UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 1-12070
TRANSFINANCIAL HOLDINGS, INC.
-----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 46-0278762
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8245 Nieman Road, Suite 100
Lenexa, Kansas 66214
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 859-0055
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 2002
- ----------------------------- ---------------------------------
Common stock, $0.01 par value 3,288,291 shares
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
- --------------------------------
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the Three Months Ended September 30,
(In thousands, except per share amounts)
(Unaudited)
2002
--------
Operating Revenues.................................. $ --
Operating Expenses.................................. (72)
----
Operating Income (Loss)............................. (72)
----
Nonoperating Income (Expense)
Other, net....................................... --
Interest income..................................... 3
Interest expense................................. --
--------
nonoperating income (expense)....................... --
--------
Income (Loss) Before Income Taxes................... (69)
Income Tax Provision (Benefit)...................... --
--------
Income (Loss) from Continuing Operations............ (69)
--------
Income (Loss) from Discontinued Operations (Note 2). 80
--------
Net Income (Loss)................................... $ 11
========
Basic Earnings (Loss) Per Share From
Continuing Operations............................ $ (0.02)
Discontinued Operations (Note 2)................. 0.02
--------
Total...................................... $ (0.00)
========
Diluted Earnings (Loss) Per Share From
Continuing Operations............................ $ (0.02)
Discontinued Operations (Note 2)................. 0.02
--------
Total...................................... $ (0.00)
========
Basic Average Shares Outstanding.................... 3,288
========
Diluted Average Shares Outstanding.................. 3,438
========
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
2
Item 1. Financial Statements
- --------------------------------
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the Nine Months Ended September 30,
(In thousands, except per share amounts)
(Unaudited)
2002
--------
Operating Revenues (Note 5)......................... $ 3,388
Operating Expenses.................................. 3,354
--------
Operating Income (Loss)............................. 34
--------
Nonoperating Income (Expense)
Other, net....................................... 28
Interest income.................................. 31
Interest expense................................. (51)
--------
Total nonoperating income (expense)................. 8
--------
Income (Loss) Before Income Taxes................... 42
Income Tax Provision (Benefit)...................... (171)
--------
Income (Loss) from Continuing Operations............ 213
--------
Income (Loss) from Discontinued Operations (Note 2). (356)
Extraordinary Income (Loss) - Goodwill
Impairment (Note 4)................................. (6,697)
--------
Net Income (Loss)................................... $(6,840)
========
Basic Earnings (Loss) Per Share From
Continuing Operations............................ $ 0.07
Discontinued Operations (Note 2)................. (0.11)
Extraordinary Loss (Note 4)...................... (2.04)
--------
Total........................................ $ (2.08)
========
Diluted Earnings (Loss) Per Share From
Continuing Operations............................ $ 0.06
Discontinued Operations (Note 2)................. (0.10)
Extraordinary Loss (Note 4)...................... (1.95)
--------
Total........................................ $ (1.99)
========
Basic Average Shares Outstanding.................... 3,288
========
Diluted Average Shares Outstanding.................. 3,434
========
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
3
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
September 30,
2002
-------------
Assets (Unaudited)
------
Current Assets:
Cash and cash equivalents........................ $ 1,195
Other current assets........................... 84
-------
Total current assets........................... 1,279
-------
Operating Property, at Cost:
...............................................
Other operating property......................... 104
-------
Less accumulated depreciation.................. (72)
-------
Net operating property..................... 32
-------
Intangibles, net of accumulated amortization
and Other Assets.................................... --
-------
$ 1,311
=======
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Accounts payable................................. 56
-------
Other accrued expenses......................... 703
-------
Total current liabilities...................... 759
-------
Contingencies and Commitments (Note 3).............. --
Shareholders' Equity
Preferred stock with $0.01 par value, authorized
1,000,000 shares, none outstanding............... --
Common stock with $0.01 par value, authorized
13,000,000 shares, issued 7,633,852.............. 76
Paid-in capital..................................... 6,262
Retained earnings................................ 29,280
Treasury stock 4,345,561 shares, at cost......... (35,067)
-------
Total shareholders' equity..................... 551
-------
$ 1,311
=======
The accompanying notes to condensed consolidated balance
sheets are an integral part of these statements.
4
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30
(In thousands)
(Unaudited)
2002
-------
Cash Flows From Operating Activities
Net Loss...................................... $(6,840)
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation and amortization................ 47
Debt cost amortization....................... 38
Extraordinary Loss - Goodwill Impairment..... 6,697
Provision for credit losses.................. 595
Net increase (decrease) from change in other
working capital items affecting operating
activities.................................
Accounts Receivable.................... (15,260)
Accounts Payable....................... (231)
Other.................................. (875)
Loss from and on discontinued operations..... --
-------
(15,829)
-------
Cash Flows From Investing Activities
Purchase of operating property, net........... (10)
Sale of Finance Company....................... 13,282
Other......................................... --
-------
13,272
Cash Flows From Financing Activities
Revolving bank loan borrowings
(repayments), net............................. 10,381
Cash overdrafts............................... 1,271
Liquidating Dividend.......................... (9,243)
-------
2,409
Net Increase (Decrease) in Cash and Cash
Equivalents..................................... (148)
Cash and Cash Equivalents at beginning of period 1,343
-------
Cash and Cash Equivalents at end of period...... $ 1,195
=======
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
5
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement Of Shareholders' Equity
(In thousands)
(Unaudited)
Total
Share
Common Paid-In Retained Treasury holders'
Stock Capital Earnings Stock Equity
----- ------ -------- -------- --------
Balance at December 31, 2001.......... 76 6,262 45,363 (35,067) 16,634
Net Loss.............................. -- -- (6,840) -- (6,840)
Liquidating Dividend.................. -- -- (9,243) -- (9,243)
----- ------ -------- -------- --------
Balance at September 30, 2002......... $ 76 $6,262 $29,280 $(35,067) $ 551
===== ====== ======== ======== ========
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
6
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Principles of Consolidation and Significant Accounting Policies
The unaudited condensed consolidated financial statements include
TransFinancial Holdings, Inc. ("TransFinancial") and all of its subsidiary
companies (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation. The unaudited condensed
financial statements included herein have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"), but does not
include all disclosures required by generally accepted accounting principles. In
the opinion of management, all adjustments necessary to fairly present the
results of operations have been made.
Pursuant to SEC rules and regulations, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from these statements unless significant changes have taken place since the end
of the most recent fiscal year. TransFinancial believes that the disclosures
contained herein, when read in conjunction with the financial statements and
notes included in TransFinancial's Annual Report for the fiscal year ended
December 31, 2001 and the 10-Q Quarterly Report for the quarter ending June 30,
2002, are adequate to make the information presented not misleading. It is
suggested, therefore, that these statements be read in conjunction with the
statements and notes included in the aforementioned reports.
2. Discontinued Operations
TransFinancial discontinued its transportation operations in 2000. The
Company's subsidiary, TFH Logistics & Transportation Services, Inc. ("TFH L&T"),
which is a holding company for the Company's transportation subsidiaries, had
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 of 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 liquidation of Crouse and
Specialized*. The proceeds of asset liquidations have allowed full payment of
secured claims and a partial distribution to priority creditors. Proceeds from
asset liquidation were insufficient to satisfy in excess of $17 million of
unsecured creditor claims*. All remaining assets are reserved for 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*.
3. 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.*
The Company and its directors were named as defendants in a lawsuit filed
on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The
suit sought declaratory, injunctive and other relief relating to a proposed
management buyout of the Company. The suit alleged 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 sought
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. This action was dismissed on November
1,
7
2002 by agreement of the parties, but with stipulation that the plaintiff could
re-file the suit in the state or federal courts in Kansas, and that defendants
would not oppose such filing or assert defenses based upon passage of time. 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.*
4. Goodwill Impairment
In July 2001, FASB issued Statement No. 142, Goodwill and Other Intangible
Assets. Statement 142, effective January 1, 2002, requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. The Company has deemed that
$6.7 million of goodwill recorded on the books related to UPAC is impaired based
upon the purchase agreement with outside investors for UPAC. The goodwill
impairment is shown on the Statement of Income and Statement of Cash Flow as an
extraordinary loss.
5. Sale of Financial Services Operations
The sale of the financial services operations, as approved by the
shareholders on January 22, 2002, was consummated on April 19, 2002, with an
effective date April 1, 2002. This sale of the financial services operations
represents the disposition of the last operating enterprise of the Company. In
accordance with the plan of liquidation as approved by the shareholders, the
Company filed a certificate of dissolution with the State of Delaware on April
29, 2002. The Company's stock was that day delisted from the American Stock
Exchange and the transfer agent has closed its records to any further trades.
Under the plan of liquidation, the Company will 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". The
Company accrued an estimate of all costs and expenses that are expected to be
incurred to complete the plan of liquidation. Such expenses and accruals are
reflected in the September 30, 2002 financial statement. In July 2002 the
company made a liqiudating distribution in the amount of $2.70 per share to
share holders of record on April 29, 2002 the date on which the transfer agent
closed its records to any further trades.
Item 2. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------------
Results of Operations
- ---------------------
RESULTS OF 0PERATIONS
The company discontinued its transportation operations in 2000.
TransFinancial operated in financial services until April 1, 2002 the effective
date of the sale of that business. With the sale of the Financial Services
Business, the company no longer has any operating businesses.
8
Forward-Looking Statements
- --------------------------
The Company believes certain statements contained in this Quarterly Report
on Form 10-Q which are not statements of historical fact may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation, the statements
specifically identified as forward-looking statements in this Form 10-Q. These
statements can often be identified by the use in such statements of
forward-looking terminology, such as "believes," "expects," "may," "will,"
"should," "could," "intends," "plans," "estimates," or "anticipates," or the
negative thereof, or comparable terminology. Certain of such statements
contained herein are marked by an asterisk ("*") or otherwise specifically
identified herein. In addition, the Company believes certain statements in
future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases, and in oral statements made by or with the
approval of an authorized executive officer of the Company which are not
statements of historical fact may constitute forward-looking statements within
the meaning of the Act. Examples of forward-looking statements include, but are
not limited to (i) projections of revenues, income or loss, earnings or loss per
share, capital expenditures, the payment or non-payment of dividends, capital
structure and other financial items, (ii) statements of plans and objectives of
the Company or its management or Board of Directors, including plans or
objectives relating to the products or services of the Company, (iii) statements
of future economic performance, and (iv) statements of assumptions underlying
the 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.
Other Matters
- -------------
With respect to statements in this Report which relate to the current
intentions of the Company and its subsidiaries or of management of the Company
and its subsidiaries, such statements are subject to change by management at any
time without notice.
With respect to statements in Part II - Item 1 regarding the outcome of
claims and litigation, such statements are subject to a number of risks and
uncertainties, including without limitation the difficulty of predicting the
results of the discovery process and the final resolution of ongoing claims and
litigation.
With respect to statements in "Financial Condition" regarding the adequacy
of the Company's capital resources, such statements are subject to a number of
risks and uncertainties including, without limitation: the ability of management
to effect operational changes to improve the future economic performance of the
Company (which is dependent in part upon the factors described above); the
ability of management to successfully liquidate the transportation operations,
the ability of the Company and its subsidiaries to comply with the covenants
contained in the financing agreements; and other material expenditures not
currently anticipated by management.
General Factors
- ---------------
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.
9
FINANCIAL CONDITION
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". The shareholders approved the plan of liquidation at
the Company's annual shareholder meeting on January 22, 2002.
The sale of the financial services operations was consummated on April 19,
2002, with an effective date April 1, 2002. This sale of the financial services
operations represents the disposition of the last operating enterprise of the
Company. In accordance with the plan of liquidation as approved by the
shareholders, the Company filed a certificate of dissolution with the State of
Delaware on April 29, 2002. The Company's stock was that day delisted from the
American Stock Exchange and the transfer agent has closed its records to any
further trades. Under the plan of liquidation, the Company will 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". The Company accrued an estimate of all costs and expenses that are
expected to be incurred to complete the plan of liquidation. Such expenses and
accruals are reflected in the September 30, 2002 financial statement, and
reduced the amounts available for distribution under the plan of liquidation.
On June 28, 2002, after setting aside the aforementioned reserves and
accruals, the Company declared an initial liquidating dividend of $2.70 per
share, payable immediately, to shareholders of record as of April 29, 2002, the
date on which the companies Stock Transfer Books were closed. This initial
Dividend distribution of $2.70 per share was substantially completed in early
July, 2002. Future distributions, if any, will be dependent upon the resolution
of ongoing litigation, claims and contingent liabilities.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -- The Company and its directors were named as
defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New
Castle County, Delaware. The suit sought declaratory, injunctive and other
relief relating to a proposed management buyout of the Company. The suit alleged
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 sought 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. This action was
dismissed on November 1, 2002 by agreement of the parties, but with stipulation
that the plaintiff could re-file the suit in the state or federal courts in
Kansas, and that defendants would not oppose such filing or assert defenses
based upon passage of time. 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 2. Changes in Securities -- None
- -------------------------------
Item 3. Defaults Upon Senior Securities -- None
- -----------------------------------------
10
Item 4. Controls and Procedures
- ---------------------------------
Based on an evaluation of disclosure controls and procedures for the period
ended September 30, 2002 conducted by our Chief Executive Officer (principal
executive officer and principal financial officer) with in 90 days of filing
this Quarterly Report on form 10-Q, we conclude that our disclosure controls and
procedures are effective.
The Company has internal controls and procedures regarding financial
reporting. Because the Company has only one employee, it has some concerns
regarding its segregation of duties, but does not believe such deficiencies or
weakness are significant or material. The Company has not made any changes in
internal controls in response to the evaluation.
Item 5. Submission of Matters to Vote of Security Holders - None
- -----------------------------------------------------------
Item 6. Other Information -- None
- ---------------------------
Item 7. Exhibits and Reports on Form 8-K
- -------------------------------------------
(a) Exhibits
(99)* Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the SARBANES-OXLEY ACT OF 2002
(b) Reports on Form 8-K -
None
(SIGNATURE)
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TransFinancial Holdings, Inc.
--------------------------------------
Registrant
By: /s/ William D. Cox
----------------------------------
William D. Cox, President &
Chief Executive Officer
(Principal executive and
financial officer)
Date December 23, 2002
302 CERTIFICATE
---------------
I, William D. Cox, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TransFinancial
Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under
11
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: December 23, 2002
/s/ William D. Cox
--------------------------------------
William D. Cox
Chief Executive Officer and
Chief Financial Officer
December 23, 2002
12