-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OX0qAgFHQaTmwAt9D8z85QSIsNmSxixErLUpg6iNVXy1x/DMoIrEdpSNkr63T2Ve x7d9HbBnU0tyYg6slEptFA== 0000719271-98-000006.txt : 19980518 0000719271-98-000006.hdr.sgml : 19980518 ACCESSION NUMBER: 0000719271-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSFINANCIAL HOLDINGS INC CENTRAL INDEX KEY: 0000719271 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 460278762 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12070 FILM NUMBER: 98623107 BUSINESS ADDRESS: STREET 1: 8245 NIEMAN ROAD, STE 100 STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: (913)859-0055X262 MAIL ADDRESS: STREET 1: 8245 NIEMAN ROAD STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: ANUHCO INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CARRIERS INC DATE OF NAME CHANGE: 19910812 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-12321 TRANSFINANCIAL HOLDINGS, INC. (Exact name of Registrant as specified in its charter) Delaware 46-0278762 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 8245 Nieman Road, Suite 100 Lenexa, Kansas 66214 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (913) 859-0055 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 8, 1998 Common stock, $0.01 par value 6,031,437 Shares PART I. FINANCIAL INFORMATION Item 1. Financial Statements TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, (In thousands, except per share amounts) (Unaudited)
1998 1997 Operating Revenues.......................................................... $ 37,003 $ 31,057 Operating Expenses.......................................................... 36,703 30,122 Operating Income............................................................ 300 935 Nonoperating Income (Expense) Interest income, net..................................................... 16 215 Other.................................................................... 35 -- Total nonoperating income (expense).................................. 51 215 Income Before Income Taxes.................................................. 351 1,150 Income Tax Provision........................................................ 190 518 Net Income.................................................................. $ 161 $ 632 Basic and Diluted Earnings Per Share........................................ $ 0.03 $ 0.10 Basic Average Shares Outstanding............................................ 6,053 6,375 Diluted Average Shares Outstanding.......................................... 6,124 6,409 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
MARCH 31, DECEMBER 31, 1998 1997 ASSETS (Unaudited) Current Assets: Cash and temporary cash investments...................................... $ 3,291 $ 4,778 Short-term investments................................................... 525 3,543 Freight accounts receivable, less allowance for doubtful accounts of $446 and $464............................... 15,793 14,909 Finance accounts receivable, less allowance for doubtful accounts of $169 and $499............................... 15,576 14,016 Current deferred tax assets.............................................. 1,349 1 Other current assets..................................................... 2,724 1,831 AFS net assets (Note 5).................................................. 6,704 7,993 Total current assets................................................. 45,962 47,071 Operating Property, at Cost: Revenue equipment........................................................ 34,485 32,275 Land..................................................................... 3,585 3,585 Structures and improvements.............................................. 10,512 10,506 Other operating property................................................. 9,431 9,624 58,013 55,990 Less accumulated depreciation........................................ (22,206) (22,969) Net operating property........................................... 35,807 33,021 Intangibles, net of accumulated amortization................................ 9,055 9,243 Other Assets................................................................ 799 420 $ 91,623 $ 89,755 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Cash overdrafts.......................................................... $ 2,436 $ 754 Accounts payable......................................................... 4,350 2,855 Notes payable............................................................ 1,851 2,500 Accrued payroll and fringes.............................................. 6,315 5,956 Claims and insurance accruals............................................ 317 566 Accrued and current deferred income taxes................................ 112 -- Other accrued expenses................................................... 1,432 2,374 Total current liabilities............................................ 16,813 15,005 Deferred Income Taxes....................................................... 2,145 2,265 Shareholders' Equity Preferred stock with $0.01 par value, authorized 1,000,000 shares, none outstanding..................................................... -- -- Common stock with $0.01 par value, authorized 13,000,000 shares, issued 7,512,672 and 7,509,622 shares................................ 75 75 Paid-in capital.......................................................... 5,600 5,581 Retained earnings........................................................ 79,555 79,394 Treasury stock, 1,481,935 shares, at cost................................ (12,565) (12,565) Total shareholders' equity........................................... 72,665 72,485 $ 91,623 $ 89,755 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, (In thousands) (Unaudited)
1998 1997 Cash Flows From Operating Activities Net income.......................................................... $ 161 $ 632 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization................................... 1,292 1,078 Provision for credit losses..................................... 210 199 Deferred tax provision.......................................... (1,468) 105 Other........................................................... (15) -- Net increase (decrease) from change in other working capital items affecting operating activities........... 756 (1,249) 936 765 Cash Flows From Investing Activities Purchase of operating property...................................... (3,875) (3,146) Origination of finance accounts receivable.......................... (32,295) (31,995) Sale of finance accounts receivable................................. 20,085 20,512 Collection of owned finance accounts receivable..................... 10,473 9,965 Purchases of short-term investments................................. -- (6,868) Maturities of short-term investments................................ 3,018 6,732 Other............................................................... (379) 230 (2,973) (4,570) Cash Flows From Financing Activities Cash overdrafts........................................................ 1,682 -- Payments to acquire treasury stock.................................. -- (199) Repayments on credit agreements, net................................ (1,101) -- Other............................................................... (31) -- 550 (199) Net Decrease in Cash and Temporary Cash Investments................... (1,487) (4,004) Cash and Temporary Cash Investments at beginning of period............ 4,778 9,021 Cash and Temporary Cash Investments at end of period.................. $ 3,291 $ 5,017 Cash Paid During the Period for Interest............................................................ $ 48 $ -- Income Tax.......................................................... $ -- $ 4 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands)
Total Share Common Paid-In Retained Treasury holders' Stock Capital Earnings Stock Equity Balance at December 31, 1996.................. $ 76 $ 5,529 $ 79,242 $(10,286) $ 74,561 Net income.................................... -- -- 1,100 -- 1,100 Fractional shares cancelled in reverse stock split....................................... (1) -- (948) -- (949) Issuance of shares under Incentive Stock Plan. -- 52 -- (2) 50 Purchase of 257,099 shares of common stock.... -- -- -- (2,277) (2,277) Balance at December 31, 1997.................. 75 5,581 79,394 (12,565) 72,485 Net Income.................................... -- -- 161 -- 161 Issuance of shares under Incentive Stock Plan. -- 19 -- -- 19 Balance at March 31, 1998 (unaudited)......... $ 75 $ 5,600 $ 79,555 $(12,565) $ 72,665 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include TransFinancial Holdings, Inc. ("TransFinancial") and all of its subsidiary companies (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and have not been examined or reviewed by independent public accountants. The yearend condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments necessary to fairly present the results of operations have been made. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. TransFinancial believes that the disclosures contained herein, when read in conjunction with the financial statements and notes included in TransFinancial's Annual Report on Form 10-K, filed with the SEC on March 30, 1998, are adequate to make the information presented not misleading. It is suggested, therefore, that these statements be read in conjunction with the statements and notes included in the aforementioned report on Form 10-K. As of January 1, 1998, the Company prospectively increased the estimated remaining lives of certain revenue equipment to reflect the Company's actual utilization of such equipment. This change decreased depreciation and amortization and increased operating income by approximately $150,000 for the first quarter of 1998. Net income was increased by approximately $90,000 or $.01 per share. This change will decrease depreciation and increase operating income by approximately $500,000 for the remaining nine months of 1998 from amounts which would have been recorded had the change not been made. 2. SEGMENT REPORTING The Company operates in three business segments: transportation, financial services, and industrial technology. Other items are shown in the table below for purposes of reconciling to consolidated amounts.
First Operating Operating Total ($ in thousands) Quarter Revenues Income Assets Transportation 1998 $ 35,547 $ 829 $ 51,304 1997 29,144 791 37,157 Financial Services 1998 1,420 (55) 24,114 1997 1,890 374 25,816 Industrial Technology 1998 -- (193) 691 1997 -- -- -- Total Segments 1998 36,967 581 76,109 1997 31,034 1,165 62,973 General Corporate and Other 1998 36 (281) 15,514 1997 23 (230) 25,221 Consolidated 1998 37,003 300 91,623 1997 31,057 935 88,194
3. PROFIT SHARING In September 1988, the employees of Crouse Cartage Company ("Crouse"), a wholly owned subsidiary of TransFinancial, approved the establishment of a profit sharing plan ("the Plan"). The Plan is structured to allow all employees (union and non-union) to ratably share 50% of Crouse's income before income taxes (excluding extraordinary items and gains or losses on the sale of assets) in return for a 15% reduction in their wages. Plan distributions are made on a quarterly basis. The Plan was recertified in 1991 and 1994, and will continue in effect until a replacement of the Collective Bargaining Agreement is reached between the parties. Crouse has continued to operate under the terms of its Teamsters union contract which expired March 31, 1998, including the profit sharing provisions, and is hopeful that the negotiation of a satisfactory contract will occur in the near future. The accompanying consolidated balance sheets as of March 31, 1998 include an accrual for profit sharing costs of $747,000. The accompanying consolidated statements of income include profit sharing costs of $747,000 and $778,000 for the first quarter of 1998 and 1997. 4. FINANCING AGREEMENTS In December, 1996, TransFinancial, UPAC and APR Funding Corporation (a wholly- owned subsidiary) entered into an extendible three year securitization agreement whereby undivided interests in a designated pool of accounts receivable can be sold on an ongoing basis. The maximum allowable amount of receivables to be sold under the agreement is $50,000,000. The purchaser permits principal collections to be reinvested in new financing agreements. The Company had securitized receivables of $34.1 million and $36.6 million at March 31, 1998 and 1997. The cash flows from the sale of receivables are reported as investing activities in the accompanying consolidated statement of cash flows. The securitized receivables are reflected as sold in the accompanying balance sheet. The terms of the agreement require UPAC to maintain a minimum tangible net worth of $5 million and contain restrictions on the payment of dividends by UPAC to TransFinancial without prior consent of the financial institution. The terms of the agreement also require the Company to maintain a minimum consolidated tangible net worth of $50 million. The Company was in compliance with all such provisions at March 31, 1998. The terms of the securitization agreement also require that UPAC maintain a default reserve at specified levels which serves as collateral. At March 31, 1998, approximately $5.2 million of owned finance receivables served as collateral under the default reserve provision. In January 1998, Crouse entered into a three-year Secured Loan Agreement with a commercial bank which provides for a $4.5 million working capital line of credit loan ("Working Capital Line") and a $4.5 million equipment line of credit loan ("Equipment Line"). There were no borrowings under the Equipment Line in the quarter ended March 31, 1998. The following table summarizes activity under the Working Capital Line in the quarter ended March 31, 1998 (in thousands, except percentages): First Quarter 1998 Balance outstanding at end of period.................. $1,851 Average amount outstanding ........................... 1,977 Maximum month end balance outstanding................. 2,752 Interest rate at end of period........................ 8.5% Weighted average interest rate........................ 8.5% 5. AFS NET ASSETS Under the provisions of a Joint Plan of Reorganization ("the Joint Plan"), AFS is responsible for the administration of pre-July 12, 1991 creditor claims and conversion of assets owned before that date. As claims were allowed and cash was available, distributions to the creditors occurred. The Joint Plan also provided for distributions to TransFinancial as unsecured creditor distributions occurred in excess of 50% of allowed claims. TransFinancial also will receive the full benefit of any remaining assets of AFS through its ownership of AFS stock, after unsecured creditors received distributions, including interest, equivalent to 130% of their claims. AFS has made full payment of all its resolved claims and liabilities. The remaining AFS assets were estimated to have net realizable value of $7.1 million at March 31, 1998. The primary assets include approximately $6.8 million in cash and investments. There are no material claims outstanding as of March 31, 1998. On April 24, 1998, the lawsuit against TransFinancial, AFS and certain directors and officers of those companies by a former employee of AFS was settled with no material impact on the Company's financial position or results of operations. On April 30, 1998, AFS paid a dividend to TransFinancial of substantially all of its remaining net assets, including approximately $6.5 million of cash and investments. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS First quarter ended March 31, 1998 compared to the first quarter March 31, 1997 TransFinancial operates primarily in three distinct segments; transportation, through its subsidiary, Crouse; and financial services, through its subsidiary, UPAC; and industrial technology, through its subsidiary, Presis. TRANSPORTATION Operating Revenue - The changes in transportation operating revenue are summarized in the following table (in thousands): Qtr. 1 1998 vs. Qtr. 1 1997 Increase (decrease) from: Increase in LTL tonnage........................ $4,399 Increase in LTL revenue per hundredweight...... 249 Increase in truckload revenues................. 1,755 Net increase............................... $6,403 Less-than-truckload ("LTL") operating revenues rose by 18.9% for the first quarter of 1998, as compared to the same period in 1997. Crouse achieved an increase of 17.9% in LTL tons for the first quarter of 1998, compared to 1997. Crouse's LTL revenue yield improved approximately 1.0% from the first quarter of 1997 to the same period of 1998. The first quarter improvement in revenue yield was the result of a general rate increase placed in effect January 1, 1998 and negotiated rate increases on certain shipping contracts, offset in part by reductions or elimination of fuel surcharges in place in the first quarter of 1997 to recover the high cost of diesel fuel in that period. Truckload operating revenues were more than 38.2% higher in the first quarter of 1998, on approximately 38% more shipments, reflecting increased strength in the meat industry. Operating Expense - A comparative summary of transportation operating expenses as a percent of transportation operating revenue follows:
Percent of Operating Revenue First Quarter 1998 1997 Salaries, wages and employee benefits.................... 58.0% 56.6% Operating supplies and expenses.......................... 11.3% 13.2% Operating taxes and licenses............................. 2.4% 2.9% Insurance and claims..................................... 2.0% 2.0% Depreciation............................................. 2.4% 3.0% Purchased transportation................................. 21.6% 19.6% Total operating expenses............................. 97.7% 97.3%
Crouse's operating expenses as a percentage of operating revenue, or operating ratio, was higher for the first quarter of 1998, as compared to the first quarter of 1997, as a result of the Company's substantial investments in 1997 to expand Crouse's service area to include Ohio, Michigan and Kentucky and to modernize the Company's fleet and management information systems. Crouse's operating expenses were positively impacted by approximately $150,000 as a result of a change in accounting estimate of the remaining useful lives of certain revenue equipment. This change is expected to decrease operating expenses by approximately $500,000 for the remaining nine months of 1998. FINANCIAL SERVICES For the first quarter of 1998, UPAC reported an operating loss of $55,000 on net financial services revenue of $1.4 million, as compared to operating income of $374,000 on net financial services revenue of $1.9 million for the first quarter of 1997. The decrease in net financial services revenue and operating income was the result of reduced average total receivables outstanding, a lower average yield on finance contracts and a slight increase in the Company's cost of funds. INDUSTRIAL TECHNOLOGY In the first quarter of 1998, Presis, the Company's start-up industrial technology business recognized operating expenses of $193,000, primarily in salaries, wages and employee benefits. In its initial phase Presis will focus on continued research, product development, establishing sources of supply, recruiting and training personnel, developing markets and contracting for production. The Company expects this operation to generate minimal, if any, revenues and to incur operating losses in the remainder of 1998, which are likely to be material in relation to its consolidated results of operations. OTHER Net interest income decreased in the first quarter of 1998 as compared to the first quarter of 1997 as a result of reduced average balances invested and interest expense on borrowed funds under Crouse's Working Capital Line. TransFinancial's effective income tax rate for the first quarter of 1998 was 54% as compared to 45% for the same period of 1997. This increase was the result of the greater significance of non-deductible intangibles amortization relative to reduced pre-tax income. Outlook The following statements are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as such involve risks and uncertainties which are detailed below under the caption "Forward-Looking Statements". The Company has developed a three-year strategic plan with the goals of continuing the growth of each of its business segments, and making the financial services segment a more equal contributor to the Company's earnings per share. In the transportation segment, the plan calls for the Company to continue to provide and improve upon its already superior service to its customers in its primary operating territory, while extending its operations throughout the Midwest. As the Company makes the strategic investments necessary to support this expansion, the Company intends to continue to improve the efficiency and effectiveness of its existing base of operations. The financial services segment will also focus on increasing its market penetration in certain states with substantial population and industrial base. The additional volumes of premium finance contracts is expected to be handled within the Company's existing administrative operations without incurring significant additional fixed costs. In its initial phase Presis will focus on continued research, product development, establishing sources of supply, recruiting and training personnel, developing markets and contracting for production. The Company expects this operation to generate minimal, if any, revenues and to incur operating losses in the remainder of 1998, which are likely to be material in relation to its consolidated results of operations. In addition to the expansion of its existing operations in each of its business segments, the Company continues to consider potential acquisitions which would complement these operations. Forward-Looking Statements Certain statements contained in this Quarterly Report on Form 10-Q which are not statements of historical fact constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, the statements specifically identified as forward-looking statements in this Form 10-Q. In addition, certain statements in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, and in oral statements made by or with the approval of an authorized executive officer of the Company which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, the payment or non-payment of dividends, capital structure and other financial items, (ii) statements of plans and objectives of the Company or its management or Board of Directors, including plans or objectives relating to the products or services of the Company, (iii) statements of future economic performance, and (iv) statements of assumptions underlying the statements described in (i), (ii) and (iii). These forward- looking statements involve risks and uncertainties which may cause actual results to differ materially from those anticipated in such statements. The following discussion identifies certain important factors that could affect the Company's actual results and actions and could cause such results or actions to differ materially from any forward-looking statements made by or on behalf of the Company that related to such results or actions. Other factors, which are not identified herein, could also have such an effect. Transportation Certain specific factors which may affect the Company's transportation operation include: competition from other regional and national carriers for freight in the Company's primary operating territory; price pressure; changes in fuel prices; labor matters; including changes in labor costs, and other labor contract issues resulting from the negotiation of a new contract to replace the current contract which expired March 31, 1998, and environmental matters. Financial Services Certain specific factors which may affect the Company's financial services operation include: the performance of financial markets and interest rates; the performance of the insurance industry; competition from other premium finance companies and insurance carriers for finance business in the Company's key operating states resulting adverse changes in interest rates in states in which the Company operates; greater than expected credit losses; the acquisition and integration of additional premium finance operations or receivables portfolios; and, the inability to obtain continued financing at a competitive cost of funds. Industrial Technology As described below under the caption "Financial Condition," the Company has acquired an equity interest in a start-up business formed to develop, sell and/or finance equipment utilizing an industrial technology for dry particle processing. This technology is subject to risks and uncertainties in addition to those generally applicable to the Company's operations described herein. These additional risks and uncertainties include the efficacy and commercial viability of the technology, the ability of the venture to market the technology, the acceptance of such technology in the marketplace, the general tendency of large corporations to be slow to change from known technology, the business' reliance on third parties to manufacture the equipment utilizing the technology, the ability to protect its proprietary information in the technology and potential future competition from third parties developing equivalent or superior technology. As result of these and other risks and uncertainties, the future results of operations of the venture are difficult to predict, and such results may be materially better or worse than expected or projected. Other Matters With respect to statements in this Report which relate to the current intentions of the Company and its subsidiaries or of management of the Company and its subsidiaries, such statements are subject to change by management at any time without notice. With respect to statements in "Financial Condition" regarding the adequacy of the Company's capital resources, such statements are subject to a number of risks and uncertainties including, without limitation: the future economic performance of the Company (which is dependent in part upon the factors described above); the ability of the Company and its subsidiaries to comply with the covenants contained in the financing agreements; future acquisitions of other businesses not currently anticipated by management of the Company; and other material expenditures not currently anticipated by management. With respect to statements in "Financial Condition" regarding the adequacy of the allowances for credit losses, such statements are subject to a number of risks and uncertainties including, without limitation: greater than expected defaults by customers, fraud by insurance agents and general economic conditions. General Factors Certain general factors which could affect any or all of the Company's operations include: changes in general business and economic conditions; changes in governmental regulation; and, tax changes. Expansion of these businesses into new states or markets is substantially dependent on obtaining sufficient business volumes from existing and new customers in these new markets at compensatory rates. The cautionary statements made pursuant to Section 21E of the Securities Exchange Act of 1934, as amended, are made as of the date of this Report and are subject to change. The cautionary statements set forth in this Report are not intended to cover all of the factors that may affect the Company's businesses in the future. Forward-looking information disseminated publicly by the Company following the date of this Report may be subject to additional factors hereafter published by the Company. FINANCIAL CONDITION The Company's financial condition remained strong at March 31, 1998 with no long-term debt and more than $3.8 million in cash and investments at the TransFinancial level, as well as approximately $6.8 million in cash and investments held in the discontinued operation. Effective April 30, 1998, AFS paid a dividend to TransFinancial of substantially all of its remaining net assets, including approximately $6.5 million of cash and investments. In addition, during the first quarter of 1998, the Company has purchased $3.9 million of operating property and equipment, without incurring any long-term indebtedness. The Company has additional commitments to purchase operating property and equipment at a cost of approximately $600,000 for delivery through May 1998. These purchases are expected to be funded from operating cash flows and available cash and investments. In addition, the Company expects to acquire approximately $1.9 million of operating equipment through a long-term operating lease by December 31, 1998. A substantial portion of the capital required for UPAC's insurance premium finance operations has been provided through the sale of undivided interests in a designated pool of receivables on an ongoing basis under receivables securitization agreements. The current securitization agreement, which matures December 31, 1999, currently provides for the sale of a maximum of $50 million of eligible receivables. As of March 31, 1998, $34.1 million of such receivables had been securitized. In January 1998, Crouse entered into a three-year Secured Loan Agreement with a commercial bank which provides for a $4.5 million working capital line of credit loan ("Working Capital Line") and a $4.5 million equipment line of credit loan ("Equipment Line"). There were no borrowings under the Equipment Line in the quarter ended March 31, 1998. As of March 31, 1998, a balance of $1.9 million was outstanding under the Working Capital Line. Effective July 31, 1997, the Company entered into a subscription agreement with a start-up business, Presis, L.L.C., pursuant to which TransFinancial committed to a $2.9 million capital contribution over two years in exchange for the exclusive finance and/or sale rights to equipment produced by, and a controlling interest in, Presis. Presis owns rights to a proprietary, industrial technology for dry particle processing. Presis intends to market equipment utilizing this technology to companies which would benefit from the use of dry particle processing in their manufacturing processes. Capital contributions through March 31, 1998 total approximately $1.0 million. In its initial phase, Presis will focus on continued research, product development, establishing sources of supply, recruiting and training personnel, developing markets and contracting for production. The Company expects this operation to incur initial operating losses during the remainder of 1998, which are likely to be material in relation to its consolidated results of operations. On April 8, 1998, 70% of the voting members of the International Brotherhood of Teamsters ("Teamsters Union") approved a new national contract effective April 1, 1998 for five years. The new national contract provides, among other things, for a first year $750 bonus in lieu of a pay increase and total wage, pension and health and welfare increases of approximately 2.8% per year. Crouse, along with certain other regional carriers, has elected to bargain independently with the Teamsters Union. While the Teamsters Union has not yet commenced negotiations with Crouse, the Company is hopeful that it will be able to negotiate a satisfactory contract in the near future. There can be, however, no assurance that Crouse will be able to negotiate a new contract with the Teamsters Union, or that work stoppages will not occur, or that the terms of any such contract, including the profit sharing program, will not be substantially less favorable than those of the existing contract. If a work stoppage should occur, Crouse's customer base would be put at risk inasmuch as its competition would have a continuing operating advantage. Any of these actions could have a material adverse effect on the Company's business, financial condition, liquidity or results of operations. PART II - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Item 3 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. On April 24, 1998, the lawsuit against TransFinancial, AFS and certain directors and officers of those companies by a former employee of AFS was settled with no material impact on the Company's financial position or results of operations. Item 2. Changes in Securities -- None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to Vote of Security Holders (a) Annual Meeting of Shareholders was held on April 27, 1998. (b) The nominees for the board of directors previously reported to the Commission in the Company's Proxy Statement were elected. (c) The matters voted upon at the Annual Meeting were as follows: (1) The adoption of the TransFinancial Holdings, Inc. 1998 Long-Term Incentive Plan was approved with 2,639,859 shares voting for, 995,883 shares voting against, 27,767 shares abstaining and 1,729,183 shares delivered by brokers not voted. (2) All seven nominees for director were elected as follows: Shares Voted Nominees For Withheld William D. Cox 5,175,426 217,266 Lawrence D. ("Larry") Crouse 5,065,653 327,039 J. Richard Devlin 5,160,065 232,627 Harold C. Hill, Jr. 5,176,841 215,851 Roy R. Laborde 5,061,053 331,639 Timothy P. O'Neil 5,157,713 234,979 Clark D. Stewart 5,171,414 221,278 (3) The selection of Coopers & Lybrand L.L.P. as independent public accountants was ratified with 5,307,929 shares voting for 70,082 shares voting against, and 14,681 shares abstaining. Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27* Financial Data Schedule. * Filed herewith. (b) Reports on Form 8-K -- None (SIGNATURE) Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TransFinancial Holdings, Inc. Registrant By: /s/ Timothy P. O'Neil Timothy P. O'Neil, President & Chief Executive Officer By: /s/ Mark A. Foltz Mark A. Foltz Vice President, Finance and Secretary Date: May 15, 1998 EXHIBIT INDEX Assigned Exhibit Number Description of Exhibit 27 Financial Data Schedule. EX-27 2
5 This schedule contains summary financial information extracted from TransFinancial Holdings, Inc.'s consolidated statement of income for the three months ended March 31, 1998 and consolidated balance sheet as of March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000719271 TRANSFINANCIAL HOLDINGS, INC. 1000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 3291 525 31984 615 0 45962 58013 22206 91623 16813 0 0 0 75 72590 91623 0 37003 0 36703 0 0 0 351 190 161 0 0 0 161 .03 .03
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