operations,
liquidity and financial condition. The Company's Year 2000 Plan is designed to
gather information concerning Year 2000 issues facing the Company and to address
and resolve such issues to the extent reasonably possible. Even if the Company
successfully implements its Year 2000 Plan, there can be no assurance that the
Company's operations will not be affected by Year 2000 failures or that such
failures will not have a material adverse effect on the Company's results of
operations, liquidity and financial condition.
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 and Use of Proceeds
On July 14, 1998, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of Common Stock of the
Company, payable on July 27, 1998 to stockholders of record at the close of
business on that date. Each Right entitles the registered holder to purchase
from the Company at any time following the Distribution Date (as defined below)
a unit consisting of one one-hundredth of a share of Series A Preferred Stock
for $50. A description of the terms of the Rights is set forth in a Rights
Agreement dated July 14, 1998, (the "Rights Agreement") between the Company and
UMB Bank, N.A., as Rights Agent.
Initially, the Rights will be evidenced by certificates of Common Stock and
will automatically trade with the Common Stock. Upon occurrence of a
Distribution Date, the Rights will become exercisable and separate certificates
representing the Rights will be issued. The "Distribution Date" will occur
upon the earlier of (a) the date of a public announcement or a public
disclosure of facts by the Company or any Person that such Person has become an
"Acquiring Person" (as defined below) and (b) 10 business days (or such later
date as the Board shall determine prior to such time as there is an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender or exchange offer, the consummation of which would result in a Person
becoming an Acquiring Person.
In the event that a Person becomes an Acquiring Person, each holder of a
Right (except the Acquiring Person and certain other persons) will no longer
have the right to purchase units of Preferred Stock, but instead will thereafter
have the right to receive, upon exercise of the Right, shares of Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a Current Market Value (as defined in the Rights Agreement)
equal to two times the then current exercise price of the Right. Once a Person
becomes an Acquiring Person, all Rights that are, or under certain circumstances
were, owned by the Acquiring Person ( or certain related parties) will be null
and void. In the event that, at any time after a Person becomes an Acquiring
Person, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger which satisfies certain requirements), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the then current exercise
price of the Right.
Under the Rights Agreement, an Acquiring Person is a Person who, together
with all affiliates and associates of such Person, and without the prior written
approval of the Company, is the Beneficial Owner (as defined in the Rights
Agreement) of 15% or more of the outstanding shares of Common Stock of the
Company, subject to a number of exceptions set forth in the Rights Agreement.
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may under certain circumstances exchange the Rights
(except Rights which previously have been voided as set forth above), in whole
or in part, at an exchange ratio of one share of Common Stock for each Right.
The Rights will expire at the close of business on July 14, 2008, unless the
Company redeems or exchanges the Rights prior to such date.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form 8-A
dated July 15, 1998 and to the Current Report on Form 8-K dated July 15, 1998.
A copy of the Rights Agreement is available free of charge from the Rights
Agent. This summary of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference. See also Footnote 7 to Consolidated
Financial Statements set forth herein.
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
10.1* Amendment No. 5 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
August 25, 1998.
10.2* Amendment No. 6 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
September 11, 1998.
10.3* Secured Loan Agreement by and between Bankers Trust of Des Moines,
Iowa, TransFinancial Holdings, Inc., and Crouse Cartage Company, dated September
29, 1998.
27* Financial Data Schedule.
* Filed herewith.
(b) Reports on Form 8-K -
(1) A Current Report on Form 8-K, dated July 15, 1998, filed July 16,
1998, to report the declaration of a rights dividend.
(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 16, 1998
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
10.1 Amendment No. 5 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
August 25, 1998.
10.2 Amendment No. 6 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
September 11, 1998.
10.3 Secured Loan Agreement by and between Bankers Trust of Des Moines,
Iowa, TransFinancial Holdings, Inc., and Crouse Cartage Company, dated September
29, 1998.
27 Financial Data Schedule.