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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Year Ended December 31, 2000
Commission File Number - 1-12070
TRANSFINANCIAL HOLDINGS, INC.
State of Incorporation - Delaware
IRS Employer Identification No. - 46-0278762
8245 Nieman Road, Suite 100, Lenexa, Kansas 66214
Telephone Number - (913) 859-0055
Securities Registered Pursuant to Section 12(b) of the Act
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------------------------ -------------------
TransFinancial Holdings, Inc. Common Stock, American Stock Exchange
par value $0.01 per share,
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __ No X.
Indicate 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 the Common Stock held by non-affiliates of
TransFinancial Holdings, Inc. as of March 30, 2001, was $2,130,889 based on the
last sale price on the American Stock Exchange prior to that date.
The number of outstanding shares of the registrant's common stock as of March
30, 2001 was 3,278,291 shares.
1
Forward-Looking Statements
The Company believes certain statements contained in this Annual Report on
Form 10-K that are not statements of historical fact may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. These statements can often be identified by the use in
such statements of forward-looking terminology, such as "believes," "expects,"
"may," "will," "should," "could," "intends," "plans," "estimates," or
"anticipates," or the negative thereof, or comparable terminology. Certain of
the forward-looking statements contained herein are marked by an asterisk ("*")
or otherwise specifically identified herein. These statements involve risks and
uncertainties that may cause actual results to differ materially from those in
such statements. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Forward-Looking Statements" for additional
information and factors to be considered concerning forward-looking statements.
PART I
Item 1. Business.
TransFinancial Holdings, Inc. ("TransFinancial" or the "Company"), is
headquartered in Lenexa, Kansas, and is a Delaware holding company formed in
April 1976. At December 31, 2000, TransFinancial operated in two industry
segments; financial services and industrial technology. The company discontinued
its transportation operations during 2000. Financial information about the
Company's operating industry segments is presented in Note 1 of Notes to
Consolidated Financial Statements.
DISCONTINUED OPERATIONS
TransFinancial discontinued its transportation operations in 2000. The
Company's subsidiary, TFH Logistics & Transportation Services, Inc. ("TFH L&T"),
which is a holding company for the Company's transportation subsidiaries, has
two principal subsidiaries, Crouse Cartage Company ("Crouse"), which was
acquired in 1991, and Specialized Transport, Inc. ("Specialized"), formed in
1999.
On September 16, 2000 and December 16, 2000, Crouse and Specialized,
respectively, ceased operations; Crouse as a result of significant operating
losses and cash flow deficiency and Specialized as a result of its insurance
carrier revoking its coverage. These companies are being liquidated outside
bankruptcy, but have established independent advisory committees of creditors
and are following the general processes and procedures defined under the federal
bankruptcy code. The Company's ability to continue as a going concern is
ultimately dependent on its ability to successfully liquidate the transportation
operations and settle claims against the Company arising from the transportation
operations at amounts within the Company's reserves. Management believes that it
will be successful in this liquidation process.* See Note 2 to the Notes to
Consolidated Financial Statements.
Crouse, headquartered in Lenexa, Kansas, was a regional motor common
carrier of general commodities in less-than-truckload ("LTL") quantities in 15
states in the north central and mid-west portion of the United States. LTL
shipments are defined as shipments weighing less than 20,000 pounds.
Specialized, headquartered in Lenexa, Kansas offered motor common carrier
service for truckload ("TL") quantities of general and perishable commodities
throughout the 48 contiguous United States. TL shipments are generally
transported in one movement from origin to destination.
The loss from discontinued operations for the year ended December 31, 2000
was $12.9 million as compared to $7.7 million for 1999. These losses increased
in 2000 as uncertainty relating to continued difficulties in union negotiations
caused certain customers to decrease their dependence on Crouse and diverted
management and employees attention from the operation of the motor carrier. In
addition, increased labor and fuel costs further deteriorated margins over the
periods. In connection with the closure of the transportation operations the
Company has also recorded an estimated "Loss on Discontinued Operations" of $9.1
million, or approximately $2.78 per share. The loss includes adjustments of
asset carrying values to liquidation values, accruals of liabilities for the
Multiemployer Pension Plan Amendments Act of 1980 (the "MPPA Act") and the
Worker Adjustment Retraining Notification Act ("WARN Act") liabilities and
estimated post-cessation administrative costs to conduct the liquidation.
2
Prior to the cessation of operations, TFH L&T employed over 1,400 persons,
of whom more than 1,100 were drivers, mechanics, dockworkers or terminal office
clerks. The remaining employees were engaged in managerial, sales and
administrative functions. Approximately 75% of its employees, including
primarily drivers, dockworkers and mechanics, were represented by the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America ("Teamsters Union") or other local unions. TFH L&T, through its
subsidiaries Crouse and Specialized, and the Teamsters Union were parties to the
National Master Freight Agreement ("NMFA"), which expires on March 31, 2003. TFH
L&T achieved ratification in 1998 of new five-year pacts with the International
Brotherhood of Teamsters or other local unions covering substantially all of its
union employees. In 1999, after a one-day work stoppage at one of its principal
terminals, the remaining locals agreed to contracts with terms comparable to the
national contract. The new contracts generally provided for all of the terms of
the NMFA with a separate addendum for wages. Under these new contracts, TFH L&T
would have continued to maintain past work rules, practices and flexibility
within its operating structure.
TFH L&T, as employer signatory to the NMFA, contributed to certain pension
plans established for the benefit of employees belonging to the Teamsters Union.
Amendments to the Employee Retirement Income Security Act of 1974 ("ERISA")
pursuant to the MPPA Act substantially expanded the potential liabilities of
employers who participate in such plans. Under ERISA as amended by the MPPA Act,
an employer who contributes to a multiemployer pension plan and the members of
such employer's controlled group may be jointly and severally liable for their
proportionate share of the plan's unfunded liabilities in the event the employer
ceases to have an obligation to contribute to the plan or substantially reduces
its contributions to the plan (i.e., in the event of plan termination or
withdrawal by TFH L&T from the multiemployer plans). Claims in excess of $9.75
million have been filed against the Company under the MPPA Act.
With respect to the Company's ability to successfully liquidate its
transportation operations, the Company's ability to do so is subject to a number
of risks and uncertainties, including, without limitation, the ability of the
Company to limit the costs of the liquidation, the ability of the Company to
sell the assets of the transportation operations at acceptable prices and the
ability of the Company to settle claims against the Company at amounts equal to
or less than reserved amounts.
The board of directors and management of TFH L&T continue, under the
advice of the advisory committee of the unsecured creditors, to conduct the
liquidation of TFH L&T. TransFinancial continues to file reports under various
federal and state regulations.
The following table sets forth certain financial and statistical data with
respect to TFH L&T:
2000(3) 1999(3) 1998(3) 1997(3) 1996(3)
------- ------- ------- ------- -------
Revenue (000's).......................... $ 111,445 $149,125 $144,592 $126,062 $107,502
Operating Income (000's)................. (19,831) (6,434) 1,321 3,136 2,915
Operating Ratio (1)...................... 117.8% 104.3% 99.1% 97.5% 97.3%
Number of Shipments (000's) -
Less-than-truckload.................. 782 1,228 1,166 1,076 952
Truckload .......................... 24 23 23 31 27
Revenue per Hundredweight -
Less-than-truckload.................. $ 8.36 $ 8.73 $ 8.59 $ 9.25 $ 8.84
Truckload .......................... 2.80 1.94 1.93 2.09 2.04
Tonnage (000's) -
Less-than-truckload.................. 535 757 743 570 503
Truckload .......................... 533 437 440 495 461
Intercity Miles Operated (000's)......... 32,886 61,235 60,848 51,952 44,523
At Year-End, -
Terminals (2)........................ 0 63 68 66 55
Tractors and trucks.................. 0 701 684 631 585
Trailers............................. 300 1,631 1,501 1,417 1,194
Employees .......................... 11 1,440 1,338 1,287 1,113
--------------------
Notes:
3
(1) Operating ratio is the percent of operating expenses to operating revenue.
(2) Includes owned, leased, agent and other operating locations.
(3) Effective in 1998 the Company prospectively changed its classification
of certain shipments, related tonnage and revenues between
less-than-truckload and truckload which affects the comparability of this
data with 1996 and 1997 information. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations" for a more detailed discussion of this change.
FINANCIAL SERVICES
The Company operates in financial services primarily through its
subsidiary, Universal Premium Acceptance Corporation ("UPAC") which was acquired
on March 29, 1996 and merged operations with Agency Premium Resource, Inc.
("APR"), which was acquired May 31, 1995. On May 29, 1998, UPAC acquired Oxford
Premium Finance, Inc. ("Oxford") and merged Oxford's operations with UPAC's.
UPAC, headquartered in Lenexa, Kansas, is engaged in the business of
financing the payment of insurance premiums. UPAC offers financing of insurance
premiums primarily to commercial purchasers of property and casualty insurance
who wish to pay their insurance premiums on an installment basis. Whereas some
insurance carriers require advance payment of a full year's premium, UPAC allows
the insured to spread the payment of the insurance premium over time.
UPAC finances insurance premiums without assuming the risk of claims loss
borne by insurance carriers. When insureds buy an insurance policy from an
independent insurance agency or broker who offers financing through UPAC, the
insureds generally pay a down payment of 20% to 25% of the total premium and
sign a premium finance agreement for the balance, which is generally payable in
installments over the following nine months. Under the terms of UPAC's standard
form of financing contract, UPAC is given the power to cancel the insurance
policies if there is a default in the payment on the finance contracts and to
collect the unearned portion of the premiums from the insurance carrier. The
down payments are usually set at a level determined, in the event of
cancellation of a policy, such that the unearned premiums returned by insurance
carriers are expected to be sufficient to cover the loan balances plus interest
and other charges due to UPAC.
UPAC currently does business with more than 2,300 insurance agencies or
brokers, the largest of which referred approximately 6% of the total premiums
financed by UPAC in 2000. The following table sets forth certain financial and
operating data with respect to UPAC since the entry into this segment by
TransFinancial in May 1995:
2000 1999 1998 1997 1996
---------- -------- -------- -------- --------
Premiums financed (000's) $201,338 $190,582 $160,773 $122,981 $120,355
UPAC had 50 employees at December 31, 2000.
Regulation
UPAC's operations are governed by state statutes, and regulations
promulgated thereunder, which provide for the licensing, administration and
supervision of premium finance companies. Such statutes and regulations impose
significant restrictions on the operation of UPAC's business. The Federal Truth
in Lending statute also governs a portion of the format of UPAC's premium
finance agreements.
UPAC currently operates as an insurance premium finance company in the 48
contiguous states under state licenses it holds or under foreign corporation
qualification in states that do not require licensing of insurance premium
finance companies. UPAC generally must renew its licenses annually. UPAC is also
subject to periodic examinations and investigations by state regulators. The
licensing agency for insurance premium finance companies is generally the
banking department or the insurance department of the applicable state.
State statutes and regulations impose minimum capital requirements, govern
the form and content of financing agreements and limit the interest and service
charges UPAC may impose. State statutes also prescribe notice periods prior to
the cancellation of policies for non-payment, limit delinquency and collection
charges and govern the procedure for
4
cancellation of policies and collection of unearned premiums. In the event of
cancellation, after deducting all interest, service and late charges due it,
UPAC must, under applicable state laws, refund the surplus unearned premium, if
any, to the insureds.
Changes in the regulation of UPAC's activities, such as increased rate
regulation, could have an adverse effect on its operations. The statutes do not
provide for automatic adjustments in the rates a premium finance company may
charge. Consequently, during periods of high or rising prevailing interest rates
on institutional indebtedness and fixed statutory ceilings on rates UPAC may
charge its insureds, UPAC's ability to operate profitably could be adversely
affected.*
Competition
UPAC encounters intense competition from numerous other firms, including
insurance carriers offering installment payment plans, finance companies
affiliated with insurance carriers, independent insurance brokers who offer
premium finance services, banks and other lending institutions. Many of UPAC's
competitors are larger and have greater financial and other resources and are
better known to insurance agencies and brokers than UPAC. In addition, there are
few, if any, barriers to entry in the event other firms, particularly insurance
carriers and their affiliates, seek to compete in this market.
The market for premium finance companies is three-tiered. The first tier
is that of large, national premium finance companies owned by large insurance
companies, banks, or commercial finance companies. This group is composed of a
small number of companies that, on a combined basis, finance a substantial
portion of the total market. The second tier, which includes UPAC, is composed
of smaller regional and national premium finance companies. The third tier is
composed of numerous small local premium finance companies.
Competition to provide premium financing to insureds is based primarily on
interest rates, level of service to the agencies and insureds, and flexibility
of terms for down payment and number of payments.
INDUSTRIAL TECHNOLOGY
In July 1997, the Company acquired a controlling interest in Presis,
L.L.C. ("Presis") and subsequently purchased the minority interests from the
former owners in 1998. Presis is a start-up business involved in developing
technical advances in dry particle processing. The Company defines dry particle
processing as a process of preparing compounds, such as pigments, for
incorporation into manufacturing processes in a dry or powder form rather than
in liquid or paste form. Presis has working prototypes that it is utilizing for
research and testing which will require further engineering before being placed
in commercial operation. In the event the process is successfully developed,
Presis expects to market its process to companies processing pigments used in
the production of inks, paints and coatings by replacing or supplementing
current wet milling processes.* The Company does not expect to spend a material
amount on research and development in 2001.* The Company does not believe that
its business will be materially affected by environmental laws.*
Competition in the particle-processing field is primarily with
manufacturers of machinery using various milling processes (including three-roll
mills, media mills, air jet mills and hammer mills). Many of the manufacturers
of such machinery used in competing processes are more established and have
substantially greater resources than Presis. Presis did not engage in any
development activity during 2000.
5
AMERICAN FREIGHT SYSTEM
American Freight System, Inc. ("AFS") was treated as a discontinued
operation of TransFinancial from 1991 through 2000. The primary obligation of
AFS was to administer the provisions of a Joint Plan of Reorganization ("Joint
Plan"). As of December 31, 1994, all unsecured creditors were paid an amount
equal to 130% of their allowed claims, which was the maximum distribution
provided under the Joint Plan.
In 1992 through 1994 TransFinancial received distributions in accordance
with the Joint Plan of $36 million. In addition, AFS paid cash dividends of
$25.0 million, $6.8 million, $8.5 million and $9.2 million to TransFinancial on
December 28, 1994, July 5, 1995, July 11, 1996 and April 30, 1998. AFS made a
final distribution to TransFinancial of $715,000 in December 2000. These
proceeds were the result of the settlement of the last open legal matter in the
AFS estate. AFS received its "final" order from the bankruptcy court in January
2001.
Item 2. Properties.
TransFinancial's, TFH L&T's, UPAC's and Presis' corporate offices are
located in approximately 22,000 square feet of a 24,000 square foot office
building owned by the Company at 8245 Nieman Road, Lenexa, Kansas 66214. The
remainder of the space is leased to third-party tenants.
Item 3. Legal Proceedings.
TransFinancial's operating subsidiaries are parties to routine litigation.
TransFinancial and its subsidiaries maintain insurance programs and accrue for
expected losses in amounts designed to cover liability resulting from these
claims. In the opinion of management, the outcome of such claims and litigation
will not materially affect the Company's financial position or results of
operations.*
The Company and its directors have been named as defendants in a lawsuit
filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware.
The suit seeks declaratory, injunctive and other relief relating to a proposed
management buyout of the Company. The suit alleges that the directors of the
Company failed to seek bidders for the Company's subsidiary, Crouse, failed to
seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the
Company, imposed arbitrary time constraints on those making offers and favored a
management buyout group's proposal. The suit seeks certification as a class
action complaint. The proposed management buyout was terminated on February 18,
2000. The plaintiff filed an amended class action complaint on August 9, 2000,
seeking damages in excess of $4.50 per share for the alleged breaches of
fiduciary duties. A motion to dismiss and an amended complaint have been filed
and the Company believes this suit will not have a material adverse effect on
the financial condition, liquidity or results of operations of the Company.*
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the security holders during the
fourth quarter of 2000.
________________________________________________________________________________
Pursuant to General Instruction G, the information regarding executive
officers of the Company required by Item 401 of Regulation S-K is incorporated
herein by reference from Item 10.
6
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
(a) Market Information.
TransFinancial's Common Stock is traded on the American Stock Exchange
under the symbol TFH. The following table shows the sales price information for
each quarterly period of 2000 and 1999.
2000 High Low
---- ---------- ---------
Fourth Quarter...................... $ 1.69 $ .25
Third Quarter....................... 1.88 .44
Second Quarter...................... 2.00 1.50
First Quarter....................... 5.50 1.31
1999 High Low
---- ---------- ---------
Fourth Quarter...................... $ 5 1/2 $ 4
Third Quarter....................... 6 1/2 3 3/4
Second Quarter...................... 5 1/8 3 1/4
First Quarter....................... 4 7/8 2 3/4
(b) Holders.
Number of
Holders of Record
Title of Class at December 31, 2000
-------------- --------------------
Common Stock, par value $0.01 per share 1,129
(c) Dividends.
No cash dividends were paid during 2000 or 1999 on TransFinancial's Common
Stock. TransFinancial currently intends to retain any earnings and does not
anticipate paying cash dividends on its Common Stock in the near future.*
TransFinancial's future policy with respect to the payment of cash dividends
will depend on several factors including, among others, acquisitions, earnings,
capital requirements, financial condition and operating results. See Note 4 of
Notes to Consolidated Financial Statements for a discussion of restrictions on
the ability of TransFinancial's subsidiaries to pay dividends to TransFinancial
and the ability of TransFinancial to pay cash dividends.
7
Item 6. Selected Financial Data.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands, Except Per Share Data)
Operating Revenue............. $ 12,721 $ 12,339 $ 10,376 $ 10,026 $ 8,793
======== ========= ======== ======== =======
Income (Loss) from Continuing
Operations................ $ (669) $ (417) $(2,307) $ (718) $ (372)
========= ========== ======== ======== =======
Income (Loss) from Discontinued
Operations (1)............ $(22,000) $ (7,667) $ 280 $ 1,818 $ 1,224
========= ========== ======== ======== =======
Net Income (Loss)............. $(22,669) $ (8,084) $(2,027) $ 1,100 $ 852
========= ========== ======== ======== =======
Basic Earnings (Loss) per Share -
Continuing Operations..... $ (0.20) $ (0.12) $ (0.43) $ (0.12) $(0.05)
Discontinued Operations... (6.71) (2.25) 0.04 0.30 0.18
--------- ---------- -------- -------- -------
Total..................... $ (6.91) $ (2.37) $ (0.39) $ 0.18 $ 0.13
========= ========== ======== ======== =======
Diluted Earnings (Loss) per Share -
Continuing Operations..... $ (0.20) $ (0.12) $ (0.43) $ (0.12) $(0.05)
Discontinued Operations... (6.71) (2.25) .04 0.30 0.17
--------- ---------- -------- -------- -------
Total..................... $ (6.91) $ (2.37) $ (0.39) $ 0.18 $ 0.12
========= ========== ======== ======== =======
Total Assets (2).............. $ 92,837 $ 47,153 $ 56,756 $76,075 $78,713
======== ========= ======== ======= =======
Current Maturities
of Long-Term Debt........ $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======= =======
Long-Term Debt................ $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======= =======
Cash Dividends per
Common Share.............. $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======= =======
(1) See Note 2 to the Notes to Consolidated Financial Statements.
(2) See Note 4 to the Notes to Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
At December 31, 2000, TransFinancial operated in two distinct industries;
insurance premium finance and industrial technology. The company discontinued
its transportation operations during 2000.
Financial Services
2000 vs. 1999
-------------
For 2000, UPAC reported an operating loss of $90,000 on net financial
service revenue of $7.2 million, as compared to operating income of $1,341,000
on net revenue of $8.3 million for 1999. The decrease in operating income and
net financial services revenue were the result of lower interest spreads due to
rising debt costs, and elimination of gain on sale treatment of accounts
receivable. The change in gain on sale treatment of accounts receivable resulted
in a non-cash reduction of revenue of $768,000. Operating expenses increased by
4.3% from $7.0 million in 1999 to $7.3 million in 2000, primarily due to
professional and consulting expenses related to refinancing of UPAC's debt
facility.
8
UPAC reported a net loss of $186,000 for 2000, not considering the
valuation allowance provided against consolidated deferred tax assets, as
compared to net income of $682,000 for 1999, as a result of decreased net
financial revenue and increased operating expenses.
1999 vs. 1998
-------------
For 1999, UPAC reported operating income of $1,341,000 on net financial
services revenue of $8.3 million, as compared to an operating loss of $653,000
on net revenue of $7.0 million for 1998. The increase in net financial services
revenue and operating income in 1999 were the result of increased average total
receivables financed, offset in part by lower average yields on finance
contracts. The growth in average total receivables was due primarily to the
acquisition of Oxford Premium Finance, Inc. on May 29, 1998 and the addition of
marketing representatives since the beginning of 1998. Operating expenses
declined 8.4% from $7.6 million in 1998 to $7.0 million in 1999, due to lower
salaries, wages and employee benefits resulting from reduced employee headcount
and the inclusion in 1998 of certain charges relative to management contract
adjustments and a decrease in consulting fees in 1999 resulting from the
expiration, effective December 31, 1998, of a consulting agreement with the
former owner of UPAC. Increased provisions for credit losses in 1999 partially
offset the reductions in operating expenses in the period. Additionally,
operating expenses for 1998 include $333,000 of additional depreciation related
to the change in estimated useful life for certain purchased software.
UPAC reported net income of $682,000 for 1999, not considering the
valuation allowance provided against consolidated deferred tax assets, as
compared to a net loss of $535,000 for 1998, as a result of increased revenues
and decreased operating expenses as discussed above.
Industrial Technology
- ---------------------
In 2000, Presis incurred operating expenses of $38,000 as compared to
operating expenses of $212,000 in 1999 and $1,469,000 in 1998. The decrease in
operating expenses in 2000 and 1999 as compared to 1998 is due to the limitation
of expenditures to essential activities related to continued development and
testing of its technology and the inclusion in 1998 of charges of $244,000
relating to termination of certain management and consulting contracts and
$525,000 resulting from the adjustment of the carrying value of certain
equipment and intangibles to fair value (See Note 1 of Notes to Consolidated
Financial Statements). Presis engaged in no development activity in 2000.
Other
- -----
Included in general corporate expenses of 1999 are approximately $380,000
of legal, accounting and financial advisor fees incurred in the evaluation of a
now terminated proposal by certain members of management to acquire all of the
outstanding shares of the Company.
In connection with a failed takeover attempt in 1998, the Company incurred
$500,000 in transaction costs and expenses that are included in general
corporate expenses. Additionally, general corporate charges of $700,000 were
recorded in 1998, principally to reflect certain excess costs incurred to remove
contaminated soil from a site formerly owned by the Company. A lawsuit has been
filed against the environmental engineering firm that performed the initial
cleanup to recover such excess costs. The Company settled this suit in 2000 for
approximately $735,000.
As a result of the Company's use of funds for the stock repurchases in
1999 and 1998, interest earnings on invested funds were substantially lower in
1999 than in 1998. Interest expense increased substantially in 1999 due to
borrowings on long-term debt incurred to repurchase stock and fund operations
and increases in interest rates on borrowings in 1999 and 1998.
TransFinancial's effective income tax provision (benefit) rates for 2000,
1999 and 1998 were 0%, 6% and (29%). In 2000 and 1999, the Company's income tax
provision (benefit) was ($51,000) and $433,000 on a pre-tax loss of $22.7
million and $7.7 million, respectively, primarily as a result of the valuation
allowance.
Forward-Looking Statements
- --------------------------
The Company believes certain statements contained in this Annual Report on
Form 10-K which are not statements of historical fact may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation, the statements
specifically identified as forward-looking statements in this
9
Form 10-K. In addition, the Company believes certain statements in future
filings by the Company with the Securities and Exchange Commission, in the
Company's press releases, and in oral statements made by or with the approval of
an authorized executive officer of the Company, which are not statements of
historical fact, may constitute forward-looking statements within the meaning of
the Act. Examples of forward-looking statements include, but are not limited to
(i) projections of revenues, income or loss, earnings or loss per share, capital
expenditures, the payment or non-payment of dividends, capital structure and
other financial items, (ii) statements of plans and objectives of the Company or
its management or Board of Directors, including plans or objectives relating to
the products or services of the Company, (iii) statements of future economic
performance, and (iv) statements of assumptions underlying the statements
described in (i), (ii) and (iii). These forward-looking statements involve risks
and uncertainties which may cause actual results to differ materially from those
anticipated in such statements. The following discussion identifies certain
important factors that could affect the Company's actual results and actions and
could cause such results or actions to differ materially from any
forward-looking statements made by or on behalf of the Company that relate to
such results or actions. Other factors, which are not identified herein, could
also have such an effect.
Financial Services
- ------------------
Certain specific factors which may affect the Company's financial services
operation include: the performance of financial markets and interest rates; the
performance of the insurance industry; competition from other premium finance
companies and insurance carriers for finance business in the Company's key
operating states; changes in interest rates in states in which the Company
operates; greater than expected credit losses; the acquisition and integration
of additional premium finance operations or receivables portfolios; and the
inability to obtain continued financing at a competitive cost of funds.
Industrial Technology
- ---------------------
Presis is a start-up business formed to develop an industrial technology
for dry particle processing. This technology is subject to risks and
uncertainties in addition to those generally applicable to the Company's
operations described herein. These additional risks and uncertainties include
the efficacy and commercial viability of the technology, the ability of the
venture to market the technology, the acceptance of such technology in the
marketplace, the general tendency of large corporations to be slow to change
from known technology, the ability to protect its proprietary information in the
technology and potential future competition from third parties developing
equivalent or superior technology. As a result of these and other risks and
uncertainties, the future results of operations of the venture are difficult to
predict, and such results may be better or worse than expected or projected.
Presis engaged in no development activity in 2000.
Other Matters
- -------------
With respect to statements in Item 3 regarding the outcome of claims and
litigation, such statements are subject to a number of risks and uncertainties,
including without limitation the difficulty of predicting the results of the
discovery process and the final resolution of ongoing claims and litigation.
With respect to statements in this Report which relate to the current
intentions of the Company and its subsidiaries or of management of the Company
and its subsidiaries, such statements are subject to change by management at any
time without notice.
With respect to statements in "Financial Condition" regarding the adequacy
of the Company's capital resources, such statements are subject to a number of
risks and uncertainties including, without limitation: the ability of management
to effect operational changes to improve the future economic performance of the
Company (which is dependent in part upon the factors described above); the
ability of the Company to successfully liquidate the transportation operations,
the ability of the Company and its subsidiaries to comply with the covenants
contained in the financing agreements; and material expenditures not currently
anticipated by management.
With respect to statements in "Financial Condition" regarding the adequacy
of the allowances for credit losses, such statements are subject to a number of
risks and uncertainties including, without limitation: greater than expected
defaults by customers, fraud by insurance agencies and general economic
conditions.
10
General Factors
- ---------------
Certain general factors that could impact any or all of the Company's
operations include: changes in general business and economic conditions; changes
in governmental regulation; and tax changes. Expansion of these businesses into
new states or markets is substantially dependent on obtaining sufficient
business volumes from existing and new customers in these new markets at
compensatory rates. The board of directors and management of the Company are
continually reviewing the long-term plans of the Company in consideration of the
best interests of the shareholders.
The cautionary statements made pursuant to Section 21E of the Securities
Exchange Act of 1934, as amended, are made as of the date of this Report and are
subject to change. The cautionary statements set forth in this Report are not
intended to cover all of the factors that may affect the Company's businesses in
the future. Forward-looking information disseminated publicly by the Company
following the date of this Report may be subject to additional factors hereafter
published by the Company.
FINANCIAL CONDITION
As of December 31, 2000, the Company's net working capital was $7.0
million as compared to working capital of $28.4 million as of December 31, 1999.
The Company's current ratio was 1.1 and its ratio of total liabilities to
tangible net worth was 8.4 as of December 31, 2000, as compared to a current
ratio of 5.2 and a ratio of total liabilities to tangible net worth of 0.2 as of
December 31, 1999. The decrease in working capital and current ratio was the
result of the losses in the Company's transportation group in 2000. Cash
generated from operating activities decreased in 2000 as compared to 1999, due
primarily to continuing operating losses in the Company's transportation
operations.
The Company has experienced operating losses in 2000, 1999 and 1998 and
significantly reduced cash flows from operating activities in 2000 through 1998.
In addition, the Company violated certain covenants in its financing agreements
in 2000 and 1999. The report of the Company's Independent Accountants contains
an explanatory paragraph indicating that these factors raise substantial doubt
about the Company's ability to continue as a going concern.
Investing Activities - UPAC entered into an $80 million revolving loan
agreement in May 2000 eliminating the off balance sheet treatment of its
accounts receivable. The continuing wind down of its discontinued operation,
AFS, has been a source of cash to the Company's operation as AFS distributed $.7
million and $6.3 million in cash dividends in 2000 and 1998, respectively. The
principal use of cash has been the acquisitions of Oxford for approximately $4.2
million in 1998.
Financing Activities - UPAC has a revolving loan agreement providing an
$80 million facility based on eligible receivables. The interest charge under
this agreement is based on commercial paper rates, plus the lending banks
program fees.
Pursuant to a definitive stock purchase agreement resolving a hostile
takeover attempt, the Company repurchased 2,115,422 shares of its common stock
held by the Crouse family, including 881,550 shares registered in the name of
TJS Partners, LP, all at a price of $9.125 per share, effective August 14, 1998.
The Company paid and expensed $350,000 of legal and other expenses incurred by
the Crouse family in connection with the takeover attempt. See Note 5 of Notes
to Consolidated Financial Statements. The Company funded the stock repurchase
out of available cash and short-term investments, the proceeds from the sale and
leaseback of approximately $4.2 million of revenue equipment and the proceeds
from a $10.0 million secured loan.
11
In the first quarter of 1999, the Board of Directors authorized the
repurchase of 1,030,000 shares of the Company's common stock. Through December
31, 1999, a total of 683,241 shares had been repurchased at a cost of $2.6
million. The repurchase of these shares was funded from the proceeds of the
additional term loan borrowings described above.
As announced by the Company in a press release dated June 21, 1999, three
TransFinancial directors, the Company's Chairman, Vice-Chairman and President,
presented a proposal to the Board of Directors of the Company by which they
would agree to acquire all of the outstanding stock of the Company for $5.25 per
share in cash. The Board of Directors appointed a Special Committee of the
independent directors to consider this proposal and other options. The Special
Committee engaged the general counsel of the Company as legal counsel and
engaged a financial advisor to assist it in evaluating the proposal and other
strategic options. On October 19, 1999, the Company executed a definitive
agreement pursuant to which COLA Acquisitions, Inc. ("COLA"), a company newly
formed by the three TransFinancial directors, would acquire all of the Company
stock not owned by such directors for $6.03 in cash. Effective February 18,
2000, COLA notified the Company that its bank financing necessary to consummate
the proposed merger had been withdrawn. The receipt of financing by COLA was a
condition to the consummation of the proposed merger. As a result, the Merger
Agreement was terminated.
The Company and its directors have been named as defendants in a lawsuit
filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware.
The suit seeks declaratory, injunctive and other relief relating to a proposed
management buyout of the Company. The suit alleges that the directors of the
Company failed to seek bidders for the Company's subsidiary, Crouse, failed to
seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the
Company, imposed arbitrary time constraints on those making offers and favored
the management buyout group's proposal. The suit seeks certification as a class
action complaint. The proposed management buyout was terminated on February 18,
2000. The plaintiff filed an amended class action complaint on August 9, 2000,
seeking damages in excess of $4.50 per share for the alleged breaches of
fiduciary duties. A motion to dismiss and an amended complaint have been filed
and the Company believes this suit will not have a material adverse effect on
the financial condition, liquidity or results of operations of the Company.*
The amount of the allowance for credit losses is based on periodic (not
less than quarterly) evaluations of the portfolios based on historical loss
experience, detail account by account agings of the portfolios and management's
evaluation of specific accounts. Management believes the allowances for credit
losses are adequate to provide for potential losses.* See Note 1 of Notes to
Consolidated Financial Statements - Summary of Significant Accounting Policies -
Allowance for Credit Losses.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 2000, the Company's primary market risk is interest rate
risk. Changes in short-term interest rates could affect the amount of the
Company's interest expense on its variable interest rate debt. The Company has
not obtained any financial instruments for trading purposes. The Company's
variable interest rate debt was $66,250,000 as of December 31, 2000.
At December 31, 2000, UPAC had an $80 million revolving loan agreement
with allowable maturities from 1 to 270 days. The collateral under this
agreement is the company's finance accounts receivable which are generally fixed
rate notes and typically have a term of 9 months. The interest expense on the
revolving loan agreement is based on commercial paper rates, plus the banks
program fees. As of December 31, 2000, UPAC had a total finance accounts
receivable portfolio of $84.6 million. UPAC does not currently use derivatives,
such as interest rate swaps, to manage its interest rate risk and does not
engage in any other hedging activities.
The estimated impact of a hypothetical 100 basis point (one percent)
change in short-term interest rates on the Company's interest expense on the
variable interest rate debt is approximately $356,000 and $314,000 as of
December 31, 2000 and 1999, respectively. This hypothetical short-term interest
rate change is based on existing business and economic conditions and assumes
that UPAC would pass the increase in interest rates on to its customers in new
finance contracts generated after the increase.*
12
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13
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of TransFinancial Holdings, Inc.:
We have audited the consolidated balance sheet of TransFinancial Holdings,
Inc. and its subsidiaries as of December 31, 2000 and the related statements of
income, shareholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
schedule based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TransFinancial Holdings,
Inc. and its subsidiaries (the "Company") at December 31, 2000 and the results
of their operations and their cash flows for the year ended in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has experienced significantly reduced cash flows from operating
activities and has violated covenants of financing agreements that raise
substantial doubt in its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WEAVER & MARTIN, LLC
Kansas City, Missouri
March 23, 2001
14
REPORT OF INDEPENDENT ACCOUNTANTS
FOR 1999 AND 1998
The registrant was unable to obtain a report from the registrant's prior
independent accountants with respect to the consolidated balance sheet of the
registrant and its subsidiaries as of December 31, 1999 and the related
statements of income, shareholders' equity, and cash flows for the years ended
December 31, 1999 and 1998 prior to filing this Annual Report on Form 10-K.
As soon as the registrant obtains such a report, the registrant will file
such report by amendment to this Annual Report on Form 10-K.
15
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
----------------------
2000 1999
--------- ---------
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 258 $ 1,076
Finance accounts receivable,
less allowance for credit losses of $1,490 and $870
(Note 4) 80,945 15,305
Discontinued Operations, net (Note 2).............. -- 17,888
Other current assets............................... 753 964
--------- ---------
Total current assets............................ 81,956 35,233
--------- ---------
Operating Property, at Cost
Land............................................... 339 322
Structures and improvements........................ 1,474 1,429
Other operating property........................... 1,083 1,101
--------- ---------
2,896 2,852
Less accumulated depreciation...................... (1,069) (847)
--------- ---------
Net operating property.......................... 1,827 2,005
--------- ---------
Intangibles, net of accumulated amortization.......... 8,946 9,005
Other Assets.......................................... 108 910
--------- ---------
$ 92,837 $ 47,153
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash overdrafts.................................... $ 1,161 $ 1,049
Accounts payable................................... 2,309 2,477
Revolving bank loan (Note 4)....................... 66,250 --
Accrued payroll and fringes........................ 66 326
Other accrued expenses............................. 1,674 2,905
Discontinued Operations, net (Note 2).............. 3,500 --
--------- ---------
Total current liabilities....................... 74,960 6,757
--------- ---------
Deferred Income Taxes (Note 6)........................ -- --
Contingencies and Commitments (Note 7)................ -- --
Shareholders' Equity (Notes 5 and 8)
Preferred stock $0.01 par value,
authorized 1,000,000 shares, none outstanding... -- --
Common stock $0.01 par value, authorized
13,000,000 shares, issued 7,623,852 and
7,597,931 shares................................ 76 76
Paid-in capital.................................... 6,254 6,104
Retained earnings.................................. 46,614 69,283
Treasury stock, 4,345,561 shares, at cost.......... (35,067) (35,067)
--------- ---------
Total shareholders' equity...................... 17,877 40,396
--------- ---------
$ 92,837 $ 47,153
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
16
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
----------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands, Except
Per Share Amounts)
Interest and Servicing Revenue............ $ 9,742 $ 9,431 $ 8,128
Fee Revenue............................... 2,801 2,689 2,030
Other..................................... 178 219 218
--------- --------- ---------
Total operating revenue............. 12,721 12,339 10,376
--------- --------- ---------
Operating Expenses
Salaries, wages and employee benefits.. 3,042 3,121 3,267
Interest and securitization costs (Note 4) 5,439 3,897
3,275
Operating supplies and expenses........ 3,136 3,153 4,529
Provision for credit losses............ 1,366 1,193 827
Insurance and claims................... 178 175 148
Depreciation and amortization.......... 816 893 2,238
--------- --------- ---------
Total operating expenses............ 13,977 12,432 14,284
--------- --------- ---------
Operating Income (Loss)................... (1,256) (93) (3,908)
--------- --------- ---------
Nonoperating Income (Expense)
Interest income........................ 8 81 430
Interest expense....................... (123) (3) (11)
Other, net............................. 651 31 (1)
--------- --------- ---------
Total nonoperating income (expense). 536 109 418
--------- --------- ---------
Income (Loss) Before Income Taxes......... (720) 16 (3,490)
Income Tax Provision (Benefit) (Note 6)... (51) 433 (1,183)
---------- --------- ---------
Income (Loss) from Continuing Operations.. (669) (417) (2,307)
---------- ---------- ---------
Discontinued Operations (Note 2).......... (12,900) (7,667) 624
Income Tax Provision (Benefit) (Note 4)... -- -- 344
--------- --------- ---------
Income (Loss) from Discontinued Operations (Note 2) (12,900) (7,667)
280
Loss on Closing of Discontinued
Operations................................ (9,100) -- --
Net Income (Loss)......................... $ (22,669) $ (8,084) $ (2,027)
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share
of Continuing Operations................... $ (0.20) $ (0.12) $ (0.43)
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share
of Discontinued Operations................. $ (6.71) $ (2.25) $ 0.04
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share $ (6.91) $ (2.37) $ (0.39)
========= ========= =========
Basic Average Shares Outstanding.......... 3,278 3,415 5,249
========= ========= =========
Diluted Average Share Outstanding......... 3,506 3,425 5,263
========= ========= =========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
17
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2000 1999 1998
--------- -------- ----------
(In Thousands)
Cash Flows From Operating Activities-
Net income (loss)...................... $ (22,669) $ (8,084) $ (2,027)
Adjustments to reconcile net income (loss)
to net cash generated by operating
activities-
Depreciation and amortization....... 816 893 2,238
Debt cost amortization.............. 365 133 64
Provision for credit losses......... 1,366 1,193 827
Deferred tax provision.............. 0 681 (2,644)
Other...............................
Net increase (decrease) from change in
working capital items affecting
operating activities-
Accounts Receivable.............. (3,132) (6,219) (1,447)
Accounts Payable................. (168) 883 (196)
Other............................ (1,148) (198) 809
Loss from and on discontinued
operations....................... 22,000 7,667 (280)
---------- ---------- ----------
(2,570) (3,051) (2,656)
---------- ---------- ----------
Cash Flows From Investing Activities-
Cash from (to) discontinued operations. (613) 1,542 20,622
Purchase of operating property......... (93) (731) (4,270)
Net sales/ repurchase of accounts
receivables, net....................... (63,875) 2,305 5,058
Purchase of finance subsidiary, net of
cash acquired.......................... 0 0 (4,178)
Purchase of short-term investments..... 0 0 (2,998)
Maturities of short-term investments... 0 0 6,541
Other.................................. (37) (646) (190)
---------- ---------- ----------
(64,618) 2,470 20,585
---------- ---------- ----------
Cash Flows From Financing Activities-
Line of credit borrowings (repayments),
net.................................... 66,250 0 0
Cash overdrafts........................ 112 1,049 (13)
Payments to acquire treasury stock..... 0 (2,603) (19,303)
Payment for fractional shares from reverse
stock split............................ 0 (11) (96)
Other.................................. 8 9 (82)
---------- ---------- ----------
66,370 (1,556) (19,494)
---------- ---------- ----------
Net Decrease in Cash and Cash Equivalents. (818) (2,137) (1,565)
Cash and Cash Equivalents:
Beginning of period.................... 1,076 3,213 4,778
---------- ---------- ----------
End of period.......................... $ 258 $ 1,076 $ 3,213
========== ========== ==========
18
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Supplemental Schedule of Noncash Investing Activities:
In 1998, the Company acquired all of the capital stock of Oxford for
approximately $4,178,000. In conjunction with the acquisition, liabilities
were assumed as follows:
1998
Fair value of assets acquired............................ $22,338
Cash paid for capital stock and acquisition expenses..... (4,178)
Intangibles.............................................. 1,876
-------
Liabilities assumed...................................... $20,036
=======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
19
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Share-
Common Paid-In Retained Treasury holders'
Stock Capital Earnings Stock Equity
----- ------- -------- ----- ------
(In Thousands)
Balance at December 31, 1997.... $ 75 $ 5,581 $ 79,394 $ (12,565) $ 72,485
Net loss........................ -- -- (2,027) -- (2,027)
Issuance of shares under
Incentive Stock Plan......... 1 509 -- (591) (81)
Purchase of 2,115,422 shares
of common stock.............. -- -- -- (19,303) (19,303)
-------- -------- --------- ---------- ---------
Balance at December 31, 1998.... 76 6,090 77,367 (32,459) 51,074
-------- -------- --------- ---------- ---------
Net loss........................ -- -- (8,084) -- (8,084)
Issuance of shares under
Incentive Stock Plan......... -- 14 -- (5) 9
Purchase of 683,241 shares
of common stock.............. -- -- -- (2,603) (2,603)
-------- -------- --------- ---------- ---------
Balance at December 31, 1999.... 76 6,104 69,283 (35,067) 40,396
-------- -------- --------- ---------- ---------
Net income...................... -- -- (22,669) -- (22,669)
Issuance of shares under Deferred
Compensation Arrangements.... -- 143 -- -- 143
Issuance of shares under
Incentive Stock Plan......... -- 7 -- -- 7
-------- -------- --------- ---------- ---------
Balance at December 31, 2000.... $ 76 $ 6,254 $ 46,614 $ (35,067) $ 17,877
======== ======== ========= ========== =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
20
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
TransFinancial Holdings, Inc. and its subsidiary companies ("the Company" or
"TransFinancial"). TransFinancial's principal operations include TFH Logistics &
Transportation Services, Inc. ("TFH L&T") and its subsidiaries, Crouse Cartage
Company ("Crouse") and Specialized Transport, Inc. ("Specialized"), Universal
Premium Acceptance Corporation and its affiliates, Agency Premium Resource, Inc.
("APR"), Oxford Premium Finance, Inc. ("Oxford") and UPAC of California, Inc.
(together "UPAC"), and Presis, L.L.C. ("Presis"). The operating results of
Oxford are included from May 29, 1998, the date of its acquisition. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Going Concern - The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
experienced operating losses in 2000, 1999 and 1998 and significantly reduced
cash flows from operating activities. In addition, the Company violated certain
covenants in its financing agreements in 2000. The Company discontinued its
transportation operations during 2000 (See Note 2). These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is ultimately
dependent on its ability to successfully liquidate the transportation operations
outside bankruptcy. Management believes that it will be successful in that
liquidation process.* The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Accounting for the Impairment of Long-Lived Assets - The Company
periodically reviews its long-lived assets and associated intangible assets and
has identified no events or changes in circumstances which indicate that the
carrying amount of these assets may not be recoverable, except as described
below. When potential impairments are indicated, impairment losses, if any, are
measured by the excess of carrying values over fair values. An evaluation of
certain equipment and intangible assets of the Company's industrial technology
operation resulted in the determination that these assets were impaired. The
impaired assets were written down by $525,000 effective September 30, 1998. Fair
value was based on estimated discounted future cash flows to be generated by
these assets and management's estimate of the value realizable from sale of the
assets. This writedown is included in "Depreciation and Amortization" in the
Consolidated Statements of Income. This writedown is included in "Other" in the
Consolidated Statements of Income.
Recognition of Revenue - Finance charges on premium finance receivables are
recognized when earned under applicable state regulations using methods that
approximate the interest method. Recognition of earned finance charges on
delinquent accounts is suspended when it is determined that collectibility of
principal and interest is not probable. Interest on delinquent accounts is
recognized when collected. Gains on sale of receivables under the securitization
agreement are recorded when the receivables are sold (See Note 4). Late fees and
other ancillary fees are recognized when chargeable. Accounts are generally
charged off when deemed uncollectible. Recoveries of charged off accounts are
recognized when collected.
The Company and UPAC had entered into a securitization agreement with a
financial institution whereby undivided interests in a designated pool of
accounts receivable can be transferred on an ongoing basis. Under the
securitization agreement UPAC recognized gains on sales of receivables. These
gains are shown as service revenue on the accompanying income statement.
Effective May 26, 2000, the securitization agreement was assigned to and assumed
by a new financial institution. UPAC and APR Funding amended the securitization
agreement that resulted in a discontinuation of the prior gain on sale treatment
of receivables. This change in accounting treatment had no effect on the total
earnings recognized over the term of each finance contract or the cash flow
received by UPAC on each contract. The timing of earnings recognition was
altered by the accounting change. The non-cash effect on operating revenue and
operating income from the change in gain on sale treatment of receivables was a
negative charge to earnings of $768,000.
Segment Information - The Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of this statement did not
require significant changes in the way the Company's segments were disclosed.
TransFinancial operates in two industry segments,
21
financial services and industrial technology. The Company discontinued its
transportation operations during 2000. TransFinancial operates as an insurance
premium finance company through UPAC. The Company provides short-term secured
financing for commercial and personal insurance premiums through insurance
agencies throughout the United States. Approximately 50% of the insurance
premiums financed by UPAC are placed through insurance agencies in California,
Illinois, Florida, Texas and Minnesota. Presis is a startup company that is
developing an industrial technology for dry particle processing. Information
regarding the Company's industry segments for the years ended December 31, 2000,
1999, and 1998 is as follows (in thousands):
Operating Depreciation
Operating Income and Capital Total
Revenues (Loss) Amortization Additions Assets
----------- -------- --------------- ---------- -----------
Financial Services 2000 12,686 (90) 708 31 91,023
1999 12,227 1,341 740 100 26,597
1998 10,247 (653) 1,172 197 25,558
Industrial Technology 2000 0 (38) 15 0 58
1999 0 (212) 90 21 81
1998 0 (1,469) 610 104 185
Total Segments 2000 12,686 (128) 723 31 91,081
1999 12,227 1,129 830 121 26,678
1998 10,247 (2,122) 1,782 301 25,743
Corporate and Other 2000 35 (1,128) 93 62 1,756
1999 112 (1,222) 63 609 20,475
1998 129 (1,786) 456 3,969 31,013
Total from Continuing
Operations 2000 12,721 (1,256) 816 93 92,837
1999 12,339 (93) 893 731 47,153
1998 10,376 (3,908) 2,238 4,270 56,756
Transportation
(Discontinued Operations) 2000 111,445 (22,000) 3,105 3,434 8,268
1999 149,125 (7,667) 4,265 5,209 29,740
1998 144,592 624 4,048 4,832 21,706
Consolidated Continuing
Operations 2000 124,166 (23,256) 3,921 3,527 101,105
and Discontinued 1999 161,464 (7,760) 5,158 5,939 76,893
Operations 1998 154,976 (3,284) 6,286 9,102 78,462
Depreciation - Depreciation is computed using the straight-line method and
the following useful lives:
Structures and Improvements............ 19 - 39 years
Other Operating Property............... 2 - 10 years
As of July 1, 1998, the Company prospectively decreased the estimated
remaining useful life of certain purchased software to reflect the Company's
plan to substantially revise and replace the software. This change increased
amortization expense in 1998 by $333,000 and decreased net income by
approximately $200,000, or $0.04 per share.
22
Allowance for Credit Losses - The allowances for credit losses is
maintained at an amount considered adequate to provide for potential losses. The
amount of allowance for credit losses is based on periodic (not less than
quarterly) evaluations of the portfolios based on historical loss experience,
detail account-by-account agings of the portfolios and management's evaluation
of specific accounts. The following is an analysis of changes in the allowance
for credit losses on finance accounts receivable:
2000 1999
------ ------
Balance, beginning of year................ $ 870 $ 566
Provision for credit losses............... 1,367 1,193
Reclass provision - gain on sale
accounting change......................... 567 -
Charge-offs, net of recoveries of
$550 and $443, respectively............... (1,314) (889)
------ ------
Balance, at the end of year............... $1,490 $ 870
====== ======
Income Taxes - The Company accounts for income taxes in accordance with
the liability method. Deferred income taxes are determined based upon the
difference between the book and the tax basis of the Company's assets and
liabilities. Deferred taxes are provided at the enacted tax rates expected to be
in effect when these differences reverse.
Cash Equivalents - The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents. The
Company maintains cash and cash equivalents with various major financial
institutions. At times such amounts may exceed the F.D.I.C. limits. The Company
believes that no significant concentration of credit risk exists with respect to
cash and cash equivalents.
Disclosures about Fair Value of Financial Instruments - The following
methods and assumptions are used to estimate the fair value of each class of
financial instruments:
a. Cash Equivalents - The carrying amount approximates fair value because
of the short maturity of these instruments.
b. Finance Accounts Receivable - The carrying amount approximates fair
value because of the short maturity of these instruments.
c. Long-Term Debt - The carrying amount approximates fair value as the
debt bears interest at a variable market rate.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Intangible Assets and Accumulated Amortization - Intangible assets,
consisting primarily of goodwill and intangibles recorded in connection with the
acquisition of insurance premium finance companies, totaled $11,499,000 at
December 31, 2000. These intangible assets are generally being amortized on the
straight-line basis over 15 - 25 years. The accumulated amortization of
intangible assets as of December 31, 2000 was $2,553,000.
Reclassifications - Certain amounts in the accompanying consolidated
balance sheet for the prior period have been reclassified to conform with the
current period's presentations.
23
2. Discontinued Operations
On September 16, 2000, the Company ceased operations of Crouse, its
less-than-truckload motor carrier subsidiary, as a result of its continuing
operating losses. The Company continued to operate Specialized Transport, Inc.
("Specialized"), its truckload motor carrier subsidiary until December 16, 2000.
Prior to Crouse's closure, approximately 33% of Specialized's revenues were
received from Crouse for providing linehaul transportation between terminals.
Specialized was in the process of securing additional freight to replace
revenues previously received from Crouse when its insurance coverages were
revoked and it was forced the close its operation.
The Company is conducting orderly liquidations of the Crouse and
Specialized assets for distribution to its secured and unsecured creditors. An
independent "Advisory Committee" of unsecured creditors has been formed for each
of Crouse and Specialized to provide advice and oversight to management during
this liquidation process. The Company has closed on the bulk sale of all of
Crouse's tractors, trailers, other equipment and real property. The Company
expects to collect a substantial portion of Crouse's remaining receivables and
liquidate the assets of Specialized over the next six months.* The Company is in
the process of verifying unsecured claims. The proceeds of asset liquidations
are anticipated to allow the full payment of the secured claims and a partial
distribution to priority creditors and, in the case of Specialized, to the
general unsecured creditors on their claims.*
A summary of the net liabilities of discontinued operations as of December
31, 2000, follows (in thousands):
Assets
------
Cash......................................... $ -
Freight accounts receivable, net............. 3,532
Operating property, at estimated
net realizable value......................... 3,617
Deposits, prepayments and other.............. 1,127
-------
Total assets................................. 8,276
-------
Liabilities
-----------
Secured notes and other...................... 3,141
Post-cessation administrative costs.......... 1,052
Priority wages, taxes and other.............. 1,934
Unsecured liabilities........................ 5,649
-------
Total liabilities............................ 11,776
-------
Net deficit.................................. $(3,500)
=======
After distribution of all of the proceeds to creditors, TFH expects to
incur approximately $3.5 million of residual liabilities for certain claims
included in the net deficit above.* This estimate of residual liabilities
considers the reduction of the transportation operations general unsecured
liabilities of Crouse and Specialized by $18.5 million.* Such forgiveness
relates to debts specific to these corpoations and without recourse to TFH L&T,
and various settlements with other creditors.* In connection with the closure of
the transportation businesses the Company has recorded an estimated "Loss on
Discontinued Operations" of $9.1 million, or approximately $2.78 per share. The
loss includes adjustments of asset and liability carrying values to liquidation
values, accruals of liabilities for multi-employer pension withdrawal and WARN
Act liabilities and estimated post-cessation administrative costs to conduct the
liquidation. Management believes that it will be successful in conducting an
orderly liquidation of the assets and disposition of claims of Crouse and
Specialized.*
24
3. Employee Benefit Plans
UPAC Plans
Effective June 1, 1995, the Company established a 401(k) Savings Plan and
a Money Purchase Pension Plan, both of which are defined contribution plans.
Employees of UPAC and TransFinancial are eligible to participate in the plans
after they attain age 21 and complete one year of employment.
Participants in the 401(k) Savings Plan may defer up to 13% of annual
compensation. The Company matches 50% of the first 10% deferred by each
employee. Company contributions vest after five years. Company matching
contributions in 2000, 1999, and 1998 were $52,000, $70,000 and $63,000.
Under the Money Purchase Pension Plan, the Company contributes 7% of each
eligible employee's annual compensation plus 5.7% of any compensation in excess
of the Social Security wage base. Company contributions in 2000, 1999 and 1998
were $128,000, $137,000 and $108,000.
Non-Union Pension Plan
TFH L&T has a defined contribution pension plan ("the Non-Union Plan")
providing for a mandatory Company contribution of 5% of annual earned
compensation of the non-union employees. Additional discretionary contributions
may be made depending upon the profitability of TFH L&T. Any discretionary funds
contributed to the Non-Union Plan were invested 100% in TransFinancial Common
Stock. TFH L&T has taken action to terminate the Non-Union Plan effective March
31, 2001.
401(k) Plan
Effective January 1, 1990, TFH L&T established a salary deferral program
under Section 401(k) of the Internal Revenue Code. To date, participant
contributions to the 401(k) plan have not been matched with Company
contributions. All employees of TFH L&T are eligible to participate in the
401(k) plan after they attain age 21 and complete one year of qualifying
employment. TFH L&T has taken action to terminate this plan effective March 31,
2001.
Stock Option Plans
A Long-Term Incentive Plan adopted in 1998 ("1998 Plan") provides that
options for shares of TransFinancial Common Stock be granted to directors, and
that options and other shares may be granted to officers and other employees.
All such option grants are at or above fair market value at the date of grant.
Options granted generally become exercisable ratably over two to five years and
remain exercisable for ten years from the date of grant. Initially, 600,000
shares were reserved for issuance pursuant to the 1998 Plan. As of December 31,
2000, 236,900 shares were available for grant pursuant to the 1998 Plan.
An Incentive Stock Plan was adopted in 1992 ("1992 Plan") which provides
that options for shares of TransFinancial Common Stock shall be granted to
directors, and may be granted to officers and key employees at fair market value
of the stock at the time such options are granted. Initially, 500,000 shares of
TransFinancial common stock were reserved for issuance pursuant to the 1992
Plan. As of December 31, 2000, options for 47,230 shares were available for
grant pursuant to the 1992 Plan. These options generally become exercisable
ratably over two to five years and remain exercisable for ten years from the
date of grant.
In each of 1995 and 1996 the Company granted non-qualified options to
acquire 10,000 shares of common stock to an officer of UPAC pursuant to an
employment agreement. These options become exercisable in 1998 and 1999 and
expire in 2005 and 2006.
The Company follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of each of the Company's stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
25
SFAS No. 123 "Accounting for Stock-Based Compensation," requires the use
of option valuation models to estimate the fair value of stock options granted
and recognize that estimated fair value as compensation expense. Pro forma
information regarding net income and earnings per share is required by SFAS No.
123, and has been determined as if the Company had accounted for its stock
options under the fair value method of SFAS No.123. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 2000, 1999 and 1998:
risk-free interest rates of 6.2%, 5.2% and 5.5%; expected life of options of 4.4
years, 4.3 years and 4.4 years; and a volatility factor of the expected market
price of the Company's common stock of .54 in 2000, .36 in 1999 and .20 in 1998.
The preceding assumptions used as inputs to the option valuation model are
highly subjective in nature. Changes in the subjective input assumptions can
materially affect the fair value estimates; thus, in management's opinion, the
estimated fair values presented do not necessarily represent a reliable single
measure of the fair value of its employee stock options. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting periods. The Company's unaudited pro forma
information follows (in thousands, except for per share amounts):
2000 1999 1998
------ ------ -------
Pro forma net income (loss).............. $(22,846) $(8,275) $(2,234)
Pro forma basic earnings (loss) per share $ (6.96) $ (2.43) $ (0.43)
The following table is a summary of data regarding stock options granted
during the three years ended December 31, 1999:
2000 1999 1998
------------------ -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Options outstanding at
beginning of year........ 408,050 $7.33 353,150 $8.17 350,650 $7.47
Granted..................... 345,750 $1.48 99,500 $4.26 131,050 $9.03
Forfeited................... (71,200) $5.61 (42,600) $7.35 (44,580) $9.13
Exercised................... (1,300) $4.41 (2,000) $2.41 (83,970) $6.07
------- ------ -------
Options outstanding at end
of year.................. 681,300 $4.31 408,050 $7.33 353,150 $8.17
======= ======= =======
Options exercisable at end
of year.................. 188,630 $7.63 160,520 $7.93 114,180 $7.49
======= ======= =======
Estimated weighted average
fair value per share of
options granted during
the year.................. $1.48 $ 1.33 $2.12
The per share exercise prices of options outstanding as of December 31,
2000, ranged from $.81 to $9.79 per share. The weighted average remaining
contractual life of those options was 7.9 years.
26
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2000.
Weighted
Average Weighted Weighted
Number of Remaining Average Number of Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices Options Life Price Options Price
--------------- ----------- ---------- ----- ----------- -----
$0.00-$2.50 341,900 9.3 $1.51 2,150 $2.41
$2.50-$5.50 97,000 7.5 $4.35 32,000 $4.54
$5.50-$8.00 111,500 5.7 $7.66 77,220 $7.69
$8.00-$10.00 130,900 6.4 $8.71 77,260 $8.99
------- -------
681,300 188,630
======= =======
4. Financing Agreements
Securitization of Receivables/Loan Agreements
In December 1996, UPAC and TransFinancial entered into a securitization
agreement whereby undivided interests in a designated pool of finance accounts
receivable can be sold on an ongoing basis. Effective May 26, 2000, the
securitization agreement was assigned to and assumed by a new financial
institution. UPAC and APR Funding amended the securitization agreement with the
new financial institution increasing the maximum allowable amount of receivables
to be sold under the new agreement to $80 million, extending the term of the
agreement by five years with annual liquidity renewals and amending certain
covenants. On August 31, 2000, UPAC and APR Funding Corporation executed a Loan
and Security Agreement with the same financial institution under essentially the
same terms as the securitization agreement. UPAC and APR Funding borrow under a
revolving loan arrangement with maturities from 1 to 270 days. The loan bears
interest at commercial paper rates plus bank program fees.
Among other things, the terms of the agreement require UPAC to maintain a
minimum tangible net worth of $10.0 million, contain restrictions on the payment
of dividends by UPAC to TransFinancial without prior consent of the financial
institution and require the Combined Group to report any material adverse
changes in its financial condition. The terms of the loan agreement require UPAC
to maintain a reserve at specified levels that serves as collateral.
5. Common Stock and Earnings Per Share
Stock Repurchases
In February 1999, the Board of Directors authorized the repurchase of
1,030,000 shares of the Company's common stock. During 1999, a total of 683,241
share were repurchased at a cost of approximately $2.6 million.
In June 1998, TJS Partners, LP ("TJS"), a shareholder of the Company,
announced its intent to acquire an additional 23% of the Company's outstanding
common stock held by one family (the "Crouse family"), obtain control of the
Company's board of directors and study possible actions such as the liquidation
or sale of part or all of the Company's businesses or assets. The board of
directors determined that the hostile takeover attempt was not in the best
interest of the Company and its shareholders and agreed to repurchase the shares
held by TJS and the Crouse family. The failed attempt at a hostile takeover of
the Company, together with other events, led the Company to record charges for
management and personnel restructuring, asset and liability valuation
adjustments, and transaction costs and other expenses related to the takeover
attempt.
Pursuant to a definitive stock purchase agreement resolving the hostile
takeover attempt, the Company repurchased 2,115,422 shares of its common stock
held by the Crouse family, including 881,550 shares registered in the name of
TJS Partners, LP, all at a price of $9.125 per share, effective August 14, 1998.
In addition, the Company paid and expensed $350,000 of legal and other costs
incurred by the Crouse family in connection with the takeover attempt. The
Company funded the payment out of available cash and short-term investments, the
proceeds from the sale and leaseback of approximately $4.2 million of revenue
equipment and the proceeds from the $10.0 million secured loan from one of the
Company's existing bank lenders.
27
Earnings Per Share
Because of the Company's simple capital structure, income (loss) available
to common shareholders is the same for the basic and diluted earnings per share
computations. Such amounts were $(22,669,000), $(8,084,000) and $(2,027,000) for
2000, 1999 and 1998. Following is a reconciliation of basic weighted average
common shares outstanding, weighted average common shares outstanding adjusted
for the dilutive effects of outstanding stock options, and basic and diluted
earnings per share for each of the periods presented (in thousands, except per
share amounts).
2000 1999 1998
----------------- -------------- ----------------
Per Share Per Share Per Share
Shares Amounts Shares Amounts Shares Amounts
Basic earnings (loss)
per share................ 3,278 $(6.91) 3,415 $ (2.37) 5,249 $(0.39)
====== ======= =======
Plus incremental shares
from assumed conversion of
stock options............ 0 10 14
----- ----- ------
Diluted earnings (loss)
per share................ 3,278 $(6.91) 3,425 $ (2.37) 5,263 $(0.39)
===== ====== ===== ======= ====== =======
Options to purchase 188,630 shares of common stock at an average exercise
price of $ $7.63 per share were outstanding at December 31, 2000, but were not
included in the computation of diluted earnings per share because the options'
average exercise price was greater than the average market price of the common
shares. These options remain outstanding and expire through 2008.
6. Income Taxes
Deferred tax assets (liabilities) are comprised of the following at
December 31 (in thousands):
2000 1999
-------- --------
Deferred Tax Assets:
Employee benefits.................... $ 835 $ 521
Claims accruals and other............ 2,553 1,706
Allowance for credit losses.......... 809 571
Net operating loss carryforwards..... 9,130 4,225
Alternative minimum tax and other
credits........................... 754 754
-------- --------
Total gross deferred tax assets......... 14,081 7,777
Less valuation allowance................ (12,331) (3,197)
-------- --------
Net deferred tax assets................. 1,750 4,580
-------- --------
Deferred Tax Liabilities:
Financial services revenue........... - (314)
Operating property, principally
due to differences in depreciation (1,424) (4,038)
Amortization of intangibles.......... (326) (228)
-------- --------
Total gross deferred tax liabilities.... (1,750) (4,580)
-------- --------
Net deferred tax........................ $ - $ -
======== ========
28
In 2000 and 1999, the Company assessed the likelihood that all or a
portion of its deferred tax assets would not be realized. Such assessment
included consideration of positive and negative factors, including the Company's
current financial position and results of operations, projected future taxable
income and available tax planning strategies. As a result of such assessment, it
was determined that it was more likely than not that the net deferred tax assets
will not be realized. Therefore, the Company recorded a valuation allowance of
$9,134,000 and $3,197,000 in its deferred income tax provision in 2000 and 1999,
respectively.
At December 31, 2000, the Company had approximately $22.8 million of net
operating loss carryforwards that were available for Federal income tax purposes
and expire in 2018 through 2020. At December 31, 2000, the Company had $709,000
of alternative minimum tax and other credit carryforwards available which do not
expire. As noted above, the carryforwards of net operating losses and
alternative minimum tax credits may not be realized. The Internal Revenue
Service ("IRS") has examined the Company's 1994 through 1996 tax returns. In
April 1998, the Company and the IRS settled all issues for tax years 1994
through 1996 within the tax reserves that the Company made provision for in
1997.
The following is a reconciliation of the Federal statutory income tax rate
to the effective income tax provision (benefit) rate:
2000 1999 1998
----- ----- -----
Federal statutory income tax rate. (35.0)% (35.0)% (35.0)%
State income tax rate, net........ (4.6) (4.7) (3.8)
Amortization of non-deductible
acquisition intangibles........ 0.4 1.3 3.0
Non-deductible meals and
entertainment.................. - 1.1 3.2
Change in valuation allowance..... 40.3 41.8 -
Other............................. (1.3) 1.2 3.5
----- ----- -----
Effective income tax rate......... (0.2)% 5.7% (29.1)%
===== ===== =====
The components of the income tax provision (benefit) consisted of the
following (in thousands):
2000 1999 1998
------- -------- -------
Current:
Federal................................ $ (61) $ (198) $ 1,444
State.................................. 10 (50) 361
------- --------- -------
Total............................... (51) (248) 1,805
-------- --------- -------
Deferred:
Federal................................ (7,308) (2,013) (2,115)
State.................................. (1,827) (503) (529)
Change in valuation allowance.......... 9,135 3,197 -
------- -------- -------
Total............................... - 681 (2,644)
------- -------- -------
Total income tax provision (benefit)...... $ (51) $ 433 $ (839)
======== ======== =======
29
7. Contingencies and Commitments
The Company is party to certain claims and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
claims and litigation will not materially affect the Company's results of
operations, cash flows or financial position.*
Crouse was named as a defendant in two lawsuits arising out of a motor
vehicle accident. The first suit was instituted on June 16, 1999 in the United
States District Court in the Eastern District of Michigan (Northern Division) by
Kimberly Idalski, Personal Representative of the Estate of Lori Cothran,
deceased against Crouse. The second suit was instituted on August 17, 1999 in
the United States District Court in the Eastern District of Michigan (Northern
Division) by Jeanne Cothran, as Legal Guardian, on behalf of Kaleb Cothran, an
infant child against Crouse. The suits alleged that Crouse negligently caused
the death of Lori Cothran in a motor vehicle accident involving a Crouse driver.
These suits were settled within Crouse's insurance coverage.
The Company and its directors have been named as defendants in a lawsuit
filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware.
The suit seeks declaratory, injunctive and other relief relating to a proposed
management buyout of the Company. The suit alleges that the directors of the
Company failed to seek bidders for the Company's subsidiary, Crouse, failed to
seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the
Company, imposed arbitrary time constraints on those making offers and favored a
management buyout group's proposal. The suit seeks certification as a class
action complaint. The proposed management buyout was terminated on February 18,
2000. The plaintiff filed an amended class action complaint on August 9, 2000,
seeking damages in excess of $4.50 per share for alleged breaches of fiduciary
duties. A motion to dismiss and an amended complaint have been filed and the
Company believes this suit will not have a material adverse effect on the
financial condition, liquidity or results of operations of the Company.*
8. Shareholder Rights Plan
On February 18, 1999, the Board of Directors authorized the amendment of
the previously adopted Shareholder Rights Plan by which the Board of Directors
declared a dividend distribution of one Preferred Stock Purchase Right for each
outstanding share of TransFinancial Common Stock.
Under the Shareholder Rights Plan, Rights were issued on July 27, 1998 to
shareholders of record as of that date and will expire in ten years, unless
earlier redeemed or exchanged by the Company. The distribution of Rights was not
taxable to the Company or its shareholders.
The Rights become exercisable only if a person or entity is an "Acquiring
Person" (as defined in the Plan) or announces a tender offer, the consummation
of which would result in any person or group becoming an "Acquiring Person."
Each Right initially entitles the holder to purchase one one-hundredth of a
newly issued share of Series A Preferred Stock of the Company at an exercise
price of $50.00. If, however, a person or group becomes an "Acquiring Person",
each Right will entitle its holder, other than an Acquiring Person and its
affiliates, to purchase, at the Right's then current exercise price, a number of
shares of the Company's common stock having a market value of twice the Right's
exercise price.
In addition, if after a person or group becomes an Acquiring Person, the
Company is acquired in a merger or other business combination transaction, or
sells 50% or more of its assets or earning power, each Right will entitle its
holder, other than an Acquiring Person and its affiliates, to purchase, at the
Right's then current exercise price, a number of shares of the acquiring
company's common stock having a market value at the time of twice the Right's
exercise price.
Under the Shareholder Rights Plan, an "Acquiring Person" is any person or
entity which, together with any affiliates or associates, beneficially owns 15%
or more of the shares of Common Stock of the Company then outstanding. The
Shareholder Rights Plan contains a number of exclusions from the definition of
Acquiring Person. The Shareholders Rights Plan will not apply to a Qualifying
Offer, which is a cash tender offer to all shareholders satisfying certain
conditions set forth in the Plan. The Company's Board of Directors may redeem
the Rights at any time prior to a person or entity becoming an Acquiring Person.
30
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
December 31, 2000 and 1999
Summary of Quarterly Financial Information (Unaudited):
TransFinancial's quarterly operating results from Crouse, as well as those
of the motor carrier industry in general, fluctuate with the seasonal changes in
tonnage levels and with changes in weather related operating conditions.
Inclement weather conditions during the winter months may adversely affect
freight shipments and increase operating costs.
The following table sets forth selected unaudited financial information
for each quarter of 2000 and 1999 (in thousands, except per share amounts).
2000
First Second Third Fourth Total
----------- ---------- --------- -------- ---------
Revenue.................................... $ 3,039 $ 2,780 $ 3,323 $ 3,579 $ 12,721
Operating Income (Loss).................... (20) (1,132) (80) (24) (1,256)
Nonoperating Income (Expense).............. (228) 151 (38) 651 536
Net Income (Loss).......................... (3,598) (3,427) (10,551) (5,093) (22,669)
Basic and Diluted Earnings (Loss) per Share (1.10) (1.05) (3.22) (1.55) (6.91)
1999
First Second Third Fourth Total
----------- ---------- --------- -------- ---------
Revenue.................................... $ 2,882 $ 3,125 $ 3,209 $ 3,123 $ 12,339
Operating Income (Loss).................... 13 173 143 (422) (93)
Nonoperating Income (Expense).............. 38 7 41 23 109
Net Income (Loss).......................... (172) (321) (1,035) (6,556) (8,084)
Basic and Diluted Earnings (Loss) per Share (0.04) (0.09) (.32) (2.00) (2.37)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
On December 19, 2000, the Company engaged the accounting firm of Weaver &
Martin to conduct the audit of the 2000 consolidated financial statements.
Weaver & Martin were not engaged to perform reviews of the second or third
quarter filing on Form 10-Q and no such reviews have been performed. Weaver &
Martin had no prior relationship with the Company, were not consulted on
accounting or audit issues, and have not performed any consulting work for the
Company subsequent to their engagement.
31
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Company
Director
of the
Name, Principal Occupation and Company
other Directorships Age Since
- --------------------------------------- --- -------
William D. Cox 58 1991
Chairman of the Board of Directors since June 1997. Mr. Cox has
served as President of various family-owned, commercial and
residential construction and land development companies in
Wichita, Kansas, currently Applewood Homes, Inc., from 1967 to
the present.
Harold C. Hill, Jr. 65 1995
Retired as a partner of Arthur Andersen LLP in 1993. Mr. Hill's
35 years of service with that firm included responsibility as
partner in charge of the transportation, financial services and
government practices in Kansas City, and National Technical
Coordinator of that firm's trucking industry practice group.
Roy R. Laborde 62 1991
Vice Chairman of the Board of Directors since June 1997.
Chairman of the Board of Directors from May 1992 to June 1997.
President of Amboy Grain, Inc., Amboy, Minnesota, since 1985;
President and Chief Operating Officer for Rapidan Grain & Feed,
Rapidan, Minnesota, from 1968 through 1988 and has continued to
merchandise grain for that company.
Timothy P. O'Neil 44 1995
President and Chief Executive Officer of the Company since May
1995 and Secretary since April 2000. From October 1989,
through May, 1995, Mr. O'Neil served in various positions with
the Company, including Senior Vice President, Vice President,
Treasurer and Director of Finance. From March 1997 to October
1998, he has also served as President and Chief Executive
Officer of Universal Premium Acceptance Corporation ("UPAC"), a
wholly owned subsidiary of the Company. Mr. O'Neil has also
served as President, Chief Executive Officer, and Chief
Financial Officer and Treasurer of American Freight System,
Inc. ("AFS"), a wholly owned subsidiary of the Company, since
July 1991.
Clark D. Stewart 61 1997
President and Chief Executive Officer of Butler National Corpora-
tion, a publicly-held company headquartered in Olathe, Kansas,
with operations primarily in the manufacture and modification of
aerospace switching equipment and management services for Indian
gaming enterprises, since September 1989.
32
Executive Officers of the Company
---------------------------------
Name Age Position
- ------------------ --- ---------------------------------------------------
Timothy P. O'Neil 44 President, Chief Executive Officer, Secretary and
Director
Kurt W. Huffman 42 Executive Vice President
Information regarding Mr. O'Neil is provided under "Directors of the
Company" above.
Kurt W. Huffman has been Executive Vice President of TransFinancial since
August 1998, President and Chief Executive Officer of Presis since March 1998
and President and Chief Executive Officer of UPAC since October 1998. From
August 1997 to March 1998 he served as Executive Vice President of Presis. Prior
to joining the Company in a management capacity in June 1997, Mr. Huffman served
as Chief Information Officer of Laidlaw Transit Services, Overland Park, Kansas,
a publicly held provider of school and municipal bus services, from May 1993 to
February 1997. Prior to his service with Laidlaw, he was a senior manager with
the international accounting firm of Arthur Andersen LLP.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors, executive officers and beneficial owners of
more than ten percent of the Common Stock to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission
(the "SEC") and the American Stock Exchange, and to provide copies to the
Company. Based solely on a review of the copies of such reports provided to the
Company and written representations from the directors and executive officers,
the Company believes that all applicable Section 16(a) filing requirements have
been met.
Item 11. Executive Compensation
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists exclusively of non-employee directors
appointed by resolution of the entire Board of Directors. William D. Cox has
been a non-employee Chairman of the Board of Directors since the 1997
Organization Meeting of the Board of Directors.
33
Summary Compensation Table
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------------------- ---------
Other Securities All
Annual Restricted Underlying Other
Name and Compen- Stock Options/ LTIP Compen-
Principal sation Award(s) SARs Payouts sation
Position Year Salary Bonus ($)(3) ($) ($) (#) ($) ($)
- --------------------- ---- ------ --------- ----------- ----------- ---------- --------- -----------
Timothy P. O'Neil, 2000 $192,500 $192,500(4) -0- -0- 100,000 -0- $ 25,000 (2)
President, Chief 1999 160,680 -0- -0- -0- 20,000 -0- 25,000 (2)
Executive Officer 1998 160,680 11,500 -0- -0- 20,000 -0- 25,000 (2)
and Secretary
Kurt W. Huffman, 2000 $143,000 $ 3,750 $7,200 -0- 50,000 -0- $ -0-
Executive Vice President 1999 125,000 9,000 7,200 -0- 10,000 -0- -0-
of the Company and 1998 110,908 9,000 -0- -0- 10,000 -0- -0-
President and Chief
Executive Officer
of UPAC and Presis
David D. Taggart, Former 2000 $147,887 $ -0- -0- -0- 50,000 -0- $306,000 (1)
Executive Vice President 1999 143,000 10,333 -0- -0- 10,000 -0- 10,000 (1)
of the Company and Former 1998 140,000 10,333 -0- -0- 10,000 -0- 10,000 (1)
Chief Executive Officer
of Crouse
- --------------
(1) Pursuant to Mr. Taggart's employment agreement an interest free loan secured
by his personal residence is being forgiven ratably over eight years, at
$10,000 per year. The remaining amount for 2000 represents severance
payments to Mr. Taggart under his employment agreement upon termination of
his employment.
(2) Represents the annual insurance premiums paid by the Company with respect to
a split-dollar life insurance policy for the benefit of Timothy P. O'Neil.
For a description of such arrangement see Employment Agreements.
(3) Except as described herein, bonuses represent incentive compensation awarded
on a discretionary basis based on subjective criteria.
(4) Retention bonus paid to Mr. O'Neil for agreeing to stay with the Company
until completion of the liquidation of the transportation operations.
Option Grants in Last Fiscal Year
Individual Grants Potential Realizable
--------------------------------------------
Number of % of Total Value at Assumed Annual
Securities Options Exer- Rates of Stock Price
Underlying Granted to cise Expir- Appreciation for
Options Employees in Price ation Option Term
------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ------------ ------ ---- ------ -------
Timothy P. O'Neil (1) 100,000 50% $1.50 04/19/2010 $94,320 $239,055
David D. Taggart (1) 50,000 25% 1.50 04/19/2010 47,160 119,527
Kurt W. Huffman (1) 50,000 25% 1.50 04/19/2010 47,160 119,527
(1) Grants are "Incentive Stock Options" under the Internal Revenue Code. The
exercise prices equal the market value on the date of grant. The options
become exercisable ratably on April 19th of the years 2001 through 2005 and
remain exercisable through 2010.
34
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Value FY-End (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable (1)
- ------ ------------ -------- ------------- -----------------
Timothy P. O'Neil -- $ -- 52,000/140,000 $-0-/-0-
David D. Taggart -- -- 21,200/68,800 -0-/-0-
Kurt W. Huffman -- -- 12,000/68,000 -0-/-0-
(1) All of the exercisable and unexercisable options held as of the fiscal
yearend were exercisable at prices above the closing market price of $.56 per
share as of December 31, 2000.
EMPLOYMENT AGREEMENTS
The Company is a party to a Supplemental Benefit and Collateral Assignment
Split-Dollar Agreement with Timothy P. O'Neil, President and Chief Executive
Officer of the Company. Under the agreement, the Company has agreed to pay the
premiums on a life insurance policy insuring the life of Mr. O'Neil with an
initial death benefit of $532,968. Mr. O'Neil has the right under the agreement
to designate the beneficiaries to whom the death benefits under the policy shall
be payable. If Mr. O'Neil's employment is terminated by the Company with cause,
Mr. O'Neil's rights under the policy shall terminate. If Mr. O'Neil terminates
his employment, Mr. O'Neil will have no further rights under the policy except
that Mr. O'Neil will receive, for each period of twelve months from the date of
hire, an amount equal to 10% of the excess, if any, of the cash surrender value
of the policy over the aggregate cost of the policy incurred by the Company in
the payment of premiums. Upon the death of Mr. O'Neil, or the earlier surrender
or cancellation of the policy by him subsequent to his retirement, disability or
termination without cause, the Company is entitled to the lesser of the cash
surrender value of the policy and the amount of premiums paid by it, and Mr.
O'Neil is entitled to the remaining amounts payable upon such event under the
policy. Mr. O'Neil has the right to retire under the agreement upon completing
ten years of employment and reaching age 50.
The Company is party to an Employment Agreement with Timothy P. O'Neil,
President and Chief Executive Officer of the Company. The Employment agreement
provides for the employment at will of Mr. O'Neil by the Company. Under the
Employment Agreement, Mr. O'Neil is entitled to (a) salary of $192,500 per year,
subject to increase by the Company from time to time, (b) annual incentive
compensation of 36% of base salary, or $69,300, based on achieving budgeted net
income levels for the Company and an additional 7% of base salary, or $13,500,
based on subjective criteria, (c) such stock options as the Company shall from
time to time grant pursuant to stock option plans, (d) certain additional fringe
and other benefits, including a Supplemental Benefit and Collateral Assignment
Split-Dollar Agreement as described above. The Employment Agreement provides
that if Mr. O'Neil's employment is terminated by the Company without good cause
(as defined in the agreement), he will be entitled to his then existing base
compensation and all related benefits for two years. The Employment Agreement
also includes a non-competition provision for two years after termination. Under
the Employment Agreement, Mr. O'Neil is entitled to certain payments upon
termination of Mr. O'Neil's employment after a change of control of the Company.
Mr. O'Neil is entitled to such payments if, within two years after such a change
of control, Mr. O'Neil's employment is terminated other than by Mr. O'Neil for
any reason other than death, permanent disability, retirement or Good Cause (as
defined in the agreement), or is terminated by Mr. O'Neil for Stated Cause (as
defined in the agreement). In such event, Mr. O'Neil is entitled to the
following: (i) 2.99 times Mr. O'Neil's average annual compensation over the
three most recent years prior to the change of control, or such lesser period as
Mr. O'Neil shall have been employed by the Company, excluding any amount which
would constitute an "excess parachute payment" under Section 280G of the Code,
(ii) immediate 100% vesting of all incentive compensation provided or to be
provided under the Employment Agreement, (iii) all benefits to which he would
have been entitled upon normal retirement under the Supplemental Benefit and
Collateral Assignment Split-Dollar Agreement described above and (iv) three
years participation in certain medical and life insurance plans of the Company.
35
The Company, UPAC and Presis are parties to an Employment Agreement with
Kurt W. Huffman, Executive Vice President of the Company, President and Chief
Executive Officer of Presis and President and Chief Executive Officer of UPAC.
The Employment agreement provides for the employment at will of Mr. Huffman by
the Company. Under the Employment Agreement, Mr. Huffman is entitled to (a)
salary of $143,000 per year, subject to increase by the Company from time to
time, (b) annual incentive compensation of 36% of base salary, or $51,667, based
on achieving budgeted net income levels for the Company and an additional 7% of
base salary, or $10,333, based on subjective criteria, (c) such stock options as
the Company shall from time to time grant pursuant to stock option plans, (d)
certain additional fringe and other benefits. The Employment Agreement provides
that if Mr. Huffman's employment is terminated by the Company without good cause
(as defined in the agreement), he will be entitled to his then existing base
compensation and all related benefits for one year. The Employment Agreement
also includes a non-competition provision for one year after termination. Under
the Employment Agreement, Mr. Huffman is entitled to certain payments upon
termination of Mr. Huffman's employment after a change of control of the
Company, UPAC or Presis. Mr. Huffman is entitled to such payments if, within one
year after such a change of control, Mr. Huffman's employment is terminated
other than by Mr. Huffman for any reason other than death, permanent disability,
retirement or Good Cause (as defined in the agreement), or is terminated by Mr.
Huffman for Stated Cause (as defined in the agreement). In such event, Mr.
Huffman is entitled to the following: (i) 2.99 times Mr. Huffman's average
annual compensation over the three most recent years prior to the change of
control, or such lesser period as Mr. Huffman shall have been employed by the
Company, excluding any amount which would constitute an "excess parachute
payment" under Section 280G of the Code, (ii) immediate 100% vesting of all
incentive compensation provided or to be provided under the Employment
Agreement, and (iii) three years participation in certain medical and life
insurance plans of the Company.
The Company and Crouse Cartage Company were parties to an Employment
Agreement with David D. Taggart, a former Executive Vice President of the
Company and former Chairman and Chief Executive Officer of Crouse. The
Employment Agreement provided for the employment at will of Mr. Taggart by
TransFinancial. Under the Employment Agreement, Mr. Taggart was entitled to (a)
salary of $148,000 per year, subject to increase by Crouse from time to time,
(b) annual incentive compensation of 36% of base salary, or $53,300, based on
achieving budgeted net income levels for Crouse or the Company, and an
additional 7% of base salary, or $10,400, based on subjective criteria, (c) an
interest free home loan from the Company to be forgiven in equal annual
installments, (d) such stock options as the Company shall from time to time
grant pursuant to stock option plans, and (e) certain additional fringe and
other benefits, including supplemental retirement benefits as described above.
The Employment Agreement provides that if Mr. Taggart's employment is terminated
by the Company without cause (as defined in the agreement) he will be entitled
to an amount equal to his then existing base compensation and all related
benefits for two years. The Employment Agreement also includes a non-competition
provision for two years after termination. Mr. Taggart's employment was
terminated without cause during 2000.
36
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 31, 2001, unless
otherwise indicated, with respect to the beneficial ownership of the Company's
Common Stock by (a) persons known to the Company to be beneficial owners of 5%
or more of the outstanding Common Stock, (b) executive officers listed in the
Summary Compensation Table, (c) directors and nominees for director and (d) all
directors and executive officers of the Company as a group.
Name of Beneficial Owners Amount and
(and address of beneficial owners Nature of
other than executive officers, Beneficial Percent
directors and nominees) Ownership(1) of Class
- ------------------------------------------ ------------ --------
Franklin Advisory Services
Charles B. Johnson
Rupert H. Johnson, Jr.
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404............................... 254,500 (2) 7.48%
Roy R. Laborde..................................... 173,365 (3) 5.09%
C/o TransFinancial Holdings, Inc.
8245 Nieman Road, Suite 100
Lenexa, KS 66214
Timothy P. O'Neil.................................. 221,360 (4) 6.50%
8245 Nieman Road, Suite 100
Lenexa, KS 66214
William D. Cox..................................... 85,000 (5) 2.50%
Harold C. Hill, Jr................................. 12,500 (6) .37%
Clark D. Stewart................................... 5,000 (7) .15%
David D. Taggart................................... 90,000 (8) 2.64%
Kurt W. Huffman.................................... 46,000 (9) 1.35%
Directors and executive officers as a
group (7 persons, including the above).......... 633,225 (10) 18.59%
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares listed.
(2) The shares shown in the table are beneficially owned by one or more open
or closed-end investment companies or other managed accounts which are
advised by Franklin Advisory Services, Inc. ("Franklin"), a subsidiary of
Franklin Resources, Inc. ("FRI"). Franklin has all investment and/or voting
power over the shares owned by such advisory clients and may be deemed the
beneficial owner of the shares shown in the table. Charles B. Johnson and
Rupert H. Johnson, Jr. (the "Principal Shareholders") each own in excess of
10% of the outstanding common stock of FRI and are the principal
shareholders of FRI. FRI, the Principal Shareholders and Franklin disclaim
any economic interest or beneficial ownership in any of the shares. The
information contained in this footnote was obtained from the Amendment No. 4
to Schedule 13G filed by these persons on February 7, 2001.
(3) Includes 14,150 shares subject to exercisable outstanding stock options
and 1,415 shares owned by and registered in the name of his wife, over which
they share voting power but Mrs. Laborde retains sole investment power.
(4) Includes 68,000 shares subject to exercisable outstanding stock options.
Does not include 9,000 shares held in various irrevocable trusts for the
benefit of Mr. O'Neil's children and over which he has no voting or
investment power.
(5) Includes 16,000 shares subject to exercisable outstanding stock options.
(6) Includes 4,500 shares in the Francile Hill Revocable Trust. Both Mr.
Hill and Francile Hill are trustees and each has shared voting and
investment power. Also includes 8,000 shares subject to exercisable
outstanding stock options.
37
(7) Includes 4,000 shares subject to exercisable outstanding stock options.
(8) Represents 90,000 shares subject to exercisable outstanding stock options.
(9) Includes 16,000 shares subject to exercisable outstanding stock options.
(10) Includes a total of 126,150 shares subject to exercisable outstanding
stock options.
Item 13. Certain Relationships and Related Transactions
Not Applicable
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
--------------------
Included in Item 8, Part II of this Report -
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Supplemental Financial Information (Unaudited) - Summary of
Quarterly Financial Information for 2000 and 1999
(a)2. Financial Statement Schedules
-----------------------------
Included in Item 14, Part IV of this Report -
Financial Statement Schedules for the three years ended December 31,
2000:
Schedule II - Valuation and Qualifying Accounts
Other financial statement schedules are omitted either because of the
absence of the conditions under which they are required or because the
required information is contained in the consolidated financial
statements or notes thereto.
38
(a)3. Exhibits
--------
The following exhibits have been filed as part of this report in
response to Item 14(c) of Form 10-K. The management contracts or
compensatory plans or arrangements required to be filed as exhibits to
this form pursuant Item 14(c) are contained in Exhibits 10(a), 10(b),
10(d), 10(u), 10(v), 10(w), 10(x), 10(y) and 10(z).
Exhibit No. Exhibit Description
----------- ------------------------------------------------------------
3(a) 1998 Restated Certificate of Incorporation of the
Registrant. Filed as Exhibit 3(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
3(b) Restated By-Laws of the Registrant. Filed as Exhibit 3(b) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
4(a) Specimen Certificate of the Common Stock, $.01 par value, of
the Registrant. Filed as Exhibit 4.3 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
4(b) Certificate of Designations of Series A Preferred Stock,
dated July 15, 1998. Filed as Exhibit 4.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
4(c) First Amended and Restated Rights Agreement, between
TransFinancial Holdings, Inc. and UMB Bank, N.A., dated
March 4, 1999. Filed as Exhibit 1 to Registrant's Current
Report on Form 8-K dated March 5, 1999.
10(a) Form of Indemnification Agreement with Directors and
Executive Officers. Filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1986.
10(b) Registrant's 1992 Incentive Stock Plan. Filed as Exhibit
10(j) to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992.
10(c) Stock Purchase Agreement by and between Universal Premium
Acceptance Corporation and Oxford Bank and Trust Company,
dated April 29, 1998. Filed as Exhibit 2(a) to Registrant's
Current Report on Form 8-K, dated May 29, 1998.
10(d) Registrant's 1998 Long-Term Incentive Plan. Filed as Exhibit
10(d) to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998.
10(e) Receivables Purchase Agreement by and among APR Funding
Corporation, Universal Premium Acceptance Corporation,
Anuhco, Inc., EagleFunding Capital Corporation, The First
National Bank of Boston, dated December 31, 1996. Filed as
Exhibit 10(j) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996.
10(f) Amendment No. 4 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated May 29,
1998. Filed as Exhibit 10(a) to Registrant's Current Report
on Form 8-K, dated May 29, 1998.
39
10(g) Amendment No. 5 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated August 25,
1998. Filed as Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter filed September 30, 1998.
10(h) Amendment No. 6 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated September
11, 1998. Filed as Exhibit 10.2 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998.
10(i) Amendment No. 7 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated July 14,
1999. Filed as Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999.
10(j) Amendment No. 8 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated October 8,
1999. Filed as Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999.
10(k) Amendment No. 9 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated December 29,
1999.
10(l) Amendment No. 10 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated February 23,
2000.
10(m) Amendment No. 11 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc., EagleFunding
Capital Corporation and BankBoston, N.A., dated April 27,
2000.
10(n) Amendment No. 12 to Receivables Purchase Agreement by and
among APR Funding Corporation, Universal Premium Acceptance
Corporation, TransFinancial Holdings, Inc Autobahn Funding
Company LLC, DG Bank Deutsche Genossenschaftsbank AG, dated
May 25, 2000.
10(o) Receivables Purchase Agreement by and among APR Funding
Corporation, Universal Premium Acceptance Corporation,
Autobahn Funding Company LLC, DG Bank Deutsche
Genossenschaftsbank AG, dated December 31, 1996 as amended
by Amendment Nos. 1 - 12 thereto.
10(p) Loan and Security Agreement, dated August 31, 2000, among
APR Funding Corporation, Universal Premium Acceptance
Corporation, Autobahn Funding Company LLC and DG Bank
Deutsche Genossenschaftsbank AG. Filed as Exhibit 10.1 to
Registrant's Quarterly Report on form 10-Q for the quarter
ended September 30, 2000.
10(q) Secured Loan Agreement by and between Bankers Trust Company
of Des Moines, Iowa and Crouse Cartage Company, dated
January 5, 1998. Filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1997.
40
10(r) Stock Purchase Agreement, dated August 14, 1998, by and
between TransFinancial Holdings, Inc. and certain members of
the Crouse family. Filed as Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
10(s) Secured Loan Agreement by and between Bankers Trust of Des
Moines, Iowa, TransFinancial Holdings, Inc., and Crouse
Cartage Company, dated March 25, 1999. Filed as Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
10(t) Amended and Restated Secured Loan Agreement, dated July 5,
2000, by and among Bankers Trust Company, N.A. of Des
Moines, Iowa, TransFinancial Holdings, Inc., Crouse Cartage
Company, Specialized Transport, Inc., TFH Logistics and
Transportation Services, Inc., Transport Brokerage, Inc.,
Phoenix Computer Services, Inc., Custom Client Services,
Inc. and TFH Properties, Inc. Filed as Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.
10(u) Supplemental Benefit and Collateral Assignment Split-Dollar
Agreement dated January 18, 1997 by and between the Company
and Timothy P. O'Neil. Filed as Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
10(v) Employment Agreement dated July 2, 1998 by and between the
Company and Timothy P. O'Neil. Filed as Exhibit 10.3 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999.
10(w) Supplemental Benefit Agreement dated September 30, 1995 by
and between the Company and David D. Taggart. Filed as
Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10(x) Employment Agreement dated April 27, 1998 by and among the
Company, Crouse Cartage Company and David D. Taggart. Filed
as Exhibit 10.5 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
10(y) Agreement dated September 30, 1995 by and between the
Company and David D. Taggart. Filed as Exhibit 10.6 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999.
10(z) Amended and Restated Employment Agreement dated October 16,
1998 by and among the Company, Universal Premium Acceptance
Corporation, Presis, L.L.C. and Kurt W. Huffman. Filed as
Exhibit 10.7 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10(aa)* Purchase Contract by and between R.L.R. Investments, L.L.C.,
an Ohio limited liability company and R.L.R. Transfer, Inc.,
an Ohio corporation and Crouse Cartage Company and
TransFinancial Holdings, Inc. dated October 20, 2000.
21* List of all subsidiaries of TransFinancial Holdings, Inc.
the state of incorporation of each such subsidiary, and the
names under which such subsidiaries do business.
*Filed herewith.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended December 31, 2000.
- --------------------
41
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Additions
----------------------
Balance at Charged Charged Balance
Beginning to to Other Deduc- at End
Description of Year Expense Accounts tions(1) of Year
- ----------- ------- ------- -------- -------- -------
(In Thousands)
Allowance for credit losses (deducted from
finance accounts receivable)
Year Ended December 31 -
2000.................... $870 $1,367 $ 567(3) $ (1,314) $1490
1999.................... 566 1,193 -- (889) 870
1998.................... 499 827 343(2) (1,103) 566
- -------------------------
(1) Deduction for purposes for which reserve was created.
(2) Allowance established as of May 29, 1998, the date of acquisition of
Oxford Premium Finance, Inc.
(3) Reclass provision from change in gain treatment on receivables.
42
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.
Date: April 20, 2001 By /s/Timothy P. O'Neil
----------------------------------------
Timothy P. O'Neil,
President, Chief Executive
Officer and Secretary
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/Timothy P. O'Neil President, Chief Executive Officer and
- ------------------------------ Secretary
Timothy P. O'Neil (Principal Financial Officer)
/s/William D. Cox /s/Timothy P. O'Neil
- ------------------------------ ------------------------------------
William D. Cox, Chairman Timothy P. O'Neil, Director
of the Board of Directors
/s/ Clark D. Stewart /s/ Harold C. Hill
- ------------------------------ -----------------------
Clark D. Stewart, Director Harold C. Hill, Jr., Director
/s/Roy R. Laborde
- ------------------------------
Roy R. Laborde, Vice Chairman of
the Board of Directors
April 20, 2001
Date of all signatures
43
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit No. Exhibit Description
10(aa) Purchase Contract by and between R.L.R. Investments, L.L.C., an
Ohio limited liability company and R.L.R. Transfer, Inc., an Ohio
corporation and Crouse Cartage Company and TransFinancial
Holdings, Inc. dated October 20, 2000.
21 List of all Subsidiaries of TransFinancial Holdings, Inc.