10-Q 1 tf-form10q_335275.txt QUARTERLY REPORT 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, 2001 [ ] 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. 1-12070 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 ( ) No (X) 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 July 9, 2001 ---------------------- ---------------------------- Common stock, $0.01 par value 3,278,291 Shares Part I. FINANCIAL INFORMATION Item 1. Financial Statements TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income For the Three Months Ended March 31, (In thousands, except per share amounts) (Unaudited) 2001 2000 Operating Revenues........................... $3,586 $1,849 Operating Expenses........................... 3,207 1,869 ------ ------ Operating Income (Loss)...................... 379 (20) ------ ------ Nonoperating Income (Expense) Interest income............................ 2 2 Interest expense........................... (7) (230) ------- ------- Total nonoperating income (expense)...... (5) (228) ------- ------- Income (Loss) Before Income Taxes............ 374 (248) Income Tax Provision (Benefit)............... 10 22 ------ ------ Income (Loss) from Continuing Operations..... 364 (270) ------ ------ Income (Loss) from Discontinued Operations (Note 2)................................... - (3,328) Income (Loss) on Closure of Discontinued Operations (Note 2).......................... (2,050) - ------ ------ Net Income (Loss)............................ $(1,686) $(3,598) ======== ======== Basic and Diluted Earnings (Loss) Per Share From Continuing Operations................. $ 0.11 $(0.08) Discontinued Operations (Note 2)........... (0.62) (1.02) ------ ------ Total.................................. $ (0.51) $(1.10) ======== ======= Basic Average Shares Outstanding............. 3,278 3,277 ======== ======= Diluted Average Shares Outstanding........... 3,286 3,278 ======== ======= The accompanying notes to condensed consolidated financial statements are an integral part of these statements. 2 TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) March 31, December 31, 2001 2000 --------- ------------ Assets (Unaudited) ------ Current Assets: Cash and cash equivalents.................. $ 353 $ 258 Finance accounts receivable, less allowance for credit losses of $1,527 and $1,490... 83,965 80,945 Other current assets..................... 637 753 ------ ------ Total current assets..................... 84,955 81,956 ------ ------ Operating Property, at Cost: Land....................................... 339 339 Structures and improvements................ 1,474 1,474 Other operating property................... 1,083 1,083 ------ ----- 2,896 2,896 Less accumulated depreciation............ (1,130) (1,069) ------ ------ Net operating property............... 1,766 1,827 ------ ------ Intangibles, net of accumulated amortization. 8,777 8,946 Other Assets................................. 131 108 ------ ----- $95,629 $92,837 ======= ======= Liabilities and Shareholders' Equity ------------------------------------ Current Liabilities: Cash overdrafts............................ $ 425 $1,161 Accounts payable........................... 2,933 2,309 Revolving bank loan (Note 4)............... 68,750 66,250 Accrued payroll and fringes................ 52 66 Other accrued expenses..................... 1,728 1,674 Net liabilities of discontinued operations (Note 2)................................. 5,550 3,500 ----- ---------- Total current liabilities................ 79,438 74,960 ------ ------ Contingencies and Commitments (Note 5)....... -- -- 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 7,623,091 and 7,623,091 shares........... 76 76 Paid-in capital............................ 6,254 6,254 Retained earnings.......................... 44,928 46,614 Treasury stock 4,345,561 shares, at cost... (35,067) (35,067) ------- ------- Total shareholders' equity............... 16,191 17,877 ------ ------ $95,629 $92,837 ======= ======= The accompanying notes to condensed consolidated balance sheets are an integral part of these statements. 3 TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, (In thousands) (Unaudited) 2001 2000 Cash Flows From Operating Activities Net income (loss)....................... $(1,686) $(3,598) Adjustments to reconcile net loss to cash used in operating activities Depreciation and amortization.......... 198 206 Debt cost amortization................. 32 84 Provision for credit losses............ 424 221 Net increase (decrease) from change in other working capital items affecting operating activities....... Accounts Receivable............... (3,444) (2,433) Accounts Payable.................. 624 463 Other............................. 158 (372) Loss from and on discontinued operations 2,050 3,328 ------ ------ (1,644) (2,101) ------ ------ Cash Flows From Investing Activities Cash from (to) discontinued operations.. -- (896) Purchase of operating property, net..... -- (22) Net sales/repurchases of accounts receivable............................ -- (515) Other................................... (24) 357 ------- ------ (24) (1,076) ------- ------ Cash Flows From Financing Activities Line of credit borrowings (repayments), net................................... 2,500 -- Cash overdrafts......................... (737) 2,133 Other................................... -- (4) ------ ------ 1,763 2,129 ------ ------ Net Decrease in Cash and Cash Equivalents. 95 (1,048) Cash and Cash Equivalents at beginning of period............................... 258 1,076 ------ ------ Cash and Cash Equivalents at end of period $ 353 $ 28 ======= ====== The accompanying notes to condensed consolidated financial statements are an integral part of these statements. 4 TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statement Of Shareholders' Equity (In thousands)(Unaudited) Total Share- Common Paid-In Retained Treasury holders' Stock Capital Earnings Stock Equity ------ ------- -------- -------- -------- Balance at December 31, 1999.. $ 76 $ 6,104 $ 69,283 $(35,067) $40,396 Net loss...................... -- -- (22,669) -- (22,669) Issuance of shares under Deferred Compensation Arrangements................ -- 143 -- -- 143 Issuance of shares under incentive plans............. -- 7 -- -- 7 ------ ------- -------- -------- ------- Balance at December 31, 2000.. 76 6,254 46,614 (35,067) 17,877 Net income.................... -- -- (1,686) -- (1,686) ------ ------- -------- -------- ------- Balance at March 31, 2001..... $ 76 $ 6,254 $ 44,928 $(35,067) $16,191 ====== ======= ======== ======== ======= The accompanying notes to condensed consolidated financial statements are an integral part of these statements. 5 TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Principles of Consolidation and Significant Accounting Policies The unaudited condensed 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 unaudited condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The year end 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 April 20, 2001, 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. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced operating losses for the years 2000, 1999 and 1998 and negative cash flows from operating activities in 2000, 1999 and 1998. In addition, the Company has violated certain covenants in its financing agreements and discontinued its transportation segment in 2000 (See Note 2, below). These factors raise substantial doubt about the Company's ability to continue as a going concern.* 2. Discontinued Operations TransFinancial discontinued its transportation operations in 2000. The Company's subsidiary, TFH Logistics & Transportation Services, Inc. ("TFH L&T"), which is a holding company for the Company's transportation subsidiaries, has two principal subsidiaries, Crouse Cartage Company ("Crouse"), which was acquired in 1991, and Specialized Transport, Inc. ("Specialized"), formed in 1999. On September 16, 2000 and December 16, 2000, Crouse and Specialized, respectively, ceased operations; Crouse as a result of significant operating losses and cash flow deficiency and Specialized as a result of its insurance carrier revoking its coverage. These companies are being liquidated outside of bankruptcy, but have established independent advisory committees of creditors and are following the general processes and procedures defined under the federal bankruptcy code. The Company's ability to continue as a going concern is ultimately dependent on its ability to successfully liquidate the transportation operations outside of bankruptcy. Management believes that it will be successful in that liquidation process.* The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company is conducting orderly liquidations of the Crouse and Specialized assets for distribution to their secured and unsecured creditors. The Company has closed on the bulk sale of Crouse's tractors, trailers, other equipment and real property. The Company expects to collect a substantial portion of Crouse's remaining receivables and liquidate the assets of Specialized over the next three months.* The Company is in the process of verifying unsecured claims. The proceeds of asset liquidations are anticipated to allow full payment of secured claims and a partial distribution to priority creditors and, in the case of Specialized, to general unsecured creditors on their claims.* 6 A summary of the net liabilities of the discontinued operations as of March 31, 2001, follows (in thousands): Assets Cash.................................. $ 435 Freight accounts receivable, net...... 54 Operating property, at estimated net realizable value................ 3,052 Deposits, prepayments, and other...... 57 ----- Total assets.......................... 3,598 ----- Liabilities Secured notes and other............... 1,340 Post- cessation administrative costs.. 590 Priority wages, taxes, and other...... 1,767 Unsecured liabilities................. 5,451 ----- Total Liabilities..................... 9,148 ----- Net deficit........................... $(5,550) ======== After distribution of all proceeds to creditors, TransFinancial expects to incur approximately $5.6 million of residual liabilities for certain claims included in the net deficit above.* This estimate of residual liabilities assumes the reduction of the transportation operations general unsecured liabilities of Crouse and Specialized by $18.5 million.* Such reduction relates to debts specific to these corporations and without recourse to TFH L&T, and various settlements with other creditors.* In connection with the closure of the transportation businesses the Company recorded a "Loss on Closure of Discontinued Operations" of $9.1 million, or approximately $2.78 per share, in the third and fourth quarters of 2000, and $2.1 million, or $0.62 per share, in the first quarter 2001. These losses include adjustments for asset and liability carrying values to liquidation values, accruals of liabilities for multi-employer pension withdrawal and WARN Act liabilities and estimated post-cessation administrative costs to conduct the liquidation. Management believes that it will be successful in conducting an orderly liquidation of the assets and disposition of claims of Crouse and Specialized.* 7 3. Segment Reporting The Company operates in financial services through Universal Premium Acceptance Corporation ("UPAC"). The company discontinued its transportation operations during 2000. Other items are shown in the table below for purposes of reconciling to consolidated amounts (in thousands). First Quarter ------------- Operating Operating Total Revenues Income (Loss) Assets Financial Services 2001 $3,580 $ 455 $93,846 2000 1,839 218 28,621 General Corporate and Other 2001 6 (76) 1,728 2000 10 (238) 1,932 Total from Continuing Operations 2001 3,586 379 95,629 2000 1,849 (20) 30,553 Transportation (Discontinued Operations) 2001 -- (2,050) 3,598 2000 37,019 (3,126) 50,011 Consolidated Continuing 2001 3,586 (1,671) 99,227 & Discontinued Operations 2000 38,868 (3,146) 80,564 4. Financing Agreements In December 1996, UPAC and TransFinancial entered into a securitization agreement whereby undivided interests in a designated pool of finance accounts receivable could be sold on an ongoing basis. Effective May 26, 2000, the securitization agreement was assigned to and assumed by a new financial institution. UPAC and its subsidiary, APR Funding Corporation, amended the securitization agreement with the new financial institution increasing maximum allowable amount of receivables to be sold under the agreement to $80 million, extending the term of the agreement by five years with annual liquidity renewals and amending certain convenants. On August 31, 2000, UPAC and APR Funding Corporation executed a Loan and Security Agreement with the same financial institution under essentially the same terms as the securitization agreement. UPAC and APR Funding borrow under a revolving loan arrangement with allowable maturities from 1 to 270 days. The loan bears interest at commercial paper rates plus bank program fees. Among other things, the terms of the agreement require UPAC to maintain a minimum tangible net worth of $10 million, contain restrictions on the payment of dividends by UPAC to TransFinancial without prior consent of the financial institution and require UPAC to report any material adverse changes in its financial condition. The terms of the loan agreement require UPAC to maintain a reserve at specific levels that serves as collateral. At March 31, 2001, $7.9 millions of receivables serve as collateral reserves for the loan agreement. Under the prior securitization agreement UPAC recognized gains on sales of receivables. These gains are shown as service revenue on the accompanying income statement. This change in accounting treatment had no effect on the total earnings recognized over the term of each finance contract or the cash flow received by UPAC on each contract. The timing of earnings recognition was altered by the accounting change. The non-cash effect on operating revenue and operating income from the change in gain on sale treatment of receivables for the first quarter 2001 versus 2000 was a negative charge of $67,000. 8 5. Contingencies and Commitments TransFinancial's operating subsidiaries are parties to routine litigation. TransFinancial and its subsidiaries maintain insurance programs and accrue for expected losses in amounts designed to cover liability resulting from these claims. In the opinion of management, the outcome of such claims and litigation will not materially affect the Company's financial position or results of operations.* The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to a proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000. The plaintiff filed an amended complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties. A motion to dismiss and an amended complaint has been filed and the Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company*. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS First quarter ended March 31, 2001 compared to the first quarter ended March 31, 2000 TransFinancial operates in financial services. The company discontinued its transportation operations in 2000. Financial Services For the first quarter of 2001, UPAC reported operating income of $455,000 on operating financial services revenue of $3.6 million, as compared to operating income of $218,000 on operating revenue of $3.0 million for the comparable period of 2000. The increase in operating revenue and operating income in 2001 was primarily the result of greater amounts financed and increases in interest spread margins. Premiums financed were $55.9 million in the first quarter of 2001 as compared to $50.9 in the first quarter of 2000. Interest margins are 0.85% higher in the first quarter of 2001 as compared to the first quarter of 2000. The increase in interest margins was primarily due to fixed interest rates on previous funded finance agreements and the non-recurring decreases in borrowing costs in the commercial paper market in the first quarter of 2001. Operating expenses increased 15.9% in the first quarter of 2001 from the same period in 2000, due principally to increases in salary and benefit costs and bad debt provisions. Other TransFinancial's effective income tax provision (benefit) rate for the first quarter of 2001 was 0.5%, as compared to 0.6% for the comparable period of 2000. In the first quarter of 2001, the Company's income tax provision was $10,000 on a pre-tax loss of $1,676,000. The effective income tax rates for each period were a lower percentage than statutory rates due to the impact of losses on discontinued operations and net operating loss carry-forwards, partially offset by non-deductible amortization of intangibles and valuation allowances provided against net deferred tax assets. The Company incurs approximately $250,000 each quarter in costs associated with maintaining and operating the public enterprise. TransFinancial intends to substantially reduce its overhead costs relating to management and director compensation and contemplates cancellation of many insurance policies (including director liability coverage) and elimination of other expenses to reflect the substantially reduced size of the Company's operations.* Forward-Looking Statements The Company believes certain statements contained in this Quarterly Report on Form 10-Q which are not statements of historical fact may 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. These statements can often be identified by the use in such statements of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "could," "intends," "plans," "estimates," or "anticipates," or the negative thereof, or comparable terminology. Certain of such statements contained herein are marked by an asterisk ("*") or otherwise specifically identified herein. In addition, the Company believes 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 may 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 10 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 relate to such results or actions. Other factors, which are not identified herein, could also have such an effect. 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 statutory interest rates or other regulations 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. 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 Part II - Item 1 regarding the outcome of claims and litigation, such statements are subject to a number of risks and uncertainties, including without limitation the difficulty of predicting the results of the discovery process and the final resolution of ongoing claims and litigation. 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 ability of management to effect operational changes to improve the future economic performance of the Company (which is dependent in part upon the factors described above); the ability of management to successfully liquidate the transportation operations, 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. General Factors Certain general factors that could impact 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. 11 FINANCIAL CONDITION As of March 31, 2001, the Company's net working capital was $5.5 million as compared to $7.0 million as of December 31, 2000. The Company's current ratio was 1.1 and its ratio of total liabilities to tangible net worth was 10.7 as of March 31, 2001, as compared to a current ratio of 1.1 and a ratio of total liabilities to tangible net worth of 8.4 as of December 31, 2000. Cash used by operating activities was negative for the three months ended March 31, 2001 and March 31, 2000 due to increases in accounts receivable resulting from increases in amounts financed by UPAC. The Company has experienced increases in net income in first quarter of 2001 as compared to the first quarter of 2000 as a result of discontinuing its transportation operations. The discontinued operations had losses of $2.1 million in the first quarter of 2001, as compared to $3.3 million in the first quarter of 2000. In addition, the Company violated certain convenants in its financing agreements in 2000. The report of the Company's Independent Accountants included in TransFinancial's Annual Report on Form 10-K for the year ended December 31, 2000, contains an explanatory paragraph indicating that these factors raise substantial doubt about the Company's ability to continue as a going concern. Effective May 26, 2000, UPAC's receivable securitization agreement was assigned to and assumed by a new purchaser. UPAC and APR Funding Corporation (wholly-owned subsidiary of UPAC) amended the securitization agreement with the new purchaser increasing the maximum allowable amount of receivables to be financed under the new agreement to $80.0 million, extending the term of the agreement by five years with annual liquidity renewals and amending certain financial covenants. Receivables transferred prior to the amendment were accounted for as sold, removed from the balance sheet and a gain on sale was recognized for the discounted interest strip retained as of the date of transfer. As a result of certain call provisions in the amended agreement, the receivables transferred under the amended agreement will not be reflected as sold in future balance sheets. The funds advanced will be accounted for as secured borrowings and earnings on receivables financed will be recognized on an interest earned basis over the term of the finance contracts. This change will have no effect on the total earnings recognized over the term of each finance contract or the cash flow received by UPAC on each such contract. The timing of earnings recognition will however be changed. The effect of this change resulted in a non-cash reduction of revenue of $768,000 in 2000, none occurring in the first quarter of 2000. On August 31, 2000, UPAC and APR Funding Corporation executed a Loan and Security Agreement with the same financial institution under essentially the same terms as the securitization agreement. Under the terms of the new agreement, UPAC and APR Funding may borrow up to $80 million using its eligible finance receivables as collateral. The loan bears interest at commercial paper rates plus bank program fees. The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to the proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000. The plaintiff filed an amended complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties. A motion to dismiss and an amended complaint has been filed and the Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company*. 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings -- The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to the proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000. The plaintiff filed an amended complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties. A motion to dismiss and an amended complaint has been filed and the Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company*. Item 2. Changes in Securities -- None 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 -- None 13 (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 (Principal executive and financial officer) Date: July 17, 2001 14