-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wm/uD5YFOhdGueGs1WhvOUa2REdY5qTWoreZIEEBjtBy7+S8SoBdfRfNKuptRU3s n3hJFIFlxtYybww0vLpJEw== 0000914039-99-000324.txt : 19990709 0000914039-99-000324.hdr.sgml : 19990709 ACCESSION NUMBER: 0000914039-99-000324 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSPRO INC CENTRAL INDEX KEY: 0000948844 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 341807383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13894 FILM NUMBER: 99661043 BUSINESS ADDRESS: STREET 1: 100 GANDO DR CITY: NEW HAVEN STATE: CT ZIP: 06513 BUSINESS PHONE: 2034016450 MAIL ADDRESS: STREET 1: 100 GANDO DR CITY: NEW HAVEN STATE: CT ZIP: 06513 10-Q/A 1 AMENDMENT #1 TO FORM 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO.1 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-13894 TRANSPRO, INC. (Exact name of Registrant as specified in its charter) DELAWARE 34-1807383 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 100 Gando Drive, New Haven, Connecticut 06513 (Address of principal executive offices, including zip code) (203) 401-6450 (Registrant's telephone number, including area code) 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 [ ] The number of shares of common stock, $.01 par value, outstanding as of April 28, 1999 was 6,597,335. Exhibit Index is on page 13 of this report. Page 1 of 14 ================================================================================ 2
INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income for the three months ended March 31, 1999 and 1998. 3 Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 1999 and 1998. 3 Condensed Consolidated Balance Sheets at March 31, 1999 and December 31, 1998. 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998. 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TRANSPRO, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Amounts in thousands, except per share)
THREE MONTHS ENDED MARCH 31, 1999 1998 ---- ---- Sales $57,278 $50,587 Cost of sales 42,808 39,013 ---------- ----------- Gross margin 14,470 11,574 Selling, general and administrative expenses 12,678 11,144 ---------- ----------- Income from operations 1,792 430 Interest expense, net 914 665 ---------- ----------- Income (loss) before taxes 878 (235) Income tax provision (benefit) 373 (96) ---------- ----------- Net income (loss) $ 505 $ (139) ========== =========== Basic earnings (loss) per common share $ .08 $ (.02) ========== =========== Diluted earnings (loss) per common share $ .07 $ (.02) ========== =========== Cash dividend per common share $ .05 $ .05 ========== =========== Weighted average common shares - basic 6,573 6,560 ========== =========== Weighted average common shares and equivalents - diluted 7,071 6,560 ========== ===========
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Amounts in thousands)
THREE MONTHS ENDED MARCH 31, 1999 1998 ---- ---- Net income (loss) $ 505 $(139) Other comprehensive income, net of tax: Foreign currency translation (14) (15) ----- ----- Comprehensive income (loss) $ 491 $(154) ===== =====
The accompanying notes are an integral part of these statements. 3 4 TRANSPRO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data)
MARCH 31, DECEMBER 31, ASSETS 1999 1998 ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 522 $ 345 Accounts receivable (less allowances of $2,760 and $2,390) 36,126 34,173 Inventories: Raw materials 13,182 14,765 Work in process 8,340 7,124 Finished goods 46,575 37,886 --------- --------- Total inventories 68,097 59,775 --------- --------- Deferred income tax benefit 2,871 2,641 Other current assets 2,028 3,200 --------- --------- Total current assets 109,644 100,134 --------- --------- Property, plant and equipment 97,313 94,913 Less accumulated depreciation (57,182) (55,426) --------- --------- Net property, plant and equipment 40,131 39,487 --------- --------- Goodwill (net of amortization of $404 and $348) 8,135 6,093 Other assets 3,333 2,813 --------- --------- Total assets $ 161,243 $ 148,527 ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 18,124 $ 14,797 Accrued expenses 5,430 5,393 Accrued insurance 4,227 4,404 Accrued salaries and wages 4,118 4,823 Accrued taxes 734 541 --------- --------- Total current liabilities 32,633 29,958 --------- --------- Long-term liabilities: Long-term debt 51,925 42,197 Retirement and post-retirement obligations 7,482 7,482 Deferred income taxes 1,128 973 Other liabilities 50 50 --------- --------- Total liabilities 93,218 80,660 --------- --------- Stockholders' equity: Preferred stock, $.01 par value: Authorized 2,500,000 shares: Issued and outstanding as follows: Series A Junior participating preferred stock, $.01 par value Authorized 200,000 shares; none issued and outstanding at March 31, 1999 and December 31, 1998 Series B convertible preferred stock, $.01 par value Authorized 30,000 shares; 30,000 issued and outstanding at March 31, -- -- 1999 and December 31, 1998 Common stock, $.01 par value: Authorized 17,500,000 shares: 66 66 6,669,445 shares issued at March 31, 1999 and December 31, 1998 Paid-in capital 55,074 55,074 Unearned compensation (101) (113) Retained earnings 15,043 14,883 Accumulated other comprehensive income (2,031) (2,017) Treasury stock, at cost, 72,111 shares at March 31, 1999 and December 31, 1998 (26) (26) --------- --------- Total stockholders' equity 68,025 67,867 --------- --------- Total liabilities and stockholders' equity $ 161,243 $ 148,527 ========= =========
The accompanying notes are an integral part of these statements. 4 5 TRANSPRO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
THREE MONTHS ENDED MARCH 31, 1999 1998 Cash flows from operating activities: Net income (loss) $ 505 $ (139) -------- -------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,812 1,542 Provision for losses - accounts receivable 366 445 -------- -------- Total adjustments to reconcile net income (loss) to net cash used in operating activities 2,178 1,987 -------- -------- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (2,147) 4,310 Inventories (7,391) (7,693) Accounts payable 5,183 (1,380) Accrued expenses (2,831) (1,973) Other 319 (201) -------- -------- Total changes in operating assets and liabilities (6,867) (6,937) -------- -------- Net cash used in operating activities (4,184) (5,089) -------- -------- Cash flows from investing activities: Capital expenditures (2,323) (1,470) Acquisitions, net of cash acquired (2,330) -- -------- -------- Net cash used in investing activities (4,653) (1,470) -------- -------- Cash flows from financing activities: Dividends paid (345) (331) Repayments of long-term debt (703) (1,250) Borrowings of long-term-debt 10,062 7,900 -------- -------- Net cash provided by financing activities 9,014 6,319 -------- -------- Increase (decrease) in cash and cash equivalents 177 (240) Cash and cash equivalents: Beginning of period 345 593 -------- -------- End of period $ 522 $ 353 ======== ======== Supplemental Cash Flow Information: Interest paid $ 825 $ 582 Taxes paid, net $ 64 $ 720
Supplemental Schedule of non-cash investing and financing activities: The Company acquired AC Plus, effective February 1, 1999, the details of which are further described in Note 5. In connection with this transaction, liabilities were assumed, as follows: Fair value of assets acquired $ 3,060 Cash paid (2,250) ------- Liabilities assumed $ 810 =======
In connection with the acquisition, the Company issued a promissory note of $250, payable on the second anniversary of the closing. The accompanying notes are an integral part of these statements. 5 6 TRANSPRO, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY TransPro, Inc. (the "Company") is a manufacturer and supplier of heat transfer components and systems, replacement automotive air conditioning parts, and specialty fabricated metal products for a variety of Aftermarket and Original Equipment Manufacturing ("OEM") automotive, truck and industrial equipment applications, and performs vehicle conversions. NOTE 2 - INTERIM FINANCIAL STATEMENTS The condensed consolidated financial information should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 filed with the Securities and Exchange Commission on March 30, 1999, including the financial statements and notes thereto included therein. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of consolidated financial position, consolidated results of operations and consolidated cash flows have been included in the accompanying unaudited condensed consolidated financial statements. All such adjustments are of a normal recurring nature. The December 31, 1998 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Certain reclassifications have been made to prior amounts to conform to current year disclosures. NOTE 3 - SEGMENT AND BUSINESS INFORMATION In 1998, the Company adopted Statement of Financial Accounting Standards No. 131 ("SFAS No. 131") "Disclosures about Segments of an Enterprise and Related Information." Prior year segment information has been included for the comparable 1998 period in accordance with SFAS No. 131 to present the Company's three reportable segments - Aftermarket Heating and Cooling Systems, OEM Heat Transfer Systems and Specialty Metal Fabrication. There has been no material change in segment assets since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. Segment data has been disclosed on a consistent basis with the 1998 Form 10-K. Aftermarket Heating and Cooling Systems product lines include complete radiators and radiator cores, heaters, air conditioning condensers and other air conditioning parts. The OEM Heat Transfer Systems business provides manufactured specialized heavy-duty equipment radiators, charge air coolers and oil coolers. Specialty Metal Fabrication products and services include fabrication of metal racking, enclosures and cabinetry and the fabrication and installation of customized van interiors and vehicle conversion components. 6 7 The table below sets forth information about reported segments for the three months ended March 31, 1999 and 1998. (Unaudited) (Amounts in thousands)
REVENUES FROM EXTERNAL INCOME FROM OPERATIONS CUSTOMERS 1999 1998 1999 1998 ---- ---- ---- ---- BUSINESS SEGMENT Aftermarket Heating and Cooling Systems $ 37,348 $ 29,682 $ 3,025 $ 1,048 OEM Heat Transfer Systems 9,567 10,775 (137) (273) Specialty Metal Fabrication 10,363 10,130 71 806 Inter-segment revenues: Aftermarket Heating and Cooling Systems 877 863 -- -- OEM Heat Transfer Systems 9 28 -- -- Elimination of inter-segment revenues (886) (891) -- -- -------- -------- -------- -------- Segment totals 57,278 50,587 2,960 1,581 Corporate expenses -- -- (1,167) (1,151) -------- -------- -------- -------- Consolidated totals $ 57,278 $ 50,587 $ 1,792 $ 430 ======== ======== ======== ========
NOTE 4 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: (Unaudited) (Amounts in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, 1999 1998 ---- ---- BASIC EARNINGS PER COMMON SHARE COMPUTATION: Numerator: Net income (loss) $ 505 $ (139) Less: preferred stock dividend (12) -- ------- ------- Net income available to common stockholders $ 493 $ (139) ======= ======= Denominator: Weighted average common shares 6,597 6,611 Non-vested restricted stock (24) (51) ------- ------- Denominator for basic earnings per common share - adjusted weighted average common shares 6,573 6,560 ------- ------- Basic earnings per common share $ (.08) $ (.02) ======= ======= DILUTED EARNINGS PER COMMON SHARE COMPUTATION: Numerator: Income available to common shareholders $ 493 $ (139) Add back: preferred stock dividend 12 -- ------- ------- Income available to stockholders and assumed conversions $ 505 $ (139) ======= ======= Denominator: Adjusted weighted average common shares 6,573 6,560 Dilutive effect of Series B preferred stock 497 -- Dilutive effect of stock options and non-vested restricted stock 1 -- ------- ------- Adjusted weighted average common shares and assumed conversions 7,071 6,560 ======= ======= Diluted earnings per common share $ .07 $ (.02) ======= =======
Options to purchase 481,829 shares of common stock, with exercise prices ranging from $5.88 to $11.75, were outstanding during the three months ended March 31, 1999, but were not included in the computation 7 8 of diluted earnings per share because the exercise prices of the options were greater than the average market price for the common shares for the period. NOTE 5 - ACQUISITION Effective February 1, 1999, the Company purchased 100% of the outstanding stock of A/C Plus, Inc., ("A/C Plus") an air conditioning compressor remanufacturer located in Arlington, Texas. A/C Plus had sales of approximately $2.9 million in fiscal 1998. The transaction was structured with a purchase price of $2.25 million cash paid at closing and a promissory note of $0.25 million payable on the second anniversary of the closing. Concurrent with the purchase, the Company repaid $0.5 million in working capital debt on behalf of A/C Plus. The purchase price and working capital repayment were financed through the Company's Revolving Credit Agreement. The acquisition was accounted for as a purchase. Goodwill of $2.1 million was recorded in connection with the transaction and is being amortized over 20 years. NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging contracts. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The adoption of SFAS No. 133 does not currently apply to the Company and accordingly will not have a material impact on its results of operations or financial position. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS QUARTER ENDED MARCH 31, 1999 VERSUS QUARTER ENDED MARCH 31, 1998 Net sales for the first quarter of 1999 increased $6.7 million, or 13.2% to $57.3 million compared with $50.6 million in the first quarter of 1998. Sales in the Aftermarket Heating and Cooling Systems business increased by $7.7 million or 25.8% from the comparable 1998 quarter, due to volume increases in both the radiator and heater product lines coupled with sales from Evap, Inc., acquired effective August 1, 1998 and A/C Plus, acquired effective February 1, 1999, which contributed $3.6 million to the first quarter 1999 increase. Sales in the OEM Heat Transfer Systems business declined by $1.2 million compared with the same 1998 quarter, reflecting the catch up in the first quarter of 1998 of overdue orders from 1997. Sales in the Specialty Metal Fabrication Business reflected a slight increase from the comparable 1998 quarter, due to an increase in vehicle conversion revenues, offset by a decline in specialty fabricated metal products. Gross margins of 25.3% for the first quarter of 1999 increased from the 22.9% achieved in the first quarter of 1998, primarily due to higher volume in the Aftermarket Heating and Cooling Systems business and the addition of Evap, Inc. and A/C Plus, which favorably impacted the gross margin percentage. The Specialty Metal Fabrication business comparable margins declined primarily due to the additional costs associated with the new metal fabrication facility in Plano, Texas, which came on line in the second quarter of 1998. Gross margins in the OEM heat transfer business improved and were positive in the first quarter, compared with negative margins in the prior year first quarter. Selling, general and administrative expenses ("SG&A") increased $1.5 million or 13.8%, but were essentially flat as a percentage of sales. SG&A in the Aftermarket Heating and Cooling business reflected higher volume and the inclusion of expenses associated with the Evap and A/C Plus operations. SG&A in the Specialty Metal Fabrication business increased slightly, due to costs associated with the new Plano metal fabrication facility. Net interest expense increased $0.2 million in the first quarter of 1999 compared with the first quarter of 1998 as a function of increased debt levels in the first quarter of 1999 associated with acquisitions compared with the first quarter of 1998. The Company's effective tax rate of 42.5% for the first quarter of 1999 is comprised of the U. S. Federal income tax rate, plus the estimated aggregate effective rate for state and local income taxes. The rate increased from the first quarter 1998 rate of 40.8%, to reflect a higher level of non-tax deductible expenses expected in 1999. Net income for the first quarter of 1999 was $0.5 million, or $.08 per basic common share and $.07 per diluted common share, compared with a net loss of $0.1 million, or $.02 per basic and diluted common share in the first quarter of 1998. 9 10 FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES In July 1998, the Company entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") with five banking institutions to replace its 1995 Revolving Credit and Term Loan Agreement in order to increase the amount of and extend the commitment period for bank financing. The Revolving Credit Agreement provides for secured borrowings or the issuance of letters of credit in an aggregate amount not to exceed $75 million. The Revolving Credit Agreement is secured by a blanket first perfected security interest in substantially all of the Company's assets plus a pledge of the stock of the Company's subsidiaries. The Revolving Credit Agreement expires on July 1, 2003. The security interest in the Company's assets and the pledge of the Company's subsidiaries' stock are eligible for release commencing March 31, 1999 if the Company achieves certain senior debt ratings or if certain financial ratios are met and maintained. Available borrowings under the Revolving Credit Agreement are determined by a borrowing base consisting of the Company's eligible (i) accounts receivable, (ii) inventory and (iii) fixed assets, as adjusted by an advance rate. The aggregate amount of borrowings under the Revolving Credit Agreement is automatically reduced by $0.5 million at the end of each calendar quarter through June 30, 1999; by $1.25 million at the end of each calendar quarter through June 30, 2000; and by $1.5 million at the end of each calendar quarter through June 30, 2003. The Revolving Credit Agreement bears interest at variable rates based, at the Company's option on either (a) a Eurodollar loan rate plus an applicable margin based upon the ratio of the Company's total funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"), or (b) (i) the higher of the BankBoston, N.A. base lending rate and (ii) one-half of one percent above the Federal Funds Effective Rate, as defined, plus an applicable margin based upon the ratio of the Company's total funded debt to EBITDA. A commitment fee of .25% or .375% based upon the ratio of the Company's total funded debt to EBITDA on the average daily unused portion of the Revolving Credit Agreement is payable quarterly, in arrears. The Revolving Credit Agreement contains financial covenants which, among other things, require maintenance of a minimum tangible net worth and debt service coverage and a maximum level of debt to EBITDA and debt to net worth, as well as covenants which place limits on dividend payments in excess of $2.0 million per year and capital expenditures in excess of 140% of such year's depreciation expense. At March 31, 1999, the Company did not meet the interest coverage ratio covenant and the liabilities to net worth ratio covenant set forth in the Revolving Credit Agreement. On June 25, 1999, the Company entered into a Waiver and Second Amendment to the Revolving Credit Agreement (the "Waiver and Amendment"), amending the interest ratio covenant and the liabilities to net worth ratio covenant. Pursuant to the Waiver and Amendment, the lenders further agreed to waive compliance with the interest coverage ratio and the liabilities to net worth ratio covenants for the quarter ended March 31, 1999. At March 31, 1999, borrowings were approximately $38.9 million under the Company's revolving credit agreement. The Company also has $13 million of borrowings under floating rate industrial revenue bonds, of which $8.0 million matures in the year 2010 and $5.0 million matures in the year 2013. The bonds bear interest based upon a short-term tax-exempt bond index. Outstanding letters of credit totaled approximately $19 million at March 31, 1999. Of the total letters of credit outstanding, $13.0 million supported the borrowings under floating rate industrial revenue bonds. During the first three months of 1999, the Company required $4.2 million of cash to support its operations. Inventory increased $7.4 million, primarily to support the second and third quarter peak selling 10 11 season for Aftermarket Heating and Cooling Systems products. Accounts receivable increased $2.1 million reflecting the higher sales volumes during the first quarter. A net increase in accounts payable and accrued expenses provided $2.4 million of cash. Net income plus total adjustments to reconcile net income to net cash used in operating activities generated $2.7 million of cash. Capital spending during the first three months of 1999 totaled $2.3 million. The acquisition of AC Plus required $2.3 million. The Company paid a cash dividend of $0.05 per common share totaling $0.3 million during the first three months of 1999. Net borrowings under the Revolving Credit Agreement increased by $9.4 million from December 31, 1998, to finance the operating and other cash requirements of the Company. The future liquidity and ordinary capital needs of the Company in the near term are expected to be met from operations. The Company's working capital requirements peak during the second and third quarters, reflecting the normal seasonality of the heat transfer aftermarket. The Company believes that the Revolving Credit Agreement, along with cash flow from operations, will be adequate to meet near term anticipated ordinary capital expenditure and working capital requirements as well as seasonal working capital requirements. However, the capital for major growth initiatives may exceed the aggregate amount of borrowings available under the Revolving Credit Agreement. If this were to occur, the Company would have to seek additional sources of capital. However, no assurance can be given that the Company would be successful in securing additional sources of capital. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 issue results from computer system software using only two digits rather than four digits to define the applicable year for a transaction. Such software may not recognize a date identified as "00" or may assume the year 1900 instead of 2000. In the worst case, this may result in system failure or miscalculation causing disruption of operations, including but not limited to, a temporary inability to process transactions, send invoices, generate disbursement checks or engage in similar normal business activities. The Company's Year 2000 initiative consists of: (i) performing an inventory of all computer, facility and manufacturing equipment and external business partners which may be Year 2000 sensitive; (ii) assessing that inventory for Year 2000 compliance; (iii) developing a plan to remediate or replace non Year 2000 compliant inventory items; and (iv) the implementation of that plan, including remediation, replacement, testing and contingency arrangements, as necessary. The Company has identified an information systems platform which is Year 2000 compliant and to which the majority of current systems employed by the Company will be converted. The conversion project began in 1996 and is expected to be completed during the third quarter of 1999. Hardware, software and other capitalizable costs will be capitalized and expensed over the useful life of the system. All other project costs will be expensed as incurred. The total cost of the Year 2000 project is currently estimated to be $2.5 million, of which $1.8 million is for capitalizable hardware and software costs. To date, the Company has spent approximately $1.9 million on this project, of which $1.5 million was for capitalizable hardware and software costs. During 1998, the Company initiated formal communications with its information technology hardware and software providers, all of its significant vendors, service providers, lenders and large customers to determine the extent to which it is vulnerable to the Year 2000 issue externally. The Company believes that with the completion of its Year 2000 initiatives, as scheduled, the possibility of significant interruptions of normal operations should be significantly reduced. However, no assurance can be given that the systems of other companies on which the Company relies will be Year 2000 compliant on 11 12 a timely basis, that the Year 2000 systems of other companies will be compatible with the Company's system or that other external Year 2000 issues would not have a material impact on the Company's operations. Contingency plans are being developed as necessary, to mitigate the impact of non year 2000 compliant external issues which, in the worst case, may result in source of supply issues with suppliers or the inability of customers to order product. FORWARD-LOOKING STATEMENTS - CAUTIONARY FACTORS Statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's Annual Report on Form 10-K contains certain detailed factors that could cause the Company's actual results to materially differ from the forward-looking statements made by the Company. In particular, statements relating to the future financial performance of the Company are subject to business conditions and growth in the general economy and automotive and truck business, the impact of competitive products and pricing, changes in customer product mix, failure to obtain new customers or retain old customers or changes in the financial stability of customers, changes in the cost of raw materials, components or finished products and changes in interest rates. Improvements in manufacturing efficiencies and reduction of costs are subject to a number of factors, including but not limited to, the ability of management to implement improvements in workforce efficiencies and the timing of such improvements. Statements regarding the Company's Year 2000 project are subject to numerous factors, including but not limited to, the availability and cost of trained personnel, the ability to effect the timely conversion of all relevant systems and the effectiveness of contingency plans for non year 2000 compliant issues. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has certain exposures to market risk related to changes in interest rates, foreign currency exchange rates and commodities. There have been no material changes in market risk since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. 12 13 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Stockholders of the Company held on April 28, 1999, two proposals were voted upon by the Company's stockholders. A brief discussion of each proposal voted upon at the Annual Meeting and the number of votes cast for, against and withheld, as well as the number of abstentions to each proposal are set forth below. There were no broker non-votes with regard to these proposals. A vote was taken at the Annual Meeting for the election of seven Directors of the Company to hold office until the next Annual Meeting of Stockholders of the Company and until their respective successors shall have been duly elected. The aggregate numbers of shares of Common Stock voted in person or by proxy for each nominee were as follows:
NOMINEE FOR WITHHELD ------- --- -------- Barry R. Banducci 5,364,714 294,305 Henry P. McHale 5,363,518 295,502 William J. Abraham, Jr 5,363,216 295,803 Philip Wm. Colburn 5,358,860 300,160 Paul R. Lederer 5,364,951 294,068 Sharon M. Oster 5,365,136 293,883 F. Alan Smith 5,364,361 294,658
A vote was taken at the Annual Meeting on the proposal to ratify the appointment of PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.) as auditors for the Company for the fiscal year ending December 31, 1999. The aggregate numbers of shares of Common Stock in person or by proxy which: (a) voted for, (b) voted against or (c) abstained from the vote upon such proposal were as follows: FOR AGAINST ABSTAIN 5,644,331 3,565 11,124 The foregoing proposals are described more fully in the Company's definitive proxy statement dated March 29, 1999, filed with the Securities and Exchange Commission pursuant to Section 14 (a) of the Securities Act of 1934, as amended, and the rules and regulations promulgated thereunder. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 10.1 Waiver and Second Amendment to Revolving Credit Agreement dated June 25, 1999. (27) Financial Data Schedule b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 1999. 13 14 SIGNATURES 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. TRANSPRO, INC. (Registrant) Date: May 17, 1999 By: /s/ Henry P. McHale ------------------------------------------------------------------ Henry P. McHale President, Chief Executive Officer and Director Date: May 17, 1999 By: /s/ Timothy E. Coyne ------------------------------------------------------------------ Timothy E. Coyne Vice President, Treasurer, Secretary, Controller and Chief Financial Officer (Principal Financial and Accounting Officer)
14 EX-10.1 2 EXHIBIT 10.1 1 EXHIBIT 10.1 WAIVER AND SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT This Waiver and Second Amendment to Revolving Credit Agreement, dated as of June 28, 1999 (the "Amendment"), by and between (a) TRANSPRO, INC., a Delaware corporation (the "Parent"), ALLEN HEAT TRANSFER PRODUCTS, INC., a Delaware corporation ("AHTP"), AHTP II, INC., a Delaware corporation ("AHTP II"), EVAP, INC. (f/k/a EI Acquisition Corp.), a Texas corporation ("EVAP"), GO/DAN INDUSTRIES, a New York general partnership ("GDI" and collectively with Parent, AHTP, AHTP II and EVAP, the "Original Borrowers"), and A/C PLUS, INC., a Texas corporation ("AC" and collectively with the Original Borrowers, the "Borrowers"), (b) BANKBOSTON, N.A., a national banking association and the other lending institutions listed on Schedule 1 of the Credit Agreement (collectively, the "Banks") and (c) BANKBOSTON, N.A., as agent (the "Agent") for the Banks, amending certain provisions of the Revolving Credit Agreement dated as of July 30, 1998 (as amended and in effect from time to time, the "Credit Agreement"), by and between the Original Borrowers, the Agent and the Banks. Capitalized terms used herein and which are not otherwise defined shall have the respective meanings ascribed thereto in the Credit Agreement. WHEREAS, the Borrowers have requested that the Banks agree to amend the terms of the Loan Documents in several respects as hereinafter more fully set forth; WHEREAS, the Banks are willing to amend the terms of the Loan Documents in such respects, upon the terms and subject to the conditions contained herein; NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Consolidated Funded Debt" in its entirety and replacing it with the following definition: "Consolidated Funded Debt. For any period, the average outstanding amount of all liabilities of the Borrowers and their Subsidiaries for money borrowed (including, without limitation (i) obligations under Capitalized Leases and (ii) obligations under letters of credit to the extent not otherwise includable in the computation of Consolidated Funded Debt)." 2 2 Section 2. AMENDMENT TO SECTION 10.2 OF THE CREDIT AGREEMENT. Section 10.2 of the Credit Agreement is hereby amended by replacing the table appearing therein with the following table: Period Ratio April 1, 1999 - March 31, 2001 2.25:1.00 April 1, 2001 and thereafter 2.75:1.00 Section 3. AMENDMENT TO SECTION 10.4 OF THE CREDIT AGREEMENT. Section 10.4 of the Credit Agreement is hereby amended in its entirety to read as follows: 10.4 Liabilities to Worth Ratio. The Borrowers will not at any time permit the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth during the periods described in the table set forth below to be greater than the ratio set forth opposite such period in such table: Period Ratio April 1, 1999 - March 31, 2001 1.80:1.00 April 1, 2001 and thereafter 1.50:1.00 Section 4. WAIVER TO SECTION 8.4(d) OF THE CREDIT AGREEMENT. The Banks and the Agent hereby agree to waive the Borrowers' compliance with Section 8.4(d) of the Credit Agreement for the fiscal quarter ended on March 31, 1999; provided, however, that the Borrowers deliver to each of the Banks the Compliance Certificate described in said Section 8.4(d) not later than seventy-five (75) days after the end of such fiscal quarter. Section 5. WAIVER TO SECTION 10.2 OF THE CREDIT AGREEMENT. The Banks and the Agent hereby agree to waive the Borrowers' compliance with Section 10.2 of the Credit Agreement for the fiscal quarter ended on March 31, 1999. Section 6. WAIVER TO SECTION 10.4 OF THE CREDIT AGREEMENT. The Banks and the Agent hereby agree to waive the Borrowers' compliance with Section 10.4 of the Credit Agreement for the fiscal quarter ended on March 31, 1999. Section 7. CONDITIONS TO EFFECTIVENESS. This Amendment shall not become effective until the Agent receives the following: (a) a counterpart of this Amendment signed by each of the Borrowers, the Agent and the Majority Banks; and (b) an amendment fee of $110,250.00 paid by the Borrowers for the pro rata account of each Bank based on such Bank's percentage of the Total Commitment. 3 3 Section 8. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Borrowers contained in the Credit Agreement and the other Loan Documents were true and correct when made and continue to be true and correct on and as of the date hereof as if made on the date hereof except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement or the other Loan Documents and to the extent that such representations and warranties relate expressly to an earlier date. No Default or Event of Default has occurred and is continuing. Section 9. RATIFICATION, ETC. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to, the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. Section 10. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. Section 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF LAWS). 4 4 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. TRANSPRO, INC. By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. ALLEN HEAT TRANSFER PRODUCTS, INC. By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. AHTP II, INC. By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. EVAP, INC. (f/k/a EI Acquisition Corp.) By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. GO/DAN INDUSTRIES By: ALLEN HEAT TRANSFER PRODUCTS, INC., its Partner By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. 5 5 By: AHTP II, INC., its Partner By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. A/C PLUS, INC. By: /s/ Timothy E. Coyne ---------------------------------------- Name: Timothy E. Coyne Title: V.P. BANKBOSTON, N.A., individually and as Agent By: /s/ Richard D. Briggs, Jr. ---------------------------------------- Name: Richard D. Briggs, Jr. Title: Director PEOPLE'S BANK By: /s/ Kevin R. Callahan ---------------------------------------- Name: Kevin R. Callahan Title: Vice President THE BANK OF NEW YORK By: /s/ Geraldine Turkington ---------------------------------------- Name: Geraldine Turkington Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Kwang S. Son ---------------------------------------- Name: Kwang S. Son Title: Assistant Vice President 6 6 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Stephen E. McDonald --------------------------------------------------- Name: Stephen E. McDonald Title: First Vice President DBD BANK, as Letter of Credit Bank By: /s/ Stephen E. McDonald --------------------------------------------------- Name: Stephen E. McDonald Title: First Vice President -----END PRIVACY-ENHANCED MESSAGE-----