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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 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
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 stock held by non-affiliates of the
registrant at March 14, 1997 was $63,446,412. On that date, there were 6,591,835
outstanding shares of the registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to stockholders for the fiscal year ended December 31, 1996
incorporated by reference into Parts I and II hereof.
Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders
are incorporated by reference into Part III of this report.
Exhibit Index is on pages 16 and 17 of this report.
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TRANSPRO, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
PAGE
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PART I
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security
Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the
Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial
Owners and Management 15
Item 13. Certain Relationships and Related
Transactions 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 15
Signatures 18
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
On September 29, 1995, TransPro, Inc. (the "Company") completed a
series of transactions pursuant to which the Company's sole stockholder, The
Allen Group Inc. ("Allen"), contributed (the "Contribution") to the Company
substantially all of the assets and liabilities of Allen's original equipment
radiator and fabricated metal products business (the "Automotive and Truck
Products Business"), as well as Allen's 50% ownership interest in GO/DAN
Industries ("GDI"), a 50/50 joint venture partnership between affiliates of
Allen and Handy & Harman ("H&H"). Immediately thereafter, Allen caused GDI to
redeem the outstanding ownership interest in GDI not already owned by Allen (the
"GDI Redemption"), thereby making GDI an indirect wholly owned partnership of
the Company. GDI produces replacement radiators and other heat transfer products
for the automotive and truck aftermarkets.
In addition, Allen effected the distribution (the "Distribution") of
100% of the outstanding shares of the Company's common stock to the holders of
record of Allen's common stock as of the close of business on September 29, 1995
(the "Record Date"). The Distribution was made on the basis of one share of the
Company's common stock for every four shares of Allen's common stock outstanding
on the Record Date, which resulted in the distribution of an aggregate of
6,621,349 shares of TransPro common stock. As a result of the Contribution, the
Distribution, and the GDI Redemption, TransPro now owns the Automotive and Truck
Products Business and 100% of GDI, and is an independent publicly-traded
company.
The Company is comprised of operating units that supply heat transfer
and fabricated metal products to original equipment manufacturers ("OEMs") of
trucks, vans and other industrial products and to the automotive and truck
aftermarkets. The Company's G&O Manufacturing Company division ("G&O") produces
radiators for OEMs of heavy duty trucks and industrial and off-highway
equipment. The Company's Crown divisions ("Crown") perform pickup truck
conversions for Ford, install specialized interiors in utility trucks and vans
for major commercial fleets and design, manufacture and assemble fabricated
metal parts for light truck, telecommunications and other industrial customers.
Through GDI, the Company is also a producer of replacement radiators and other
heat transfer products for the automotive and truck aftermarkets.
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. Allen
acquired G&O in 1970 as part of its strategy to become a broad-based automotive
supplier. Crown commenced operations in 1947 and was acquired by Allen in 1967
as part of the same business strategy. 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 H&H contributed
substantially all of the assets of its then wholly owned subsidiaries, Daniel
Radiator Corporation, Jackson Industries, Inc., Lexington Tube Co., Inc. and
U.S. Auto Radiator Manufacturing Corporation, to form a 50/50 joint venture
partnership.
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DESCRIPTION OF BUSINESS
MARKETS
The automotive and heavy truck parts industries are each comprised of
two distinct sectors, the OEM market and the aftermarket. 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
products and services used to maintain and repair automobiles, vans and 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 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 light truck segment of the automotive OEM market and the heavy truck OEM
market as well as both the automotive and heavy truck aftermarkets. The Company
also sells its products to OEMs of off-highway equipment and other industrial
customers.
PRINCIPAL PRODUCTS AND SERVICES
The Company designs, manufactures and markets radiators and other
specialty heat exchangers for OEMs of heavy trucks and industrial and
off-highway equipment as well as replacement radiators, air conditioning
condensers and other heat transfer products for the automotive and heavy truck
aftermarkets. The Company also performs pickup truck conversions for Ford,
installs specialized interiors in utility trucks and vans for major commercial
fleets and designs, manufactures and assembles fabricated metal products for
light truck, telecommunications and other industrial customers. A description of
the particular products manufactured and the services performed by the Company
through each of its principal operating units is set forth below.
GO/DAN Industries
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. In
addition to its standard models, the Company can produce 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 contains 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 recirculated through the engine.
Complete Radiators. The Company's lines of complete radiators are
produced for automotive, 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 has become extremely 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.
The Company introduced its Ready Rad(R) Heatbuster line of complete
radiators in fiscal 1994. This line of replacement radiators is specially
designed to provide approximately 20% more cooling capability than a standard
radiator. The Heatbuster line is the ideal replacement radiator for vehicles
which are used for towing, hauling,
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plowing, or off-highway purposes, and as a result, it has been particularly
popular in the growing light truck segment of the automotive fleet.
Radiator Cores. Radiator cores are 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 13
strategically positioned, regional manufacturing plants.
Industrial cores are heavy duty units which are constructed of
extremely durable materials 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 four times the cost 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 propelled into the vehicle 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 cells 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 20% of the Company's total heater
core sales.
Air Conditioning Condensers. Automotive air conditioning condensers
were added to the GDI product line in 1996 through the acquisition of certain
assets and liabilities of Rahn Industries, Inc., an independent aftermarket
supplier of automotive air conditioning condensers. Air conditioning condensers
are a component of a vehicle's air conditioning system which removes heat from
the air conditioner refrigerant allowing the refrigerant to produce cool air for
circulation into the passenger compartment by a fan. GDI distributes this
product under both the GDI and Rahn Industries brands and has fully integrated
this product in the GDI distribution network. GDI catalogs more than 900
condenser part numbers through Rahn.
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 expansive line includes radiator parts, small hand tools and
equipment, and solders and fluxes. The Company is one of the largest domestic
supplier of stamped metal radiator parts, supplying these parts to regional core
manufacturers throughout the United States.
The Crown Divisions
The Company's Crown divisions are comprised of three interrelated
businesses. The principal products produced and services performed by each of
these businesses is set forth below.
Truck Cab Conversions. At the Company's 129,000 square foot
manufacturing facility located near Louisville, Kentucky, the Company produces a
four-door pickup truck cab for Ford's F-Series Truck (a "Crew Cab") and modifies
rear wheel fender assemblies to accommodate a dual rear wheel axle ("DRWs"). The
Crew Cab is produced by the Company utilizing an assembly line production
process in which various stamped components are assembled using certain welding
techniques. In much the same fashion, the Company produces DRWs in order to
provide adequate space for the additional tire on each side of the rear wheel
axle assembly.
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The Company is the exclusive supplier of Crew Cabs and DRWs to Ford,
and has provided such products to Ford for 30 years and 20 years, respectively,
excluding a brief period from 1980 to 1982 when Ford did not offer either option
with its F-Series Pickup Trucks. Crown was notified by Ford that Ford intends to
move manufacture of Crew Cabs and DRWs in-house in late 1997. Crown expects to
continue to provide Ford with its needs until that time. The Company's
production facility is located in close proximity with Ford's truck assembly
plant in Louisville, Kentucky and was leased by the Company in 1993 as a result
of Ford shifting production of its F-Series Pickup Truck from Ontario, Canada to
Kentucky. This facility provides Ford with Crew Cabs and DRWs on a just-in-time
basis and is electronically connected to Ford's facility to facilitate
information exchange.
Utility Truck and Van Conversions. The Company is one of the leaders in
the installation of specialized interiors in utility trucks and vans for major
commercial fleets such as Sears, Airborne Express, General Electric and the
regional telephone companies. The Company's van conversion installation
facilities are strategically located near each of the major production
facilities for utility trucks and vans of Ford, Chrysler and General Motors. The
Company offers its customers a full range of customizing options ranging from
the installation of ladder racks, specialized bins and shelves and other
components for convenient and safe storage to decaling the outside of the
vehicle. Each interior is installed according to the customer's specifications,
based upon various design and equipment options offered by the Company. Much of
the specialized equipment installed by the Company in its conversion business is
also manufactured by the Company. The Company's van conversion business has
received a contract from the Ford Motor Company to convert approximately 9,000
Aerostar and Windstar mini vans for the U.S. Postal Service. The vehicles are
expected to go into service during 1997. The Company will perform the
modification at its Lorain, Ohio and St. Louis, Missouri facilities.
The Company enjoys a reputation in the industry of offering new and
innovative products. For example, the Company introduced in the early 1990s its
exclusive Slide-Down(TM) ladder rack, which enables service technicians to
easily load and unload heavy ladders from the top of the vehicle with reduced
risk of back injury and strain and Slide-Out(TM) storage racks, which make it
easier and safer for service technicians to retrieve parts and components
transported by commercial van users. The Company is attempting to further
capitalize on such reputation by increasing its sales to the aftermarket portion
of the van conversion industry.
Fabricated Metal Products. The Company designs, manufactures and
assembles over 400 different fabricated metal parts such as high tolerance
cabinets for light truck, telecommunications and other industrial customers such
as Ingersoll-Rand, Lucent Technologies, DSC and East Penn. The Company's metal
fabrication business is principally conducted out of its Wooster, Ohio and
Thomaston, Georgia manufacturing facilities. Certain of the products produced by
the Company are used in its own van conversion business. In addition to van
conversion products, the Company also produces fabricated metal components for
telephone switching equipment, wireless communications equipment, stationary
rotary air compressors and heavy duty battery boxes. The Company focuses on the
production of large, complex parts that typically require greater engineering
and more sophisticated production techniques than traditional high volume,
undifferentiated products. The Company's Wooster, Ohio facility is ISO 9001
certified.
The G&O Manufacturing Company Division
Through its G&O division, the Company designs, manufactures and markets
radiators and charge air coolers to OEMs of heavy duty trucks, buses and
industrial and off-highway equipment such as generator sets, construction
vehicles, railroad locomotives and military equipment. The Company manufactures
its products in Jackson, Mississippi. The Company's Jackson, Mississippi
facility is ISO 9002 certified, which is an internationally recognized
verification system for quality management.
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Radiators. The Company custom designs, manufactures and sells
approximately 400 different models of radiators, most of which are specifically
designed and engineered to meet customer specifications. The Company's radiators
are specifically engineered to withstand the demanding applications of its
industrial customers. The Company's radiators are sold under the
widely-recognized Ultra-Fused(R) brand name when utilizing welded tube-to-header
core constructions.
Charge Air Coolers. The Company offers its customers approximately 200
different models of aluminum charge air coolers. A charge air cooler is a device
that is used to decrease the temperature of the air 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 1995 and 1996, the Company obtained its charge
air coolers, which are designed and engineered by the Company, from a contract
manufacturer through a preferred supplier relationship. In July 1995, the
Company placed a significant purchase order to obtain the necessary production
equipment in order to produce such charge air coolers in-house. The Company
began internal production of charge air coolers in early 1997 and intends to use
such equipment in the production of G&O designed aluminum radiators.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN OPERATIONS AND EXPORT
SALES
The Company operates principally in one segment, "automotive and truck
products." Applicable segment information appears in Note 3 of the Notes to
Consolidated Financial Statements contained in the Registrant's 1996 Annual
Report to Stockholders, certain portions of which are filed as Exhibit 13 to
this Report. All such information is incorporated herein by reference.
CUSTOMERS
The Company sells its products and services to a wide variety and large
number of industrial and other commercial customers. The Company supplies
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 Onan Corporation, a subsidiary of the Cummins Engine Company, AM General and
Oshkosh Truck Corporation. Principal customers of the Company's van conversion
products and services include operators of large commercial fleets such as
Sears, General Electric and Airborne Express. The Company sells its replacement
radiators and other heat transfer products to national retailers of aftermarket
automotive products, such as AutoZone and Pep Boys, and warehouse distributors,
radiator shops, parts jobbers and, to a lesser extent, OEMs.
The Company's largest customer is Ford. The Company is the exclusive
supplier of Crew Cabs and DRWs to Ford and has a manufacturing facility located
near Louisville, Kentucky dedicated to such production. The Company had a
five-year contract with Ford regarding such products that expired on December
31, 1995. In early 1996, the company was notified by Ford that it plans to move
production of Crew Cabs and DRWs in-house, which is expected to occur in late
1997. TransPro anticipates maintaining its position as the exclusive supplier of
these products to Ford until that time. However, any decisions relating to the
move of Crew Cabs and DRW production in-house is solely at Ford's discretion and
outside the control of the Company. Accordingly, no assurance can be given that
the Company will continue to supply these products until late 1997. Sales of
Crew Cabs and DRWs accounted for 24% and 38% of 1996 and 1995 sales,
respectively and a significantly greater percentage of 1996 and 1995 profits.
In 1996, the Company had no other customers who individually accounted
for greater than 10% of the Company's net sales. In 1995 other significant
customers included PACCAR who accounted for 11% of the Company's net sales. The
Company had net sales to Allen of approximately $.7 million in 1996 and $2.9
million in 1995 for fabricated metal products used by Allen in its
telecommunications and automotive emissions test businesses. The
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Company believes that the terms of such sales were no less favorable than what
could have been achieved through arms-length negotiations. The Company expects
such sales to Allen to continue in the foreseeable future.
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 280
individuals involved in sales and marketing efforts.
At G&O, the Company has an in-house sales management staff who are
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 its customers'
engineering staff 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 foreign sales opportunities. For example, G&O has been supplying charge
air coolers to customers in India.
The Company's Crown divisions have salespersons dedicated to servicing
Ford and several other salespersons who are responsible for servicing the
Company's industrial customers for fabricated metal products as well as its
national van conversion accounts. In addition, the Company hired a sales manager
based in Wooster, Ohio to focus on marketing the Company's products to the
aftermarket portion of the van conversion industry. To further this goal, this
sales manager has retained several independent sales representatives and has
established over 150 distributor arrangements to market and sell the Company's
van conversion products in such market.
GDI's sales and marketing efforts are under the direction of GDI's
Senior Vice President of Sales and Marketing, who oversees four regional sales
managers. Each regional sales manager is responsible for the Company's branches
and agencies located in his assigned region. GDI also employs several marketing
specialists who report to a 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. In addition, a Vice
President of Special Market Sales reports to the Senior Vice President of Sales
and Marketing and is responsible for sales to retailers and auto parts
warehouses. A Vice President of Heavy Duty Sales and Marketing specializes in
sales of products to the fleet and industrial markets and reports to the Senior
Vice President of Sales and Marketing.
COMPETITION
The Company faces significant competition within each of the markets in
which it operates. In each of its product lines, the Company believes that it is
among the major manufacturers and that competition is widely distributed. The
Company's principal methods of competition include product design, performance,
price, service, warranty, product availability and timely delivery. In both its
original equipment and replacement radiator product lines, the Company competes
with the national producers of heat transfer products, such as Modine
Manufacturing Company and Valeo Engine Cooling Systems, the internal operations
of OEMs and, to a lesser extent, local and regional manufacturers.
With respect to its OEM radiator business, the Company principally
competes for new business both at the beginning of the development phase of a
totally new model or offering 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
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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 U.S. patents and trademarks.
The patents expire on various dates from 2009 to 2013. In general, the Company's
patents cover certain of its radiator 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 original
equipment and replacement radiator product lines are copper and brass. Although
these 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 90% of
its copper and brass requirements in 1996 and 1995. With respect to the
Company's other manufacturing operations, the primary raw material used by the
Company is steel, which is generally available from a number of suppliers. The
Company believes its sources for raw materials are very reliable and adequate
for its needs. 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. The market price of copper had steadily increased during 1994 to reach
a 5 year high at the end of that year. During 1995 copper prices remained near
the record price for the entire year. In mid-July 1996 copper prices declined
significantly; however by year end 1996, the copper market had firmed and prices
were trending higher. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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BACKLOG
The Company's backlog was approximately $18.7 million at December 31,
1996 as compared to approximately $21.7 million at December 31, 1995. 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
Historically, G&O and Crown have experienced a slight decrease in
revenues and operating income during the third and fourth calendar quarters as
compared to the first and second quarters. Third quarter results are affected by
scheduled plant shut-downs for vacations and model year changeovers while fourth
quarter results are affected by scheduled plant shut-downs for the holiday
season. The Company expects the third quarter to be positively impacted and the
first quarter to be negatively impacted by the operating results of GDI, which
typically experiences higher sales during the summer months as the demand for
replacement radiators tends to increase and lower sales during the winter
months.
RESEARCH AND DEVELOPMENT
Research and development expenses were approximately $106,000 for the
year ended December 31, 1996, $177,000 for the year ended December 31, 1995, and
$117,000 for the year ended December 31, 1994.
EMPLOYEES
At December 31, 1996, the Company had approximately 2,100 employees. Of
these employees approximately 1,100 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), United Paperworkers
International Union and The International Association of Machinists and
Aerospace Workers represent approximately 21%, 17% and 17%, respectively, of the
Company's unionized employees. In addition, a local Mexican labor union
represents approximately 37% of the Company's unionized employees. The Company
believes that its relations with its unions and employees are good. In 1992 the
Company experienced a two week work stoppage at its Peru, Illinois facility and
in 1994, a three-week work stoppage at its Jackson, Mississippi facility. Except
for the work stoppages noted above, the Company has successfully renegotiated 20
collective bargaining agreements over the last six years without work stoppages;
however, there can be no assurance that work stoppages will not occur in the
future.
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ITEM 2. PROPERTIES
The Company maintains its corporate headquarters in New Haven,
Connecticut and conducts its operations through 13 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, with its truck
cab and dual rear wheel assembly plant in Louisville, Kentucky currently
operating at the highest level (80%-95%) of capacity since its opening in 1993.
The Company has sufficient capacity to increase production with respect to its
original equipment and replacement radiator product lines as well as its van
conversion and fabricated metal products operations. The Company's principal
manufacturing and assembly facilities are as follows:
APPROXIMATE OWNED/
LOCATION SQUARE FOOTAGE LEASED PRODUCT LINE
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New Haven, Connecticut 158,800 Owned (1) Corporate headquarters, GDI
headquarters, tubes for original
equipment radiators (2)
Jackson, Mississippi 135,885 Owned Original equipment radiators
Wooster, Ohio 216,000 Owned (1) Fabricated metal products, van
conversion
Lorain, Ohio 79,846 Owned Van Conversion
Thomaston, Georgia 30,000 Owned Fabricated metal products
Baltimore, Maryland 10,000 Leased Van conversion
Bridgeton (St. Louis), Missouri 16,900 Leased Van Conversion
Louisville, Kentucky 129,000 Leased Truck cab & dual rear wheel assembly
Dallas, Texas 50,050 Leased Replacement radiators (radiator cores)
Nuevo Laredo, Mexico 109,055 Leased Replacement radiators (radiator cores)
Maquoketa, Iowa 38,000 Leased Parts and tooling for replacement
radiators
Los Angeles, California 32,900 Leased Air conditioning condensers
Atlanta, Georgia 14,000 Leased Air conditioning condensers
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(1) Subject to IRB financing arrangements.
(2) In December 1996, most of the manufacturing operation was moved to Jackson,
Mississippi. A small tube mill operation remains. The Company is currently
exploring the options of either leasing or utilizing the currently
unoccupied space.
As part of its replacement radiator business, 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 12 fully equipped, regional
manufacturing facilities. These twelve 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 also has 48 local branch offices and 20 independent agencies and 3
distribution
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12
centers that comprise its nationwide local distribution network. All of the
Company-owned local 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. The Company believes it is reasonably
possible that environmental related liabilities may exist with respect to one
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 has an environmental policy that confirms its
commitment to compliance with existing environmental regulations and planning to
reduce the level of pollutants in the manufacturing process.
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
The Company and its subsidiaries are not a party to any pending legal
proceedings in which an adverse decision, in the opinion of the Company, would
have a material adverse effect upon 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, 1996.
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13
EXECUTIVE OFFICERS OF THE REGISTRANT*
SERVED AS
OFFICER POSITION OR OFFICE WITH THE COMPANY & BUSINESS
NAME AGE SINCE EXPERIENCE DURING PAST FIVE (5) YEAR PERIOD
- ----------------------- --- ------------- -------------------------------------------
Henry P. McHale 58 July 1995 President, Chief Executive Officer and Director, since 1995;
President and Chief Executive Officer of GDI, 1992 through
1995. Prior thereto, various executive positions with Ladish
Corporation and Rockwell Automotive.
Jeffrey L. Jackson 49 August 1995 Vice President of Human Resources, since 1995; Vice President
of Human Resources of GDI, 1992 through 1995. Prior thereto,
Managing Director of Resources of IMCOR since 1990.
John C. Martin, III 44 July 1995 Vice President, Treasurer, Secretary and Chief Financial Officer,
since 1995; Vice President and Treasurer of The Allen Group, 1991
through 1995.
Timothy E. Coyne 42 October 1996 Vice President and Corporate Controller, since 1996; Vice
President of Finance and Administration and Treasurer of Keene
Corporation 1990 through 1996. (1)
(1) On December 3, 1993 Keene Corporation filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code as a direct result of
asbestos-related lawsuits which named Keene as a defendant. Keene emerged from
Chapter 11 pursuant to a plan of reorganization effective July 31, 1996.
* All officers are elected by the Board of Directors.
The information contained in the Company's 1997 Proxy Statement under
the heading "Proposal No. 1 -- ELECTION OF DIRECTORS" and under the heading
"EXECUTIVE COMPENSATION - Compliance with Section 16(a) of The Securities
Exchange Act of 1934" is incorporated herein by reference.
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PART II
ITEM 5. MARKET FOR THE 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 3, 1997, was 1,496. The Company's Common Stock began
"regular way" trading on October 11, 1995. Information regarding market prices
and dividends declared for the Company's Common Stock is shown below for 1996.
Market prices are closing prices quoted on the New York Stock Exchange, the
principal exchange market for the Company's Common Stock. The Company currently
expects that comparable dividends will continue to be paid in the future,
although there can be no assurance of this.
YEAR ENDED DECEMBER 31, 1996
1995 -------------------------------------------------
4TH QTR 1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- ------- --------
Market price of common stock
---High $11 3/4 $11 $ 8 3/4 $ 8 3/8 $ 9 1/4
---Low $ 8 7/8 $ 6 1/4 $ 6 3/4 $ 5 1/2 $ 6 3/4
Dividends per share $.05 $.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 1996 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 1996 Annual Report to
Stockholders, portions of which are filed as Exhibit 13 to this Report.
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings
per Share" which must be adopted by the Company no later than calendar year
1997. The statement, whose objective is to simplify the computation of earnings
per share ("EPS") and to make the U.S. standard of computing EPS more compatible
with international EPS standards, specifies the computation, presentation and
disclosure requirements for EPS for entities with publicly held common stock or
potential common stock. The impact of the adoption of SFAS No. 128 on the
Company has not been determined at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by
reference to the Consolidated Statements of Income, Consolidated Balance Sheets,
Consolidated Statements of Cash Flows and Consolidated Statements of
Stockholders' Equity, to the Notes to Consolidated Financial Statements and to
"Report of Independent Accountants" contained in the Registrant's 1996 Annual
Report to Stockholders, portions of which are filed as Exhibit 13 to this
Report.
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15
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, 1996.
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 13 of this Report. Other information required by this item is
contained in the Company's 1997 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 1997 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 1997 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 1997 Proxy Statement, under
the heading "CERTAIN TRANSACTIONS" is incorporated herein by reference.
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 13, 1997,
are incorporated herein by reference to the Registrant's 1996 Annual Report to
Stockholders, portions of which are filed as Exhibit 13 to this Report.
Consolidated Statements of Income for the Years Ended December 31,
1996, 1995, and 1994
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants
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16
(a) (2) Financial Statement Schedules
The following additional information should be read in conjunction with
the Consolidated Financial Statements of the Registrant described in Item 14 (a)
(1) above:
Schedule II - Valuation and Qualifying Accounts, on page 21 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 1996 fiscal
year.
(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)
3.1 (i) Restated Certificate of Incorporation of TransPro, Inc. (1)
3.1 (ii) By-laws of TransPro, Inc. (1)
4.1 Form of Rights Agreement between the Company and 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 Credit Agreement between the Company and the First
National Bank of Boston, as agent, and the other lenders
named therein. (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.
10.1 TransPro, Inc. 1995 Stock Plan. (1)
10.2 Form of Stock Option Agreement under the 1995 Stock Option
Plan (1)
10.3 Form of Restricted Stock Agreements between the Company and
Messrs. Scanlon and Martin (two agreements). (1)
10.4 Form of TransPro, Inc. 1995 Nonemployee Directors Stock
Option Plan. (1)
10.5 Form of Stock Option Agreement under the 1995 Nonemployee
Directors Stock Option Plan. (1)
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10.6 Form of Contribution Agreement between Allen and the
Company. (1)
10.7 Form of Instrument of Assumption of the Company. (1)
10.8 Form of Interim Services Agreement between Allen and the
Company. (1)
10.9 Form of Consulting Agreement between Allen and the Company.
(1)
10.10 Form of Indemnification Agreement. (1)
10.11 Form of Employment Agreement between the Company and Henry
P. McHale. (1)
10.12 Form of Employment Agreement between the Company and John
C. Martin, III. (1)
10.13 Form of Employment Agreement between the Company and
Raymond M. Scanlon. (1)
10.14 Form of Key Employee Severance Policy. (1)
10.15 Letter Agreement, dated July 21, 1993 between Andrew J.
Mazzarella and GO/DAN Industries. (1)
10.16 Letter Agreement, dated December 15, 1992 between Jeffrey
J. Jackson and GO/DAN Industries. (1)
10.17 Letter Agreement, dated September 24, 1996 between Timothy
E. Coyne and TransPro, Inc.
11 Statement Re: Computation of Earnings per Common Share
13 Portions of the 1996 Annual Report to Stockholders
incorporated by reference herein
21.1 Subsidiaries of the Company
23.2 Consent of Coopers & Lybrand L.L.P.
24 Powers of Attorney (included on signature page)
27 Financial Data Schedule
- -----------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-96770).
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/ Henry P. McHale
------------------------------------------------
Henry P. McHale
President, Chief Executive Officer, and Director
Date: March 14, 1997
POWER OF ATTORNEY
Each of the undersigned hereby appoints Barry R. Banducci and Henry P.
McHale, 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.
BOARD OF DIRECTORS
/s/ HENRY P. MCHALE March 14, 1997
- ---------------------------------------------------
Henry P. McHale, Director
/s/ WILLIAM J. ABRAHAM, JR. March 14, 1997
- ---------------------------------------------------
William J. Abraham, Jr., Director
/s/ BARRY R. BANDUCCI March 14, 1997
- ---------------------------------------------------
Barry R. Banducci, Director
/s/ PHILIP WM. COLBURN March 14, 1997
- ---------------------------------------------------
Philip Wm. Colburn, Director
/s/ PAUL R. LEDERER March 14, 1997
- ---------------------------------------------------
Paul R. Lederer, Director
/s/ SHARON M. OSTER March 14, 1997
- ---------------------------------------------------
Sharon M. Oster, Director
/s/ F. Alan Smith, March 14, 1997
- ---------------------------------------------------
F. Alan Smith, Director
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19
/s/ JOHN C. MARTIN, III March 14, 1997
- ---------------------------------------------------
John C. Martin, III.,
Vice President, Treasurer, Secretary and Chief
Financial Officer
/s/ TIMOTHY E. COYNE, March 14, 1997
- ---------------------------------------------------
Timothy E. Coyne
Vice President and Controller
(Principal Accounting Officer)
19
20
REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of TransPro, Inc.:
Our report on the consolidated financial statements of TransPro, Inc. has been
incorporated by reference in this Form 10-K from page 45 of the 1996 Annual
Report to Shareholders of TransPro, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index on page 16 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
February 13, 1997
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SCHEDULE II
TRANSPRO, INC.
VALUATION AND QUALIFYING ACCOUNTS
PERIOD BALANCE AT CHARGED TO ACCOUNTS BALANCE AT
BEGINNING COSTS AND WRITTEN OFF END OF
(DOLLARS IN THOUSANDS) OF PERIOD EXPENSES AND OTHER PERIOD
---------- ---------- ----------- ----------
Year Ended December 31, 1996
Allowance for doubtful accounts $3,059 $1,090 $ (771) $3,378
Allowance for obsolete inventory 5,731 1,114 (1,903) 4,942
Year Ended December 31, 1995
Allowance for doubtful accounts 538 (100) 2,621* 3,059
Allowance for obsolete inventory 800 598 4,333* 5,731
Year Ended December 31, 1994
Allowance for doubtful accounts 403 150 (15) 538
Allowance for obsolete inventory 1,000 180 (380) 800
* Consists primarily of the acquired balance of GDI
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