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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 2004
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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares of common stock, $.01 par value, outstanding as of
May 7, 2004 was 7,106,023.
Exhibit Index is on page 15 of this report.
Page 1 of 22
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INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2004 and 2003 3
Condensed Consolidated Balance Sheets at March 31, 2004 and December
31, 2003 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2004 and 2003 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSPRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months
(in thousands, except per share amounts) Ended March 31,
-----------------------
2004 2003
------- -------
Net sales $61,208 $52,700
Cost of sales 50,653 45,509
------- -------
Gross margin 10,555 7,191
Selling, general and administrative expenses 10,163 10,662
Restructuring and other special charges -- 418
------- -------
Operating income (loss) 392 (3,889)
Interest expense 839 849
------- -------
Loss before taxes (447) (4,738)
Income tax benefit (34) (403)
------- -------
Net loss $ (413) $(4,335)
======= =======
Loss per common share -- basic $ (0.06) $ (0.61)
======= =======
-- diluted $ (0.06) $ (0.61)
======= =======
Weighed average common shares -- basic 7,106 7,106
======= =======
-- diluted 7,106 7,106
======= =======
The accompanying notes are an integral part of these statements.
3
TRANSPRO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data) March 31, December 31,
2004 2003
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 454 $ 189
Accounts receivable (less allowances of $2,707 and $2,746) 44,823 46,056
Inventories:
Raw material and component parts 18,036 15,704
Work in process 1,269 1,082
Finished goods 53,357 54,641
-------- --------
Total inventories 72,662 71,427
-------- --------
Other current assets 5,865 5,944
-------- --------
Total current assets 123,804 123,616
-------- --------
Property, plant and equipment 69,268 68,594
Accumulated depreciation and amortization (45,475) (44,440)
-------- --------
Net property, plant and equipment 23,793 24,154
-------- --------
Other assets 9,043 9,408
-------- --------
Total assets $156,640 $157,178
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit debt and current portion of long-term debt $ 42,894 $ 49,638
Accounts payable 39,077 32,816
Accrued liabilities 19,156 18,134
-------- --------
Total current liabilities 101,127 100,588
-------- --------
Long-term liabilities:
Long-term debt 1,232 1,306
Other long-term liabilities 11,090 11,664
-------- --------
Total long-term liabilities 12,322 12,970
-------- --------
Commitments and contingent liabilities
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; issued and outstanding -- none at
March 31, 2004 and December 31, 2003 -- --
Series B convertible preferred stock, $.01 par value: Authorized 30,000 shares;
issued and outstanding;-- 12,781 shares at March 31, 2004 and December
31, 2003 (liquidation preference $1,278) -- --
Common Stock, $.01 par value: Authorized 17,500,000 shares; 7,147,959
shares issued at March 31, 2004 and December 31, 2003; 7,106,023 shares
outstanding at March 31, 2004 and December 31, 2003 71 71
Paid-in capital 55,041 55,041
Accumulated deficit (7,396) (6,967)
Accumulated other comprehensive loss (4,510) (4,510)
Treasury stock, at cost, 41,936 shares at March 31, 2004 and December 31, 2003 (15) (15)
-------- --------
Total stockholders' equity 43,191 43,620
-------- --------
Total liabilities and stockholders' equity $156,640 $157,178
======== ========
The accompanying notes are an integral part of these statements.
4
TRANSPRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended
(Amounts in thousands) March 31,
----------------------
2004 2003
------ -------
Cash flows from operating activities:
Net loss $ (413) $(4,335)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,472 1,577
Provision for uncollectible accounts receivable 39 313
Non-cash restructuring charges -- 46
Gain on sale of building 69 --
Changes in operating assets and liabilities:
Accounts receivable 1,194 2,033
Inventories (1,235) (6,823)
Accounts payable 6,261 9,893
Accrued expenses 1,022 1,624
Other (304) 412
------ -------
Net cash provided by operating activities 8,105 4,740
------ -------
Cash flows from investing activities:
Capital expenditures, net of sales and retirements (718) (399)
------ -------
Net cash used in investing activities (718) (399)
------ -------
Cash flows from financing activities:
Dividends paid (16) (16)
Net repayments under revolving credit facility (6,714) (3,772)
Repayments of term loan and capitalized lease obligations (392) (181)
Deferred debt issuance costs -- (27)
------ -------
Net cash used in financing activities (7,122) (3,996)
------ -------
Increase in cash and cash equivalents 265 345
Cash and cash equivalents at beginning of period 189 155
------ -------
Cash and cash equivalents at end of period $ 454 $ 500
====== =======
Non-cash investing and financing activity:
Entered capital lease obligation $ 288 $ --
====== =======
The accompanying notes are an integral part of these statements.
5
TRANSPRO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - 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, 2003 including the audited financial statements and notes
thereto included therein.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America 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 accounting
principles generally accepted in the United States of America 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.
NOTE 2 - STOCK COMPENSATION COSTS
The Company applies APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock option plans.
Accordingly, no compensation cost has been recognized in the financial
statements with respect to stock options. Had compensation cost for the
Company's plans been determined based on the fair value at the grant dates for
awards under the plans, consistent with Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation," as amended by SFAS
No. 148 "Accounting for Stock-Based Compensation-Transition and Disclosure", the
pro forma net loss and loss per share for the three months ended March 31, would
have been as follows:
(in thousands, except per share amounts) 2004 2003
------ -------
Net loss:
As reported $ (413) $(4,335)
Stock based compensation costs, net of tax (52) (64)
------ -------
Pro forma $ (465) $(4,399)
====== =======
Basic net loss per common share:
As reported $(0.06) $ (0.61)
Pro forma $(0.07) $ (0.62)
Diluted net loss per common share:
As reported $(0.06) $ (0.61)
Pro forma $(0.07) $ (0.62)
NOTE 3 - COMPREHENSIVE LOSS
For the three months ended March 31, 2004 and 2003, "Accumulated other
comprehensive loss" was comprised of the reported net loss for the period of
$0.4 million and $4.3 million, respectively.
6
NOTE 4 - RESTRUCTURING AND OTHER SPECIAL CHARGES
During 2003, the Company completed the $7.0 million restructuring
program that it had commenced during the third quarter of 2001. The program was
designed around business initiatives to improve the Company's operating
performance, including the redesign of our distribution system, headcount
reductions, the transfer of production between manufacturing facilities and a
reevaluation of our product offerings. The Company also added approximately $0.9
million of new relocation programs in 2003 to include the relocation of Fedco's
inventory and machinery to Mexico and salaried headcount reductions made in
order to lower overall operating costs.
The remaining reserve balance at March 31, 2004 and December 31, 2003 is
classified in other accrued liabilities. A summary of the reserve activity is as
follows:
Balance at Charge to Cash Non-Cash Balance at
December 31, 2003 Operations Payments Write-off March 31, 2004
----------------- ---------- -------- --------- --------------
(in thousands)
Workforce related $ 199 -- $(111) -- $ 88
Facility consolidations 23 -- (23) -- --
----- ------ ----- ------ ----
Total $ 222 -- $(134) -- $ 88
===== ====== ===== ====== ====
Cash payments for severance programs are expected to continue through the end of
2004.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued Statement No. 132 (Revised 2003)
"Employers' Disclosures about Pensions and Other Postretirement Benefits" which
replaces the original SFAS 132 and revises employers' financial statement
disclosures about pension plans and other postretirement plans. The Company has
adopted the applicable provisions of this Statement in its reporting of the
financial results for the year ended December 31, 2003 and has implemented the
interim reporting requirements in the financial statements included with this
filing.
7
NOTE 6 - LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share:
(in thousands, except per share amounts)
Three Months
Ended March 31,
-------------------------
2004 2003
------- --------
Numerator:
Net loss $ (413) $ (4,335)
Deduct preferred stock dividend (16) (16)
------- --------
Net loss attributable to common stockholders - basic (429) (4,351)
Add back preferred stock dividend -- --
------- --------
Net loss attributable to common stockholders - diluted $ (429) $ (4,351)
======= ========
Denominator:
Weighted average common shares-- basic 7,106 7,106
Dilutive effect of Series B preferred stock -- --
Dilutive effect of stock options -- --
------- --------
Adjusted weighted average common shares and equivalents -- diluted 7,106 7,106
======= ========
Loss per common share -- basic $ (0.06) $ (0.61)
======= ========
-- diluted $ (0.06) $ (0.61)
======= ========
The weighted average basic common shares outstanding was used in the
calculation of the diluted loss per common share for the three months ended
March 31, 2004 and 2003 as the use of weighted average diluted common shares
outstanding would have an anti-dilutive effect on the loss per share.
Certain options to purchase common stock were outstanding during the
three months ended March 31, 2004 and 2003, but were not included in the
computation of diluted loss per share because their exercise prices were greater
than the average market price of common shares for the period. The anti-dilutive
options outstanding and their exercise prices are as follows:
Three Months Ended March 31,
-------------------------------
2004 2003
-------------- --------------
Options outstanding 80,300 83,800
Range of exercise prices $5.50 - $11.75 $5.50 - $11.75
8
NOTE 7 - BUSINESS SEGMENT DATA
The Company is organized into two segments, also referred to herein as
strategic business groups ("SBG"), based on the type of customer served --
Automotive and Light Truck, and Heavy Duty. The Automotive and Light Truck SBG
is comprised of a Heat Exchange Unit and a Temperature Control Products Unit,
both serving the aftermarket. The Heavy Duty SBG consists of an OEM and
Aftermarket unit, both serving the heavy-duty marketplace. The table below sets
forth information about the reported segments:
Three Months
Ended March 31,
--------------------
2004 2003
------- -------
(in thousands)
Trade sales:
Automotive and Light Truck $43,392 $39,096
Heavy Duty 17,816 13,604
Intersegment transfers:
Automotive and Light Truck 1,716 855
Heavy Duty -- --
Eliminations (1,716) (855)
------- -------
Total net sales $61,208 $52,700
======= =======
Operating income (loss):
Automotive and Light Truck $ 2,066 $ (632)
Restructuring and other special charges -- (60)
------- -------
Automotive and Light Truck total 2,066 (692)
------- -------
Heavy Duty (27) (1,350)
Restructuring and other special charges -- (358)
------- -------
Heavy Duty total (27) (1,708)
------- -------
Corporate expenses (1,647) (1,489)
------- -------
Total operating income (loss) $ 392 $(3,889)
======= =======
NOTE 8 - RETIREMENT AND POST-RETIREMENT PLANS
The components of net periodic benefit costs for the first quarter of 2004 and
2003 are as follows:
RETIREMENT PLANS POSTRETIREMENT PLANS
---------------- --------------------
2004 2003 2004 2003
---- ---- ---- ----
(in thousands)
Service cost $214 $277 $ 1 $ 1
Interest cost 456 622 10 10
Expected return on plan assets (560) (692) -- --
Amortization of net loss 59 49 1 1
---- ---- ---- ----
Net periodic benefit cost $169 $256 $12 $12
==== ==== ==== ====
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company designs, manufactures and markets radiators, radiator
cores, heater cores, air conditioning parts (including condensers, compressors,
accumulators and evaporators) and other heat transfer products for the
automotive and light truck aftermarket. In addition, the Company designs,
manufactures and distributes radiators, radiator cores, charge air coolers, oil
coolers and other specialty heat exchangers for original equipment manufacturers
("OEMs") of heavy trucks and industrial and off-highway equipment and the heavy
duty heat exchanger aftermarket.
The Company is organized into two strategic business groups based upon
the type of customer served - Automotive and Light Truck and Heavy Duty.
Management evaluates the performance of its reportable segments based upon
operating income (loss) before taxes as well as cash flow from operations which
reflects operating results and asset management.
In order to evaluate market trends and changes, management utilizes a
variety of economic and industry data including miles driven by vehicles,
average age of vehicles, gasoline usage and pricing and automotive and light
truck vehicle population data. In the heavy duty segment, we also utilize Class
7 and 8 truck production data and industrial and off-highway equipment
production.
Management looks to grow the business through a combination of internal
growth, including the addition of new customers and new products, and strategic
acquisitions. At the end of 2002, the Company acquired certain assets of Fedco
Automotive Components Company. This acquisition strengthened our position in the
heater core market, provided the Company with a new major customer, provided the
capability for in-house production of aluminum heaters and allowed us to
maximize the benefits generated by the in-house production of copper/brass
heaters at our Mexican plant.
During 2003, the Company completed the $7.0 million restructuring
program that it had commenced during the third quarter of 2001. The program was
designed around business initiatives to improve the Company's operating
performance, including the redesign of our distribution system, headcount
reductions, the transfer of production between manufacturing facilities and a
reevaluation of our product offerings. The Company also added approximately $0.9
million of restructuring programs in 2003 to include the relocation of Fedco's
inventory and machinery to Mexico and salaried headcount reductions made in
order to lower overall operating costs. Management believes that benefits from
these initiatives will serve as a foundation for improvements expected in 2004.
OPERATING RESULTS
QUARTER ENDED MARCH 31, 2004 VERSUS QUARTER ENDED MARCH 31, 2003
Sales for the first quarter of 2004 of $61.2 million were $8.5 million
or 16.1% above the first quarter of 2003. The Automotive and Light Truck segment
had sales of $43.4 million, which were $4.3 million or 11.0% above the first
quarter of 2003. Heat exchange product sales increased 15.1%, while temperature
control product sales were 10.3% lower than the prior year period. Heat exchange
product sales benefited from increased demand for heaters as a result of weather
conditions in January and February, the contributions of the Fedco acquisition,
which was being integrated during the first quarter of 2003, product line
extensions by certain retail customers and new customer business initiated since
the first quarter of 2003. Revenues, however, were unfavorably impacted by lower
demand for the Company's temperature control
10
products, despite having added new customers over the prior year. Customers have
changed their buying patterns such that they no longer rely heavily on large
preseason orders, rather they purchase products in closer proximity to the
summer season. The Company believes that the temperature control market will
likely remain soft pending the arrival of hot weather. Heavy Duty segment sales
in the first quarter of 2004 were $17.8 million, $4.2 million or 31.0% above the
prior year period. Sales in the Heavy Duty OEM Unit were up 59.7% reflecting
increased product demand from our OEM customers due to rising Class 7 and 8
truck sales and incremental revenues from new business announced subsequent to
the first quarter of 2003. Heavy Duty Aftermarket Unit sales were 4.3% above the
first quarter of 2003 due to the impact of new product lines recently introduced
into the marketplace and an increase in unit volume caused by the positive
effects of an improving economy.
Gross margin, as a percentage of net sales, was 17.2% versus 13.6% in
the first quarter of 2003. The improvement reflects higher sales, higher levels
of productivity, lower product costs, the benefits of cost savings initiatives
executed by the Company over the past three years as well as the full
integration of the Fedco acquisition. Gross margin dollars also benefited from
the higher level of net sales. During the first quarter of 2004, the Company
began experiencing the impact of rising commodity prices. As this trend is
expected to continue, a program of customer price increases is being implemented
in an effort to offset these additional costs.
Selling, general and administrative expenses decreased as a percentage
of net sales to 16.6% from 20.2% in the first quarter of 2003. The decrease in
expenses primarily reflects the Company's cost reduction programs. Expense
levels in the first quarter of 2003 also reflected costs incurred by Fedco prior
to the completion of the integration of this acquisition.
Restructuring costs in the first quarter of 2003 of $0.4 million were
associated with the closure of two regional Heavy Duty Aftermarket manufacturing
plants and one Automotive and Light Truck branch location. The Company's
restructuring program was completed during 2003 and only cash flow impacts are
being incurred in 2004.
Interest costs were 1.2% below last year's levels due to the impact of
lower interest rates and lower average debt levels. Average rates on our
revolving credit facility were 4.0% for the first quarter of 2004 versus 4.25%
for the same period in 2003, while average borrowings for the quarter were $51.1
million in 2004 compared with $59.6 million a year ago. Discounting charges
associated with a customer-sponsored vendor program administered by a financial
institution are also included in interest expense.
The effective tax rates of 7.6% in 2004 and 8.5% in 2003 primarily
reflect only a foreign provision, as the reversal of the Company's deferred tax
valuation allowances will offset a majority of the state and any federal income
tax provisions.
The net loss for the first quarter was $0.4 million, or $0.06 per basic
and diluted share in the first quarter of 2004 versus $4.3 million or $0.61 per
basic and diluted share in the first quarter of 2003.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $8.1 million in the first
quarter of 2004. Accounts receivable levels decreased by $1.2 million as the
Company continued to accelerate the collection of customer receivables utilizing
a cost effective customer-sponsored vendor program administered by a financial
institution and by working directly with other customers. This accelerated
collection was done in an effort to offset the continuing trend towards longer
customer dating terms by "blue chip" customers. Inventory levels grew $1.2
million reflecting the start-up of new customer programs and increases related
to typical seasonal
11
buying patterns. The Company will remain focused on managing inventory levels to
match marketplace demand throughout the remainder of 2004. Accounts payable rose
by $6.3 million as a result of the growth in inventory levels as well as our
efforts to balance payables with the ongoing shift in customer receivables mix
toward longer payment cycles. During the first three months of 2003, operations
generated $4.7 million of cash. Accounts receivable declined by $2.0 million as
the Company commenced its participation in a customer-sponsored vendor payment
program designed to accelerate the collection of receivables. Inventories rose
$6.8 million due to higher anticipated near term sales, the push-out of orders
by certain customers and the Company's efforts to enhance its high level of
customer service. Accounts payable rose by $9.9 million as a result of the
growth in inventory levels as well as our efforts to balance payables with the
ongoing shift in customer receivable mix towards longer payment cycles.
The $0.7 million of capital spending during the first three months of
2004 was primarily in the Automotive and Light Truck segment. This reflected
expenditures for new product introduction, cost reductions and computer
upgrades. The Company expects that capital expenditures for the year will be
between $5.5 million and $6.5 million.
Total debt at March 31, 2004 was $44.1 million, compared to $50.9
million at the end of 2003 and $55.6 million at March 31, 2003. The reduction
from year-end reflects the utilization of cash generated by operating
activities, while the reduction from a year ago also reflects the pay down of a
$5.0 million Industrial Revenue Bond upon the sale of the New Haven, Connecticut
headquarters facility in May 2003. At March 31, 2004 the Company had $8.7
million available for future borrowings under its Loan Agreement.
The future liquidity and ordinary capital needs of the Company in the
short term are expected to be met from a combination of cash flows from
operations and borrowings under the existing Loan Agreement. The Company's
working capital requirements peak during the second and third quarters,
reflecting the normal seasonality in the Automotive and Light Truck segment. In
addition, the Company's future cash flow may be impacted by industry trends
lengthening customer payment terms or the discontinuance of currently utilized
customer sponsored payment programs. The loss of one or more of the Company's
significant customers or changes in payment terms to one or more major suppliers
could also have a material adverse effect on the Company's results of operations
and future liquidity. During 2003, the Company began utilizing a
customer-sponsored program administered by a financial institution in order to
accelerate the collection of funds and offset the impact of these lengthening
terms. The Company intends to continue utilizing this program as long as it is a
cost effective tool to accelerate cash flow and will expand its usage as other
customers make it available. The Company believes that its cash flow from
operations, together with borrowings under its Loan Agreement, will be adequate
to meet its near-term anticipated ordinary capital expenditures and working
capital requirements. However, the Company believes that the amount of
borrowings available under the Loan Agreement would not be sufficient to meet
the capital needs for major growth initiatives, such as significant
acquisitions. If the Company were to implement major new growth initiatives, it
would have to seek additional sources of capital. However, no assurance can be
given that the Company would be successful in securing such additional sources
of capital.
CRITICAL ACCOUNTING ESTIMATES
For interim reporting purposes, the Company calculates its effective
income tax rate based upon the current estimate of pre-tax income for the year.
The critical accounting estimates utilized by the Company remain unchanged from
those disclosed in its Annual Report on Form 10-K for the year ended December
31, 2003.
12
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued Statement No. 132 (Revised 2003)
"Employers' Disclosures about Pensions and Other Postretirement Benefits" which
replaces the original SFAS 132 and revises employers' financial statement
disclosures about pension plans and other postretirement plans. The Company
adopted the applicable provisions of this Statement in its reporting of the
financial results for the year ended December 31, 2003 and has implemented the
interim reporting requirements in the financial statements included with this
filing.
FORWARD-LOOKING STATEMENTS AND 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 and 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 and continued availability under the Company's Loan Agreement. The
forward-looking statements contained in this filing are made as of the date
hereof, and the Company does not undertake any obligation to update any
forward-looking statements, whether as a result of future events, new
information or otherwise.
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 the price of commodities
used in our manufacturing process. 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, 2003.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
The Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and
13
procedures as of March 31, 2004. Based on the foregoing, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective.
There have been no changes in the Company's internal control over
financial reporting during the quarter ended March 31, 2004 that have materially
affected, or are reasonably likely to materially affect the Company's internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
On April 29, 2004, the Company announced that its Board of Directors
approved the amendment of the Company's Shareholders' Rights Agreement to
accelerate its expiration date from September 29, 2005 to September 30, 2004.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on May 6,
2004, 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.
A vote was taken 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 6,171,614 33,328
William J. Abraham, Jr. 5,539,668 665,274
Philip Wm. Colburn 6,170,814 34,128
Charles E. Johnson 6,171,614 33,328
Paul R. Lederer 6,192,614 12,328
Sharon M. Oster 5,549,431 655,511
F. Alan Smith 6,168,954 35,988
A vote was taken on the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as auditors for the Company for the fiscal year
ending December 31, 2004. The aggregate numbers of shares of Common Stock voted
in person or by proxy were as follows:
For Against Abstain
------------ ------------ ------------
6,150,547 16,294 38,101
The foregoing proposals are described more fully in the Company's
definitive proxy statement dated March 29, 2004, 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.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
4.1 Amendment No. 2 to Rights Agreement between the Company and American
Stock Transfer & Trust Company
31.1 Certification of CEO in accordance with Section 302 of the
Sarbanes-Oxley Act.
31.2 Certification of CFO in accordance with Section 302 of the
Sarbanes-Oxley Act.
32.1 Certification of CEO in accordance with Section 906 of the
Sarbanes-Oxley Act.
32.2 Certification of CFO in accordance with Section 906 of the
Sarbanes-Oxley Act.
b) Reports on Form 8-K
The following reports on Form 8-K were filed during the first quarter
of 2004:
-- On February 27, 2004, a Form 8-K was filed containing as an exhibit a
press release announcing the results of operations and financial condition
for the fourth quarter and twelve months ended December 31, 2003.
15
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 11, 2004 By: /s/ Charles E. Johnson
------------------------------------------
Charles E. Johnson
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 2004 By: /s/ Richard A. Wisot
------------------------------------------
Richard A. Wisot
Vice President, Treasurer, Secretary, and
Chief Financial Officer (Principal
Financial and Accounting Officer)
16