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, 2001
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 X No__.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of
TransFinancial Holdings, Inc. as of March 30, 2002, was $7,439,214 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, 2002 was 3,288,291 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, 2001, TransFinancial operated in the financial
services industry. 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. On September
14, 2001, the Board of Directors unanimously approved a plan of liquidation. On
January 22, 2002, shareholders approved the plan of complete liquidation of the
Company and the sale of the financial services operations. The terms and
conditions of the sale of the financial services operations are described in the
Company's proxy statement dated November 29, 2001 and the exhibits thereto. The
sale of the financial services operations is subject to bank and state
regulatory approval. The Company expects to close the sale of the financial
services operations in the second quarter of 2002*. Upon closure of the sale of
the financial services operations, the Company intends to file a Certificate of
Dissolution*. The Company will then sell all of its remaining assets and, after
paying off its debts and setting aside required reserves, will distribute the
remaining proceeds as one or more liquidating dividends.
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 liquidated outside bankruptcy,
with the advice of independent advisory committees of creditors, and followed
the general processes and procedures defined under the federal bankruptcy code.
The Company has essentially completed the orderly liquidations of Crouse and
Specialized*. The proceeds of asset liquidations have allowed full payment of
secured claims and a partial distribution to priority creditors. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.* See Note 2 to the Notes to Consolidated Financial Statements.
Crouse, headquartered in 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. Costs of closing the discontinued operations were $2.9
million in 2001 as compared to $9.1 million for 2000.
2
Prior to the cessation of operations, TFH L&T and its subsidiaries
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 such
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. These claims
against TFH L&T, and all other control group entities, were settled with the
claimants and have been paid.
The following table sets forth certain financial and statistical data with
respect to TFH L&T:
2001(3) 2000(3) 1999(3) 1998(3) 1997(3)
------- ------- ------- ------- -------
Revenue (000's).............. $ 0 $ 111,445 $ 149,125 $ 144,592 $ 126,062
Operating Income (000's)..... 0 (19,831) (6,434) 1,321 3,136
Operating Ratio (1).......... 0.0% 117.8% 104.3% 99.1% 97.5%
Number of Shipments (000's) -
Less-than-truckload....... 0 782 1,228 1,166 1,076
Truckload................. 0 24 23 23 31
Revenue per Hundredweight -
Less-than-truckload....... $ 0.00 $ 8.36 $ 8.73 $ 8.59 $ 9.25
Truckload................. 0.00 2.80 1.94 1.93 2.09
Tonnage (000's) -
Less-than-truckload....... 0 535 757 743 570
Truckload................. 0 533 437 440 495
Intercity Miles Operated (000's) 0 32,886 61,235 60,848 51,952
At Year-End, -
Terminals (2)............. 0 0 63 68 66
Tractors and trucks....... 0 0 701 684 631
Trailers.................. 0 300 1,631 1,501 1,417
Employees................. 1 11 1,440 1,338 1,287
--------------------
Notes:
(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.
3
AMERICAN FREIGHT SYSTEM
American Freight System, Inc. ("AFS") was treated as a discontinued
operation of TransFinancial from 1991 through 2001. 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.
All the stock of AFS is included in the sale of the financial services
operations as more fully described in the Company's proxy statement dated
November 29,2001 and the exhibits thereto.
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 generally expected to be sufficient to cover the loan balances plus
interest and other charges due to UPAC.
UPAC currently does business with more than 2,200 insurance agencies or
brokers, the largest of which referred approximately 3% of the total premiums
financed by UPAC in 2001. The following table sets forth certain financial and
operating data with respect to UPAC since 1997:
2001 2000 1999 1998 1997
--------- -------- -------- -------- --------
Premiums financed (000's) $ 245,965 $201,338 $190,582 $160,773 $122,981
UPAC had 58 employees at December 31, 2001.
4
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,
require surety bonds, 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
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, all with access to lower cost
sources of funds. 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.
Item 2. Properties.
TransFinancial's, TFH L&T's, and UPAC's corporate offices are located in
approximately 10,000 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 available for lease to third party tenants. This office building is
included in the sale of the financial services operations as more fully
described in the Company's proxy statement dated November 29,2001 and the
exhibits thereto.
5
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 and failed to obtain
approval of the Company's shareholders for the sale of certain Crouse assets.
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 a second amended complaint has been filed and the Company believes this
suit will not have a material adverse effect on the financial condition,
liquidity or results of operations of the Company.*
The Company and its directors have been named as defendants in a lawsuit
filed on December 7, 2001 in the United States District Court, District of
Kansas, in Kansas City, Kansas. The suit seeks certification as a class action
complaint. The suit alleges that the transfer of the assets of Crouse Cartage
Company (a subsidiary of TransFinancial Holdings, Inc.) violated Section 271 of
the Delaware Code insofar as the transfer constituted a sale of substantially
all the assets of the Company without shareholder approval and alleges that the
Company only obtained approximately one-half the fair market value of the assets
for no valid business reason, when 90% could have been achieved. The Company has
filed a motion to dismiss a portion of this complaint, and intends to vigorously
defend. 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 the shareholders for vote during the fourth
quarter of 2001.
_______________________________________________________________________________
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 2001 and 2000.
2001 High Low
---- -------- --------
Fourth Quarter....................... $ 2.69 $1.40
Third Quarter........................ 1.45 0.60
Second Quarter....................... 1.00 0.51
First Quarter........................ 1.25 0.56
6
2000 High Low
---- -------- --------
Fourth Quarter....................... $ 1.69 $0.25
Third Quarter........................ 1.88 0.44
Second Quarter....................... 2.00 1.50
First Quarter........................ 5.50 1.31
(b) Holders.
Number of
Holders of Record
Title of Class at December 31, 2001
-------------- --------------------
Common Stock, par value $0.01 per share 1,144
(c) Dividends.
No cash dividends were paid during 2001 or 2000 on TransFinancial's Common
Stock. On September 14, 2001, the Board of Directors unanimously approved a plan
of liquidation for the Company. On January 22, 2002, shareholders approved the
Plan of Complete Liquidation of the Company and the sale of UPAC. The Company
expects to close the sale of UPAC, which is subject to bank and state regulatory
approval in the first or second quarter of 2002.
Item 6. Selected Financial Data.
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(In Thousands, Except Per Share Data)
Operating Revenue............ $15,663 $12,721 $12,339 $10,376 $10,026
======= ======= ======= ======= =======
Income (Loss) from Continuing
Operations............... $ 1,651 $ (669) $ (417) $(2,307) $ (718)
======= ======== ======= ======== =======
Income (Loss) from Discontinued
Operations (1)........... $(2,894) $(22,000) $(7,667) $ 280 $1,818
======== ========= ======== ====== =======
Net Income (Loss)............ $(1,243) $(22,669) $(8,084) $(2,027) $1,100
======== ========= ======== ======== =======
Basic Earnings (Loss) per Share -
Continuing Operations.... $ 0.50 $ (0.20) $ (0.12) $ (0.43) $(0.12)
Discontinued Operations.. (0.88) (6.71) (2.25) 0.04 0.30
-------- --------- -------- -------- -------
Total.................... $ (0.38) $ (6.91) $ (2.37) $ (0.39) $ 0.18
Diluted Earnings (Loss) per Share -
Continuing Operations.... $ 0.50 $ (0.20) $ (0.12) $ (0.43) $(0.12)
Discontinued Operations (0.88) (6.71) (2.25) 0.04 0.30
-------- --------- -------- -------- -------
Total.................... $ (0.38) $ (6.91) $ (2.37) $ (0.39) $ 0.18
======== ========= ======== ======== =======
Total Assets (2)............. $113,324 $ 92,837 $ 47,153 $ 56,756 $76,075
======== ========= ======== ======== =======
Current Maturities
of Long-Term Debt....... $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======== =======
Long-Term Debt............... $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======== =======
7
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, 2001, TransFinancial operated in the insurance premium
finance industry. The company discontinued its transportation operations during
2000.
Financial Services
2001 vs. 2000
For 2001, UPAC reported an operating income of $2.3 million on net
financial service revenue of $11.3 million, as compared to an operating loss of
$90,000 on net revenue of $7.2 million for 2000. The increase in operating
income and net financial services revenue were the result of higher interest
spreads due to decreases in debt costs resulting from actions by the Federal
Reserve in 2001. Also, the amount financed increased by $45 million as a result
of increases in insurance premiums due to a hardening of the insurance market.
In 2000, a change in gain on sale treatment of accounts receivable resulted in a
non-cash reduction of revenue of $768,000. Operating expenses increased by 22.2%
from $7.3 million in 2000 to $9.0 million in 2001, primarily due to salaries,
employee benefits, and bad debt expense. Bad debt expense increased from the
prior year due to increases in premium financed, charge offs related to monies
owed to UPAC by insurance agents, and reserves for liquidated carriers.
UPAC reported net income of $1,292,000 for 2001, not considering the
valuation allowance provided against consolidated deferred tax assets, as
compared to a net loss of $186,000 for 2000, as a result of increased net
financial revenue.
2000 vs. 1999
For 2000, UPAC reported an operating loss of $90,000 on net financial
services 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.
UPAC reported a net loss of $186,000 for 2000, not considering the
valuation allowance provided against consolidated deferred tax assets, as
compared to a net income of $682,000 for 1999, as a result of decreased net
financial revenue and increased operating expenses.
Other
In 2001, Presis, an inactive industrial technology division of
TransFinancial, incurred operating expenses of $31,000 as compared to operating
expenses of $38,000 in 2000 and $212,000 in 1999. The decrease in operating
expenses in 2001 and 2000 as compared to 1999 is due to the limitation of
expenditures to essential activities related to continued development and
testing of its technology. Presis engaged in no development activity in 2001.
Other expenses decreased as public company costs were scaled backed in
2001 as compared to 2000. Included in general corporate expenses of 1999 are
approximately $380,000 of legal, accounting and financial advisor fees incurred
in the
8
evaluation of a now terminated proposal by certain members of management to
acquire all of the outstanding shares of the Company. 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.
TransFinancial's effective income tax provision (benefit) rates for 2001,
2000 and 1999 were 2%, 0% and 6%. In 2001 and 2000, the Company's income tax
provision (benefit) was $20,000 and ($51,000) on a pre-tax loss of $1.1 million
and $22.7 million, respectively, primarily as a result of valuation allowances.
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 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; inability to
obtain surety bonds; and the inability to obtain continued financing at a
competitive cost of funds.
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
9
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 or insurance carriers, fraud by insurance agencies and
general economic conditions.
With respect to the sale of the financial services operations, the sale is
subject to a number of conditions, including bank and state regulatory approval,
which are described in the Company's proxy statement dated November 29, 2001.
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.
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, 2001, the Company's net working capital was $7.0
million, the same as at December 31, 2000. The Company's current ratio was 1.1
and its ratio of total liabilities to tangible net worth was 11.7 as of December
31, 2001, as compared to a current ratio of 1.1 and a ratio of total liabilities
to tangible net worth of 8.4 as of December 31, 2000. Cash generated from
operating activities decreased in 2001 as compared to 2000, due primarily to
growth in finance accounts receivable.
Investing Activities - In 2001, cash was utilized to close the operations
of the transportation entities. UPAC entered into a revolving loan agreement in
May 2000 eliminating the off balance sheet treatment of its finance accounts
receivable. This resulted in a repurchase of previously sold finance accounts
receivables. The wind down of its discontinued operation, AFS, was a source of
cash to the Company's operation as AFS distributed $.7 million in cash dividends
in 2000.
Financing Activities - UPAC has a revolving loan agreement providing a
$100 million facility based on eligible finance accounts receivable. The
interest charge under this agreement is based on commercial paper rates, plus
the lending banks program fees.
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.
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
10
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 and failed to obtain approval of the
Company's shareholders for the sale of certain Crouse assets. 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 a second amended
complaint has been filed and the Company believes this suit will not have a
material adverse effect on the financial condition, liquidity or results of
operations of the Company.*
The Company and its directors have been named as defendants in a lawsuit
filed on December 7, 2001 in the United States District Court, District of
Kansas, in Kansas City, Kansas. The suit seeks certification as a class action
complaint. The suit alleges that the transfer of the assets of Crouse Cartage
Company (a subsidiary of TransFinancial Holdings, Inc.) violated Section 271 of
the Delaware Code insofar as the transfer constituted a sale of substantially
all the assets of the Company without shareholder approval and alleges that the
Company only obtained approximately one-half the fair market value of the assets
for no valid business reason, when 90% could have been achieved. The Company has
filed a motion to dismiss a portion of this complaint, and intends to vigorously
defend. 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, 2001, 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 $87.6 million as of December 31, 2001.
At December 31, 2001, UPAC had a $100 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, 2001, UPAC had a total finance accounts receivable portfolio
of $106.0 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 Company, in settlement of joint liability with its discontinued
operations, entered into two short-term notes each in the amount of $1.25
million. The Company's corporate office building serves as collateral for a note
with the Crouse's primary lending bank, with interest at the bank's prime rate.
The proceeds from the sale of UPAC serve as collateral for a note with UPAC's
acquirer. Interest on this note is paid monthly at 10%.
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 $462,000 and $356,000 as of December 31,
2001 and 2000, 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.*
11
This page is intentionally blank.
12
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 accompanying consolidated balance sheet of
TransFinancial Holdings, Inc. as of December 31, 2001 and 2000 and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2001. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements schedule based on our audits.
We conducted our audits 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 misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TransFinancial
Holdings, Inc. as of December 31, 2001 and 2000 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
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 and has experienced significantly reduced cash flows from
operating activities 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
April 12, 2002
13
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
---------------------
2001 2000
-------- --------
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents................... $ 1,343 $ 258
Finance accounts receivable,
less allowance for credit losses
of $1,541 and $1,490 (Note 4)............ 102,028 80,945
Other current assets........................ 344 753
-------- --------
Total current assets..................... 103,715 81,956
-------- --------
Operating Property, at Cost
Land........................................ 192 339
Structures and improvements................. 1,018 1,474
Other operating property.................... 1,030 1,083
-------- --------
2,240 2,896
Less accumulated depreciation............... (1,085) (1,069)
-------- --------
Net operating property................... 1,155 1,827
-------- --------
Intangibles, net of accumulated
amortization (Note 1) 8,355 8,946
Other Assets................................... 99 108
-------- --------
$113,324 $ 92,837
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash overdrafts............................. $ 1,776 $ 1,161
Accounts payable............................ 5,204 2,309
Revolving loan and other notes (Note 4)..... 87,616 66,250
Accrued payroll and fringes................. 1,002 434
Other accrued expenses...................... 1,092 1,306
Discontinued Operations, net (Note 2)....... -- 3,500
-------- --------
Total current liabilities................ 96,690 74,960
-------- --------
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 7,633,852
and 7,623,852 shares..................... 76 76
Paid-in capital............................. 6,254 6,254
Retained earnings........................... 45,371 46,614
Treasury stock, 4,345,561 shares, at cost... (35,067) (35,067)
-------- --------
Total shareholders' equity............... 16,634 17,877
-------- --------
$113,324 $ 92,837
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
14
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
-------------------------------
2001 2000 1999
-------- ------- --------
(In Thousands, Except Per Share Amounts)
Interest and Servicing Revenue.............. $ 12,357 $ 9,742 $ 9,431
Fee Revenue................................. 3,171 2,801 2,689
Other....................................... 135 178 219
------- ------- --------
Total operating revenue............... 15,663 12,721 12,339
------- ------- --------
Operating Expenses
Salaries, wages and employee benefits.... 3,863 3,042 3,121
Interest and securitization costs
(Note 4)................................ 4,349 5,439 3,897
Operating supplies and expenses.......... 2,487 3,136 3,153
Provision for credit losses.............. 2,400 1,366 1,193
Insurance and claims..................... 117 178 175
Depreciation and amortization............ 770 816 893
------- ------- --------
Total operating expenses.............. 13,986 13,977 12,432
------- ------- --------
Operating Income (Loss)..................... 1,677 (1,256) (93)
------- ------- --------
Nonoperating Income (Expense)
Interest income.......................... 158 8 81
Interest expense......................... (55) (123) (3)
Other, net............................... (109) 651 31
------- ------- --------
Total nonoperating income (expense) (6) 536 109
------- ------- --------
Income (Loss) Before Income Taxes........... 1,671 (720) 16
Income Tax Provision (Benefit) (Note 6) 20 (51) 433
------- ------- --------
Income (Loss) from Continuing Operations 1,651 (669) (417)
------- ------- --------
Discontinued Operations (Note 2)............ -- (12,900) (7,667)
Income Tax Provision (Benefit) (Note 4)..... -- -- --
------- ------- --------
Income (Loss) from Discontinued Operations
(Note 2)................................... -- (12,900) (7,667)
Loss on Closure of Discontinued Operations (2,894) (9,100) --
------- ------- --------
Net Income (Loss)........................... $ (1,243) $(22,669) $ (8,084)
======= ======= ========
Basic and Diluted Earnings (Loss) Per
Share of Continuing Operations............. $ 0.50 $ (0.20) $ (0.12)
======= ======= ========
Basic and Diluted Earnings (Loss)
Per Share of Discontinued Operations....... $ (0.88) $ (6.71) $ (2.25)
======= ======= ========
Basic and Diluted Earnings (Loss) Per Share. $ (0.38) $ (6.91) $ (2.37)
======= ======= ========
Basic Average Shares Outstanding............ 3,282 3,278 3,415
======= ======= ========
Diluted Average Share Outstanding........... 3,287 3,506 3,425
======= ======= ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
15
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-------------------------------
2001 2000 1999
-------- -------- --------
(In Thousands)
Cash Flows From Operating Activities-
Net Loss............................................. $ (1,243) $ (22,669) $ (8,084)
Adjustments to reconcile net loss to
net cash generated by operating activities-
Depreciation and amortization..................... 770 816 893
Debt cost amortization............................ 166 365 133
Provision for credit losses....................... 2,400 1,366 1,193
Deferred tax provision............................ 0 0 681
Other............................................. 133 0 0
Net increase (decrease) from change in
working capital items affecting operating
activities-
Accounts Receivable............................. (23,483) (3,132) (6,219)
Accounts Payable................................ 2,893 (168) 883
Other........................................... 763 (1,148) (198)
Loss from and on discontinued operations........ 2,894 22,000 7,667
--------- --------- ---------
(14,707) (2,570) (3,051)
--------- --------- ---------
Cash Flows From Investing Activities-
Cash from (to) discontinued operations............... (6,394) (613) 1,542
Purchase of operating property....................... (79) (93) (731)
Net sales/ repurchase of accounts receivables, net -- (63,875) 2,305
Other................................................ 284 (37) (646)
--------- --------- ---------
(6,189) (64,618) 2,470
--------- --------- ---------
Cash Flows From Financing Activities-
Line of credit borrowings, net....................... 21,366 66,250 0
Cash overdrafts...................................... 615 112 1,049
Payments to acquire treasury stock................... 0 0 (2,603)
Payment for fractional shares from reverse stock split 0 0 (11)
Other................................................ 0 8 9
--------- --------- ---------
21,981 66,370 (1,556)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents.... 1,085 (818) (2,137)
Cash and Cash Equivalents:
Beginning of period.................................. 258 1,076 3,213
--------- --------- ---------
End of period........................................ $ 1,343 $ 258 $ 1,076
========= ========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
16
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, 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 2,115,422 shares
of common stock............................ -- -- -- (2,603) (2,603)
------ -------- -------- --------- --------
Balance at December 31, 1999.................. 76 6,104 69,283 (35,067) 40,396
------ -------- -------- --------- --------
Net loss...................................... -- -- (22,669) -- (22,669)
Issuance of shares under Deferred
Compensation Arrangements.................. -- 143 -- -- 143
Issuance of shares under
Incentive Stock Plan....................... -- 7 -- -- 7
------ -------- -------- --------- --------
Balance at December 31, 2000.................. 76 6,254 46,614 (35,067) 17,877
------ -------- -------- --------- --------
Net loss...................................... -- -- (1,243) -- (1,243)
------ -------- -------- --------- --------
Balance at December 31, 2001.................. $ 76 $ 6,254 $ 45,371 $ (35,067) $ 16,634
====== ======== ======== ========= ========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
17
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
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")(see Note 2
for Discontinued Operations), Universal Premium Acceptance Corporation and its
affiliate, UPAC of California, Inc. (together "UPAC"), and Presis, L.L.C.
("Presis"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Going Concern - On September 14, 2001, the Board of Directors unanimously
approved a plan of liquidation for the Company. Under the plan of liquidation,
the Company will sell all of its assets, and after paying off its debts and
setting aside required reserves will distribute the remaining proceeds as one or
more liquidating dividends. On January 22, 2002, shareholders approved the Plan
of Complete Liquidation of the Company and the sale of UPAC. The Company expects
to close the sale of UPAC, which is subject to bank and state regulatory
approval in the second quarter of 2002. 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.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill.
Statement 142 will require that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142 will
also require that intangible assets with estimated useful lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with FASB Statement 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of.
The Company is required to adopt the provisions of Statement 141
immediately, and Statement 142 effective January 1, 2002. Furthermore, goodwill
and intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full, will not be amortized, but will continue to be
evaluated for impairment in accordance with appropriate pre-Statement 142
accounting literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized and
tested for impairment in accordance with the appropriate pre-Statement 142
accounting literature prior to full adoption of Statement 142.
Statement 141 will require, upon the adoption of Statement 142, that the
Company evaluate its existing intangible assets and goodwill that were acquired
in prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in Statement 141 for
recognition apart from goodwill. Upon adoption of Statement 142, the Company
will be required to reassess the useful lives and residual values of all
intangible assets acquired, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.
18
In connection with Statement 142's transitional goodwill impairment
evaluation, the Statement will require the Company to perform an assessment of
whether there is an indication that goodwill is impaired as of the date of
adoption. To accomplish this, the Company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those
reporting units as o f the date of adoption. The Company will have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the carrying amount of the reporting unit. To the extent
the carrying amount of a reporting unit exceeds the fair value of the reporting
unit, an indication exists that the reporting unit goodwill may be impaired and
the Company must perform the second step of the transitional impairment test. In
the second step, the Company must compare the implied fair value of the
reporting goodwill with the carrying amount of the reporting unit goodwill, both
of which would be measured as of the date of adoption. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit to all
of the assets (recognized and unrecognized) and liabilities of the reporting
unit goodwill. This second step is required to be completed as soon as possible,
but no later than the end of the year of adoption. Any transitional impairment
loss will be recognized as the cumulative effect of a change in accounting
principle in the Company's statement of earnings.
Based on the existing contract for sale as disclosed in the Company's proxy
statement dated November 29, 2001, management believes the company will need to
record a goodwill impairment charge upon the adoption of this pronouncement in
the first quarter of 2002. The impairment amount is expected to amount to most
of the current unamortized intangible balance.
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 prior
securitization agreement was 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 in 2000.
Special Purpose Entity - APR Funding Corporation is a 100% owned special
purpose entity ("SPE") of UPAC. The sole purpose of APR Funding Corporation is
to provide credit enhancement to UPAC in its loan agreement used to originate
finance agreements. The SPE has been formed to provide bankruptcy remote status.
Effective May 26, 2000, all receivables and debt balances related to the SPE are
shown on the consolidated financial statements. Prior to this date, the
receivables were accounted for as sold receivables and followed gain on sale
accounting treatment under FAS 125, Accounting for Transfers and Servincing of
Financial Assets and Extinguishment of Liabilities. At December 31, 1999 off
balance sheet finance receivables deemed to be sold were $63.9 million.
19
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 the financial services industry. 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, Missouri and Minnesota. Information
regarding the Company's industry segments for the years ended December 31, 2001,
2000, and 1999 is as follows (in thousands):
Operating Deprecitation
Operating Income and Capital Total
Revenues (Loss) Amortization Additions Assets
--------- --------- ------------- --------- ------
2001 161.464 (23,256) 5,158 5,939 111,500
Financial Services 2001 15,637 2,319 669 77 111,500
2000 12,686 (90) 708 31 91,023
1999 10,247 1,341 740 100 26,597
Corporate and Other 2001 26 (642) 101 2 1,824
2000 35 (1,166) 108 62 1,814
1999 112 (1,434) 153 630 20,556
Total from Continuing Operations 2001 15,663 1,677 770 79 113,324
2000 12,721 (1,256) 816 93 92,837
1999 12,339 (93) 893 730 47,153
Transportation (Discontinued Operations) 2001 -- (2,894) 0 0 47
2000 111,445 (22,000) 3,105 3,434 8,268
1999 149,125 (7,667) 4,265 5,209 29,740
Consolidated Continuing Operations 2001 15,663 (1,217) 770 79 113,371
and Discontinued Operations 2000 124,166 (23,256) 3,921 3,527 101,105
1999 161,464 (7,760) 5,158 5,939 76,893
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
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:
2001 2000
Balance, beginning of year.............................. $1,490 $ 870
Provision for credit losses............................. 2,400 1,367
Reclass provision - gain on sale accounting change...... -- 567
Charge-offs, net of recoveries of $550 and $443,
respectively........................................ (2,349) (1,314)
------ ------
Balance, at the end of year............................. $1,541 $1,490
====== ======
20
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 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. Revolving Loan and Other Notes - 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 $11,622,000 at
December 31, 2001. 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, 2001 was $3,267,000. See discussion of
Accounting for Long-Lived Assets in Summary of Significant Accounting Policies
regarding new impairment rules for intangible assets effective with 2002
financial reporting.
Reclassifications - Certain amounts in the accompanying consolidated
balance sheet for the prior period have been reclassified to conform with the
current period's presentations.
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. Crouse has closed on the bulk sale of all of its
tractors, trailers, other equipment and real property. Substantially all
collection of accounts receivable and liquidation of the assets of Specialized
is complete. The proceeds of asset liquidations have allowed the full payment of
the secured claims and a partial distribution to priority creditors of Crouse
and, in the case of Specialized full payment of priority creditors. Proceeds
from asset liquidation were insufficient to satisfy in excess of $17 million of
the general unsecured creditors' claims.* All remaining assets (which
approximate $50,000) are reserved for the administrative costs associated with
the closure of these companies. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.*
21
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 2001, 2000, and 1999 were $49,000, $52,000 and $70,000.
Effective January 1, 2002, the Company contributions vest after three years to
comply with new Federal regulations.
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 2001, 2000 and 1999
were $111,000, $128,000 and $137,000.
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,
2001, 272,900 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, 2001, options for 126,480 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.
22
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.
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 2001, 2000 and 1999:
risk-free interest rates of 5.7%, 6.2% and 5.2%; expected life of options of 4.3
years, 4.4 years and 4.3 years; and a volatility factor of the expected market
price of the Company's common stock of .51 in 2001, .54 in 2000 and .36 in 1999.
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):
2001 2000 1999
-------- --------- ----------
Pro forma net income (loss)............ $(1,461) $(22,846) $(8,275)
Pro forma basic earnings (loss)
per share......................... $ (0.42) $ (6.96) $ (2.43)
The following table is a summary of data regarding stock options granted
during the three years ended December 31, 2001:
2001 2000 1999
----------------- ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
Options outstanding at
beginning of year. 681,300 $4.31 408,050 $7.33 353,150 $8.17
Granted.................... 0 $0.00 345,750 $1.48 99,500 $4.26
Forfeited.................. 115,250 $4.78 (71,200) $5.61 (42,600) $7.35
Exercised.................. 0 $0.00 (1,300) $4.41 (2,000) $2.41
------- ------- -------
Options outstanding at end
of year.................. 566,050 $4.21 681,300 $4.31 408,050 $7.33
======= ======= =======
Options exercisable at end
of year.................. 418,350 $4.77 188,630 $7.63 160,520 $7.93
======= ======= =======
Estimated weighted average
fair value per share of
options granted during
the year................. $0.00 $ 1.48 $1.33
23
The per share exercise prices of options outstanding as of December 31,
2001, ranged from $.81 to $9.79 per share. The weighted average remaining
contractual life of those options was 6.9 years.
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2001.
Weighted
Average Weighted
Number of Remaining Average Number of Average Weighted
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices Options Life Price Options Price
--------------- ----------- ----------- --------- ----------------- --------
$0.00-$2.50 300,650 8.3 $1.49 184,250 $1.50
$2.50-$5.50 70,000 6.5 $4.34 56,200 $4.36
$5.50-$8.00 94,300 4.7 $7.63 91,200 $7.63
$8.00-$10.00 101,100 5.4 $9.03 86,700 $9.01
------- -------
566,050 418,350
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 program fees. On August 17, 2001, UPAC
amended the Loan and Security Agreement to increase the facility to $100 million
under essentially the same terms as the prior agreement.
Among other things, the terms of the agreement require UPAC to maintain a
minimum tangible net worth of $10.0 million plus 25% of cumulative net income,
contain restrictions on the payment of dividends by UPAC to TransFinancial
without prior consent of the financial institution and require the Company 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.
Other Notes
The Company, in settlement of joint liability with its discontinued
operations, entered into two short-term notes each in the amount of $1.25
million. The Company's corporate office building serves as collateral for a note
with the Crouse's primary lending bank, with interest at the bank's prime rate.
The proceeds from the sale of UPAC serve as collateral for a note with UPAC's
acquirer. Interest on this note is paid monthly at 10%.
5. Common Stock and Earnings Per Share
24
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 $(1,143,000), $(22,669,000) and $(8,084,000) for
2001, 2000 and 1999. 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).
2001 2000 1999
--------------- --------------- ---------------
Per Share Per Share Per Share
Shares Amounts Shares Amounts Shares Amounts
Basic earnings (loss)
per share................... 3,278 $(0.38) 3,278 $(6.91) 3,415 $(2.37)
====== ====== ======
Plus incremental shares
from assumed conversion of
stock options............... 10 0 10
----- ----- -----
Diluted earnings (loss)
per share................... 3,288 $(0.38) 3,278 $(6.91) 3,425 $(2.37)
===== ====== ===== ====== ===== ======
Options to purchase 265,400 shares of common stock at an average exercise
price of $7.30 per share were outstanding at December 31, 2001, 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 2010.
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
shares were repurchased at a cost of approximately $2.6 million.
6. Income Taxes
Deferred tax assets (liabilities) are comprised of the following at
December 31 (in thousands):
Deferred Tax Assets:
Employee benefits........................................ $ 200 $ 835
Claims accruals and other................................ 927 2,553
Allowance for credit losses.............................. 710 809
Net operating loss carryforwards......................... 10,476 9,130
Alternative minimum tax and other credits................ 754 754
------- -------
Total gross deferred tax assets............................. 13,067 14,081
Less valuation allowance.................................... (12,734) (12,331)
------- -------
Net deferred tax assets..................................... 333 1,750
------- -------
Deferred Tax Liabilities:
Operating property, principally
due to differences in depreciation.................... 61 (1,424)
Amortization of intangibles.............................. (394) (326)
------- -------
Total gross deferred tax liabilities........................ (333) (1,750)
------- -------
Net deferred tax............................................ $ - $ -
======= =======
25
In 2001 and 2000, 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
$403,000 and $9,134,000 in its deferred income tax provision in 2001 and 2000,
respectively.
At December 31, 2001, the Company had approximately $26.1 million of net
operating loss carryforwards that were available for Federal income tax purposes
and expire in 2018 through 2021. At December 31, 2001, the Company had $754,000
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:
2001 2000 1999
---- ---- ----
Federal statutory income tax rate.......... (35.0)% (35.0)% (35.0)%
State income tax rate, net................. (4.5) (4.6) (4.7)
Amortization of non-deductible
acquisition intangibles.................. 8.3 0.4 1.3
Non-deductible meals and
entertainment............................ 0.5 -- 1.1
Change in valuation allowance.............. 29.8 40.3 41.8
Other...................................... 2.8 (1.3) 1.2
----- ----- ----
Effective income tax rate.................. 1.9% (0.2)% (29.1)%
===== ===== ====
The components of the income tax provision (benefit) consisted of the
following (in thousands):
2001 2000 1999
-------- -------- --------
Current:
Federal................................. $ -- $ (61) $ (198)
State................................... 20 10 (50)
-------- -------- --------
Total................................ 20 (51) (248)
-------- -------- --------
Deferred:
Federal................................. (272) (7,308) (2,013)
State................................... (91) (1,827) (503)
Change in valuation allowance........... 363 9,135 3,197
-------- -------- --------
Total................................ - - 681
-------- -------- --------
Total income tax provision (benefit)....... $ 20 $ (51) $ 433
======== ======== ========
26
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 and failed to obtain approval of the
Company's shareholders for the sale of certain Crouse assets. 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 a second amended
complaint has been filed and the Company believes this suit will not have a
material adverse effect on the financial condition, liquidity or results of
operations of the Company.*
The Company and its directors have been named as defendants in a lawsuit
filed on December 7, 2001 in the United States District Court, District of
Kansas, in Kansas City, Kansas. The suit seeks certification as a class action
complaint. The suit alleges that the transfer of the assets of Crouse Cartage
Company (a subsidiary of TransFinancial Holdings, Inc.) violated Section 271 of
the Delaware Code insofar as the transfer constituted a sale of substantially
all the assets of the Company without shareholder approval and alleges that the
Company only obtained approximately one-half the fair market value of the assets
for no valid business reason, when 90% could have been achieved. The Company has
filed a motion to dismiss a portion of this complaint, and intends to vigorously
defend. 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
27
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.
9. Related Party Transactions
The Company has engaged Timothy P. O'Neil, the former president of TFH, as
independent contractor to assist in the wind down of the transportation
operations and such other duties, as the board of TFH may assign. Mr. O'Neil
earned $33,900 in compensation from TFH as an independent contractor in 2001. As
part of the closure of the Crouse operations and payment of their creditors, Mr.
O'Neil purchased a note receivable from Crouse for $115,000. This note had a
remaining principal balance of approximately $119,000. Proceeds from this
transaction were immediately distributed to the creditors of Crouse as a part of
the July 2001 initial distribution. Subsequent to December 31, 2001, Gordon
Headlee, the former chief financial officer of Crouse Cartage Company, was also
engaged to assist with the wind down of the transportation operations.
10. Subsequent Events
The sale of the financial services operations was approved by the
shareholders on January 22, 2002 at the Company's annual shareholders' meeting.
The sale of the financial services operations, which is subject to bank and
state regulatory approval, is expected to occur in the second quarter of 2002.
The shareholders also approved a plan of liquidation at the January 22, 2002
meeting. Under the plan of liquidation, the Company will sell all of its assets,
and after paying off its debts and setting aside required reserves, will
distribute the remaining proceeds as one or more "liquidating dividends". The
preliminary estimates of the total distribution under the plan range from $2.50
to $3.00 per share.
28
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
December 31, 2000 and 1999
Summary of Quarterly Financial Information (Unaudited):
TransFinancial's quarterly results from its discontinued operation,
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 2001 and 2000 (in thousands, except per share amounts).
2001
-----------------------------------------------
First Second Third Fourth Total
------- ------- ------- ------- --------
Revenue........................ $ 3,586 $ 3,881 $ 4,174 $ 4,022 $ 15,663
Operating Income (Loss)........ 379 321 668 309 1,677
Nonoperating Income (Expense).. (5) 161 (21) (141) (6)
Net Income (Loss).............. (1,686) 467 632 (656) (1,243)
Basic and Diluted Earnings
(Loss) per Share............. (0.51) 0.11 0.19 (0.17) (0.38)
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)
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 & and Martin were not engaged to perform reviews of the second or third
quarter filing on Form 10-Q for 2000 and no such reviews have been performed.
Subsequently, Weaver & Martin were retained to perform an audit of the 1999 and
1998 consolidated financial statements. 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.
29
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 59 1991
President and Chief Executive Officer of the
Company since August 2001, and 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. 66 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 63 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.
Clark D. Stewart 62 1997
President and Chief Executive Officer of Butler
National Corporation, 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.
Executive Officers of the Company
Name Age Position
- ---------------- --- -----------------------------------------------
William D. Cox 59 President, Chief Executive Officer, Secretary
and Director
Kurt W. Huffman 43 Executive Vice President
Information regarding Mr.Cox 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.
30
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 served
as a non-employee Chairman of the Board of Directors from the 1997 Organization
Meeting of the Board of Directors until August 2001. Mr. Cox accepted the role
of president of the Company in August 2001 and continues as Chairman of the
Board of Directors.
Summary Compensation Table
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------------------ ----------------------- -------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Principal sation Awards SARs Payouts sation
Position Year Salary Bonus ($)(3) ($) ($) (#) ($) ($)
- ------------------ ---- ------ ------------ -------- ---------- ---------- ------- --------
William D. Cox, 2001 $ 21,667(1) $ -0- -0- $7,400 -0- -0- $ -0-
President, Chief
Executive Officer
and Secretary
Timothy P. O'Neil, 2001 $112,292 $ -0- -0- -0- -0- -0- $ 558,763(2)
Former President, Chief 2000 192,500 192,500(4) -0- -0- 100,000 -0- 25,000(2)
Executive Officer 1999 160,680 -0- -0- -0- 20,000 -0- 25,000(2)
and Secretary
Kurt W. Huffman, 2001 $151,000 $ 41,155 $7,200 -0- -0- -0- $ -0-
Executive Vice President 2000 145,000 3,750 7,200 -0- 50,000 -0- -0-
of the Company and President 1999 125,000 9,000 7,200 -0- 10,000 -0- -0-
and Chief Executive Officer
of UPAC and Presis
- -------------------
(1) Mr. Cox is an "at will" employee with an annual salary of
approximately $52,000.
(2) Represents the annual insurance premium of paid by the Company with respect
to a split-dollar life insurance policy for the benefit of Timothy P O'Neil.
For a description of such arrangement see Employment Agreements. The
remaining amount for 2001 represents severance payments to Mr. O'Neil under
his employment agreement upon termination of his employment.
(3) Except as described herein, bonuses represent incentive compensation awarded
on a discretionary basis based on subjective criteria.
(4) Retention bonus paid to Mr. O'Neil for agreeing to stay with the Company
until completion of the liquidation of the transportation operations.
31
Option Grants in Last Fiscal Year
Individual Grants Potential Realizable
----------------------------- Value at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Exer- Appreciation for
Underlying Granted to cise Expir- Optiom Term
Options Employees in Price ation -----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---- ----------- -------------- ------ ----- ----- ------
Note: No grants were made in 2001.
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
- ------ ------------ ------- ------------- --------------
William D. Cox -- $-- 19,000/90,000 $ 4,378/10,590
Timothy P. O'Neil -- -- 52,000/140,000 110,000/-0-
Kurt W. Huffman -- -- 12,000/68,000 11,000/44,000
EMPLOYMENT AGREEMENTS
The Company was a party to an Employment Agreement with Timothy P. O'Neil,
President and Chief Executive Officer of the Company through July 31, 2001. The
Employment agreement provided for the employment at will of Mr. O'Neil by the
Company. Under the Employment Agreement, Mr. O'Neil was 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 below. The
Employment Agreement provided that if Mr. O'Neil's employment were terminated by
the Company without good cause (as defined in the agreement), he would be
entitled to his then existing base compensation and all related benefits for two
years. The Employment Agreement also included a non-competition provision for
two years after termination. Under the Employment Agreement, Mr. O'Neil was
entitled to certain payments upon termination of Mr. O'Neil's employment after a
change of control of the Company. Mr. O'Neil was entitled to such payments if,
within two years after such a change of control, Mr. O'Neil's employment was
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 was
terminated by Mr. O'Neil for Stated Cause (as defined in the agreement). In such
event, Mr. O'Neil was 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. This Employment Agreement was
32
terminated by the Company effective August 1, 2001, and the Company and Mr.
O'Neil mutually agreed on the amount then due thereunder.
The Company was 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 had 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 had 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 was terminated by the Company with cause,
Mr. O'Neil's rights under the policy shall terminate. If Mr. O'Neil terminated
his employment, Mr. O'Neil had no further rights under the policy except that
Mr. O'Neil would 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 was entitled to the lesser of the cash
surrender value of the policy and the amount of premiums paid by it, and Mr.
O'Neil was entitled to the remaining amounts payable upon such event under the
policy. Mr. O'Neil had the right to retire under the agreement upon completing
ten years of employment and reaching age 50.
The Company and UPAC are parties to an Employment Agreement with Kurt W.
Huffman, Executive Vice President of the Company, 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 $151,000 per year, subject to increase by the Company
from time to time, (b) annual incentive compensation of 36% of base salary, or
$64,500, based on achieving budgeted net income levels for the Company and an
additional 7% of base salary, or $10,750, 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 two 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 or UPAC. 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, 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.
33
Item 12.Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 31, 2002, 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
- ------------------------------------ ------------ --------
Timothy P. O'Neil............................. 345,340(2) 8.65%
c/o TransFinancial Holdings, Inc.
8245 Nieman Road, Suite 100
Lenexa, KS 66214
Roy R. Laborde................................ 176,365(3) 4.42%
c/o TransFinancial Holdings, Inc.
8245 Nieman Road, Suite 100
Lenexa, KS 66214
William D. Cox................................ 98,000(4) 2.45%
Harold C. Hill, Jr............................ 15,500(5) .39%
Clark D. Stewart.............................. 8,000(6) .20%
Kurt W. Huffman............................... 62,000(7) 1.55%
Directors and executive officers as a
group (5 persons, including the above)..... 355,865(8) 17.66%
- --------------
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares listed.
(2) Includes 192,000 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.
(3) Includes 17,150 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 19,000 shares subject to exercisable outstanding stock options.
(5) 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 11,000 shares subject to exercisable outstanding stock
options.
(6) Includes 7,000 shares subject to exercisable outstanding stock options.
(7) Includes 32,000 shares subject to exercisable outstanding stock options.
(8) Includes a total of 278,150 shares subject to exercisable outstanding stock
options. The total includes shares held by Mr. O'Neil even though he was no
longer a director or officer at March 31, 2002.
Item 13. Certain Relationships and Related Transactions
34
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, 2001 and 2000
Consolidated Statements of Income for the years ended December 31, 2001,
2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Supplemental Financial Information (Unaudited) - Summary of Quarterly
Financial Information for 2001 and 2000
(a)2. Financial Statement Schedules
Included in Item 14, Part IV of this Report -
Financial Statement Schedules for the three years ended December 31,
2001:
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.
(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).
35
Exhibit No. Exhibit Description
----------- ----------------------------------------------------------
2(a) Purchase Agreement dated November 6, 2001 between the
Company and Commercial Equity Group, Ltd. Filed as Exhibit B
to the proxy statement filed December 4, 2001.
2(b) Plan of Complete Liquidation. Filed as Exhibit A to the
proxy statement filed December 4, 2001.
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) 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.
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
36
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.
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.
37
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, 2001
- --------------------
38
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 -
2001.................... $1,490 $2,400 $ -- $ 2,349 $1,541
2000.................... 870 1,367 567(2) (1,314) 1,490
1999.................... 566 1,193 -- (889) 870
- -------------------------
(1) Deduction for purposes for which reserve was created.
(2) Reclass provision from change in gain treatment on receivables.
39
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 12,2002 By /s/ William D. Cox
---------------------------
William D. Cox,
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/William D. Cox President, Chief Executive Officer and Secretary
- -------------------------- (Principal Financial Officer)
William D. Cox
/s/William D. Cox /s/Roy R. Laborde
- -------------------------- --------------------
William D. Cox, Chairman Roy R. Laborde, Vice Chairman of
of the Board of Directors the Board of Directors
/s/ Clark D. Stewart /s/ Harold C. Hill
- -------------------------- --------------------
Clark D. Stewart, Director Harold C. Hill, Jr., Director
April 12, 2002
Date of all signatures
40
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Exhibit Index
Exhibit No. Exhibit Description
- ----------- -------------------
21 List of all Subsidiaries of TransFinancial Holdings, Inc.
41