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UNITED STATES
DRAFT #4 - MARCH 26, 2001
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-13894
TRANSPRO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1807383
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
100 Gando Drive, New Haven, Connecticut 06513
(Address of principal executive offices, including zip code)
(203) 401-6450
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $.01 Par Value New York Stock Exchange
(together with associated Preferred Stock purchase rights)
Securities registered pursuant to Section 12 (g) of the Act:
NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting and non-voting common stock held
by non-affiliates of the Registrant at March 1, 2001 was $18,321,131. On that
date, there were 6,590,335 outstanding shares of the Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to stockholders for the fiscal year ended
December 31, 2000 are incorporated by reference into Part II hereof.
Portions of the Proxy Statement for the 2001 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report.
Exhibit Index is on pages 14 through 17 of this report.
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TRANSPRO, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 2000
PAGE
----
PART I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results 12
of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 12
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners and Management 13
Item 13. Certain Relationships and Related Transactions 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14
Signatures 18
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PART I
ITEM 1. BUSINESS
TransPro, Inc. (the "Company") designs, manufactures and markets radiators,
heater cores, air conditioning parts (including condensers, compressors,
accumulators and evaporators) and other heat transfer products for the
automotive aftermarket. In addition, the Company manufactures and distributes
radiators, charge air coolers, oil coolers and other specialty heat exchangers
for OEMs of heavy trucks and industrial and off-highway equipment and the heavy
truck aftermarket. A description of the particular products manufactured and the
services performed by the Company in each of its market segments is set forth
below.
GENERAL DEVELOPMENT OF BUSINESS
The Company currently operates in two business segments, Aftermarket
Heating and Cooling Systems and Original Equipment Manufacturer ("OEM") Heat
Transfer Systems. The Company is comprised of three operating divisions that
supply products and services to the automotive and truck aftermarkets and
original equipment manufacturers of trucks and other industrial products. The
Aftermarket Heating and Cooling Systems segment includes the Company's GO/DAN
Industries, Inc. division ("GDI") and the air conditioning parts division. GDI
is a producer of replacement radiators and other heat transfer products for the
automotive and truck aftermarkets. The air conditioning parts division ("Evap")
is a manufacturer and distributor of replacement automotive air conditioning
parts for the automotive aftermarket and a re-manufacturer of air conditioning
compressors primarily for import applications in the automotive aftermarket. The
OEM Heat Transfer Systems segment consists of the Company's G&O Manufacturing
Company division ("G&O") which produces and supplies radiators, charge air
coolers, and engine cooling system components for OEMs of heavy trucks and
industrial and off-highway equipment.
The Company's origins date back to 1915 when G&O commenced operations in
New Haven, Connecticut as a manufacturer of radiators for custom built
automobiles, fire engines and original equipment radiators for Ford Motor
Company ("Ford"). Allen Telecom Inc. ("Allen," formerly The Allen Group Inc.)
acquired G&O in 1970 as part of its strategy to become a broad-based automotive
supplier. The specialty metal fabrication business commenced operations in 1947
to install specialized interiors in utility trucks and vans for commercial
fleets and design, manufacture and assemble fabricated metal parts for light
truck telecommunications and other industrial customers and was acquired by
Allen in 1967 as part of the same strategy to become a broad-based automotive
supplier. GDI was formed in 1990 when Allen contributed a portion of its G&O
division and other assets, which together represented all of Allen's aftermarket
radiator business, and Handy & Harman contributed substantially all of the
assets of its then wholly owned subsidiaries, Daniel Radiator Corporation,
Jackson Industries, Inc., Lexington Tube Co., Inc. and US Auto Radiator
Manufacturing Corporation, to form a 50/50 joint venture partnership. In 1995,
Allen contributed all of the assets and liabilities of G&O and the specialty
fabricated metal products business and Allen's interest in GDI to the Company.
Immediately thereafter, Allen caused GDI to redeem Handy and Harman's ownership
interest in GDI. On September 29, 1995, Allen spun off the Company to Allen's
stockholders. The Company added replacement automotive air conditioning
condensers to its Aftermarket product line with the acquisition of substantially
all of the assets, and the assumption of certain liabilities, of Rahn Industries
effective August 1996. In December 1997, the Company acquired substantially all
of the assets and assumed certain liabilities of Vehicle Management Systems Inc.
("VMS"), a small Canadian van upfitter, to extend its geographic coverage for
vehicle conversions into Canada. The Company added replacement automotive air
conditioning parts to its aftermarket product line with the acquisition of the
outstanding stock of Evap in a purchase transaction effective August 1, 1998.
The Company added re-manufactured automotive air conditioning compressors to its
aftermarket product line with the acquisition of the outstanding stock of A/C
Plus, Inc. ("A/C Plus") in a purchase transaction effective February 1, 1999.
Effective April 1, 1999, GDI changed its organizational structure from a
partnership to a corporation. Effective December 31, 2000, A/C Plus was merged
into Evap.
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In 1999, the Company decided to concentrate its efforts on its heating and
cooling systems businesses. Effective May 5, 2000, the Company sold
substantially all of the assets, including the stock of Crown VMS Canada, Ltd.,
and liabilities of its specialty metal fabrication business to Leggett &
Platt, Incorporated in a transaction valued at $37.5 million, comprised of
$28.7 million in cash and the assumption of $8.0 million of Industrial Revenue
Bonds due in 2010 and an unfunded pension liability of $0.9 million. The
Company recorded a gain of $6.0 million, net of $3.9 million of tax.
DESCRIPTION OF BUSINESS
MARKETS
The automotive and heavy truck parts industries target two distinct
markets, the aftermarket and the OEM market. The products and services used to
maintain and repair automobiles, vans, light trucks and heavy trucks, as well as
accessories not supplied with such vehicles when manufactured, form the
respective automotive and heavy truck aftermarkets. The manufacture of
individual component parts for use in the original equipment manufacturing
process of automobiles, vans and light trucks forms the automotive OEM market
and the manufacture of individual components for use in the original equipment
manufacturing process of heavy trucks forms the heavy truck OEM market. The
Company believes that in recent years demand for replacement parts and supplies
in both the automotive and heavy truck aftermarkets has increased as both
individuals and commercial fleet operators are driving more and keeping their
vehicles longer. The Company sells its products and services principally to the
automotive and heavy truck aftermarkets, as well as the heavy truck OEM market.
The Company also sells its automotive products to OEM's of off-highway and
transportation equipment and other industrial customers.
PRINCIPAL PRODUCTS AND SERVICES
The Company designs, manufactures and markets radiators, heater cores, air
conditioning parts (including condensers, compressors, accumulators and
evaporators) and other heat transfer products for the automotive aftermarket. In
addition, the Company manufactures and distributes radiators, charge air
coolers, oil coolers and other specialty heat exchangers for OEMs of heavy
trucks and industrial and off-highway equipment and the heavy truck aftermarket.
A description of the particular products manufactured and the services performed
by the Company in each of its market segments is set forth below.
AFTERMARKET HEATING AND COOLING SYSTEMS
GDI
Through GDI, the Company provides one of the most extensive product ranges
of high-quality radiators, radiator cores, heater cores and air conditioning
condensers to the automotive and heavy truck aftermarkets. The Company's primary
radiator and heater manufacturing facility in Nuevo Laredo, Mexico is ISO-9002
certified, which is an internationally recognized verification system for
quality management. In addition to its standard models, the Company can produce
and deliver special orders of such products typically within 24 hours.
The purpose of a radiator is to cool the engine. A radiator acts as a heat
exchanger, removing heat from engine coolant as it passes through the radiator.
The construction of a radiator usually consists of: the radiator core, which
consists of coolant-carrying tubes and a large cooling area; a receiving (inlet)
tank; a dispensing (outlet) tank; and side columns. In operation, coolant is
pumped from the engine to the inlet tank where it spreads over the tops of the
tubes. As the engine coolant passes through the tubes, it loses its heat to the
air stream through the fins connected to the tubes. After passing through the
tubes, the reduced temperature coolant enters the outlet tank and is then
re-circulated through the engine.
Complete Radiators. The Company's lines of complete radiators are produced
for automobile and light and heavy truck applications and consist of more than
700 models, which are able to service approximately 90% of the automobiles in
the United States. The Company has established itself as an industry leader with
its well-recognized line of Ready-Rad(R) radiators. The Ready-Rad(R) Plus
line with adaptable fittings has become popular because of its ability to fit
the requirements of a broad line of vehicles, enabling distributors to service a
larger number of vehicles with lower inventory levels.
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The Company introduced its Ready Rad(R) Heatbuster ("Heatbuster") line of
complete radiators in 1994. This line of replacement radiators is specially
designed to provide approximately 20% more cooling capability than a standard
radiator. The Heatbuster line is an ideal replacement radiator for vehicles,
which are used for towing, hauling, plowing, or off-highway purposes, and as a
result, it has been particularly popular in the growing light truck market of
the automotive fleet.
Radiator Cores. A radiator core is the largest and most expensive component
of a complete radiator. The Company's Ready-Core(R) line consists of 2,500
models of radiator cores for automobiles and light trucks. Given the wide range
of cores required by today's automobile and truck fleet, there are many times
when a specific core is not readily available. In these cases, the Company can
produce a new core, on demand, within several hours. The Company is able to
provide same day service to virtually the entire United States using its 11
strategically positioned regional manufacturing plants.
Industrial cores are heavy-duty units, which are constructed of extremely
durable components in order to meet the demands of the commercial marketplace.
The Company produces approximately 13,000 models of industrial cores, and these
products serve many different needs in a variety of markets. In general, an
industrial core is much larger than an automotive core and typically sells for
three to four times the price of an automotive core.
Heater Cores. The Company produces more than 350 different heater core
models for domestic and foreign cars and trucks, which cover the requirements
for more than 95% of today's automotive fleet. A heater core is part of a
vehicle's heater system through which heated coolant from the engine cooling
system flows. The warm air generated as the liquid flows through the heater core
is then propelled into the vehicle's passenger compartment by a fan.
The Company's Ready-Aire(R) line of heater cores is recognized as an
industry leader and its models utilize both cellular and tubular technology.
Traditional heater cores utilize folded metal cellular construction to transport
coolant through the unit, while the more modern models transport coolant through
tubes. The Company introduced its tubular CT Ready-Aire(R) line of heater
cores in 1988, and its CT heater cores now account for approximately 30% of the
Company's total heater core sales.
Radiator Parts and Supplies. The Company sells radiator shop supplies and
consumable products used by its customers in the process of radiator repairs.
The Company's extensive line includes radiator parts, small hand tools and
equipment, solders and fluxes. The Company is one of the largest domestic
suppliers of stamped metal radiator parts, supplying these parts to regional
core manufacturers throughout the United States.
Air Conditioning Condensers. Automotive air conditioning condensers were
added to the GDI product line in 1996 through the acquisition of Rahn
Industries, Inc., an aftermarket manufacturer and supplier of automotive air
conditioning condensers. Air conditioning condensers are a component of a
vehicle's air conditioning system designed to convert the air conditioner
refrigerant from a high-pressure gas to a high-pressure liquid by passing it
through the air-cooled condenser. GDI distributes this product under the
Ready-Aire(R) brand and has fully integrated this product into its
distribution network. GDI catalogs more than 750 condenser part numbers.
Air Conditioning Parts
Through its air conditioning parts division, the Company provides one of
the most extensive catalogs of replacement automotive air conditioning parts and
compressors to the automotive and truck aftermarkets.
Compressors. The Company re-manufactures more than 1,500 models of
replacement air conditioning compressors for import applications in the
automotive and truck aftermarkets. The Company also sells approximately 2,000
air conditioning compressor models for replacement in both the domestic and
import automotive and truck aftermarkets. The compressor is designed to compress
low-pressure vapor refrigerant, which it draws from the evaporator into a
high-pressure gas. This gas is then pumped to the condenser.
Accumulators. The Company offers over 500 accumulator models. Accumulators
act as a reservoir that prevents liquid refrigerant from reaching the
compressor. The accumulator uses a drying agent to remove moisture from the
system and a filter screen to trap any solid contaminants.
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Evaporators. The Company offers over 400 evaporator models. Automotive air
conditioning evaporators are designed to remove heat from the passenger
compartment. The core is generally located under the dash or adjacent to the
fire wall and functions as a heat exchanger by passing low pressure liquid
refrigerant through its passageways and forcing warm air from the passenger
compartment over the core. The refrigerant becomes a low-pressure vapor and is
then re-compressed by the compressor and re-circulated.
Air Conditioning Parts and Supplies. The Company sells an extensive line of
other air conditioning parts and supplies. These other component parts include
driers, hose and tube assemblies, blowers and fan clutches.
OEM HEAT TRANSFER SYSTEMS
Through its G&O Division, the Company designs, manufactures and markets
radiators and charge air coolers to OEMs of heavy duty trucks, buses, as well as
industrial and off-highway equipment such as generator sets, construction
vehicles, railroad locomotives and military equipment. The Company's Jackson,
Mississippi production facility is ISO 9002 certified and is currently employing
QS-9000 principles in anticipation of obtaining QS-9000 certification in the
future.
Radiators. The Company custom designs, manufactures and sells approximately
350 different models of radiators, which are specifically designed and
engineered to meet customer specifications. The Company's radiators are
specifically engineered to withstand a variety of demanding customer
applications. The Company's radiators are sold under the widely-recognized
Ultra-Fused(R) brand name utilizing welded tube-to-header core construction
and are specifically engineered to meet customer specifications to withstand a
variety of demanding customer applications.
Charge Air Coolers. The Company offers its OEM customers approximately 150
different models of aluminum charge air coolers. A charge air cooler is a device
that is used to decrease the temperature of the turbo that is used by the engine
in its combustion process, which in turn improves the operating efficiency of
the engine and lowers its emission levels. The Company believes that the demand
for charge air coolers will continue to increase as the Company's customers face
increasing pressure to produce vehicles and equipment that are more fuel
efficient and less polluting. In 1999, the Company obtained a U.S. Patent
relating to its proprietary Ultra-Seal grommetted charge air cooler. This
product offers significant improvements in performance and reliability and
exceeds current industry guidelines for durability.
G&O's traditional heavy-duty on-highway (class 8) truck market has become
increasingly competitive and its share of this market has been reduced. The
Company believes there are opportunities to expand into the specialty vehicle
marketplace, which is not as well served as the traditional class 8 truck
market.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, EXPORT SALES AND DOMESTIC AND
FOREIGN OPERATIONS
The Company operates in two business segments, Aftermarket Heating and
Cooling Systems and OEM Heat Transfer Systems. Applicable segment information
appears in Note 3 of the Notes to Consolidated Financial Statements contained in
the Registrant's 2000 Annual Report to Stockholders, certain portions of which
are included in Item 8 of this Report. All such information is incorporated
herein by reference. Export sales from North America were below 10% in each of
the years reported. The Company has a manufacturing facility in Mexico. The net
assets of the Company's Mexico operation were $9.3 million and $7.7 million as
of December 31, 2000 and 1999, respectively. During 2000, 1999 and 1998, the
Company had $5.8 million, $5.1 million and $4.8 million of sales in Mexico,
respectively. Sales in Canada aggregated $1.0 million, $4.3 million and $1.4
million in 2000, 1999 and 1998, respectively.
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CUSTOMERS
The Company sells its products and services to a wide variety and large
number of industrial and other commercial customers. The Company sells its
Aftermarket replacement radiators, air conditioning replacement parts and
supplies, and other heat transfer products to national retailers of aftermarket
automotive products, such as AutoZone, Pep Boys, warehouse distributors,
radiator shops, parts jobbers and, to a lesser extent, OEMs. The Company
supplies OEM heat transfer systems, including radiators, charge air coolers and
cooling modules, to OEMs of heavy duty trucks, such as PACCAR and Mack, and OEMs
of industrial and off-highway equipment, such as Cummins Power Generation, AM
General and Oshkosh Truck Corporation.
The Company's largest customer during 2000, 1999 and 1998 was AutoZone.
AutoZone accounted for approximately 20%, 12% and 11% of net sales for 2000,
1999 and 1998, respectively. In 2000, 1999 and 1998, the Company had no other
customers who individually accounted for greater than 10% of the Company's net
sales.
SALES AND MARKETING
The Company maintains a separate sales and marketing department at each of
its principal operating units. By focusing its sales effort at the operating
unit level, the Company enables its sales staff to develop a thorough
understanding of such unit's technical and production capabilities and of the
overall market in which such unit operates. The Company has approximately 150
individuals involved in sales and marketing efforts.
GDI's sales and marketing efforts are under the direction of GDI's
Executive Vice President who oversees the Vice President of Marketing, the Vice
President of National Account Sales and the National Sales Manager. The National
Sales Manager is responsible for sales to radiator shops and traditional
wholesale distributors through the Company's branches and agencies. GDI also
employs several marketing specialists who report to the Vice President of
Marketing and develop, implement and monitor GDI's various marketing and
advertising programs. As part of its current marketing efforts, GDI is focusing
on increasing its sales to the fastest growing segments of the automotive
aftermarket. The Vice President of National Account Sales is responsible for
sales to retailers and auto parts warehouses. GDI also uses independent sales
representatives to aid in its outside sales efforts in these channels.
The air conditioning parts division has an internal sales and marketing
staff consisting of a Vice President of Sales and Marketing with staff that
serves its existing customer base and seeks new customers. The air conditioning
division also utilizes the GDI sales staff to identify and seek new customers.
The air conditioning parts division also utilizes independent sales
representatives to aid in its outside sales efforts.
At G&O, the Company has an in-house sales management staff that is
responsible for growing the business, servicing existing customers and
identifying new marketing opportunities. These individuals and in-house
engineering specialists, work in close consultation with the engineering staff
of G&O's customers in order to provide the technical expertise and advice needed
in the development stage of new customer products. In addition, G&O's engineers
work closely with truck engine OEMs, such as Cummins Engine and Detroit Diesel,
during the early stages of new product development and design. G&O has
historically focused on sales of its products to domestic OEMs of heavy-duty
trucks and industrial equipment. In recent years, G&O has expanded its focus to
include all highway and specialty vehicle applications.
COMPETITION
The Company faces significant competition within each of the markets in
which it operates. In its Aftermarket Heating and Cooling Systems product lines,
the Company believes that it is among the major manufacturers and that
competition is widely distributed. The Company competes with the national
producers of heat transfer products, such as Modine Manufacturing ("Modine"),
the internal operations of OEMs and, to a lesser extent, local and regional
manufacturers. The Company's primary competition in the air conditioning
replacement parts business includes Four Seasons, a division of Standard Motor
Products, as well as numerous regional operators. The Company believes it can
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utilize its established distribution system to expand its air conditioning parts
business nationally. The Company's principal methods of competition include
product design, performance, price, service, warranty, product availability and
timely delivery.
With respect to its OEM Heat Transfer Systems segment, the Company competes
with national producers of heat transfer products, such as Modine, Valeo Engine
Cooling Systems and Behr GmbH & Co. The Company principally competes for new
business both at the beginning of the development phase or offering of a new
model and upon the redesign of existing models used by its major customers. New
model development generally begins two to three years prior to the marketing of
the vehicle to the public. Once a producer has been designated to supply
components to a new program, an OEM will generally continue to purchase those
components from the designated producer for the life of the program.
INTELLECTUAL PROPERTY
The Company owns a number of foreign and US patents and trademarks. The
patents expire on various dates from 2009 to 2019. In general, the Company's
patents cover certain of its radiator, charge air cooler and air conditioning
accumulator manufacturing processes. The Company has entered into licensing and
other agreements with respect to certain patents, trademarks and manufacturing
processes it uses in the operation of its business. The Company believes that it
owns or has rights to all patents and other technology necessary for the
operation of its business. The Company does not consider any single patent or
trademark or group of patents or trademarks to be material to its business as a
whole.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in its Aftermarket Heating
and Cooling Systems and OEM Heat Transfer Systems product lines are copper and
brass. The Company also uses aluminum in its radiator, condenser, charge air
cooler, and heater product lines. Although copper, brass, aluminum and other
primary materials are available from a number of vendors, the Company has chosen
to concentrate its sources with a limited number of long-term suppliers. The
Company believes this strategy results in purchasing and operating economies.
Outokumpu, a Swedish corporation, supplied the Company with approximately 95% of
its copper and brass requirements in 2000, 1999, and 1998. The Company has not
experienced any significant supply problems in its operations and does not
anticipate any significant supply problems in the foreseeable future.
The Company typically executes purchase orders for its anticipated copper
and brass requirements approximately three to six months prior to the actual
delivery date. The purchase price for such copper and brass is established at
the time orders are placed by the Company and not at the time of delivery.
Copper prices had been trending downward through the end of 1998. Prices began
to rise during the middle of 1999 and have leveled off during 2000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" - Item 7.
BACKLOG
The Company's backlog was approximately $4.9 million at December 31, 2000
compared with approximately $7.8 million at December 31, 1999. Backlog consists
of product orders for which a customer purchase order has been received and is
scheduled for shipment within 12 months. Since orders may be rescheduled or
canceled, backlog does not necessarily reflect future sales levels.
SEASONALITY
The Company expects the second and third quarters to be positively
impacted, and the first and fourth quarters to be negatively impacted, by the
operating results of the Aftermarket Heating and Cooling Systems segment, which
typically experiences higher sales during the summer months, as the demand for
replacement radiators and air conditioning parts and supplies increases, and
lower sales during the winter months. Historically, the OEM Heat
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Transfer Systems segment has experienced a slight decrease in revenues and
operating income during the fourth quarter as results are affected by scheduled
plant shut-downs for the holiday season.
RESEARCH AND DEVELOPMENT
Research and development expenses were approximately $0.2 million for each
of the years ended December 31, 2000, 1999 and 1998.
EMPLOYEES
At December 31, 2000, the Company had approximately 1,644 employees. Of
these employees, approximately 689 were covered by collective bargaining
agreements. The Company's collective bargaining agreements are independently
negotiated at each manufacturing facility and expire on a staggered basis.
Locals affiliated with the International Union of Electronic, Electrical,
Technical, Salaried and Machine Workers (AFL-CIO) and the United Paperworkers
International Union represent approximately 20% each of the Company's unionized
employees. Approximately 59% of the Company's unionized employees are employed
at the Company's Mexico plant and are represented by a local Mexican labor
union. The Company has successfully re-negotiated five collective bargaining
agreements over the last several years and feels labor relations are good,
although there can be no assurance that the Company will not experience work
stoppages in the future.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters in New Haven, Connecticut
and conducts its operations through 17 principal manufacturing and assembly
facilities. The Company believes its property and equipment are in good
condition and suitable for its needs. The Company estimates that its plants
operate at between 40% and 95% of capacity on a six-day basis. The Company has
sufficient capacity to increase production with respect to its replacement
radiator and original equipment product lines and its air conditioning
replacement parts business. The Company's principal manufacturing and assembly
facilities are as follows:
APPROXIMATE OWNED/
LOCATION SQUARE FOOTAGE LEASED PRODUCT LINE
-------- -------------- ------ ------------
New Haven, Connecticut 158,800 Owned(1) Corporate headquarters, GDI headquarters, G&O
headquarters, tubes for Aftermarket and original
equipment radiators.
Jackson, Mississippi 135,885 Owned Original equipment radiators.
Dallas, Texas 50,050 Leased Replacement radiators (radiator cores).
Nuevo Laredo, Mexico Leased Replacement radiators (radiator cores).
109,055
Maquoketa, Iowa Leased Parts and tooling for replacement radiators.
38,000
Los Angeles, California Leased Replacement air conditioning condensers.
32,900
Arlington, Texas 125,000 Leased Air Conditioning Parts division headquarters,
remanufactured air conditioning compressors,
air conditioning parts and supplies.
- -------------------------
(1) Subject to IRB financing arrangements.
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In its Aftermarket Heating and Cooling Systems segment, the Company
maintains a nationwide network of manufacturing and distribution facilities
which enables the Company to provide its customers, generally, with same day
delivery service. In addition to the three manufacturing facilities for
replacement radiators described above, the Company also operates 10 fully
equipped, regional manufacturing facilities. These 10 facilities are all leased,
average approximately 11,000 square feet in size and are strategically located
to generally provide same-day service to virtually the entire United States. The
Company has sales branch locations at each of its regional manufacturing
facilities, has 47 additional local branch offices, 18 independent agencies and
one distribution center in Memphis, Tennessee that comprise its nationwide local
distribution network. All of the Company's local branch distribution facilities
are leased and are approximately 6,000 square feet in size.
ENVIRONMENTAL MATTERS
As is the case with manufacturers of similar products, the Company uses
certain hazardous substances in its operations, including certain solvents,
lubricants, acids, paints and lead, and is subject to a variety of environmental
laws and regulations governing discharges to air and water, the handling,
storage and disposal of hazardous or solid waste materials and the remediation
of contamination associated with releases of hazardous substances. These laws
include the Resource Conservation and Recovery Act (as amended), the Clean Air
Act (as amended), the Clean Water Act of 1990 (as amended) and the Comprehensive
Environmental Response, Compensation and Liability Act (as amended). The Company
believes that, as a general matter, its policies, practices and procedures are
properly designed to reasonably prevent risk of environmental damage and
financial liability to the Company. During 1998, the Company was fined
approximately $0.1 million in connection with certain pre-treatment water
containment violations at its Jackson, Mississippi facility. These issues were
satisfactorily resolved. The Company believes it is reasonably possible that
environmental related liabilities might exist with respect to an industrial site
formerly occupied by the Company. Based upon environmental site assessments, the
Company believes that the cost of any potential remediation for which the
Company may ultimately be responsible will not have a material adverse effect on
the consolidated financial position, results of operation or liquidity of the
Company.
The Company currently does not anticipate any material adverse effect on
its consolidated results of operations, financial condition or competitive
position as a result of compliance with federal, state, local or foreign
environmental laws or regulations. However, risk of environmental liability and
charges associated with maintaining compliance with environmental laws is
inherent in the nature of the Company's business and there is no assurance that
material environmental liabilities and compliance charges will not arise. The
Company has assumed all environmental liabilities, if any, associated with the
former Allen Automotive and Truck Products Business and GDI.
ITEM 3. LEGAL PROCEEDINGS
Various legal actions are pending against or involve the Company with
respect to such matters as product liability, casualty and employment-related
claims. In the opinion of management, the aggregate liability, if any, that
ultimately may be incurred in excess of amounts already provided should not have
a material adverse effect on the consolidated financial position, results of
operations, or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2000.
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11
EXECUTIVE OFFICERS OF THE REGISTRANT*
SERVED AS
OFFICER POSITION OR OFFICE WITH THE COMPANY & BUSINESS EXPERIENCE DURING PAST
NAME AGE SINCE FIVE (5) YEAR PERIOD
---- --- ----- --------------------
Charles E. Johnson 55 March 2001 President, Chief Executive Officer and Director and President of GDI,
since 2001; Chief Executive Officer of Canadian General Tower, Ltd., 1997
through 2001 and, since 1996, President and Director; President
and Chief Operating Officer of Equion Corporation, 1993 through 1996.
Jeffrey L. Jackson 53 August 1995 Vice President Human Resources, since 1995; Vice President of Human
Resources of GDI, 1992 through 1995.
Timothy E. Coyne 46 October 1996 Vice President Finance, Treasurer, Secretary, Chief Financial Officer
since 1998 and Corporate Controller, since 1996; Vice President of
Finance and Administration and Treasurer of Keene Corporation, 1990
through 1996.
John F. Della Ventura 52 February 1998 President of G&O, since 1998; Group Controller-Engine Systems of
Echlin, Inc. (which was acquired by Dana Corporation), 1990 through 1998.
Kevin J. O'Connor 55 February 2001 President - Air Conditioning Parts Division, since 2001;
Executive Vice President of GDI, 1993 through 2001
* All officers are elected by the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange. The
number of stockholders of record of the Company's Common Stock as of the close
of business on March 1, 2001, was 1,012. Information regarding market prices and
dividends declared for the Company's Common Stock is shown below for 2000 and
1999. Market prices are closing prices quoted on the New York Stock Exchange,
the principal exchange market for the Company's Common Stock. The Company
discontinued the quarterly common stock cash dividend in September 2000. Under
the provisions of the loan agreement entered into on January 4, 2001, the
Company is prohibited from paying common stock dividends.
YEAR ENDED DECEMBER 31, 2000
----------------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- -------
Market price of common stock
---High $ 6-1/2 $ 6 $ 5-3/16 $ 3-11/16
---Low 4-3/16 4-1/4 3-1/16 2-1/8
Dividends per common share $ .05 $ .05 $ -- $ --
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YEAR ENDED DECEMBER 31, 1999
----------------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- -------
Market price of common stock
---High $ 6-1/4 $ 6-3/8 $ 7-15/16 $ 6-7/8
---Low 4-5/16 4-3/8 4-15/16 5
Dividends per common share $ .05 $ .05 $ .05 $ .05
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
to "Financial Highlights" contained in the Registrant's 2000 Annual Report to
Stockholders, portions of which are filed as Exhibit 13 to this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated herein by reference
to "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Registrant's 2000 Annual Report to Stockholders,
portions of which are filed as Exhibit 13 to this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has certain exposures to market risk related to changes in
interest rates, foreign currency exchange rates and commodities.
The Company's interest rate risk is most sensitive to changes in the U.S.
interest rates. At December 31, 2000, the Company had a revolving credit
agreement, under which approximately $40.0 million was outstanding. The
revolving credit agreement bore interest at variable rates based on current
indices. The weighted average interest rate on the revolving credit agreement
during 2000 was 8.85%. Interest on the revolving credit agreement is based on,
at the Company's option, changes in either the Eurodollar loan rate or the
Federal Funds effective rate, plus an applicable margin based on certain Company
ratios. The Company also has an Industrial Revenue Bond ("IRB") of $5.0 million
outstanding at December 31, 2000, which matures in October 2013. The IRB had a
weighted average interest rate of 4.40% during 2000. Interest on the IRB is
based on the short-term tax exempt bonds index.
On January 4, 2001, the Company entered into a loan agreement to replace
the revolving credit agreement. At February 28, 2001, approximately $39.2
million was outstanding under the loan agreement. The loan agreement bears
interest at variable rates based upon current indices. The weighted average
interest rate from the inception of the loan agreement to February 28, 2001 was
9.24%.
The Company has sales and a manufacturing facility in Mexico. The
functional currency of the Company's operations in Mexico is the U.S. dollar. As
a result, changes in the foreign currency exchange rates and changes in the
economic conditions in Mexico could affect financial results. The Company has
accounted for transactions associated with this foreign operation in accordance
with the guidance established under Financial Accounting Standards No. 52,
"Foreign Currency Translation." Generally, assets and liabilities are translated
into U.S. dollars at the current rate of exchange, while revenues and expenses
are translated at the average rate for the year. Property, plant and equipment
and its associated depreciation and stockholders' equity are translated at the
historical rate. Operating income or loss for the Mexico operation is included
in the periodic results of operations of the Company. The Company believes it
has mitigated the risk associated with its foreign operations through its
management of inventory and other significant operating assets.
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13
Certain risks may arise in the various commodity markets in which the
Company participates. Commodity prices in the copper, brass and aluminum markets
may be subject to changes based on availability. The Company conducts its
purchasing of such commodities generally through three to six month purchase
order commitments. See "Raw Materials and Suppliers" in Part I of this Report
for additional information on commodity pricing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference
to the Consolidated Statements of Operations, Consolidated Statements of
Comprehensive (Loss) Income, Consolidated Balance Sheets, Consolidated
Statements of Cash Flows and Consolidated Statements of Changes in Stockholders'
Equity, the Notes to Consolidated Financial Statements and the "Report of
Independent Accountants" contained in the Registrant's 2000 Annual Report to
Stockholders, portions of which are filed as Exhibit 13 to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements between Registrant and its independent
accountants on accounting and financial disclosure during the year ended
December 31, 2000.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Portions of the information required by this item are included in Part I
hereof, on page 11 of this Report. Other information required by this item is
contained in the Company's 2001 Proxy Statement under the heading, "PROPOSAL NO.
1 - ELECTION OF DIRECTORS" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Company's 2001 Proxy Statement under the
heading "EXECUTIVE COMPENSATION" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Company's 2001 Proxy Statement under the
headings "STOCK OWNERSHIP-Principal Stockholders and Directors and Officers" is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Company's 2001 Proxy Statement, under the
heading "CERTAIN TRANSACTIONS" is incorporated herein by reference.
13
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements of the Registrant
The Consolidated Financial Statements of the Registrant listed below,
together with the Report of Independent Accountants, dated February 27, 2001,
are incorporated herein by reference to the Registrant's 2000 Annual Report to
Stockholders, portions of which are filed as Exhibit 13 to this Report.
Consolidated Statements of Operations for the Years Ended December 31,
2000, 1999 and 1998
Consolidated Statements of Comprehensive (Loss) Income for the Years
Ended December 31, 2000, 1999 and 1998
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Cash Flows for the Years Ended December 31,
2000, 1999 and 1998
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a) (2) Financial Statement Schedules
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Registrant included in Item 8 of this
Report:
Schedule II - Valuation and Qualifying Accounts together with Report of
Independent Accountants on Financial Statement Schedule, on pages 19 and 20 of
this Report
Schedules other than the schedule listed above are omitted because they are
not applicable, or because the information is furnished elsewhere in the
Consolidated Financial Statements or the Notes thereto.
(a) (3) Exhibits
The information required by this Item relating to Exhibits to this Report
is included in the Exhibit Index in (c) below.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 2000.
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15
(c) Exhibits -The following exhibits are filed as part of this report:
2.1 Agreement, dated June 15, 1995, between Allen Heat Transfer
Products, Inc., AHTP II, Inc., GO/DAN Industries and Handy &
Harman Radiator Corporation. (1)
2.2 Asset Purchase Agreement dated as of April 17, 2000 by and
among TransPro, Inc. and Leggett & Platt, Incorporated. (7)
3.1 (i) Restated Certificate of Incorporation of TransPro, Inc. (3)
3.1 (ii) By-laws of TransPro, Inc. (1)
4.1 Form of Rights Agreement between the Company and American
Stock Transfer & Trust Company, as assignee of the First
National Bank of Boston, as Rights Agent (including form of
Certificate of Designations of Series A Junior Participating
Preferred Stock and form of Rights Certificate). (1)
4.2 Form of Revolving Credit Agreement between the Company and
Certain lending Institutions or Banks, BankBoston, N.A., as
Agent. (1)
The Company is a party to certain other long-term debt
agreements each of which does not exceed 10 percent of the
total assets of the Company and its subsidiaries on a
consolidated basis. The Company agrees to file such agreements
upon request from the Securities and Exchange Commission.
4.3 First Amendment to Revolving Credit Agreement between the
Company and Certain Lending Institutions or Banks, BankBoston
N.A. as Agent. (5)
4.4 Waiver and Second Amendment to Revolving Credit Agreement
between the Company and Certain Lending Institutions or Banks,
BankBoston, N.A., as Agent. (5)
4.5 Third Amendment to Revolving Credit Agreement between the
Company and Certain Lending Institutions or Banks, BankBoston
N.A. as Agent.(6)
4.6 Limited Waiver and Fourth Amendment to Revolving Credit
Agreement between the Company and Certain Lending Institutions
or Banks, BankBoston, N.A., as Agent. (8)
4.7 Forbearance Agreement dated as of August 18, 2000. (9)
4.8 Forbearance Agreement dated as of September 29, 2000. (9)
4.9 Forbearance Agreement dated as of November 15, 2000.
4.10 Forbearance Agreement dated as of December 20, 2000.
4.11 Loan and Security Agreement dated as of January 4, 2001, by
and between Congress Financial Corporation (New England) as
Lender and TransPro, Inc., Evap, Inc., and GO/DAN Industries,
Inc. as Borrowers.
10.1 TransPro, Inc. 1995 Stock Plan. (1)
15
16
10.2 Form of Stock Option Agreement under the 1995 Stock Option
Plan (1)
10.3 Form of TransPro, Inc. 1995 Non-employee Directors Stock
Option Plan. (1)
10.4 Form of Stock Option Agreement under the 1995 Non-employee
Directors Stock Option Plan. (1)
10.5 Form of Contribution Agreement between Allen and the Company.
(1)
10.6 Form of Instrument of Assumption of the Company. (1)
10.7 Form of Indemnification Agreement. (1)
10.8 Form of Employment Agreement between the Company and Henry P.
McHale. (1)
10.9 Amendment No. 1 to Employment Agreement between the Company
and Henry P. McHale. (4)
10.10 Separation and Release Agreement dated December 18, 2000
between the Company and Henry P. McHale.
10.11 Form of Key Employee Severance Policy. (1)
10.12 Letter Agreement, dated December 15, 1992 between Jeffrey J.
Jackson and GO/DAN Industries. (1)
10.13 Letter Agreement dated September 24, 1996 between Timothy E.
Coyne and TransPro, Inc. (2)
10.14 Employment Agreement between the Company and Charles E.
Johnson
13 Portions of the 2000 Annual Report to Stockholders
incorporated by reference herein.
21.1 Subsidiaries of the Company.
16
17
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney (included on signature page).
- --------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 33-96770).
(2) Incorporated by reference to the Company's 1996 Form 10-K (File No.
1-13894).
(3) Incorporated by reference to the Company's Form 10-Q for the quarter
ended September 30, 1998 (File No. 1-13894).
(4) Incorporated by reference to the Company's 1998 Form 10-K (File No.
1-13894).
(5) Incorporated by reference to the Company's Form 10-Q/A for the quarter
ended March 31, 1999 (File No. 1-13894).
(6) Incorporated by reference to the Company's 1999 Form 10-K (File No.
1-13894).
(7) Incorporated by reference to the Company's Form 8-K filed May 2, 2000
(File No. 1-13894).
(8) Incorporated by reference to the Company's Form 10-Q for the quarter
ended March 31, 2000 (File No. 1-13894).
(9) Incorporated by reference to the Company's Form 10-Q for the quarter
ended September 30, 2000 (File No. 1-13894).
17
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
TransPro, Inc.
By /s/ CHARLES E. JOHNSON
------------------------------------------
Charles E. Johnson
President and Chief Executive Officer
Date: March 30, 2001
POWER OF ATTORNEY
Each of the undersigned hereby appoints Barry R. Banducci and Charles
E. Johnson and each of them severally, his or her true and lawful attorneys to
execute on behalf of the undersigned any and all amendments to this annual
report on Form 10-K and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission.
Each such attorney will have the power to act hereunder with or without the
others. Each of the undersigned hereby ratifies and confirms all such attorneys,
or any of them may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ WILLIAM J. ABRAHAM, JR. March 30, 2001
- --------------------------------------------------
William J. Abraham, Jr., Director
/s/ BARRY R. BANDUCCI March 30, 2001
- --------------------------------------------------
Barry R. Banducci, Director
/s/ PHILIP WM. COLBURN March 30, 2001
- --------------------------------------------------
Philip Wm. Colburn, Director
/s/ CHARLES E. JOHNSON March 30, 2001
- --------------------------------------------------
Charles E. Johnson, President,
Chief Executive Officer and Director
/s/ PAUL R. LEDERER March 30, 2001
- --------------------------------------------------
Paul R. Lederer, Director
/s/ SHARON M. OSTER March 30, 2001
- --------------------------------------------------
Sharon M. Oster, Director
/s/ F. ALAN SMITH March 30, 2001
- --------------------------------------------------
F. Alan Smith, Director
/s/ TIMOTHY E. COYNE March 30, 2001
- --------------------------------------------------
Timothy E. Coyne
Vice President, Treasurer,
Secretary, Corporate Controller and
Chief Financial Officer
(Chief Financial and Accounting Officer)
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19
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of TransPro, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 27, 2001 appearing in the 2000 Annual Report to Stockholders of
TransPro, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14 (a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 27, 2001
19
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SCHEDULE II
TRANSPRO, INC.
VALUATION AND QUALIFYING ACCOUNTS
PERIOD BALANCE AT CHARGED TO
- ------ BEGINNING OF COSTS AND CHARGED TO OTHER BALANCE AT
(DOLLARS IN THOUSANDS) PERIOD EXPENSES ACCOUNTS (1) DEDUCTIONS END OF PERIOD
- ---------------------- ------ -------- ------------ ---------- -------------
Year Ended December 31, 2000
Allowance for doubtful accounts $ 1,943 $ 739 $ 26 $ (10) $ 2,698
Allowance for excess/slow moving inventory 4,550 3,047 0 (2,628) 4,969
Allowance for tax loss valuation 189 -- (189) -- --
Year Ended December 31, 1999
Allowance for doubtful accounts $ 2,205 $ 268 $ (238) $ (292) $ 1,943
Allowance for excess/slow moving inventory 5,405 668 (232) (1,291) 4,550
Allowance for tax loss valuation -- -- 189 -- 189
Year Ended December 31, 1998
Allowance for doubtful accounts $ 3,074 $ 1,323 $ 250 $(2,442) $ 2,205
Allowance for excess/slow moving inventory 4,596 1,539 800 (1,530) 5,405
(1) Amounts charged to other accounts in doubtful accounts and inventory in
1999 and 1998 were related to acquisition reserves recorded to
goodwill. Amounts for tax valuation allowance were charged to deferred
taxes.
20