(Mark One)
(Mark One) | ||
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware (State or other jurisdiction of incorporation or organization) 1000 Sagamore Parkway South Lafayette, Indiana (Address of Principal Executive Offices) | 52-1375208 (IRS Employer Identification Number) 47905 (Zip Code) | |||||||
Title of each class | Name of each exchangeon which registered | |
Common Stock, $.01 Par Value | New York Stock Exchange |
No ý
Large accelerated filer x | |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
Emerging growth company ¨ |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨ Noxý
55,150,975.
TABLE OF CONTENTS
YEAR ENDED DECEMBER 31, 2016
▪ | our business plan; |
▪ | our ability to effectively integrate Supreme and realize expected synergies and benefits from the Supreme acquisition; |
▪ | our expected revenues, income or loss; |
▪ | our ability to manage our |
▪ | our strategic plan and plans for future operations; |
▪ | financing needs, plans and liquidity, including for working capital and capital expenditures; |
▪ | our ability to achieve sustained profitability; |
▪ | reliance on certain customers and corporate relationships; |
▪ | availability and pricing of raw |
▪ | availability of capital and financing; |
▪ | dependence on industry trends; |
▪ | the outcome of any pending litigation or notice of environmental dispute; |
▪ | export sales and new markets; |
▪ | engineering and manufacturing capabilities and |
▪ | our ability to develop and commercialize new products; |
▪ | acceptance of new |
▪ | government |
▪ | assumptions relating to the foregoing. |
industries that they serve.(together with its subsidiaries,which we refer to herein as “Wabash,” “Wabash National,” “the Company,the “Company,” “us,” “we,” or “our”) was founded in 1985 as a start-up company in Lafayette, Indiana. Wabash was incorporated in Delaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985.now a leading designer, manufacturer and distributor of high-quality, custom-engineered transportation and diversified industrial manufacturerproducts and North America’s leading producer of semi-trailers and liquid transportation systems. We design, manufacture and market aservices. Our diverse range of products, includingproduct portfolio includes dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food gradefood-grade and pharmaceutical equipment. We have achieved this diversification through acquisitions and product innovation. We continue to search for acquisitions that will increase margins, enhance business stability, reduce cyclicality, and provide operational synergies.Wabash was incorporatedDelaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985. Our internet website is www.wabashnational.com. We make our electronic filings with the Securities Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available on our website free of charge as soon as practicable after we file them with or furnish them to the SEC. Information on the website is not part of this Annual Report. We are listed on the NYSE as “WNC”.Operating SegmentsDuring the second quarter of 2016, in an effort to strengthen the alignment between our manufacturing businesses and our retail sales and service operations, improve profitability and capitalize on growth opportunities, we realigned our reporting segments into two segments,three reportable segments: Commercial Trailer Products, Diversified Products, and DiversifiedFinal Mile Products. As a result of the realignment, the businesses previously operating within our former retail segment are now included in oneEach of these two segments. Certain corporate-related administrative costs, interestreportable segments offers a diverse portfolio of industrial solutions for the end markets and income taxes are not allocated to these two segments, but are reported in our Corporate and Eliminations segment. Financial results by operating segment, including information about revenues from customers, measures of profit and loss, and financial information regarding geographic areas and export sales are discussed in Note 12, Segments and Related Information, of the accompanying consolidated financial statements. By operating segment, net sales, prior to the elimination of intersegment sales, were as follows (dollars in thousands): Year Ended December 31, 2016 2015 2014 Sales by Segment Commercial Trailer Products $ 1,506,110 $ 1,582,240 $ 1,380,623 Diversified Products Group 352,404 456,927 494,992 Corporate and Eliminations (13,070 ) (11,679 ) (12,300 ) Total $ 1,845,444 $ 2,027,489 $ 1,863,315 Commercial Trailer Products Diversified Products Final Mile Products ■ Dry and Refrigerated Van Trailers ■ Tank Trailers and Truck-Mounted Tanks ■ Truck-Mounted Dry Bodies ■ Platform Trailers ■ Composite Panels and Products ■ Truck-Mounted Refrigerated Bodies ■ Fleet Used Trailers ■ Food, Dairy and Beverage Equipment ■ Service and Stake Bodies ■ Aftermarket Parts and Service ■ Containment and Aseptic Systems ■ Fiberglass Reinforced Plywood Panels 4 ■ Aftermarket Parts and Service ■ Upfitting Parts and Services
Commercial Trailer Products
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Percentage of net sales | 81.0 | % | 77.6 | % | 73.6 | % | ||||||
Percentage of gross profit | 77.0 | % | 64.9 | % | 51.4 | % |
The Commercial Trailer Products segment manufactures standarddry and customized van andrefrigerated vans, platform trailers truck bodies and other transportation related equipment. Commercial Trailer Products’ transportation equipment is marketed under the Wabash
Commercial Trailer Products’ transportation equipment is marketed under the Wabashâ, DuraPlateâ, DuraPlateHDâ, DuraPlateâ XD-35®, ArcticLite®, RoadRailer®, Transcraft® and Benson® trademarks directly to customers, through independent dealers and through our Company-owned retail branch network. Historically, we have focused on our longstanding core customers, which represent many of the largest companies in the trucking industry, but we have expanded this focus over the past several years to include numerous additional key accounts. Our relationships with our core customers have been central to our growth since inception. We have also actively pursued the diversification of our customer base through our network of independent dealers. For our van business we utilize a total of 27 independent dealers with approximately 68 locations throughout North America to market and distribute our trailers. We distribute our flatbed and dropdeck trailers through a network of 74 independent dealers with approximately 120 locations throughout North America. In addition, we maintain a used fleet sales center to focus on selling both large and small fleet trade packages to the wholesale market.
Diversified Products segment sales as a percentage of our consolidated net sales and gross profit margin measured prior to intersegment eliminations were:
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Percentage of net sales | 19.0 | % | 22.4 | % | 26.4 | % | ||||||
Percentage of gross profit | 23.0 | % | 35.1 | % | 48.6 | % |
INNOVATE | ■ Continue innovation leadership | |
■ Improve durability and reduce weight with material technologies | ||
OPTIMIZE | ■ Margin enhancement through integration, alignment and shared services activities | |
■ Utilize the Wabash Management System and lean manufacturing to drive margin enhancement through continuous focus on efficiency | ||
GROW | ■ Expand Final Mile platform | |
■ Commercialize Molded Structural Composites refrigerated van | ||
■ Increase business development capabilities |
The Diversified Products segment focusesWe believe that if we are successful in focusing on each of these three pillars, we will be well-positioned to advance our commitment to expand our customer base, diversify our product offerings, end markets and revenues, and extend our market leadership by leveraging our intellectual property and technology, including our proprietary DuraPlate® panel technology, drawing on our core manufacturing expertise and making available products that are complementary to the truck and tank trailers and transportation equipment we offer. This segment includes a wide array of products and customer-specific solutions. Leveraging our intellectual property and technology and core manufacturing expertise into new applications and market sectors enables us to deliver greater value to our customers and shareholders.
Through these brands and product offerings, our Diversified Products segment now serves a variety of end markets, a number of which we believe are less cyclical than the markets served by our Commercial Trailer Products segment. We expect to continue to focus on diversifying our Diversified Products segment to enhance our business model, strengthen our revenues and become a more diverse company that can deliver greater value to our shareholders.
Strategy
In addition to our commitment to long-term profitable growth within each of our reportingreportable segments, our strategic initiatives includeincrease diversification to progress the Company’s goal of becoming a focus on diversification efforts, both organic and strategic, to further transform Wabash into amore diversified industrial manufacturer with a higher growth and margin profile, and successfully deliver a greater value to our shareholders. Organically, our focus is on profitably growing and diversifying our operations by leveragingBy continuing to be an innovation leader we expect to leverage our existing assets capabilities, and technologycapabilities into higher margin products and markets and thereby providingby delivering value-added customer solutions. Strategically, we continue to focus onOptimizing our transition into a more diversified industrial manufacturer, profitably growing and further broadening the product portfolio, we offer,operations and processes to enhance manufacturing efficiency and agility is expected to well-position the customersCompany to drive margin expansion and end markets we servereinforce our customer relationships. Growing strategically may diversify our revenue stream and strengthening our geographic presence. Future acquisitions may further provide us the opportunity to move forward on this strategic initiative and our long-term plan to become a more diversified industrial manufacturer. Our most recent acquisitions have enabledallow us to recognize top-lineleverage our technology across more markets.
▪ | Value-added, engineered products and services manufactured at scale to provide customer-focused solutions; |
▪ | Leading market position; |
▪ | Strong management team that is a cultural fit; |
▪ | Aligned with our core competencies in purchasing, operations, distribution and product development; and |
▪ | Diversified growth markets, whether end-markets or geographical, and less cyclical industries. |
Company’s capital allocation strategy are summarized below:
Maintain Liquidity: | § Manage the business for the long-term | |
§ Be equipped for changes in market conditions and strategic growth opportunities | ||
Debt Management: | § Reduce debt and de-lever the Company | |
Reinvest for Growth: | § Fund capital expenditures that drive growth and margin expansion | |
Dividends: | § Return excess cash to shareholders | |
Share Repurchases: | § Opportunistically repurchase shares | |
§ Offset dilution from stock based compensation |
Wabash, Great Dane, Utility and Hyundai Translead are generally viewed as the top trailer manufacturers in the U.S. trailer shipments by volume. Our share of U.S. total trailer shipments in 20162018 was approximately 21%19%. Trailer manufacturers compete primarily through the quality of their products, customer relationships, innovative technology, and price. We have seen others in the industry also pursue the development and use of composite sidewalls that compete directly with our DuraPlateâ® products. Our product development is focused on maintaining a leading position with respect to these products and on development of new products and markets, leveraging our proprietary DuraPlate® product, as well as our expertise in the engineering and design of customized products.
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Wabash | 60,000 | 63,000 | 56,000 | 46,000 | 45,000 | (2) | ||||||||||||||
Hyundai Translead | 49,000 | 43,000 | 34,000 | 27,000 | 23,000 | |||||||||||||||
Great Dane | 48,000 | 52,000 | 48,000 | 44,000 | 44,000 | |||||||||||||||
Utility | 46,000 | 49,000 | 41,000 | 39,000 | 38,000 | |||||||||||||||
Stoughton | 16,000 | 15,000 | 13,000 | 12,000 | 11,000 | |||||||||||||||
Other principal producers | 64,000 | 80,000 | 37,000 | 31,000 | 33,000 | |||||||||||||||
Total Industry | 283,000 | 302,000 | 265,000 | 232,000 | (1) | 227,000 |
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Wabash | 60,150 | 54,000 | 60,000 | 63,000 | 56,000 | ||||||||||
Hyundai Translead | 59,000 | 58,000 | 49,000 | 43,000 | 36,000 | ||||||||||
Great Dane | 49,000 | 46,000 | 48,000 | 52,000 | 48,000 | ||||||||||
Utility | 49,000 | 43,000 | 46,000 | 49,000 | 41,000 | ||||||||||
Stoughton | 16,000 | 15,000 | 16,000 | 15,000 | 13,000 | ||||||||||
Other principal producers | 46,000 | 32,000 | 33,000 | 40,000 | 37,000 | ||||||||||
Total Industry | 317,000 | 282,000 | 283,000 | 300,000 | 268,000 | (1) |
(1) | Data revised by publisher in a subsequent year. |
▪ | Long-Term Core Customer Relationships – We are the leading provider of trailers to a significant number of top tier trucking companies, generating a revenue base that has helped to sustain us as one of the market leaders. Our van products are preferred by many of the industry’s leading carriers. We are also a leading provider of liquid-transportation systems and engineered products and we have a strong customer base, consisting of mostly private fleets, and have earned a leading market position across many of the markets we serve. |
We have been manufacturing DuraPlateâ trailers for over 21 years and through December 2016 have sold approximately 650,000 DuraPlate® trailers. We believe that this proven experience, combined with ownership and knowledge of the DuraPlateâ panel technology, will help ensure continued industry leadership in the future. We continue to introduce new innovations in our DuraPlate® line of products, including DuraPlateHD®and DuraPlate XD-35®, along with new innovations in other product lines, including our ArcticLite® refrigerated trailers and Lean Duplex tank trailers.
▪ | Technology |
In addition
▪ | Extended Service Life – operate three to five years longer; |
▪ | Lower Operating and Maintenance Costs – greater durability and performance; |
▪ | Less Downtime – higher utilization for fleets; |
▪ | Extended Warranty – warranty period for DuraPlate® panels is ten years; and |
▪ | Improved Resale Value – higher trade-in and resale values. |
▪ | Significant Market Share and Brand Recognition – We have been one of the three largest manufacturers of trailers in North America since 1994, with one of the most widely recognized brands in the industry. We are currently one of the largest producers of van trailers in North America and, according to data published by Trailer Body Builders Magazine. We are one of the largest manufacturers of platform trailers in North America through our Transcraft® and Benson® brands. We are one of the largest manufacturer of liquid stainless steel and aluminum tank trailers in North America through our Walker Transport, Brenner® Tank, Bulk International and Beall® brands. In addition, we are the second largest manufacturer of truck bodies in North America through our Supreme, Iner-City®, Spartan, and Kold King® brands. We participate broadly in the transportation industry through all of our business segments. |
▪ | Committed Focus on Operational Excellence – Safety, quality, on-time delivery, productivity and cost reduction are the core elements of our program of continuous improvement. We currently maintain an ISO 14001 registration of the Environmental Management System at five facilities, which include our Lafayette, Indiana; Cadiz, Kentucky; San José Iturbide, Mexico; Portland, Oregon; and Harrison, Arkansas locations. In addition, we have achieved ISO 9001 registration of the Quality Management Systems at our Lafayette, Indiana and Cadiz, Kentucky facilities. |
▪ | CorporateCulture – We benefit from an experienced, value-driven management team and dedicated workforce focused on operational excellence. Safety of our associates is our number one value and highest priority. |
▪ | Extensive Distribution Network– We utilize a network of |
Commercial Trailer Products segment sales represented approximately 81%, 78% and 74% of our consolidated net sales in 2016, 2015 and 2014, respectively.
▪ | Dry Van Trailers. The dry van market represents our largest product line and includes trailers sold under DuraPlate |
▪ | Platform Trailers. Platform trailers are sold under the Transcraft® and Benson® trademarks. Platform trailers consist of a trailer chassis with a flat or “drop” loading deck without permanent sides or a roof. These trailers are primarily utilized to haul steel coils, construction materials and large equipment. In addition to our all steel and combination steel and aluminum platform trailers, we also offer a premium all-aluminum platform trailer. |
▪ | Refrigerated Trailers. Refrigerated trailers provide thermal efficiency, maximum payload capacity, and superior damage resistance. Our refrigerated trailers are sold under the ArcticLite® trademark and use our proprietary SolarGuard® technology, coupled with our foaming process, which we believe enables customers to achieve lower costs through reduced operating hours of refrigeration equipment and therefore reduced fuel consumption. In 2016, Wabash introduced a proprietary molded structural composite with thermal technology which, based on our testing, provides improved thermal performance for refrigerated trailers by up to 25% and is up to 20% lighter than standard refrigerated trailers while still maintaining strength and durability. |
▪ |
Specialty Trailers. These products include a wide array of specialty equipment and services generally focused on products that require a higher degree of customer specifications and requirements. These specialty products include converter dollies, Big Tire Hauler, Steel Coil Hauler and RoadRailer® trailers. |
▪ | Aftermarket Parts and Service. Aftermarket component products are manufactured to provide continued support to our customers throughout the |
▪ | Used Trailers. |
▪ | Wood Products. We manufacture laminated hardwood oak flooring used primarily in our dry van trailer segment at our manufacturing operations located in Harrison, Arkansas. |
Diversified Products segment sales represented approximately 19%, 22% and 26% of our consolidated net sales in 2016, 2015 and 2014, respectively.
▪ | Tank Trailers.Tank Trailers currently has several principal brands dedicated to transportation products including Walker Transport, Brenner® Tank, Bulk Tank International, and Beall® Trailers. Equipment sold under these brands include stainless steel and aluminum liquid and dry bulk tank trailers and other transport solutions for the dairy, food and beverage, chemical, environmental, petroleum and refined fuel industries. We also provide parts and maintenance and repair services for tank trailers and other related equipment through our six Brenner Tank Service centers. |
▪ | Walker Transport – Founded as the original Walker business in 1943, the Walker Transport brand includes stainless steel tank trailers for the dairy, food and beverage end markets. |
▪ | Brenner® Tank – Founded in 1900, Brenner®Tank manufactures stainless steel and aluminum tank trailers, dry bulk trailers, and fiberglass reinforced poly tank trailers, as well as vacuum tank trailers |
▪ | Bulk Tank International – Manufactures stainless steel tank trailers for the oil and gas and chemical end markets. |
▪ | Beall® Trailers – With tank trailer production dating to 1928, the Beall® brand includes aluminum tank trailers and related tank trailer equipment for the dry bulk and petroleum end markets. |
▪ | Process Systems.Process Systems currently sells products under the Walker Engineered Products and Extract Technology® brands and specializes in the design and production of a broad range of products including: a portfolio of products for storage, mixing and blending, including process vessels, as well as round horizontal and vertical storage silo tanks; containment and isolation systems for the pharmaceutical, chemical, and nuclear industries, including custom designed turnkey systems and spare components for full service and maintenance contracts; containment systems for the pharmaceutical, chemical and biotech |
▪ | Walker Engineered Products – Since the 1960s, Walker has marketed stainless steel storage tanks and silos, mixers, and processors for the dairy, food and beverage, pharmaceutical, chemical, craft brewing, and biotech end markets under the Walker Engineered Products brand. |
▪ | Extract Technology® – Since 1981, the Extract Technology® brand has included stainless steel isolators and downflow booths, as well as custom-fabricated equipment, including workstations and drum booths for the pharmaceutical, fine chemical, biotech and nuclear end markets. |
▪ |
Composites. Our |
▪ | Signature Van Bodies. Signature van bodies range from 8 to 28 feet in length with exterior walls assembled from one of several material options including pre-painted aluminum, FiberPanel PW, FiberPanel HC, or DuraPlate®. Additional features include molded composite front and side corners, LED marker lights, sealed wiring harnesses, hardwood or pine flooring, and various door configurations to accommodate end-user loading and unloading requirements. This product is adaptable for a diverse range of uses in dry-freight transportation. |
▪ | Iner-City® Cutaway Van Bodies. An ideal route truck for a variety of commercial applications, the Iner-City bodies are manufactured on cutaway chassis which allow access from the cab to the cargo area. Borrowing many design elements from Supreme’s larger van body, the Iner-City is shorter in length (8 to 18 feet) than a typical van body. |
▪ | Spartan Service Bodies. Built on a cutaway chassis and constructed of FiberPanel PW, the Spartan cargo van provides the smooth maneuverability of a commercial van with the full-height and spacious cargo area of a truck body. In lengths of 8 to 14 feet and available with a variety of pre-designed options, the Spartan cargo van is a bridge product for those moving up from a traditional cargo van into the truck body category. |
▪ | Kold King® Insulated Van Bodies. Kold King® insulated bodies, in lengths up to 28 feet, provide versatility and dependability for temperature controlled applications. Flexible for either hand-load or pallet-load requirements, they are ideal for multi-stop distribution of both fresh and frozen products. |
▪ | Stake Bodies. Stake bodies are flatbeds with various configurations of removable sides. The stake body is utilized for a broad range of agricultural and construction industries’ transportation needs. |
▪ | Final Mile Series and Cold Chain Series. Introduced in 2015, we have combined fleet-proven equipment designs and advanced materials to create a line of high performance refrigerated and dry freight truck bodies for Class 6, 7, and 8 chassis. The truck body product leverages our DuraPlate® technology utilized in dry van trailers and also introduces a revolutionary proprietary molded structural composite designed to improve weight and thermal efficiency in refrigerated truck body applications. |
We have
▪ | Truckload Carriers: Averitt Express, Inc.; Celadon Group, Inc.; Covenant Transportation Group, |
▪ | Less-Than-Truckload Carriers: FedEx Corporation; Old Dominion Freight Lines, Inc.; R&L Carriers Inc.; Saia, Inc.: and YRC Worldwide, Inc. |
▪ | Refrigerated Carriers: CR England, Inc.; K&B Transportation, Inc.; Prime, Inc.; and Southern Refrigerated Transport, Inc. |
▪ | Leasing Companies: Matlack Leasing; Penske Truck Leasing Company; Wells Fargo Equipment Finance, Inc.; |
▪ | Private Fleets: C&S Wholesale Grocers, Inc.; Dollar General Corporation; and Safeway, Inc. |
▪ | Liquid Carriers: Dana Liquid Transport Corporation; Evergreen Tank Solutions LLC; Kenan Advantage Group, Inc.; Oakley Transport, Inc.; Quality Carriers, Inc.; Superior Tank, Inc.; and Trimac Transportation. |
Southern Glazer’s Leasing, LLC.
▪ | Factory direct accounts; and |
Independent dealerships. |
Our Company-owned distribution network generates sales of trailers to smaller fleets and independent operators located in geographic regions where our branches are located. This branch network enables us to provide maintenance and other services to customers.
Backlog
months.
Canada while the SIG patent applications include new and innovative designs for effectively protecting against side underride.
We also hold or have applied for 4349 trademarks in the U.S. as well as 6360 trademarks in foreign countries. These trademarks include the Wabash®, Wabash National®, Transcraft®, Benson®, Extract Technology®, Beall®, Beall®, Brenner®, and BrennerSupreme® brand names as well as trademarks associated with our proprietary products such as DuraPlate®, RoadRailer®, Transcraft Eagle®, Arctic Lite®, Kold King®, and Arctic LiteIner-City®. Additionally, we utilize several tradenames that are each well-recognized in their industries, including Walker Transport, Walker Stainless Equipment, Walker Engineered Products Garsite,and Bulk Tank International and Progress Tank.International. Our trademarks associated with additional proprietary products include MSC Technology™, MaxClearance® Overhead Door System, Trust Lock Plus®, EZ-7®, DuraPlate Aeroskirt®, Aeroskirt CX®, DuraPlate XD-35®, DuraPlate HD®, SolarGuard®, VentixDRS®, AeroFin®, AeroFin XL™XL® and EZ-Adjust®. We believe these trademarks are important for the identification of our products and the associated customer goodwill; however, our business is not materially dependent on such trademarks.
Research and Development
Research and development expenses are charged to earnings as incurred and were $6.4 million, $4.8 million and $1.7 million in 2016, 2015 and 2014, respectively.
Name | Age | Position | ||
President and Chief Executive Officer, Director | ||||
41 | Senior Vice President | |||
Melanie D. Margolin | 47 | Senior Vice President and General Counsel and Corporate Secretary | ||
Kevin J. Page | 57 | Senior Vice President and Group President, Diversified Products | ||
Michael N. Pettit | 44 | Senior Vice President and Group President, Final Mile Products | ||
Dustin T. Smith | 41 | Senior Vice President and Group President, Commercial Trailer Products | ||
Jeffery L. Taylor | Senior Vice President | |||
Richard J. Giromini.Brent L. Yeagy. Mr. Giromini has served as ourYeagy was appointed to President and Chief Executive Officer since January 2007, while also serving as our President until October 2016. Previously, Mr. Giromini served as our Executive Vice President and Chief Operating Officer from February 2005 until December 2005 when he was appointed President and a Director of the Company. Mr. Giromini joined the Company in July 2002, as Senior Vice President - Chief Operating Officer. Earlier experience includes 26 years in the transportation industry, having begun his career with General Motors Corporation (1976 – 1985), serving in a variety of positions of increasing responsibility within the Tier 1 automotive sector, most recently with Accuride Corporation (Senior Vice President and General Manager) , AKW LP (President and CEO), and ITT Automotive (Director of Manufacturing). Mr. Giromini holds a Master of Science degree in Industrial Management and a Bachelor of Science degree in Mechanical and Industrial Engineering, both from Clarkson University. He is also a graduate of the Advanced Management Program at the Duke University Fuqua School of Management.
Brent L. Yeagy.effective June 2, 2018. Mr. Yeagy has served as ourhad been President and Chief Operating Officer, and a Director of the Company since October 2016. He had beenPreviously, he served as Senior Vice President –- Group President of Commercial Trailer Products Group from June 2013 to October 2016. Previously, he served as2016 and Vice President and General Manager for the Commercial Trailer Products Group from 2010 to 2013. Mr. Yeagy has held numerous operations related roles since joining Wabash National in February 2003. Prior to joining the Company, Mr. Yeagy held various roles within Human Resources, Environmental Engineering and Safety Management for Delco Remy International from July 1999 through February 2003. Mr. Yeagy served in various Plant Engineering roles at Rexnord Corporation from December 1995 through July 1997.June 1999. Mr. Yeagy is a veteran of the United States Navy, serving from 1991 to 1994. He received his Masters of Business Administration from Anderson University and his Master and Bachelor degrees in Science from Purdue University. He is also a graduate of the University of Michigan, Ross School of Business Program in Executive Management and the Stanford Executive Program.
William D. Pitchford
Erin J. Roth He has also attended several executive programs at the Booth School of Management from University of Chicago, as well as Northwestern’s Kellogg School of Management.
Jeffery L. Taylor. Mr. Taylor was appointed Senior Vice President and Chief Financial Officer insince January 2014. Mr. Taylor joined the company in July 2012 as Vice President of Finance and Investor Relations and was promoted to Vice President –- Acting Chief Financial Officer and Treasurer in June 2013. Prior to joining the Company, Mr. Taylor was with King Pharmaceuticals, Inc. from May 2006 to July 2011 as Vice President, Finance –- Technical Operations, and with Eastman Chemical Company from June 1997 to May 2006 where he served in various positions of increasing responsibility within finance, accounting, investor relations and business management, including its Global Business Controller –- Coatings, Adhesives, Specialty Polymers & Inks. Mr. Taylor earned his Masters of Business Administration from the University of Texas at Austin and his Bachelor of Science in Chemical Engineering from Arizona State University.
Mark J. Weber. Mr. Weber was appointed to Senior Vice President - Group President of Diversified Products Group in June 2013. Mr. Weber joined the Company in August 2005 as Director of Internal Audit, was promoted in February 2007 to Director of Finance, and in November 2007 to Vice President and Corporate Controller. In August 2009 Mr. Weber was then appointed to the position of Senior Vice President – Chief Financial Officer. Prior to joining the Company, Mr. Weber was with Great Lakes Chemical Corporation from October 1995 through August 2005 where he served in several positions of increasing responsibility within accounting and finance, including Vice President of Finance. Mr. Weber earned his Masters of Business Administration and Bachelor of Science in Accounting from Purdue University’s Krannert School of Management.
could have a material adverse effect on our business, financial condition and results of operations.
results of operations.
results of operations.
results of operations.
We may not be able to execute on our long-term strategic plan and growth initiatives, or meet our long-term financial goals.
goals, and this may have a material adverse effect on our business, financial condition and results of operations.
business, financial condition and results of operations.
Significant competition in the industries in which we operate may result in our competitors offering new or better products and services or lower prices, which could result inhave a lossmaterial adverse effect on our business, financial condition and results of customers and a decrease in our revenues.
operations.
business, financial condition and results of operations.
of operations.
▪ | challenges caused by distance, language and cultural differences and by doing business with foreign agencies and governments; |
▪ | longer payment cycles in some countries; |
▪ | uncertainty regarding liability for services and content; |
▪ | credit risk and higher levels of payment fraud; |
▪ | currency exchange rate fluctuations and our ability to manage these fluctuations; |
▪ | foreign exchange controls that might prevent us from repatriating cash earned outside the U.S.; |
▪ | import and export requirements that may prevent us from shipping products or providing services to a particular market and may increase our operating costs; |
▪ | potentially adverse tax consequences; |
▪ | higher costs associated with doing business internationally; |
▪ | different expectations regarding working hours, work culture and work-related benefits; and |
▪ | different employee/employer relationships and the existence of workers’ councils and labor unions. |
Compliance with complex foreign and U.S. laws and regulations that apply to international operations may increase our cost of doing business and could expose us or our employees to fines, penalties and other liabilities. These numerous and sometimes conflicting laws and regulations include import and export requirements, content requirements, trade restrictions, tax laws, environmental laws and regulations, sanctions, internal and disclosure control rules, data privacy requirements, labor relations laws, and U.S. laws such as the Foreign Corrupt Practices Act and substantially equivalent local laws prohibiting corrupt payments to governmental officials and/or other foreign persons. Although we have policies and procedures designed to ensurecause compliance with these laws and regulations, there can be no assurance that our officers, employees, contractors or agents will not violate our policies. Any violation of the laws and regulations that apply to our operations and properties could result in, among other consequences, fines, environmental and other liabilities, criminal sanctions against us, our officers or our employees, and prohibitions on our ability to offer our products and services to one or more countries and could also materially damage our reputation, our brand, our efforts to diversify our business, our ability to attract and retain employees, our business and could have a material adverse effect on our operating results.
business, financial condition and results of operations.
operations.
financial condition and results of operations.
We are subject to extensive governmental laws and regulations, and our costs related to compliance with, or our failure to comply with, existing or future laws and regulations could adversely affecthave a material adverse effect on our business, financial condition and results of operations.
Regulations related to conflict-free minerals may force us to incur additional expenses
As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission adopted rules regarding disclosure of the use of certain minerals, known as conflict minerals, originating from the Democratic Republic of Congo or adjoining countries. These requirements require ongoing due diligence efforts and disclosure requirements. We may incur significant costs to determine the source of any such minerals used in our products. We may also incur costs with respect to potential changes to products, processes or sources of supply as a consequence of our diligence activities. Further, the implementation of these rules and their effect on customer and/or supplier behavior could adversely affect the sourcing, supply and pricing of materials used in our products, as the number of suppliers offering conflict-free minerals could be limited. We may incur additional costs or face regulatory scrutiny if we determine that some of our products contain materials not determined to be conflict-free or if we are unable to sufficiently verify the origins of all conflict minerals used in our products. Accordingly, compliance with these rulesother legal claims could have a material adverse effect on our business, results of operations and/or financial condition.
Product liability and other legal claims could have an adverse effect on our financial condition and results of operations.
▪ | the state of our business, competition, and changes in our industry; |
▪ | changes in the factors, assumptions, and other considerations made by our Board of Directors in reviewing and revising our dividend policy; |
▪ | our future results of operations, financial condition, liquidity needs, and capital resources; and |
▪ | our various expected cash needs, including cash interest and principal payments on our indebtedness, capital expenditures, the purchase price of acquisitions, and taxes. |
Risks Related to Our Indebtedness
Our levels ofsubstantial indebtedness could adversely affect our business, financial condition and results of operations,prevent us from fulfilling our ability to meet our payment obligations under our debt agreements, and our ability to pay dividends.
thereunder.
▪ | negatively affect our ability to pay principal and interest on our debt; |
▪ | increase our vulnerability to general adverse economic and industry conditions; |
▪ | limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments of interest and principal or to comply with any restrictive terms of our debt; |
▪ | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
▪ | impair our ability to obtain additional financing or to refinance our indebtedness in the future; |
▪ | place us at a competitive disadvantage compared to our competitors that may have proportionately less debt; and |
▪ | impact our ability to continue to fund a regular quarterly dividend. |
Any of the factors listed above could have a material adverse effect on our business, financial condition and results of operations.
Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt obligations.
be successful.
it will be in default and, as a result, holders of Senior Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Revolving Credit Agreement and Term Loan Credit Agreement could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation.
Despite
The conditional conversion featureProvisions of the Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than cash in lieu of any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our working capital.
Provisions of theSenior Notes could discourage a potential future acquisition of us by a third party.
Our common stock has experienced, and may continue to experience, price and trading volume volatility.
▪ | trends in our industry and the markets in which we operate; |
▪ | changes in the market price of the products we sell; |
▪ | the introduction of new technologies or products by us or by our competitors; |
▪ | changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; |
▪ | operating results that vary from the expectations of securities analysts and investors; |
▪ | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, financings or capital commitments; |
▪ | changes in laws and regulations; |
▪ | general economic and competitive conditions; and |
▪ | changes in key management personnel. |
▪ | our assessments of the asset quality and value of Supreme and its assets; |
▪ | our projections of Supreme’s business and its future financial performance; |
▪ | our ability to realize synergies related to supply chain optimization, commercialization and distribution of new and existing products, back office and administrative consolidation, and further implementation of manufacturing best practices; |
▪ | costs to comply with, and liabilities related to, laws and regulations applicable to Supreme, including environmental laws and regulations; |
▪ | our ability to maintain, develop and deepen relationships with Supreme’s customers; |
▪ | our belief that the Final Mile Products segment served by Supreme will grow substantially in the future and tends to be less cyclical than the van and platform trailer markets historically served by Wabash; and |
▪ | other financial and strategic risks of operating the acquired business. |
Properties owned by Wabash are subject to security interests held by our lenders. We believe the facilities we are now using are adequate and suitable for our current business operations and the currently foreseeable level of operations. The following table provides information regarding the locations of our major facilities which are in the following areas in the United States, Mexico and United Kingdom:
Location | Owned or Leased | Description of Activities at Location | Segment | |||
Ashland, Kentucky | Leased | Parts distribution | Diversified Products | |||
Baton Rouge, Louisiana | Leased | Service and parts distribution | Diversified Products | |||
Cadiz, Kentucky | Leased | Manufacturing | Commercial Trailer Products | |||
Chicago, Illinois | Leased | Service and parts distribution | Diversified Products | |||
Owned | ||||||
Elroy, Wisconsin | Owned | Manufacturing | Diversified | |||
Fond du Lac, Wisconsin | Owned | Manufacturing | Diversified Products | |||
Frankfort, Indiana | Leased | Manufacturing | Diversified Products | |||
Goshen, Indiana | Owned | Manufacturing | Final Mile Products | |||
Griffin, Georgia | Owned | Manufacturing | Final Mile Products | |||
Harrison, Arkansas | Owned | Manufacturing | ||||
Houston, Texas | Leased | Service and parts distribution | Diversified Products | |||
Huddersfield, United Kingdom | Leased property/Owned building | Manufacturing | Diversified Products | |||
Owned/Leased | Manufacturing | |||||
Lafayette, Indiana | Owned | Corporate Headquarters, Manufacturing and used trailers | Commercial Trailer Products, Diversifed Products and | |||
Ligonier, Indiana | Owned | Manufacturing | Final Mile Products | |||
Little Falls, Minnesota | Owned | Manufacturing | Commercial Trailer Products | |||
Mauston, Wisconsin | Leased | Service and parts distribution | Diversified Products | |||
Owned/Leased | Manufacturing | Final Mile Products | ||||
New Lisbon, Wisconsin | Owned | Manufacturing | Diversified Products | |||
Portland, Oregon | Owned | Manufacturing | Diversified Products | |||
Queretaro, Mexico | Owned | Manufacturing | Diversified | |||
West Memphis, Arkansas | Leased | Service and parts distribution | Diversified Products |
We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities, and are periodically subject to governmental examinations (including by regulatory and tax authorities), and information gathering requests (collectively, "governmental examinations").
We have recorded liabilities for certain On the basis of our outstanding legalinformation currently available to us, management does not believe that existing proceedings and governmental examinations. A liability is accrued when it is both (a) probable that a loss with respect to the legal proceeding has occurred and (b) the amount of loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the liability that has been previously accrued. These legal proceedings, as well as governmental examinations, involve various lines of business and a variety of claims (including, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against us specify the damages claimed by the plaintiff, many seek a not-yet-quantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against Wabash is stated, the claimed amount may be exaggerated and/or unsupported. As a result, it is not currently possible to estimate a range of possible loss beyond previously accrued liabilities relating to some matters including those described below. Such previously accrued liabilities may not represent our maximum loss exposure. The legal proceedings and governmental examinations underlying the estimated rangeinvestigations will change from time to time and actual results may vary significantly from the currently accrued liabilities.
Based on our current knowledge, and taking into consideration litigation-related liabilities, we believe we are not a party to, nor is any of our properties the subject of, any pending legal proceeding or governmental examination other than the matters below, which are addressed individually, that could have a material adverse effectimpact on our consolidated financial condition or liquidity if determined in a manner adverse to us.the Company. However, in light of the uncertainties involved in such matters the ultimate outcome of a particular matterare unpredictable, and we could be material toincur judgments or enter into settlements for current or future claims that could materially and adversely affect our operating results for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.financial statements. Costs associated with the litigation and settlements of legal matters are reported withinGeneral and Administrative Expenses in the Consolidated Statements of Operations.
Brazil Joint Venture
In March 2001, Bernard Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against the Company in the Fourth Civil Court of Curitiba in the State of Paraná, Brazil. Because of the bankruptcy of BK, this proceeding is now pending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99).
The case grows out of a joint venture agreement between BK and the Company related to marketing of RoadRailer trailers in Brazil and other areas of South America. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the joint venture was dissolved. BK subsequently filed its lawsuit against the Company alleging that it was forced to terminate business with other companies because of the exclusivity and non-compete clauses purportedly found in the joint venture agreement. BK asserted damages, exclusive of any potentially court-imposed interest or inflation adjustments, of approximately R$20.8 million (Brazilian Reais). BK did not change the amount of damages it asserted following its filing of the case in 2001.
A bench (non-jury) trial was held on March 30, 2010 in Curitiba, Paraná, Brazil. On November 22, 2011, the Fourth Civil Court of Curitiba partially granted BK’s claims, and ordered Wabash to pay BK lost profits, compensatory, economic and moral damages in excess of the amount of compensatory damages asserted by BK. The total ordered damages amount was approximately R$26.7 million (Brazilian Reais), which was approximately $8.2 million U.S. dollars using the exchange rate as of December 31, 2016 and exclusive of any potentially court-imposed interest, fees or inflation adjustments. On October 5, 2016, the Court of Appeals re-heard all facts and legal questions presented in the case, and ruled in favor of the Company on all claims at issue. In doing so, the Court of Appeals dismissed all claims against the Company and vacated the judgment and damages previously ordered by the Fourth Civil Court of Curitiba. Unless BK appeals the ruling and a higher court finds in favor of BK on any of its claims, the judgment of the Court of Appeals is final. As a result of the Court of Appeals ruling, the Company does not expect that this proceeding will have a material adverse effect on its financial condition or results of operations; however, it will continue to monitor these legal proceedings in the event BK further appeals the ruling of the Court of Appeals.
Intellectual Property
In October 2006, we filed a patent infringement suit against Vanguard National Corporation (“Vanguard”) regarding our U.S. Patent Nos. 6,986,546 and 6,220,651 in the U.S. District Court for the Northern District of Indiana (Civil Action No. 4:06-cv-135). We amended the Complaint in April 2007. In May 2007, Vanguard filed its Answer to the Amended Complaint, along with Counterclaims seeking findings of non-infringement, invalidity, and unenforceability of the subject patents. We filed a reply to Vanguard’s counterclaims in May 2007, denying any wrongdoing or merit to the allegations as set forth in the counterclaims. The case was stayed by agreement of the parties while the U.S. Patent and Trademark Office (“Patent Office”) undertook a reexamination of U.S. Patent No. 6,986,546. In June 2010, the Patent Office notified Wabash that the reexamination was completed and the Patent Office reissued U.S. Patent No. 6,986,546 without cancelling any claims of the patent. The parties have not yet petitioned the Court to lift the stay, and it is unknown at this time when the parties may do so.
We believe that our claims against Vanguard have merit and that the claims asserted by Vanguard are without merit. We intend to vigorously defend our position and intellectual property. We believe that the resolution of this lawsuit will not have a material adverse effect on our financial position, liquidity or future results of operations. However, at this stage of the proceeding, no assurance can be given as to the ultimate outcome of the case.
Walker Acquisition
In connection with our acquisition of Walker Group Holdings (“Walker”) in May 2012, there is an outstanding claim of approximately $2.9 million for unpaid benefits owed by the Seller that is currently in dispute and that, if required to be paid, is not expected to have a material adverse effect on our financial condition or results of operations.
Environmental Disputes
Bulk Tank International, S. de R.L. de C.V. (“Bulk”), one
In January 2006, we received a letter from the North Carolina Department of Environment and Natural Resources indicating that a site that we formerly owned near Charlotte, North Carolina has been included on the state's October 2005 Inactive Hazardous Waste Sites Priority List. The letter states that we were being notified in fulfillment of the state's “statutory duty” to notify those who own and those who at present are known to be responsible for each Site on the Priority List. Following receipt of this notice, no action has ever been requested from Wabash, and since 2006 we have not received any further communications regarding this matter from the state of North Carolina. We do not expect that this designation will have a material adverse effect on our financial condition or results of operations.
On607.
High and low stock prices as reported on the New York Stock Exchange for the last two years were:
High | Low | |||||||
2016 | ||||||||
First Quarter | $ | 13.57 | $ | 9.68 | ||||
Second Quarter | $ | 14.97 | $ | 11.81 | ||||
Third Quarter | $ | 14.72 | $ | 12.23 | ||||
Fourth Quarter | $ | 16.30 | $ | 10.74 | ||||
2015 | ||||||||
First Quarter | $ | 14.96 | $ | 11.36 | ||||
Second Quarter | $ | 15.21 | $ | 12.31 | ||||
Third Quarter | $ | 14.09 | $ | 10.16 | ||||
Fourth Quarter | $ | 13.10 | $ | 10.02 |
2018
On February 1, 2016, our
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Amount That May Yet Be Purchased Under the Plans or Programs ($ in millions) | ||||||||||||
October 2016 | 950,000 | $ | 13.32 | 950,000 | $ | 49.1 | ||||||||||
November 2016 | 365,900 | $ | 12.47 | 365,900 | $ | 44.5 | ||||||||||
December 2016 | 1,433,681 | $ | 15.07 | 1,430,602 | $ | 23.0 | ||||||||||
Total | 2,749,581 | $ | 14.12 | 2,746,502 | $ | 23.0 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Amount That May Yet Be Purchased Under the Plans or Programs ($ in millions) | ||||||||||
October 2018 | 136,000 | $ | 14.71 | 136,000 | $ | 11.9 | ||||||||
November 2018 | 762,455 | $ | 15.63 | 762,455 | $ | 100.0 | ||||||||
December 2018 | 2,676 | $ | 12.97 | — | $ | 100.0 | ||||||||
Total | 901,131 | $ | 15.48 | 898,455 | $ | 100.0 |
Years Ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Statement of Comprehensive Income Data: | ||||||||||||||||||||
Net sales | $ | 1,845,444 | $ | 2,027,489 | $ | 1,863,315 | $ | 1,635,686 | $ | 1,461,854 | ||||||||||
Cost of sales | 1,519,910 | 1,724,046 | 1,630,681 | 1,420,563 | 1,298,031 | |||||||||||||||
Gross profit | $ | 325,534 | $ | 303,443 | $ | 232,634 | $ | 215,123 | $ | 163,823 | ||||||||||
Selling, general and administrative expenses | 101,399 | 100,728 | 88,370 | 89,263 | 68,340 | |||||||||||||||
Amortization of intangibles | 19,940 | 21,259 | 21,878 | 21,786 | 10,590 | |||||||||||||||
Other operating expenses | 1,663 | 1,087 | - | 883 | 14,409 | |||||||||||||||
Income from operations | $ | 202,532 | $ | 180,369 | $ | 122,386 | $ | 103,191 | $ | 70,484 | ||||||||||
Interest expense | (15,663 | ) | (19,548 | ) | (22,165 | ) | (26,308 | ) | (21,724 | ) | ||||||||||
Other, net | (1,452 | ) | 2,490 | (1,759 | ) | 740 | (97 | ) | ||||||||||||
Income before income taxes | $ | 185,417 | $ | 163,311 | $ | 98,462 | $ | 77,623 | $ | 48,663 | ||||||||||
Income tax expense (benefit) | 65,984 | 59,022 | 37,532 | 31,094 | (56,968 | ) | ||||||||||||||
Net income | $ | 119,433 | $ | 104,289 | $ | 60,930 | $ | 46,529 | $ | 105,631 | ||||||||||
Basic net income per common share | $ | 1.87 | $ | 1.55 | $ | 0.88 | $ | 0.67 | $ | 1.53 | ||||||||||
Diluted net income per common share | $ | 1.82 | $ | 1.50 | $ | 0.85 | $ | 0.67 | $ | 1.53 | ||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working capital | $ | 314,791 | $ | 318,430 | $ | 298,802 | $ | 232,638 | $ | 221,402 | ||||||||||
Total assets | $ | 898,733 | $ | 950,126 | $ | 928,651 | $ | 912,245 | $ | 902,626 | ||||||||||
Total debt and capital leases | $ | 237,836 | $ | 315,633 | $ | 332,527 | $ | 370,595 | $ | 425,151 | ||||||||||
Stockholders' equity | $ | 472,391 | $ | 439,811 | $ | 390,832 | $ | 322,379 | $ | 268,727 |
Years Ended December 31, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Net sales | $ | 2,267,278 | $ | 1,767,161 | $ | 1,845,444 | $ | 2,027,489 | $ | 1,863,315 | |||||||||
Cost of sales | 1,983,627 | 1,506,286 | 1,519,910 | 1,724,046 | 1,630,681 | ||||||||||||||
Gross profit | 283,651 | 260,875 | 325,534 | 303,443 | 232,634 | ||||||||||||||
Selling, general and administrative expenses | 128,160 | 103,413 | 101,399 | 100,728 | 88,370 | ||||||||||||||
Amortization of intangibles | 19,468 | 17,041 | 19,940 | 21,259 | 21,878 | ||||||||||||||
Acquisition expenses | 68 | 9,605 | — | — | — | ||||||||||||||
Impairment | 24,968 | — | 1,663 | 1,087 | — | ||||||||||||||
Income from operations | 110,987 | 130,816 | 202,532 | 180,369 | 122,386 | ||||||||||||||
Interest expense | (28,759 | ) | (16,400 | ) | (15,663 | ) | (19,548 | ) | (22,165 | ) | |||||||||
Other, net | 13,776 | 8,122 | (1,452 | ) | 2,490 | (1,759 | ) | ||||||||||||
Income before income taxes | 96,004 | 122,538 | 185,417 | 163,311 | 98,462 | ||||||||||||||
Income tax expense (benefit) | 26,583 | 11,116 | 65,984 | 59,022 | 37,532 | ||||||||||||||
Net income | $ | 69,421 | $ | 111,422 | $ | 119,433 | $ | 104,289 | $ | 60,930 | |||||||||
Dividends declared per share | $ | 0.305 | $ | 0.255 | $ | 0.060 | $ | — | $ | — | |||||||||
Basic net income per common share | $ | 1.22 | $ | 1.88 | $ | 1.87 | $ | 1.55 | $ | 0.88 | |||||||||
Diluted net income per common share | $ | 1.19 | $ | 1.78 | $ | 1.82 | $ | 1.50 | $ | 0.85 | |||||||||
Balance Sheet Data: | |||||||||||||||||||
Working capital | $ | 277,743 | $ | 292,723 | $ | 314,791 | $ | 318,430 | $ | 298,802 | |||||||||
Total assets | $ | 1,304,393 | $ | 1,351,513 | $ | 898,733 | $ | 950,126 | $ | 928,651 | |||||||||
Total debt and capital leases | $ | 505,911 | $ | 551,413 | $ | 237,836 | $ | 315,633 | $ | 332,527 | |||||||||
Stockholders’ equity | $ | 473,849 | $ | 506,063 | $ | 472,391 | $ | 439,811 | $ | 390,832 |
During the second quarter of 2016, we realigned our reporting segments into two segments, Commerical Trailer Products and Diversified Products. As a result of the realignment,acquisition of Supreme in the businesses previously operating within the former retail segment arethird quarter of 2017, we now reportedmanage our business in one of these two segments. We undertook the realignment in an effort to strengthen the alignment between our manufacturing businessesthree segments: Commercial Trailer Products, Diversified Products, and our retail sales and service operations, improve profitability and capitalize on growth opportunities.Final Mile Products. The Commercial Trailer Products segment manufactures standard and customized van and platform trailers truck bodies and other transportation related equipment tofor customers who purchase directly from us or through independent dealers or Company owned branch locations through which we provide service and support.dealers. The Diversified Products segment, comprised of fourthree strategic business units including, Tank Trailer, Aviation & Truck Equipment, Process Systems, and Composites, focuses on our commitment to expand our customer base and diversify our product
the fourth quarter of 2017.
2016
We delivered consolidated results for 2016 that set new records for profitability for the fifth consecutive year, including gross profit, gross profit margin, operating income and operating margin.
e-commerce.
The outlook for the overall trailer market for 20172019 continues to indicate a strong demand environment. In fact, the most recent estimates from industry forecasters, ACT and FTR, indicate demand levels expected to be in excess of the estimated replacement demand in every year through 2021.2023. More specifically, ACT is currently estimating 20172019 demand will be approximately 261,000, down 9%316,000 trailers, a decrease of 2.2% as compared to the previous year period, with 20182020 through 20212023 industry demand levels ranging between 252,000261,000 and 267,000275,000 trailers. In addition, FTR anticipates trailer production for 20172019 to remain strong at approximately 259,000312,000 trailers, a decrease of 10%1.7% as compared to 20162018 levels. This continued strong demand environment for new trailer equipment as well as the positive economic and industry specific indicators we monitor reinforce our belief that the current trailer demand cycle will be an extended cycle with a strong likelihood for several more years of demand above replacement levels. We
However, we are not relying solely on volume and product pricing within the trailer industry to improve operations and enhance profitability.
Internal performance. Our primary internal quality measurement is Process Yield. Process Yield is a performance metric that measures the impact of all aspects of the business on our ability to ship our products at the end of the production process. As with previous years, the expectations of the highest quality product continue to increase while maintaining Process Yield performance and reducing rework. In addition, we currently maintain an ISO 9001 registration of our Quality Management System at our Lafayette operations. |
▪ | External performance. We actively track our warranty claims and costs to identify and drive improvement opportunities in quality and reliability. Early life cycle warranty claims for our van trailers are trended for performance monitoring. Using a unit based warranty reporting process to track performance and document failure rates, early life cycle warranty units per 100 trailers shipped averaged approximately |
During the past several years, Commercial Trailer Products has focused on productivity enhancements within manufacturing assembly and sub-assembly areas through developing the capability for mixed model production. These efforts have resulted in throughput improvements in our Lafayette, Indiana, and Cadiz, Kentucky facilities. |
▪ |
The Federal Motor Carrier Safety Administration (the “FMCSA”) has taken steps in recent years to improve truck safety standards, particularly by implementing the Compliance, Safety, and Accountability (“CSA”) program as well as requiring Electronic Logging Devices (“ELDs”). CSA is considered a comprehensive driver and fleet rating system that measures both the freight carriers and drivers on several safety related criteria, including driver safety, equipment maintenance and overall condition of trailers. This system drives increased awareness and action by carriers since enforcement actions were targeted and implemented beginning in June 2011. CSA is generally believed to have contributed to the tightening of the supply of drivers and capacity after 2011 as carriers took measures to improve their rating. The FMCSA issued a mandate |
▪ | In July 2013, a new FMCSA hours-of-service rule went into effect, reducing total driver hours from 82 hours per week to 70 hours. Congress included language in the 2016 spending package that requires the agency to meet an appropriate safety, driver health and driver longevity standard before re-imposing those restrictions. Specifically, the language prohibits FMCSA from reinstating certain sections of the rule’s 34-hour restart provisions unless an FMCSA study finds that they result in statistically significant improvements in safety and driver health, among other things. In 2017, the U.S. Department of Transportation (the “DOT”) released the findings of the study that failed to “explicitly identify a net benefit” from two suspended provisions of the hours of service rules regarding the 34-hour restart. We believe |
The U.S. |
▪ |
While we believe the need for trailer equipment will be positively impacted by the legislative and regulatory changes addressed above, these demand drivers could be offset by factors that contribute to the increased concentration and density of |
▪ | Trucking company profitability, which can be influenced by factors such as fuel prices, freight tonnage volumes, and government regulations, is highly correlated with the overall economy of the U.S. Carrier profitability significantly impacts demand for, and the financial ability to purchase new trailers. |
▪ | Fleet equipment utilization has been rising due to increasing freight volumes, new government regulations and shortages of qualified truck drivers. As a result, trucking companies are under increased pressure to look for alternative ways to move freight, leading to more intermodal freight movement. We believe that railroads are at or near capacity, which will limit their ability to respond to freight demand pressures. Therefore, we expect that the majority of freight will continue to be moved by truck and, according to ATA, freight tonnage carried by trucks is expected to increase approximately |
Results of Operations
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of sales | 82.0 | 85.0 | 87.5 | |||||||||
Gross profit | 18.0 | 15.0 | 12.5 | |||||||||
General and administrative expenses | 4.0 | 3.6 | 3.3 | |||||||||
Selling expenses | 1.5 | 1.3 | 1.4 | |||||||||
Amortization of intangibles | 1.1 | 1.1 | 1.2 | |||||||||
Other Operating Expenses | 0.1 | 0.1 | - | |||||||||
Income from operations | 11.3 | 8.9 | 6.6 | |||||||||
Interest expense | (0.8 | ) | (0.9 | ) | (1.2 | ) | ||||||
Other, net | (0.1 | ) | 0.1 | (0.1 | ) | |||||||
Income before income taxes | 10.4 | 8.1 | 5.3 | |||||||||
Income tax expense (benefit) | 3.6 | 3.1 | 2.0 | |||||||||
Net income | 6.8 | % | 5.0 | % | 3.3 | % |
2016
Years Ended December 31, | ||||||||
2018 | 2017 | 2016 | ||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||
Cost of sales | 87.5 | % | 85.2 | % | 82.0 | % | ||
Gross profit | 12.5 | % | 14.8 | % | 18.0 | % | ||
General and administrative expenses | 4.2 | % | 4.4 | % | 4.0 | % | ||
Selling expenses | 1.5 | % | 1.5 | % | 1.5 | % | ||
Amortization of intangibles | 0.8 | % | 1.0 | % | 1.1 | % | ||
Other Operating Expenses | 1.1 | % | 0.5 | % | 0.1 | % | ||
Income from operations | 4.9 | % | 7.4 | % | 11.3 | % | ||
Interest expense | (1.3 | )% | (1.0 | )% | (0.8 | )% | ||
Other, net | 0.6 | % | 0.5 | % | (0.1 | )% | ||
Income before income taxes | 4.2 | % | 6.9 | % | 10.4 | % | ||
Income tax expense (benefit) | 1.1 | % | 0.6 | % | 3.6 | % | ||
Net income | 3.1 | % | 6.3 | % | 6.8 | % |
2017
Year Ended December 31, | ||||||||||||||||
(prior to elimination of intersegment sales) | Change | |||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
Sales by Segment | ||||||||||||||||
Commercial Trailer Products | $ | 1,506,110 | $ | 1,582,241 | $ | (76,131 | ) | (4.8 | ) | |||||||
Diversified Products | 352,404 | 456,927 | (104,523 | ) | (22.9 | ) | ||||||||||
Eliminations | (13,070 | ) | (11,679 | ) | ||||||||||||
Total | $ | 1,845,444 | $ | 2,027,489 | $ | (182,045 | ) | (9.0 | ) | |||||||
New Trailers | (units) | |||||||||||||||
Commercial Trailer Products | 58,850 | 61,300 | (2,450 | ) | (4.0 | ) | ||||||||||
Diversified Products | 2,100 | 3,400 | (1,300 | ) | (38.2 | ) | ||||||||||
Eliminations | - | - | ||||||||||||||
Total | 60,950 | 64,700 | (3,750 | ) | (5.8 | ) | ||||||||||
Used Trailers | (units) | |||||||||||||||
Commercial Trailer Products | 950 | 1,900 | (950 | ) | (50.0 | ) | ||||||||||
Diversified Products | 100 | 150 | (50 | ) | (33.3 | ) | ||||||||||
Eliminations | - | - | ||||||||||||||
Total | 1,050 | 2,050 | (1,000 | ) | (48.8 | ) |
Year Ended December 31, | Change | |||||||||||||
2018 | 2017 | Amount | % | |||||||||||
(prior to elimination of intersegment sales) | ||||||||||||||
Sales by Segment | ||||||||||||||
Commercial Trailer Products | $ | 1,536,938 | $ | 1,348,382 | $ | 188,556 | 14.0 | % | ||||||
Diversified Products | 393,971 | 361,358 | $ | 32,613 | 9.0 | % | ||||||||
Final Mile Products | 358,249 | 70,461 | $ | 287,788 | ||||||||||
Eliminations | (21,880 | ) | (13,040 | ) | ||||||||||
Total | $ | 2,267,278 | $ | 1,767,161 | $ | 500,117 | 28.3 | % | ||||||
New Trailers | (units) | |||||||||||||
Commercial Trailer Products | 59,500 | 52,800 | 6,700 | 12.7 | % | |||||||||
Diversified Products | 2,650 | 2,250 | 400 | 17.8 | % | |||||||||
Total | 62,150 | 55,050 | 7,100 | 12.9 | % | |||||||||
Used Trailers | (units) | |||||||||||||
Commercial Trailer Products | 950 | 1,050 | (100 | ) | (9.5 | )% | ||||||||
Diversified Products | 150 | 100 | 50 | 50.0 | % | |||||||||
Total | 1,100 | 1,150 | (50 | ) | (4.3 | )% |
2017.
Year Ended December 31, | ||||||||||||||||
Change | ||||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
Gross Profit by Segment: | ||||||||||||||||
Commercial Trailer Products | $ | 253,274 | $ | 197,777 | $ | 55,497 | 28.1 | |||||||||
Diversified Products | 75,630 | 107,023 | (31,393 | ) | (29.3 | ) | ||||||||||
Corporate and Eliminations | (3,371 | ) | (1,356 | ) | (2,015 | ) | ||||||||||
Total | $ | 325,533 | $ | 303,444 | $ | 22,089 | 7.3 |
Year Ended December 31, | Change | |||||||||||
2018 | 2017 | $ | % | |||||||||
Gross Profit by Segment | ||||||||||||
Commercial Trailer Products | $ | 168,343 | 183,912 | $ | (15,569 | ) | (8.5 | )% | ||||
Diversified Products | 68,428 | 70,159 | (1,731 | ) | (2.5 | )% | ||||||
Final Mile Products | 48,771 | 8,150 | 40,621 | |||||||||
Corporate and Eliminations | (1,891) | (1,346) | (545 | ) | ||||||||
Total | $ | 283,651 | 260,875 | $ | 22,776 | 8.7 | % |
supplier induced production interruptions.
Year Ended December 31, | Change | |||||||||||||
2017 | 2016 | Amount | % | |||||||||||
(prior to elimination of intersegment sales) | ||||||||||||||
Sales by Segment | ||||||||||||||
Commercial Trailer Products | $ | 1,348,382 | $ | 1,506,110 | $ | (157,728 | ) | (10.5 | )% | |||||
Diversified Products | 361,358 | 352,404 | $ | 8,954 | 2.5 | % | ||||||||
Final Mile Products | 70,461 | — | $ | 70,461 | ||||||||||
Eliminations | (13,040 | ) | (13,070 | ) | ||||||||||
Total | $ | 1,767,161 | $ | 1,845,444 | $ | (78,283 | ) | (4.2 | )% | |||||
New Trailers | (units) | |||||||||||||
Commercial Trailer Products | 52,800 | 58,850 | (6,050 | ) | (10.3 | )% | ||||||||
Diversified Products | 2,250 | 2,100 | 150 | 7.1 | % | |||||||||
Final Mile Products | — | — | ||||||||||||
Eliminations | — | — | ||||||||||||
Total | 55,050 | 60,950 | (5,900 | ) | (9.7 | )% | ||||||||
Used Trailers | (units) | |||||||||||||
Commercial Trailer Products | 1,050 | 950 | 100 | 10.5 | % | |||||||||
Diversified Products | 100 | 100 | — | — | % | |||||||||
Final Mile Products | — | — | ||||||||||||
Eliminations | — | — | ||||||||||||
Total | 1,150 | 1,050 | 100 | 9.5 | % |
Year Ended December 31, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Gross Profit by Segment | ||||||||||||||
Commercial Trailer Products | $ | 183,912 | $ | 253,274 | $ | (69,362 | ) | (27.4 | )% | |||||
Diversified Products | 70,159 | 75,630 | (5,471 | ) | (7.2 | )% | ||||||||
Final Mile Products | 8,150 | — | 8,150 | |||||||||||
Corporate and Eliminations | (1,346 | ) | (3,371 | ) | 2,025 | |||||||||
Total | $ | 260,875 | $ | 325,533 | $ | (64,658 | ) | (19.9 | )% |
was 11.6% in 2017.
2016.
Amortization of Intangibles
Other Operating
Other operating
diligence, legal, and accounting.
previous year.
assets.
2015 Compared to 2014
Net Sales
Net sales in 2015 increased $164.2 million, or 8.8%, compared to the 2014 period. By business segment, net sales prior to intersegment eliminations and related units sold were as follows (dollars in thousands):
Year Ended December 31, | ||||||||||||||||
(prior to elimination of intersegment sales) | Change | |||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
Sales by Segment | ||||||||||||||||
Commercial Trailer Products | $ | 1,582,241 | $ | 1,380,623 | $ | 201,618 | 14.6 | |||||||||
Diversified Products | 456,927 | 494,992 | (38,065 | ) | (7.7 | ) | ||||||||||
Eliminations | (11,679 | ) | (12,300 | ) | ||||||||||||
Total | $ | 2,027,489 | $ | 1,863,315 | $ | 164,174 | 8.8 | |||||||||
New Trailers | (units) | |||||||||||||||
Commercial Trailer Products | 61,300 | 53,800 | 7,500 | 13.9 | ||||||||||||
Diversified Products | 3,400 | 3,550 | (150 | ) | (4.2 | ) | ||||||||||
Eliminations | - | - | ||||||||||||||
Total | 64,700 | 57,350 | 7,350 | 12.8 | ||||||||||||
Used Trailers | (units) | |||||||||||||||
Commercial Trailer Products | 1,900 | 4,700 | (2,800 | ) | (59.6 | ) | ||||||||||
Diversified Products | 150 | 150 | - | - | ||||||||||||
Eliminations | - | - | ||||||||||||||
Total | 2,050 | 4,850 | (2,800 | ) | (57.7 | ) |
Commercial Trailer Products segment sales, prior to the elimination of intersegment sales, were $1.6 billion in 2015, an increase of $201.6 million, or 14.6%, compared to 2014. The increase in sales was primarily due to a 13.9% increase in new trailer shipments, as approximately 61,300 trailers were shipped in 2015 compared to 53,800 trailers shipped in the prior year. The increase in sales was further aided by an improved pricing environment as average selling prices increased 2.5% as compared to the prior year. Used trailer sales decreased $6.9 million, or 16.2%, due to the availability of product through fleet trade packages as approximately 2,800 fewer used trailers shipped in 2015 as compared to the prior year. Parts and service sales were up/down $2.6 million, or 3.2%, compared to the prior year.
Diversified Products segment sales, prior to the elimination of intersegment sales, were $456.9 million in 2015, down $38.1 million, or 7.7%, compared to 2014. New trailer sales decreased $9.4 million, or 4.1%, due to a 4.2% decrease in new trailer shipments, as approximately 3,400 trailers were shipped in 2015 compared to 3,550 trailers shipped in the prior year. Parts and service sales decreased $7.5 million, or 7.5%, compared to the prior year due to decreased demand. Equipment and other sales decreased $21.3 million, or 16.0%, due to lower demand for our non-trailer truck mounted equipment and other engineered products.
Gross Profit
Gross profit was $303.4 million in 2015, an improvement of $70.8 million, or 30.4% from 2014. Gross profit as a percentage of sales was 15.0% in 2015 as compared to 12.5% in 2014. Gross profit by segment was as follows (in thousands):
Year Ended December 31, | ||||||||||||||||
Change | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
Gross Profit by Segment: | ||||||||||||||||
Commercial Trailer Products | $ | 197,777 | $ | 117,734 | $ | 80,043 | 68.0 | |||||||||
Diversified Products | 107,023 | 111,298 | (4,275 | ) | (3.8 | ) | ||||||||||
Corporate and Eliminations | (1,357 | ) | 3,602 | (4,959 | ) | |||||||||||
Total | $ | 303,443 | $ | 232,634 | $ | 70,809 | 30.4 |
Commercial Trailer Products segment gross profit was $197.8 million in 2015 compared to $117.7 million in the prior year. Gross profit, as a percentage of net sales prior to the elimination of intersegment sales, was 12.5% in 2015 as compared to 8.5% in 2014. The increase in gross profit and gross profit margin as compared to the prior year was primarily driven by the increase in new trailer volumes, an improved pricing environment and increased operational efficiencies.
Diversified Products segment gross profit was $107.0 million in 2015 compared to $111.3 million in 2014. Gross profit, as a percentage of net sales prior to the elimination of intersegment sales, was 23.4% in 2015 compared to 22.5% in 2014. The increase in gross profit as a percentage of net sales, as compared to the prior year, was attributable to product mix and operational efficiencies.
General and Administrative Expenses
General and administrative expenses in 2015 increased $11.8 million, or 19.1%, from the prior year as a result of a $9.7 million increase in salaries and other employee related costs, including costs associated with employee incentive programs, as well as a $2.1 million increase in other operating expenses, primarily technology costs, professional fees and outside services. General and administrative expenses, as a percentage of net sales, were 3.6% in 2015 compared to 3.3% in 2014.
Selling Expenses
Selling expenses were $27.2 million in 2015, an increase of $0.6 million, or 2.1%, compared to the prior year, as a $1.5 million increase in salaries and other employee related costs, including costs associated with employee incentive programs were partially offset by lower advertising, promotional and various other selling related expenses. As a percentage of net sales, selling expenses were 1.3% in 2015 compared to 1.4% in the prior year.
Amortization of Intangibles
Amortization of intangibles was $21.3 million in 2015 compared to $21.9 million in 2014. Amortization of intangibles for both periods primarily includes amortization expense recognized for intangible assets recorded from the acquisition of Walker in May 2012 and certain assets acquired from Beall in February 2013.
Other Operating Expenses
Other operating expenses of $1.1 million in 2015 include the impairment of intangible assets recognized in connection with consolidating our existing tradenames within the Diversified Products segment.
Other Income (Expense)
Interest expense in 2015 totaled $19.5 million compared to $22.2 million in the prior year. Interest expense for both periods primarily related to interest and non-cash accretion charges on our Convertible Senior Notes and Term Loan Credit Agreement. The decrease from the prior year is primarily due to lower outstanding loan commitments through voluntary debt payments made over the prior year, as well as lower interest rates achieved through amendments to both our Revolving Credit Agreement and Term Loan Credit Agreement during 2015.
Other, netfor 2015 represented income of $2.5 million as compared to an expense of $1.8 million for the prior year period. The current year period primarily consists of an $8.3 million gain on the sale of our former Retail branch real estate in Fontana, California and Portland, Oregon partially offset by $5.3 million of accelerated amortization and related fees in connection with the refinancing of our Term Loan Credit Agreement in March 2015 and $0.3 million of charges incurred in connection with the amendment to our Revolving Credit Agreement in June 2015 (see the section “Debt Agreements and Related Amendments” below for further details). The prior year period includes a loss on early extinguishment of debt of $1.0 million for debt issuance costs recognized on the voluntary principal payments made on our Term Loan Credit Agreement as well as a $0.6 million loss on the transition of three of our former retail branches to independent dealer facilities.
Income Taxes
We recognized income tax expense of $59.0 million in 2015 compared to $37.5 million in the prior year. The effective tax rate for 2015 was 36.1%, which differs from the U.S. Federal statutory rate of 35% primarily due to the impact of state and local taxes offset by the benefit of the U.S. Internal Revenue Code domestic manufacturing deduction. Cash taxes paid in 2015 were $66.3 million.
Liquidity and Capital Resources
The Notes are convertible by their holders into cash, shares of our common stock or any combination thereof at our election, at an initial conversion rate of 85.4372 shares of our common stock per $1,000 in principal amount of Notes, which is equal to an initial conversion price of approximately $11.70 per share, only under the following circumstances: (A) before November 1, 2017 (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2012 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture for the Notes) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events as described in the indenture for the Notes; and (B) at any time on or after November 1, 2017 until the close of business on the second business day immediately preceding the maturity date. As of December 31, 2016, the Notes were not convertible based on the above criteria. If the Notes outstanding at December 31, 2016 were converted as of December 31, 2016, the if-converted value would exceed the principal amount by approximately $17 million.
It is our intent to settle conversions through a net share settlement, which involves repayment of cash for the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion. We used the net proceeds of $145.1 million from the sale of the Notes to fund a portion of the purchase price of the acquisition of Walker in May 2012.
We account separately for the liability and equity components of the Notes in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance required the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature. We determined that senior, unsecured corporate bonds traded on the market represent a similar liability to the Notes without the conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, we estimated the implied interest rate of the Notes to be 7.0%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $123.8 million upon issuance, calculated as the present value of implied future payments based on the $150.0 million aggregate principal amount. The $21.7 million difference between the cash proceeds before offering expenses of $145.5 million and the estimated fair value of the liability component was recorded in additional paid-in capital. The discount on the liability portion of the Notes is being amortized over the life of the Notes using the effective interest rate method.
During 2016 we executed multiple agreements with existing holders of the Notes to repurchase $82.0 in principal of such Notes for $98.9 million, excluding accrued interest. Additionally, in December 2015, we acquired $19.0 million in principal for $22.9 million, excluding accrued interest. For the years ended December 31, 2016 and 2015, we recognized a loss on debt extinguishment of $1.9 million and $0.2 million, respectively, in connection with the repurchase activity, which is included inOther, net on our Consolidated Statements of Operations.
Revolving Credit Agreement
In June 2015, we entered into a Joinder and First Amendment to Amended and Restated Credit Agreement, First Amendment to Amended and Restated Security Agreement and First Amendment to Amended and Restated Guaranty Agreement (the “Amendment”) by and among us, certain of our subsidiaries designated as Loan Parties (as defined in the Amendment), Wells Fargo Capital Finance, LLC, as arranger and administrative agent (the “Agent”), and the other lenders party thereto. The Amendment amends, among other things, the Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), dated as of May 8, 2012, among us, certain of our subsidiaries from time to time party thereto (together with us, the “Borrowers”), the several lenders from time to time party thereto, and the Agent and provides for, among other things, a five year, $175 million senior secured revolving credit facility (the “Credit Facility”).
The Amendment, among other things, (i) increases the total commitments under the Credit Facility from $150 million to $175 million, and (ii) extends the maturity date of the Credit Facility from May 2017 to June 2020, but provides for an accelerated maturity in the event our outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is 121 days prior to the maturity date thereof and we are not then maintaining, and continue to maintain until the Notes are converted, redeemed, repurchased or refinanced in full, (x) Liquidity of at least $125 million and (y) availability under the Credit Facility of at least $25 million. Liquidity, as defined in the Credit Agreement, reflects the difference between (i) the sum of (A) unrestricted cash and cash equivalents and (B) availability under the Credit Facility and (ii) the amount necessary to fully redeem the Notes.
In addition, the Amendment (i) provides that borrowings under the Credit Facility will bear interest, at the Borrowers’ election, at (x) LIBOR plus a margin ranging from 150 basis points to 200 basis points (in lieu of the previous range from 175 basis points to 225 basis points), or (y) a base rate plus a margin ranging from 50 basis points to 100 basis points (in lieu of the previous range from 75 basis points to 125 basis points), in each case, based upon the monthly average excess availability under the Credit Facility, (ii) provides that the monthly unused line fee shall be equal to 25 basis points (which amount was previously 37.5 basis points) times the average unused availability under the Credit Facility, (iii) provides that if availability under the Credit Facility is less than 12.5% (which threshold was previously 15%) of the total commitment under the Credit Facility or if there exists an event of default, amounts in any of the Borrowers’ and the subsidiary guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the Credit Facility, (iv) provides that we will be required to maintain a minimum fixed charge coverage ratio of not less than 1.1 to 1.0 as of the end of any period of 12 fiscal months when excess availability under the Credit Facility is less than 10% (which threshold was previously 12.5%) of the total commitment under the Credit Facility and (v) amends certain negative covenants in the Credit Agreement.
The Credit Agreement is guaranteed by certain of the Company’s subsidiaries (the “Revolver Guarantors”) and is secured by (i) first priority security interests (subject only to customary permitted liens and certain other permitted liens) in substantially all personal property of the Borrowers and the Revolver Guarantors, consisting of accounts receivable, inventory, cash, deposit and securities accounts and any cash or other assets in such accounts and, to the extent evidencing or otherwise related to such property, all general intangibles, licenses, intercompany debt, letter of credit rights, commercial tort claims, chattel paper, instruments, supporting obligations, documents and payment intangibles (collectively, the “Revolver Priority Collateral”), and (ii) second-priority liens on and security interests in (subject only to the liens securing the Term Loan Credit Agreement (as defined below) customary permitted liens and certain other permitted liens) (A) equity interests of each direct subsidiary held by the Borrower and each Revolver Guarantor (subject to customary limitations in the case of the equity of foreign subsidiaries), and (B) substantially all other tangible and intangible assets of the Borrowers and the Revolver Guarantors including equipment, general intangibles, intercompany notes, insurance policies, investment property, intellectual property and material owned real property (in each case, except to the extent constituting Revolver Priority Collateral) (collectively, the “Term Priority Collateral”). The respective priorities of the security interests securing the Credit Agreement and the Term Loan Credit Agreement are governed by an Intercreditor Agreement between the Revolver Agent and the Term Agent (as defined below) (the “Intercreditor Agreement”).
Subject to the terms of the Intercreditor Agreement, if the covenants under the Credit Agreement are breached, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral. Other customary events of default in the Credit Agreement include, without limitation, failure to pay obligations when due, initiation of insolvency proceedings, defaults on certain other indebtedness, and the incurrence of certain judgments that are not stayed, satisfied, bonded or discharged within 30 days.
As of December 31, 2016, we were in compliance with all covenants of the Credit Agreement.
Term Loan Credit Agreement
In May 2012 we entered into a credit agreement among us, the several lenders from time to time party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent, joint lead arranger and joint bookrunner (the “Term Agent”), and Wells Fargo Securities, LLC, as joint lead arranger and joint bookrunner (the “Term Loan Credit Agreement”), which initially provided, among other things, for a senior secured term loan facility of $300 million. Also in May 2012, certain of our subsidiaries (the “Term Guarantors”) entered into a general continuing guarantee of our obligations under the Term Loan Credit Agreement in favor of the Term Agent (the “Term Guarantee”).
In April 2013, we entered into Amendment No.1 to Credit Agreement (the “Amendment No. 1”), which became effective on May 9, 2013. As of the Amendment No. 1 date, there was $297.0 million of term loans outstanding under the Term Loan Credit Agreement (the “Initial Loans”), of which we paid $20.0 million in connection with Amendment No. 1. Under Amendment No. 1, the lenders agreed to provide us term loans in an aggregate principal amount of $277.0 million, which were exchanged for and used to refinance the Initial Loans (the “Tranche B-1 Loans”).
In March 2015, we entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”). As of the Amendment No. 2 date, there was $192.8 million of the Tranche B-1 Loans outstanding. Under Amendment No. 2, the lenders agreed to provide to us term loans in an aggregate principal amount of $192.8 million (the “Tranche B-2 Loans”), which were used to refinance the outstanding Tranche B-1 Loans. The Tranche B-2 Loans mature in March 2022, but provide for an accelerated maturity in the event our outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is 91 days prior to the maturity date thereof and we are not then maintaining, and continue to maintain until the Notes are converted, redeemed, repurchased or refinanced in full, liquidity of at least $125 million. Liquidity, as defined in the Term Loan Credit Agreement, reflects the difference between (i) the sum of (A) unrestricted cash and cash equivalents and (B) the amount available and permitted to be drawn under our existing Credit Agreement and (ii) the amount necessary to fully redeem the Notes. The Tranche B-2 Loans shall amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the original principal amount of the Tranche B-2 Loans, with the balance payable at maturity, and will bear interest at a rate, at our election, equal to (i) LIBOR (subject to a floor of 1.00%) plus a margin of 3.25% or (ii) a base rate plus a margin of 2.25%.
Amendment No. 2 also amended the Term Loan Credit Agreement by (i) removing the maximum senior secured leverage ratio test, (ii) modifying the accordion feature, as described in the Term Loan Credit Agreement, to provide for a senior secured incremental term loan facility in an aggregate amount not to exceed the greater of (A) $75 million (less the aggregate amount of (1) any increases in the maximum revolver amount under the existing Credit Agreement and (2) certain permitted indebtedness incurred for the purpose of prepaying or repurchasing the Notes) and (B) an amount such that the senior secured leverage ratio would not be greater than 3.0 to 1.0, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Term Loan Credit Agreement, to provide such increased amounts, and (iii) amending certain negative covenants. The senior secured leverage ratio is defined in the Term Loan Credit Agreement and reflects a ratio of consolidated net total secured indebtedness to consolidated EBITDA.
Furthermore, on February 24, 2017, we entered into Amendment No. 3 to Credit Agreement (“Amendment No. 3”). As of February 24, 2017, there was $189.5 million of the Tranche B-2 Loans outstanding. Under Amendment No. 3, the lenders agreed to provide term loans in the same aggregate principal amount of the outstanding Tranche B-2 Loans (the “Tranche B-3 Loans”), which were used to refinance the outstanding Tranche B-2 Loans. The Tranche B-3 Loans shall amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the initial principal amount of the Tranche B-3 Loans, with the balance payable at maturity, and will bear interest at a rate, at the Company’s election, equal to (i) LIBOR (subject to a floor of 0%) plus a margin of 2.75% or (ii) a base rate (subject to a floor of 0%) plus a margin of 1.75%. Amendment No. 3 also provides for a 1% prepayment premium applicable in the event we enter into a refinancing of, or amendment in respect of, the Tranche B-3 Loans on or prior to the six month anniversary of the effective date of Amendment No. 3 that, in either case, results in the all-in yield (including, for purposes of such determination, the applicable interest rate, margin, original issue discount, upfront fees and interest rate floors, but excluding any customary arrangement, structuring, commitment or underwriting fees) of such refinancing or amendment being less than the all-in yield (determined on the same basis) on the Tranche B-3 Loans. Except as amended by Amendment No. 3, the remaining terms of the Credit Agreement remain in full force and effect.
The Term Loan Credit Agreement, as amended, is guaranteed by the Term Guarantors and is secured by (i) first-priority liens on and security interests in the Term Priority Collateral, and (ii) second-priority security interests in the Revolver Priority Collateral. In addition, the Term Loan Credit Agreement, as amended, contains customary covenants limiting our ability to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock, enter into transactions with affiliates, merge, dissolve, pay off subordinated indebtedness, make investments and dispose of assets.
Subject to the terms of the Intercreditor Agreement, if the covenants under the Term Loan Credit Agreement, as amended, are breached, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral. Other customary events of default in the Term Loan Credit Agreement, as amended, include, without limitation, failure to pay obligations when due, initiation of insolvency proceedings, defaults on certain other indebtedness, and the incurrence of certain judgments that are not stayed, satisfied, bonded or discharged within 60 days.
For the years ended December 31, 2016, 2015 and 2014, under the Term Loan Credit Agreement we paid interest of $8.3 million, $8.5 million and $10.0 million, respectively, and principal of $1.9 million, $1.4 million and $42.1 million, respectively. As of December 31, 2016, we had $189.5 million outstanding under the Term Loan Credit Agreement, of which $1.9 million was classified as current on the Company’s Consolidated Balance Sheet.
For the years ended December 31, 2016, 2015 and 2014 we incurred charges of approximately $0.2 million, $0.3 million and $1.1 million, respectively, for amortization of fees and original issuance discount which is included inInterest Expense in the Consolidated Statements of Operations.
Cash Flow
2016 compared to 2015
Cash provided by operating activities for 2016 totaled $178.8 million, compared to $131.8 million in 2015. The cash provided by operations during the current year period was the result of net income adjusted for various non-cash activities, including depreciation, amortization, gain (loss) on the sale of assets, deferred taxes, loss on debt extinguishment, stock-based compensation, accretion of debt discount and impairment of goodwill and intangibles, of $179.4 million, and a $0.7 million increase in our working capital. Changes in key working capital accounts for 2016 and 2015 are summarized below (in thousands):
Source (Use) of cash: | 2016 | 2015 | Change | |||||||||
Accounts receivable | $ | (809 | ) | $ | (17,618 | ) | $ | 16,809 | ||||
Inventories | $ | 24,969 | $ | 10,162 | $ | 14,807 | ||||||
Accounts payable and accrued liabilities | $ | (13,002 | ) | $ | (12,243 | ) | $ | (759 | ) | |||
Net (use) source of cash | $ | 11,158 | $ | (19,699 | ) | $ | 30,857 |
Accounts receivable increased by $0.8 million in 2016 as compared to an increase of $17.6 million in the prior year period. Days sales outstanding, a measure of working capital efficiency that measures the amount of time a receivable is outstanding, increased to approximately 30 days as of December 31, 2016, compared to 25 days in 2015. The increase in accounts receivable for 2016 was primarily the result of the timing of shipments. Inventory decreased by $25.0 million during 2016 as compared to a decrease of $10.2 million in 2015. The decrease in inventory for the 2016 period was primarily due to lower finished goods inventories as customer shipments exceeded production, and lower raw materials inventories due to improved inventory management and expected lower demand volume for January 2017 as compared to January 2016. Our inventory turns, a commonly used measure of working capital efficiency that measures how quickly inventory turns per year was approximately 8 times in 2016 and 2015. Accounts payable and accrued liabilities decreased by $13.0 million in 2016 compared to a decrease of $12.2 million for 2015. The decrease in 2016 was primarily due to timing of production and a decrease in accruals pertaining to employee salaries and related incentive compensation. Days payable outstanding, a measure of working capital efficiency that measures the amount of time a payable is outstanding, was 16 days in 2016 and 2015.
Investing activities used $17.3 million during 2016 compared to $7.6 million used in 2015. Investing activities for 2016 include capital expenditures to support growth and improvement initiatives at our facilities totaling $20.3 million, partially offset by proceeds from the sale of certain branch location assets totaling $3.0 million. Cash used in investing activities in 2015 was primarily related to capital expenditures totaling $20.8 million, partially offset by proceeds from the sale of property, plant and equipment totaling $13.2 million, which was comprised primarily of the sale of our former Retail branch real estate.
Financing activities used $176.8 million during 2016, primarily due to the repurchases of common stock through our share repurchase program totaling $77.0 million and repurchase of Notes totaling $98.9 million, excluding accrued interest. Financing activities used $91.4 million during 2015 primarily due to the repurchases of common stock through our share repurchase program totaling $60.1 million, repurchase of Notes totaling $22.9 million, excluding accrued interest, principal payments under existing debt and capital lease obligations of $6.1 million, and debt issuance costs of $2.6 million in relation to amendments to our Term Loan Credit Agreement and Revolving Credit Agreement.
As of December 31, 2016, our liquidity position, defined as cash on hand and available borrowing capacity, amounted to $333.0 million, representing a decrease of $14.9 million from December 31, 2015. Total debt and capital lease obligations amounted to $237.8 million as of December 31, 2016. As we continue to see a strong demand environment within the trailer industry and excellence in operational performance across both of our business segments, we believe our liquidity is adequate to fund our currently planned operations, working capital needs and capital expenditures for 2017.
2015 compared to 2014
Cash provided by operating activities for 2015 totaled $131.8 million, compared to $92.6 million in 2014. The cash provided by operations during the 2015 period was the result of net income adjusted for various non-cash activities, including depreciation, amortization, gain (loss) on the sale of assets, deferred taxes, loss on debt extinguishment, stock-based compensation, accretion of debt discount and impairment of intangibles, of $148.4 million, partially offset by a $16.6 million increase in our working capital. Changes in key working capital accounts for 2015 and 2014 are summarized below (in thousands):
Source (Use) of cash: | 2015 | 2014 | Change | |||||||||
Accounts receivable | $ | (17,618 | ) | $ | (14,848 | ) | $ | (2,770 | ) | |||
Inventories | $ | 10,162 | $ | 3,116 | $ | 7,046 | ||||||
Accounts payable and accrued liabilities | $ | (12,243 | ) | $ | (26,787 | ) | $ | 14,544 | ||||
Net (use) source of cash | $ | (19,699 | ) | $ | (38,519 | ) | $ | 18,820 |
Accounts receivable increased by $17.6 million in 2015 as compared to an increase of $14.8 million in the prior year period. Days sales outstanding, a measure of working capital efficiency that measures the amount of time a receivable is outstanding, increased to approximately 25 days as of December 31, 2015, compared to 23 days in 2014. The increase in accounts receivable for 2015 was primarily the result of the timing of shipments and an 8.8% increase in our consolidated net sales compared to the prior year. Inventory decreased by $10.2 million during 2015 as compared to a decrease of $3.1 million in 2014. The decrease in inventory for the 2015 period was primarily due to lower finished goods inventories at December 31, 2015 as customer shipments exceeded production in 2015. Our inventory turns, a commonly used measure of working capital efficiency that measures how quickly inventory turns per year was approximately 8 times in 2015 compared to approximately 7 times in 2014. Accounts payable and accrued liabilities decreased by $12.2 million in 2015 compared to a decrease of $26.8 million for 2014. The decrease in 2015 was primarily due to timing of production, a decrease in deposits from customers for products not delivered as well as an increase in volume-based rebate incentives offered by our suppliers as compared to the prior year. Days payable outstanding, a measure of working capital efficiency that measures the amount of time a payable is outstanding, was 16 days in 2015 and 19 days for the 2014 period.
Investing activities used $7.6 million during 2015 compared to $15.8 million used in 2014. Investing activities for 2015 include capital expenditures to support growth and improvement initiatives at our facilities totaling $20.8 million, partially offset by proceeds from the sale of property, plant and equipment totaling $13.2 million, which was comprised primarily of the sale of our former Retail branch real estate. Cash used in investing activities in 2014 was primarily related to capital expenditures totaling $20.0 million, partially offset by proceeds from the sale of certain former retail branch location assets totaling $4.1 million.
Financing activities used $91.4 million during 2015, primarily due to the repurchases of common stock through our share repurchase program totaling $60.1 million and repurchase of Notes totaling $22.9 million, excluding accrued interest, principal payments under existing debt and capital lease obligations of $6.1 million, and debt issuance costs of $2.6 million incurred in relation to Amendment No. 2 to our Term Loan Credit Agreement and the amendment to our Revolving Credit Agreement. Financing activities used $44.0 million during 2014 primarily due to principal payments under our term loan credit facility of approximately $42.1 million.
As of December 31, 2015, our liquidity position, defined as cash on hand and available borrowing capacity, amounted to $347.9 million, representing an increase of $58.0 million from December 31, 2014. Total debt and capital lease obligations amounted to $315.6 million as of December 31, 2015.
Capital Expenditures
Capital spending amounted to $20.3 million for 2016 and is anticipated to be in the range of $30 million to $40 million for 2017. Capital spending for 2016 was primarily utilized to support maintenance, growth, and productivity improvement initiatives within our facilities.
Off-Balance Sheet Transactions
As of December 31, 2016, we had approximately $6.4 million in operating lease commitments. We did not enter into any material off-balance sheet debt or operating lease transactions during the year.
Outlook
The demand environment for trailers remained healthy throughout 2016, as evidenced by our strong backlog, a trailer demand forecast by industry forecasters significantly above replacement demand levels for the next several years and our ability to increase prices to improve and recapture lost margins. Recent estimates from industry analysts, ACT Research Company (“ACT”) and FTR Associates (“FTR”), forecast demand for 2017 and beyond to remain strong. ACT currently estimates demand to be approximately 261,000 trailers for 2017, representing a decrease of 9.1% as compared to 2016, and forecasting continued strong demand levels into the foreseeable future with estimated annual average demand for the four year period ending 2021 to be approximately 257,000 new trailers. FTR anticipates new trailer demand to be approximately 255,000 new trailers in 2017, representing a decrease of 9.6% as compared to 2016 while projecting a year over year increase in 2018 with demand totaling 265,000 trailers. In spite of strong forecasted demand, there remain downside risks relating to issues with both the domestic and global economies, including housing, energy, and construction-related markets in the U.S.
Other potential risks as we proceed into 2017 will primarily relate to our ability to effectively manage our manufacturing operations as well as the cost and supply of raw materials, commodities and components. Significant increases in the cost of certain commodities, raw materials or components could have an adverse effect on our results of operations. As has been our practice, we will endeavor to pass raw material and component price increases to our customers in addition to continuing our cost management and hedging activities in an effort to minimize the risk changes in material costs could have on our operating results. In addition, we rely on a limited number of suppliers for certain key components and raw materials in the manufacturing of our products, including tires, landing gear, axles, suspensions aluminum extrusions and specialty steel coil. At the current and expected demand levels, there may be shortages of supplies of raw materials or components which would have an adverse impact on our ability to meet demand for our products.
We believe we are well-positioned for long-term success in the trailer industry because: (1) our core customers are among the dominant participants in the trucking industry; (2) our DuraPlate® and other industry leading brand trailers continue to have a strong market acceptance; (3) our focus is on developing solutions that reduce our customers’ trailer maintenance and operating costs providing the best overall value; and (4) our presence throughout North America utilizing both our extensive independent dealer network and Company-owned branch locations to market and sell our products.
Based on the published industry demand forecasts, customer feedback regarding their current requirements, our existing backlog of orders and our continued efforts to be selective in our order acceptance to ensure we obtain appropriate value for our products, we estimate that for the full year 2017 total new trailers sold will be between 51,000 and 55,000, which reflects trailer volumes 10% to 16% lower than 2016 demand levels and consistent with the decrease in demand as projected by industry forecasters for the overall trailer market. While our expectations for trailer volumes are similar to the demand levels forecasted by industry analysts, our commitment to maintain margins within our Commercial Trailer Products segment and the continued productivity, cost optimization initiatives, and exceptional operational excellence through all of our businesses, we expect to deliver solid results in 2017 despite a softer demand environment.
We are not relying solely on strong new trailer volumes and price recovery to improve operations and enhance our profitability. We believe our corporate strategy to continue our transformation into a more diversified industrial manufacturer will provide us the opportunity to address new markets, enhance our financial profile and reduce the cyclicality within our business. While demand for some of these products is dependent on the development of new products, customer acceptance of our product solutions and the general expansion of our customer base and distribution channels, we remain committed to enhancing and diversifying our business model through the organic and strategic initiatives. Through our two operating segments we offer a wide array of products and customer-specific solutions that we believe provide a good foundation for achieving these goals. In addition, we have been and will continue to focus on driving ongoing improvements throughout the business, while developing innovative new products that both add value to our customers’ operations and allow us to continue to differentiate our products from the competition.
Contractual Obligations and Commercial Commitments
A summary of payments of our contractual obligations and commercial commitments, both on and off balance sheet, as of December 31, 2016 are as follows (in thousands):
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | ||||||||||||||||||||||
DEBT: | ||||||||||||||||||||||||||||
Revolving Facility (due 2020) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
Convertible Senior Notes (due 2018) | - | 48,951 | - | - | - | - | 48,951 | |||||||||||||||||||||
Term Loan Credit Facility (due 2022) | 1,928 | 1,928 | 1,928 | 1,928 | 1,928 | 179,828 | 189,468 | |||||||||||||||||||||
Other Debt | 540 | 135 | - | - | - | - | 675 | |||||||||||||||||||||
Capital Leases (including principal and interest) | 605 | 461 | 361 | 361 | 361 | 30 | 2,179 | |||||||||||||||||||||
TOTAL DEBT | $ | 3,073 | $ | 51,475 | $ | 2,289 | $ | 2,289 | $ | 2,289 | $ | 179,858 | $ | 241,273 | ||||||||||||||
OTHER: | ||||||||||||||||||||||||||||
Operating Leases | $ | 3,123 | $ | 2,027 | $ | 1,033 | $ | 211 | $ | 41 | $ | - | $ | 6,435 | ||||||||||||||
TOTAL OTHER | $ | 3,123 | $ | 2,027 | $ | 1,033 | $ | 211 | $ | 41 | $ | - | $ | 6,435 | ||||||||||||||
OTHER COMMERCIAL COMMITMENTS: | ||||||||||||||||||||||||||||
Letters of Credit | $ | 5,442 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 5,442 | ||||||||||||||
Raw Material Purchase Commitments | 57,818 | - | - | - | - | - | 57,818 | |||||||||||||||||||||
TOTAL OTHER COMMERCIAL | ||||||||||||||||||||||||||||
COMMITMENTS | $ | 63,260 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 63,260 | ||||||||||||||
TOTAL OBLIGATIONS | $ | 69,456 | $ | 53,502 | $ | 3,322 | $ | 2,500 | $ | 2,330 | $ | 179,858 | $ | 310,968 |
Scheduled payments for our Credit Facility exclude interest payments as rates are variable. Borrowings under the Credit Facility bear interest at a variable rate based on the London Interbank Offer Rate (LIBOR) or a base rate determined by the lender’s prime rate plus an applicable margin, as defined in the agreement. Outstanding borrowings under the Credit Facility bear interest at a rate, at our election, equal to (i) LIBOR plus a margin ranging from 1.50% to 2.00% or (ii) a base rate plus a margin ranging from 0.50% to 1.00%, in each case depending upon the monthly average excess availability under the Credit Facility. We are required to pay a monthly unused line fee equal to 0.25% times the average daily unused availability along with other customary fees and expenses of our agent and lenders.
Scheduled payments for our Notes exclude interest payments that bear interest at the rate of 3.375% per annum from the date of issuance, payable semi-annually on May 1 and November 1.
Scheduled payments for our Term Loan Credit Agreement, as amended, exclude interest payments as rates are variable. Borrowings under the Term Loan Credit Agreement, as amended, bear interest at a variable rate, at our election, equal to (i) LIBOR (subject to a floor of 1.00%) plus a margin of 3.25% or (ii) a base rate plus a margin of 2.25%. The Term Loan Credit Agreement matures in March 2022, but provides for an accelerated maturity in the event our outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is 91 days prior to the maturity date thereof and we are not then maintaining, and continue to maintain until the Notes are converted, redeemed, repurchased or refinanced in full, liquidity of at least $125 million.
Capital leases represent future minimum lease payments including interest. Operating leases represent the total future minimum lease payments.
We have standby letters of credit totaling $5.4 million issued in connection with workers compensation claims and surety bonds.
We have $57.8 million in purchase commitments through December 2017 for various raw material commodities, including aluminum, steel and nickel as well as other raw material components that are within normal production requirements.
Significant Accounting Policies and Critical Accounting Estimates
Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, evaluation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.
We consider an accounting estimate to be critical if it requires us to make assumptions about matters that were uncertain at the time we were making the estimate or changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations.
The table below presents information about the nature and rationale for our critical accounting estimates:
| ||||||||
In addition, there are other items within our financial statements that require estimation, but are not as critical as those discussed above. Changes in estimates used in these and other items could have a significant effect on our consolidated financial statements. The determination of the fair market value of our finished goods, primarily consisting of new trailers, and used trailer inventories are subject to variation, particularly in times of rapidly changing market conditions. A 5% change in the valuation of our finished goods and used trailer inventories at December 31, 2016, would be approximately $3.0 million.
Other
Inflation
We have historically been able to offset the impact of rising costs through productivity improvements as well as selective price increases. As a result, inflation has not had, and is not expected to have, a significant impact on our business.
New Accounting Pronouncements
For information related to new accounting standards, see Note 2 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In addition to the risks inherent in our operations, we have exposure to financial and market risk resulting from volatility in commodity prices and interest rates. The following discussion provides additional detail regarding our exposure to these risks.
We are exposed to fluctuation in commodity prices through the purchase of various raw materials that are processed from commodities such as aluminum, steel, lumber, nickel, copper and polyethylene. Given the historical volatility of certain commodity prices, this exposure can significantly impact product costs. We manage some of our commodity price changes by entering into fixed price contracts with our suppliers. As of December 31, 2016, we had $57.8 million in raw material purchase commitments through December 2017 for materials that will be used in the production process, as compared to $72.4 million as of December 31, 2015. We typically do not set prices for our products more than 45-90 days in advance of our commodity purchases and can, subject to competitive market conditions, take into account the cost of the commodity in setting our prices for each order. To the extent that we are unable to offset the increased commodity costs in our product prices, our results would be materially and adversely affected.
As of December 31, 2016, we had no floating rate debt outstanding under our revolving facility and for 2016 we maintained no floating rate borrowing under our revolving facility. As of December 31, 2016, we had outstanding borrowings under our Term Loan Credit Agreement, as amended, totaling $189.5 million that bear interest at a floating rate, subject to a minimum interest rate. Based on the average borrowings under our revolving facility and the outstanding indebtedness under our Term Loan Credit Agreement a hypothetical 100 basis-point change in the floating interest rate would result in a corresponding change in interest expense over a one-year period of $1.5 million. This sensitivity analysis does not account for the change in the competitive environment indirectly related to the change in interest rates and the potential managerial action taken in response to these changes.
We are subject to fluctuations in the British pound sterling and Mexican peso exchange rates that impact transactions with our foreign subsidiaries, as well as U.S. denominated transactions between these foreign subsidiaries and unrelated parties. A five percent change in the British pound sterling or Mexican peso exchange rates would have an immaterial impact on results of operations. We do not hold or issue derivative financial instruments for speculative purposes.
ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Wabash National Corporation:
We have audited the accompanying consolidated balance sheets of Wabash National Corporation as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wabash National Corporation at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Wabash National Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2017 expressed an unqualified opinion thereon.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, | ||||||||
2016 | 2015 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 163,467 | $ | 178,853 | ||||
Accounts receivable | 153,634 | 152,824 | ||||||
Inventories | 139,953 | 166,982 | ||||||
Deferred income taxes | - | 22,431 | ||||||
Prepaid expenses and other | 24,351 | 8,417 | ||||||
Total current assets | $ | 481,405 | $ | 529,507 | ||||
PROPERTY, PLANT AND EQUIPMENT | 134,138 | 140,438 | ||||||
DEFERRED INCOME TAXES | 20,343 | 1,358 | ||||||
GOODWILL | 148,367 | 149,718 | ||||||
INTANGIBLE ASSETS | 94,405 | 114,616 | ||||||
OTHER ASSETS | 20,075 | 14,033 | ||||||
$ | 898,733 | $ | 949,670 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Current portion of long-term debt | $ | 2,468 | $ | 37,611 | ||||
Current portion of capital lease obligations | 494 | 806 | ||||||
Accounts payable | 71,338 | 79,618 | ||||||
Other accrued liabilities | 92,314 | 93,042 | ||||||
Total current liabilities | $ | 166,614 | $ | 211,077 | ||||
LONG-TERM DEBT | 233,465 | 274,885 | ||||||
CAPITAL LEASE OBLIGATIONS | 1,409 | 1,875 | ||||||
DEFERRED INCOME TAXES | 499 | 1,497 | ||||||
OTHER NONCURRENT LIABILITIES | 24,355 | 20,525 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock 200,000,000 shares authorized, $0.01 par value, 60,129,631 and 64,929,510 shares outstanding, respectively | 725 | 715 | ||||||
Additional paid-in capital | 640,883 | 642,908 | ||||||
Retained Earnings (Accumulated Deficit) | 3,591 | (111,907 | ) | |||||
Accumulated other comprehensive loss | (2,847 | ) | (1,500 | ) | ||||
Treasury stock at cost, 12,474,109 and 6,638,643 common shares, respectively | (169,961 | ) | (90,405 | ) | ||||
Total stockholders' equity | $ | 472,391 | $ | 439,811 | ||||
$ | 898,733 | $ | 949,670 |
The accompanying notes are an integral part of these Consolidated Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
NET SALES | $ | 1,845,444 | $ | 2,027,489 | $ | 1,863,315 | ||||||
COST OF SALES | 1,519,910 | 1,724,046 | 1,630,681 | |||||||||
Gross profit | $ | 325,534 | $ | 303,443 | $ | 232,634 | ||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 74,129 | 73,495 | 61,694 | |||||||||
SELLING EXPENSES | 27,270 | 27,233 | 26,676 | |||||||||
AMORTIZATION OF INTANGIBLES | 19,940 | 21,259 | 21,878 | |||||||||
OTHER OPERATING EXPENSES | 1,663 | 1,087 | - | |||||||||
Income from operations | $ | 202,532 | $ | 180,369 | $ | 122,386 | ||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (15,663 | ) | (19,548 | ) | (22,165 | ) | ||||||
Other, net | (1,452 | ) | 2,490 | (1,759 | ) | |||||||
Income before income taxes | $ | 185,417 | $ | 163,311 | $ | 98,462 | ||||||
INCOME TAX EXPENSE | 65,984 | 59,022 | 37,532 | |||||||||
Net income | $ | 119,433 | $ | 104,289 | $ | 60,930 | ||||||
BASIC NET INCOME PER SHARE | $ | 1.87 | $ | 1.55 | $ | 0.88 | ||||||
DILUTED NET INCOME PER SHARE | $ | 1.82 | $ | 1.50 | $ | 0.85 |
The accompanying notes are an integral part of these Consolidated Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
NET INCOME | $ | 119,433 | $ | 104,289 | $ | 60,930 | ||||||
Other comprehensive (loss) income: | ||||||||||||
Foreign currency translation adjustment | (1,347 | ) | (863 | ) | (619 | ) | ||||||
Total other comprehensive (loss) income | (1,347 | ) | (863 | ) | (619 | ) | ||||||
COMPREHENSIVE INCOME | $ | 118,086 | $ | 103,426 | $ | 60,311 |
The accompanying notes are an integral part of these Consolidated Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
Accumulated | ||||||||||||||||||||||||||||
Additional | Retained | Other | ||||||||||||||||||||||||||
Common Stock | Paid-In | Earnings | Comprehensive | Treasury | ||||||||||||||||||||||||
Shares | Amount | Capital | (Deficit) | Losses | Stock | Total | ||||||||||||||||||||||
BALANCES, December 31, 2013 | 68,523,419 | $ | 705 | $ | 625,971 | $ | (277,128 | ) | $ | (18 | ) | $ | (27,151 | ) | $ | 322,379 | ||||||||||||
Net income for the year | - | - | - | 60,930 | - | - | 60,930 | |||||||||||||||||||||
Foreign currency translation | - | - | - | - | (619 | ) | - | (619 | ) | |||||||||||||||||||
Stock-based compensation | 392,470 | 4 | 7,714 | - | - | - | 7,718 | |||||||||||||||||||||
Stock repurchase | (113,203 | ) | - | - | - | - | (1,497 | ) | (1,497 | ) | ||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||||
Stock option exercises | 195,383 | - | 1,921 | - | - | - | 1,921 | |||||||||||||||||||||
BALANCES, December 31, 2014 | 68,998,069 | $ | 709 | $ | 635,606 | $ | (216,198 | ) | $ | (637 | ) | $ | (28,648 | ) | $ | 390,832 | ||||||||||||
Net income for the year | 104,291 | 104,291 | ||||||||||||||||||||||||||
Foreign currency translation | (863 | ) | (863 | ) | ||||||||||||||||||||||||
Stock-based compensation | 396,389 | 4 | 10,006 | 10,010 | ||||||||||||||||||||||||
Stock repurchase | (4,651,570 | ) | (61,757 | ) | (61,757 | ) | ||||||||||||||||||||||
Equity component of convertible senior notes repurchase | (4,714 | ) | (4,714 | ) | ||||||||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||||
Stock option exercises | 186,622 | 2 | 2,010 | 2,012 | ||||||||||||||||||||||||
BALANCES, December 31, 2015 | 64,929,510 | $ | 715 | $ | 642,908 | $ | (111,907 | ) | $ | (1,500 | ) | $ | (90,405 | ) | $ | 439,811 | ||||||||||||
Net income for the year | 119,433 | 119,433 | ||||||||||||||||||||||||||
Foreign currency translation | (1,347 | ) | (1,347 | ) | ||||||||||||||||||||||||
Stock-based compensation | 615,066 | 6 | 12,031 | 12,037 | ||||||||||||||||||||||||
Stock repurchase | (5,832,387 | ) | (79,556 | ) | (79,556 | ) | ||||||||||||||||||||||
Equity component of convertible senior notes repurchase | (18,883 | ) | (18,883 | ) | ||||||||||||||||||||||||
Common stock dividends | (3,935 | ) | (3,935 | ) | ||||||||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||||
Stock option exercises | 417,442 | 4 | 4,827 | 4,831 | ||||||||||||||||||||||||
BALANCES, December 31, 2016 | 60,129,631 | $ | 725 | $ | 640,883 | $ | 3,591 | $ | (2,847 | ) | $ | (169,961 | ) | $ | 472,391 |
The accompanying notes are an integral part of these Consolidated Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 119,433 | $ | 104,289 | $ | 60,930 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation | 16,830 | 16,739 | 16,951 | |||||||||
Amortization of intangibles | 19,940 | 21,259 | 21,878 | |||||||||
Net loss (gain) on sale of property, plant and equipment | 101 | (8,299 | ) | 13 | ||||||||
Loss on debt extinguishment | 1,895 | 5,808 | 1,042 | |||||||||
Deferred income taxes | 4,044 | (7,749 | ) | 16,573 | ||||||||
Stock-based compensation | 12,038 | 10,010 | 7,833 | |||||||||
Non-cash interest expense | 3,475 | 5,222 | 5,994 | |||||||||
Impairment of goodwill and other intangibles | 1,663 | 1,087 | ||||||||||
Changes in operating assets and liabilities | ||||||||||||
Accounts receivable | (809 | ) | (17,618 | ) | (14,848 | ) | ||||||
Inventories | 24,969 | 10,162 | 3,116 | |||||||||
Prepaid expenses and other | (10,147 | ) | 1,786 | (571 | ) | |||||||
Accounts payable and accrued liabilities | (13,002 | ) | (12,243 | ) | (26,787 | ) | ||||||
Other, net | (1,680 | ) | 1,342 | 511 | ||||||||
Net cash provided by operating activities | $ | 178,750 | $ | 131,795 | $ | 92,635 | ||||||
Cash flows from investing activities | ||||||||||||
Capital expenditures | (20,342 | ) | (20,847 | ) | (19,957 | ) | ||||||
Proceeds from sale of property, plant and equipment | 19 | 13,203 | 87 | |||||||||
Other | 3,014 | - | 4,113 | |||||||||
Net cash used in investing activities | $ | (17,309 | ) | $ | (7,644 | ) | $ | (15,757 | ) | |||
Cash flows from financing activities | ||||||||||||
Proceeds from exercise of stock options | 4,831 | 2,012 | 1,921 | |||||||||
Borrowings under revolving credit facilities | 618 | 1,134 | 806 | |||||||||
Payments under revolving credit facilities | (618 | ) | (1,134 | ) | (806 | ) | ||||||
Principal payments under capital lease obligations | (779 | ) | (4,201 | ) | (1,898 | ) | ||||||
Proceeds from issuance of term loan credit facility | - | 192,845 | - | |||||||||
Principal payments under term loan credit facility | (1,928 | ) | (194,291 | ) | (42,078 | ) | ||||||
Principal payments under industrial revenue bond | (473 | ) | (496 | ) | (475 | ) | ||||||
Debt issuance costs paid | - | (2,587 | ) | - | ||||||||
Convertible senior notes repurchase | (98,922 | ) | (22,936 | ) | - | |||||||
Stock repurchase | (79,556 | ) | (61,757 | ) | (1,497 | ) | ||||||
Net cash used in financing activities | $ | (176,827 | ) | $ | (91,411 | ) | $ | (44,027 | ) | |||
Net (decrease) increase in cash and cash equivalents | $ | (15,386 | ) | $ | 32,740 | $ | 32,851 | |||||
Cash and cash equivalents at beginning of year | 178,853 | 146,113 | 113,262 | |||||||||
Cash and cash equivalents at end of year | $ | 163,467 | $ | 178,853 | $ | 146,113 | ||||||
Supplemental disclosures of cash flow information | ||||||||||||
Cash paid during the period for | ||||||||||||
Interest | $ | 12,656 | $ | 14,578 | $ | 16,136 | ||||||
Income taxes | $ | 68,870 | $ | 66,283 | $ | 20,220 |
The accompanying notes are an integral part of these Consolidated Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wabash National Corporation (the “Company,” “Wabash” or “Wabash National”) manufactures a diverse range of products including: dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade and pharmaceutical equipment. Its innovative products are sold under the following brand names: Wabash National®, Beall®, Benson®, Brenner® Tank, Bulk Tank International, DuraPlate®, Extract Technology®, Garsite, Progress Tank, Transcraft®, Walker Engineered Products, and Walker Transport.
The consolidated financial statements reflect the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany profits, transactions and balances have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that directly affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
The Company recognizes revenue from the sale of its products when the customer has made a fixed commitment to purchase a product for a fixed or determinable price, collection is reasonably assured under the Company’s normal billing and credit terms and ownership and all risk of loss has been transferred to the buyer, which is normally upon shipment to or pick up by the customer. Revenues on certain contracts are recorded on a percentage of completion method, measured by actual total cost incurred to the total estimated costs for each project. Revenues exclude all taxes collected from the customer. Shipping and handling fees are included inNet Sales and the associated costs included inCost of Salesin the Consolidated Statements of Operations.
In the normal course of business, the Company may accept used trailers on trade for new trailer purchases. These commitments arise related to future new trailer orders at the time a new trailer order is placed by the customer. The Company acquired used trailers on trade of $4.6 million, $12.8 million, and $26.8 million in 2016, 2015, and 2014, respectively. As of December 31, 2016, the Company had no outstanding trade commitments, and $2.1 million in outstanding trade commitments as of December 31, 2015. On occasion, the amount of the trade allowance provided for in the used trailer commitments, or cost, may exceed the net realizable value of the underlying used trailer. In these instances, the Company’s policy is to recognize the loss related to these commitments at the time the new trailer revenue is recognized. Net realizable value of used trailers is measured considering market sales data for comparable types of trailers. The net realizable value of the used trailers subject to the remaining outstanding trade commitments was estimated by the Company to be $0.0 million and $10.0 million as of December 31, 2016 and 2015, respectively.
Cash and cash equivalents include all highly liquid investments with a maturity of three months or less at the time of purchase.
Accounts receivable are shown net of allowance for doubtful accounts and primarily include trade receivables. The Company records and maintains a provision for doubtful accounts for customers based upon a variety of factors including the Company’s historical collection experience, the length of time the account has been outstanding and the financial condition of the customer. If the circumstances related to specific customers were to change, the Company’s estimates with respect to the collectability of the related accounts could be further adjusted. The Company’s policy is to write-off receivables when they are determined to be uncollectible. Provisions to the allowance for doubtful accounts are charged toSelling, General, and Administrative Expenses in the Consolidated Statements of Operations. The following table presents the changes in the allowance for doubtful accounts (in thousands):
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Balance at beginning of year | $ | 956 | $ | 1,047 | $ | 2,058 | ||||||
Provision | 117 | 145 | 178 | |||||||||
Write-offs, net of recoveries | (122 | ) | (236 | ) | (1,189 | ) | ||||||
Balance at end of year | $ | 951 | $ | 956 | $ | 1,047 |
Inventories are stated at the lower of cost, determined on either the first-in, first-out or average cost method, or market. The cost of manufactured inventory includes raw material, labor and overhead. Inventories consist of the following (in thousands):
December 31, | ||||||||
2016 | 2015 | |||||||
Finished goods | $ | 57,297 | $ | 67,260 | ||||
Raw materials and components | 53,388 | 65,790 | ||||||
Work in progress | 18,422 | 18,201 | ||||||
Aftermarket parts | 8,356 | 8,714 | ||||||
Used trailers | 2,490 | 7,017 | ||||||
$ | 139,953 | $ | 166,982 |
Prepaid expenses and other as of December 31, 2016 and 2015 were $24.4 million and $8.4 million, respectively. The balances as of December 31, 2016 include $5.8 million of assets held for sale related to three of the Company’s former branch locations. Prepaid expenses and other for both periods include items such as insurance premiums, maintenance agreements, and income tax and other receivables. Insurance premiums and maintenance agreements are charged to expense over the contractual life, which is generally one year or less. Additionally, costs in excess of billings on contracts for which the Company recognizes revenue on a percentage of completion basis are included in this category.
Property, plant and equipment are recorded at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, while expenditures that extend the useful life of an asset are capitalized. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives are up to 33 years for buildings and building improvements and range from three to ten years for machinery and equipment. Depreciation expense, which is recorded inCost of Sales andGeneral and Administrative Expenses in the Consolidated Statements of Operations, as appropriate, on property, plant and equipment was $15.9 million, $16.0 million, and $16.5 million in 2016, 2015, and 2014, respectively, and includes amortization of assets recorded in connection with the Company’s capital lease agreements. As of December 31, 2016 and 2015, the assets related to the Company’s capital lease agreements are recorded withinProperty, Plant and Equipmentin the Consolidated Balance Sheet for the amount of $4.3 million and $5.0 million, respectively, net of accumulated depreciation of $1.9 million and $2.6 million, respectively.
Property, plant and equipment consist of the following (in thousands):
December 31, | ||||||||
2016 | 2015 | |||||||
Land | $ | 20,958 | $ | 22,978 | ||||
Buildings and building improvements | 110,789 | 114,216 | ||||||
Machinery and equipment | 231,094 | 220,814 | ||||||
Construction in progress | 12,116 | 13,741 | ||||||
$ | 374,957 | $ | 371,749 | |||||
Less: accumulated depreciation | (240,819 | ) | (231,311 | ) | ||||
$ | 134,138 | $ | 140,438 |
As of December 31, 2016, the balances of intangible assets, other than goodwill, were as follows (in thousands):
Weighted Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||
Tradenames and trademarks | 20 years | $ | 37,894 | $ | (11,864 | ) | $ | 26,030 | ||||||
Customer relationships | 10 years | 151,090 | (92,686 | ) | 58,404 | |||||||||
Technology | 12 years | 16,517 | (6,546 | ) | 9,971 | |||||||||
Total | $ | 205,501 | $ | (111,096 | ) | $ | 94,405 |
As of December 31, 2015, the balances of intangible assets, other than goodwill, were as follows (in thousands):
Weighted Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||
Tradenames and trademarks | 20 years | $ | 37,894 | $ | (9,970 | ) | $ | 27,924 | ||||||
Customer relationships | 10 years | 151,634 | (76,340 | ) | 75,294 | |||||||||
Technology | 12 years | 16,517 | (5,119 | ) | 11,398 | |||||||||
Total | $ | 206,045 | $ | (91,429 | ) | $ | 114,616 |
Intangible asset amortization expense was $19.9 million, $21.3 million, and $21.9 million for 2016, 2015, and 2014, respectively. Annual intangible asset amortization expense for the next 5 fiscal years is estimated to be $16.9 million in 2017; $15.4 million in 2018; $14.5 million in 2019; $13.7 million in 2020; and $12.0 million in 2021.
Goodwill represents the excess purchase price over fair value of the net assets acquired. The Company reviews goodwill for impairment, at the reporting unit level, annually on October 1 and whenever events or changes in circumstances indicate its carrying value may not be recoverable. In accordance with ASC 350,Intangibles – Goodwill and Other, goodwill is reviewed for impairment utilizing either a qualitative assessment or a two-step quantitative process.
The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit's fair value or carrying amount involve significant judgments and assumptions. The judgments and assumptions include the identification of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and Company specific events and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.
For reporting units in which the Company performs the two-step quantitative analysis, the first step compares the carrying value, including goodwill, of each reporting unit with its estimated fair value. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is greater than the fair value, this suggests that an impairment may exist and a second step is required in which the implied fair value of goodwill is calculated as the excess of the fair value of the reporting unit over the fair values assigned to its assets and liabilities. If this implied fair value is less than the carrying value, the difference is recognized as an impairment loss charged to the reporting unit. In assessing goodwill using this quantitative approach, the Company establishes fair value for the purpose of impairment testing by averaging the fair value using an income and market approach. The income approach employs a discounted cash flow model incorporating similar pricing concepts used to calculate fair value in an acquisition due diligence process and a discount rate that takes into account the Company’s estimated average cost of capital. The market approach employs market multiples based on comparable publicly traded companies in similar industries as the reporting unit. Estimates of fair value are established using current and forward multiples adjusted for size and performance of the reporting unit relative to peer companies.
During the second quarter of 2016, with the realignment of the Company’s reporting segments, the Company performed an analysis to determine the allocations of goodwill and test for impairment. Based on this analysis, the Company determined that the portion of goodwill allocated to the retail branch operations was impaired as the fair value of the reporting unit did not exceed its carrying value resulting in an impairment charge for the Commercial Trailer Products reporting segment of $1.7 million. In the fourth quarter of 2016 and 2014, the Company completed its goodwill impairment test using the quantitative assessment. Furthermore, for 2015, the Company completed its goodwill impairment testing during the fourth quarter using the qualitative approach. Based on the testing performed in each of these years, the Company believed it was more likely than not that the fair value of its reporting units were greater than their carrying amount and no additional impairment of goodwill was recognized. Additionally, in 2014, the Company’s former retail reporting unit recognized a partial disposal of goodwill in the amount of $0.5 million resulting from the transitioning of three retail branch locations to independent dealer facilities during the second quarter of 2014.
The changes in the carrying amounts of goodwill, all of which are included in the Company’s Diversified Products segment as of December 31, 2016, except for approximately $2.6 million allocated to the Company’s Commercial Trailer Products segment, for the years ended December 31, 2016 and 2015 were as follows (in thousands):
2016 | 2015 | |||||||
Balance as of January 1 | $ | 149,718 | $ | 149,603 | ||||
Effects of foreign currency | 312 | 115 | ||||||
Impairment of goodwill | (1,663 | ) | - | |||||
Balance as of December 31 | $ | 148,367 | $ | 149,718 |
The Company capitalizes the cost of computer software developed or obtained for internal use. Capitalized software is amortized using the straight-line method over three to seven years. As of December 31, 2016 and 2015, the Company had software costs, net of amortization, of $5.4 million and $2.7 million, respectively. Amortization expense for 2016, 2015 and 2014 was $1.0 million, $0.7 million, and $0.5 million, respectively.
Long-lived assets, consisting primarily of intangible assets and property, plant and equipment, are reviewed for impairment whenever facts and circumstances indicate that the carrying amount may not be recoverable. Specifically, this process involves comparing an asset’s carrying value to the estimated undiscounted future cash flows the asset is expected to generate over its remaining life. If this process were to result in the conclusion that the carrying value of a long-lived asset would not be recoverable, a write-down of the asset to fair value would be recorded through a charge to operations. Fair value is determined based upon discounted cash flows or appraisals as appropriate.
The following table presents the major components ofOther Accrued Liabilities (in thousands):
December 31, | ||||||||
2016 | 2015 | |||||||
Payroll and related taxes | $ | 26,793 | $ | 34,427 | ||||
Warranty | 20,520 | 19,709 | ||||||
Customer deposits | 19,302 | 14,877 | ||||||
Self-insurance | 8,387 | 7,677 | ||||||
Accrued taxes | 6,400 | 8,075 | ||||||
All other | 10,912 | 8,277 | ||||||
$ | 92,314 | $ | 93,042 |
The following table presents the changes in the product warranty accrual included inOther Accrued Liabilities (in thousands):
2016 | 2015 | |||||||
Balance as of January 1 | $ | 19,709 | $ | 15,462 | ||||
Provision for warranties issued in current year | 6,601 | 9,714 | ||||||
Provision for (Recovery of ) pre-existing warranties | 560 | (409 | ) | |||||
Payments | (6,350 | ) | (5,058 | ) | ||||
Balance as of December 31 | $ | 20,520 | $ | 19,709 |
The Company offers a limited warranty for its products with a coverage period that ranges between one and five years, except that the coverage period for DuraPlate® trailer panels is ten years. The Company passes through component manufacturers’ warranties to its customers. The Company’s policy is to accrue the estimated cost of warranty coverage at the time of the sale.
The following table presents the changes in the self-insurance accrual included inOther Accrued Liabilities (in thousands):
2016 | 2015 | |||||||
Balance as of January 1 | $ | 7,677 | $ | 7,494 | ||||
Expense | 41,470 | 40,023 | ||||||
Payments | (40,760 | ) | (39,840 | ) | ||||
Balance as of December 31 | $ | 8,387 | $ | 7,677 |
The Company is self-insured up to specified limits for medical and workers’ compensation coverage. The self-insurance reserves have been recorded to reflect the undiscounted estimated liabilities, including claims incurred but not reported, as well as catastrophic claims as appropriate.
The Company determines its provision or benefit for income taxes under the asset and liability method. The asset and liability method measures the expected tax impact at current enacted rates of future taxable income or deductions resulting from differences in the tax and financial reporting basis of assets and liabilities reflected in the Consolidated Balance Sheets. Future tax benefits of tax losses and credit carryforwards are recognized as deferred tax assets. Deferred tax assets are reduced by a valuation allowance to the extent management determines that it is more-likely-than-not the Company would not realize the value of these assets.
The Company accounts for income tax contingencies by prescribing a “more-likely-than-not” recognition threshold that a tax position is required to meet before being recognized in the financial statements.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and customer receivables. The Company places its cash and cash equivalents with high quality financial institutions. Generally, the Company does not require collateral or other security to support customer receivables.
Research and development expenses are charged to earnings as incurred and were $6.4 million, $4.8 million and $1.7 million in 2016, 2015 and 2014, respectively.
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605,Revenue. Furthermore, the FASB issued additional amendments and technical corrections related to ASU 2014-09 during 2016, which are considered in our evaluation of this standard. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date of these standards will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company is currently developing an implementation plan to adopt this new standard and in the process of reviewing a majority of its revenue streams and the related performance obligations and pricing arrangements. In addition, the Company is also evaluating contractual terms, such as customer acceptance clauses, payment terms, shipping instructions, and timing of shipments, against the new standards to determine the impact on the Company’s financial statements. As part of this plan, the Company is evaluating which method to apply and assessing the potential impact of the adoption on its financial statements and related disclosures. The Company expects to conclude this evaluation in 2017.
In August 2014, the FASB issued ASU No. 2014-15,Presentation of Financial Statements – Going Concern, which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosures. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016. The Company adopted the guidance in 2016 and, as a result, this standard did not have a material impact on its financial statements.
In April 2015, the FASB issued ASU No. 2015-03,Imputation of Interest. Also, in August 2015, the FASB issued ASU No. 2015-15,Imputation of Interest, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Agreements. These ASUs simplified the presentation of debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs are not affected by these ASUs. Furthermore, ASU No. 2015-15 provided authoritative guidance permitting an entity to defer and present debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. These ASUs were effective for annual and interim reporting periods beginning after December 15, 2015 and required a retrospective approach. The Company adopted the guidance in 2016 and, as a result, it did not have a material impact on financial statements.
In July 2015, the FASB issued ASU No. 2015-11,simplifying the Measurement of Inventory. This ASU, which applies to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, requires that entities measure inventory at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. The Company adopted the guidance in 2016 and, as a result, this standard did not have a material impact on its financial statements.
In November 2015, the FASB issued ASU 2015-17,Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.This amendment changes how deferred taxes are recognized by eliminating the requirement of presenting deferred tax liabilities and assets as current and noncurrent on the balance sheet. Instead, the requirement will be to classify all deferred tax liabilities and assets as noncurrent. ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with earlier adoption permitted. ASU 2015-17 can be adopted either prospectively or retrospectively to all periods presented. The Company adopted ASU 2015-17 prospectively beginning with the first quarter of 2016 and deferred income taxes are now presented as non-current.
In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). This update requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance will be effective for the Company as of January 1, 2019. A modified retrospective transition method is required. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changed the accounting for certain aspects of employee share-based payments. The ASU requires companies to recognize additional tax benefits or expenses related to the vesting or settlement of employee share-based awards (the difference between the actual tax benefit and the tax benefit initially recognized for financial reporting purposes) as income tax benefit or expense in earnings, rather than in additional paid-in capital, in the reporting period in which they occur. The ASU also requires companies to classify cash flows resulting from employee share-based payments, including the additional tax benefits or expenses related to the vesting or settlement of share-based awards, as cash flows from operating activities rather than financing activities. Although this change will reduce some of the administrative complexities of tracking share-based awards, it will increase the volatility of our income tax expense and cash flows from operations. The new standard is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company early adopted the ASU during the fourth quarter of 2016 and are therefore required to report the impacts as though the ASU had been adopted on January 1, 2016. Accordingly, the Company recognized an immaterial income tax benefit as an increase to earnings during the year ended December 31, 2016. Additionally, the Company recognized additional income tax benefits as an increase to operating cash flows for the year ended December 31, 2016. The new accounting standard did not impact any periods prior to January 1, 2016, as the Company applied the changes in the ASU on a prospective basis.
In November 2016, the FASB issued ASU No. 2016-18,Statement of Cash Flows (Topic 230), Restricted Cash,which requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. This guidance will be effective for the Company as of January 1, 2018. Entities will be required to apply the guidance retrospectively. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
Per share results have been calculated based on the average number of common shares outstanding. The calculation of basic and diluted net income per share is determined using net income applicable to common stockholders as the numerator and the number of shares included in the denominator as follows (in thousands, except per share amounts):
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Basic net income per share | ||||||||||||
Net income applicable to common stockholders | $ | 119,433 | $ | 104,289 | $ | 60,930 | ||||||
Undistributed earnings allocated to participating securities | - | - | (481 | ) | ||||||||
Net income applicable to common stockholders excluding amounts applicable to participating securities | $ | 119,433 | $ | 104,289 | $ | 60,449 | ||||||
Weighted average common shares outstanding | 63,729 | 67,201 | 68,895 | |||||||||
Basic net income per share | $ | 1.87 | $ | 1.55 | $ | 0.88 | ||||||
Diluted net income per share: | ||||||||||||
Net income applicable to common stockholders | $ | 119,433 | $ | 104,289 | $ | 60,930 | ||||||
Undistributed earnings allocated to participating securities | - | - | (481 | ) | ||||||||
Net income applicable to common stockholders excluding amounts applicable to participating securities | $ | 119,433 | $ | 104,289 | $ | 60,449 | ||||||
Weighted average common shares outstanding | 63,729 | 67,201 | 68,895 | |||||||||
Dilutive shares from assumed conversion of convertible senior notes | 794 | 1,128 | 1,354 | |||||||||
Dilutive stock options and restricted stock | 1,239 | 1,039 | 814 | |||||||||
Diluted weighted average common shares outstanding | 65,762 | 69,368 | 71,063 | |||||||||
Diluted net income per share | $ | 1.82 | $ | 1.50 | $ | 0.85 |
Average diluted shares outstanding for the periods ended December 31, 2016, 2015 and 2014 exclude options to purchase common shares totaling 503, 666 and 581, respectively, because the exercise prices were greater than the average market price of the common shares. In addition, the calculation of diluted net income per share for each period includes the impact of the Company’s Notes as the average stock price of the Company’s common stock during these periods was above the initial conversion price of approximately $11.70 per share.
The Company leases office space, manufacturing, warehouse and service facilities and equipment for varying periods under both operating and capital lease agreements. Future minimum lease payments required under these lease commitments as of December 31, 2016 are as follows (in thousands):
Capital Leases | Operating Leases | |||||||
2017 | 605 | 3,123 | ||||||
2018 | 460 | 2,027 | ||||||
2019 | 361 | 1,033 | ||||||
2020 | 361 | 211 | ||||||
2021 | 361 | 41 | ||||||
Thereafter | 30 | - | ||||||
Total minimum lease payments | $ | 2,178 | $ | 6,435 | ||||
Interest | (276 | ) | ||||||
Present value of net minimum lease payments | $ | 1,902 |
Total rental expense was $6.2 million, $6.2 million, and $5.8 million for 2016, 2015, and 2014, respectively.
Long-term debt consists of the following (in thousands):
December 31, | December 31, | |||||||
2016 | 2015 | |||||||
Convertible senior notes | $ | 48,951 | $ | 131,000 | ||||
Term loan credit agreement | 189,470 | 191,399 | ||||||
Other debt | 676 | 1,149 | ||||||
$ | 239,097 | $ | 323,548 | |||||
Less: unamortized discount and fees | (3,164 | ) | (11,052 | ) | ||||
Less: current portion | (2,468 | ) | (37,611 | ) | ||||
$ | 233,465 | $ | 274,885 |
Convertible Senior Notes
In April 2012, the Company issued Convertible Senior Notes due 2018 (the “Notes”) with an aggregate principal amount of $150 million in a public offering. The Notes bear interest at a rate of 3.375% per annum from the date of issuance, payable semi-annually on May 1 and November 1.1, and matured on May 1, 2018. The Convertible Notes arewere senior unsecured obligations of the Company rankingranked equally with itsour existing and future senior unsecured debt.
The Notes are convertible by their holders into cash, shares of the Company’s common stock or any combination thereof at the Company’s election, at an initial conversion rate of 85.4372 shares of the Company’s common stock per $1,000 in principal amount of Notes, which is equal to an initial conversion price of approximately $11.70 per share, only under the following circumstances: (A) before November 1, 2017 (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2012 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture for the Notes) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events as described in the indenture for the Notes; and (B) at any time on or after November 1, 2017 until the close of business on the second business day immediately preceding the maturity date. As of December 31, 2016, the Notes were not convertible based on the above criteria. If the Notes outstanding at December 31, 2016 were converted as of December 31, 2016, the if-converted value would exceed the principal amount by approximately $17 million.
It is the Company’s intent to settle conversions through a net share settlement, which involves repayment of cash for the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion. The Company We used the net proceeds of $145.1 million from the sale of the Convertible Notes to fund a portion of the purchase price of the acquisition of Walker Group Holdings (“Walker”) in May 2012.
The Company accounts We accounted separately for the liability and equity components of the Convertible Notes in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance required the carrying amount of the liability component
During 2016 the Company executed multiple agreements with existing holders of the Notes to repurchase $82.0settle $44.6 million in principal of suchthe Convertible Notes of which none were converted to common shares. The excess of the cash settlement amount over the principal value of the Convertible Notes was accounted for $98.9as a reacquisition of equity, resulting in a $35.5 million excluding accrued interest. Additionally, in December 2015, the Company acquired $19.0 million in principal for $22.9 million, excluding accrued interest.reduction to additional paid-in capital during 2018. For the years ended December 31, 20162018 and 2015, the Company2017, we recognized a loss on debt extinguishment of $1.9$0.2 million and $0.2$0.1 million, respectively in connection withrelated to settlements and the repurchase activity,retirement of the Convertible Notes, which wasis included in
The following table summarizes information about the equity and liability components of the Notes (dollars2018, we were in thousands).
December 31, | December 31, | |||||||
2016 | 2015 | |||||||
Principal amount of the Notes outstanding | $ | 48,951 | $ | 131,000 | ||||
Unamortized discount and fees of liability component | (2,183 | ) | (9,888 | ) | ||||
Net carrying amount of liability component | 46,768 | 121,112 | ||||||
Less: current portion | - | (35,165 | ) | |||||
Long-term debt | $ | 46,768 | $ | 85,947 | ||||
Carrying value of equity component, net of issuance costs | $ | (3,971 | ) | $ | 15,810 | |||
Remaining amortization period of discount on the liability component | 1.3 years | 2.3 years |
compliance with all covenants.
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Contractual coupon interest expense | $ | 3,198 | $ | 5,063 | $ | 5,063 | ||||||
Accretion of discount and fees on the liability component | $ | 2,902 | $ | 4,324 | $ | 4,037 |
Revolving Credit Agreement
In June 2015, the Company
The Amendment, among other things, (i) increases the total commitments under the Credit Facility from $150 million to $175 million, and (ii) extends the maturity date of the Credit Facility from May 2017 to June 2020, but provides for an accelerated maturity in the event the Company’s outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is 121 days prior to the maturity date thereof and the Company is not then maintaining, and continues to maintain until the Notes are converted, redeemed, repurchased or refinanced in full, (x) Liquidity of at least $125 million and (y) availability under the Credit Facility of at least $25 million. Liquidity, as defined in the Credit Agreement, reflects the difference between (i) the sum of (A) unrestricted cash and cash equivalents and (B) availability under the Credit Facility and (ii) the amount necessary to fully redeem the Notes.
In addition, the Amendment (i) provides that borrowings under the Credit Facility will bear interest, at the Borrowers’ election, at (x) LIBOR plus a margin ranging from 150 basis points to 200 basis points (in lieu of the previous range from 175 basis points to 225 basis points), or (y) a base rate plus a margin ranging from 50 basis points to 100 basis points (in lieu of the previous range from 75 basis points to 125 basis points), in each case, based upon the monthly average excess availability under the Credit Facility, (ii) provides that the monthly unused line fee shall be equal to 25 basis points (which amount was previously 37.5 basis points) times the average unused availability under the Credit Facility, (iii) provides that if availability under the Credit Facility is less than 12.5% (which threshold was previously 15%) of the total commitment under the Credit Facility or if there exists an event of default, amounts in any of the Borrowers’ and the subsidiary guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the Credit Facility, (iv) provides that the Company will be required to maintain a minimum fixed charge coverage ratio of not less than 1.1 to 1.0agreement, dated as of the end of any period of 12 fiscal months when excess availability under the Credit Facility is less than 10% (which threshold was previously 12.5%) of the total commitment under the Credit Facility and (v) amends certain negative covenants in the Credit Agreement.
May 8, 2012.
The Revolving Credit Agreement has a scheduled maturity date of December 21, 2023, subject to certain springing maturity events.
2018 | 2017 | Change | |||||||||
Source (use) of cash: | |||||||||||
Accounts receivable | $ | (39,539 | ) | $ | 31,943 | $ | (71,482 | ) | |||
Inventories | (18,713 | ) | (13,158 | ) | (5,555 | ) | |||||
Accounts payable and accrued liabilities | 32,653 | (963 | ) | 33,616 | |||||||
Net (use) source of cash | $ | (25,599 | ) | $ | 17,822 | $ | (43,421 | ) |
2017 | 2016 | Change | |||||||||
Source (use) of cash: | |||||||||||
Accounts receivable | $ | 31,943 | $ | (809 | ) | $ | 32,752 | ||||
Inventories | (13,158 | ) | 24,969 | (38,127 | ) | ||||||
Accounts payable and accrued liabilities | (963 | ) | (13,002 | ) | 12,039 | ||||||
Net source of cash | $ | 17,822 | $ | 11,158 | $ | 6,664 |
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
Debt: | |||||||||||||||||||||||||||
Revolving Facility (due 2023) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Term Loan Credit Facility (due 2022) | 1,880 | 1,880 | 1,880 | 180,057 | — | — | 185,697 | ||||||||||||||||||||
Senior Notes (due 2025) | — | — | — | — | — | 325,000 | 325,000 | ||||||||||||||||||||
Capital Leases (including principal and interest) | 361 | 361 | 361 | 30 | — | — | 1,113 | ||||||||||||||||||||
Total debt | 2,241 | 2,241 | 2,241 | 180,087 | — | 325,000 | 511,810 | ||||||||||||||||||||
Other: | |||||||||||||||||||||||||||
Operating Leases | 3,253 | 2,612 | 2,095 | 862 | 649 | 1,733 | 11,203 | ||||||||||||||||||||
Total other | 3,253 | 2,612 | 2,095 | 862 | 649 | 1,733 | 11,203 | ||||||||||||||||||||
Other commercial commitments: | |||||||||||||||||||||||||||
Letters of Credit | 8,222 | — | — | — | — | — | 8,222 | ||||||||||||||||||||
Raw Material Purchase Commitments | 147,484 | — | — | — | — | — | 147,484 | ||||||||||||||||||||
Chassis Converter Pool Agreements | 27,774 | — | — | — | — | — | 27,774 | ||||||||||||||||||||
Total other commercial commitments | 183,480 | — | — | — | — | — | 183,480 | ||||||||||||||||||||
Total obligations | $ | 188,974 | $ | 4,853 | $ | 4,336 | $ | 180,949 | $ | 649 | $ | 326,733 | $ | 706,494 |
Page | |
/s/ ERNST & YOUNG LLP | |
We have served as the Company‘s auditor since 2002. | |
Indianapolis, Indiana | |
February 28, 2019 |
December 31, | |||||||
2018 | 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 132,690 | $ | 191,521 | |||
Accounts receivable, net | 181,064 | 146,836 | |||||
Inventories | 184,404 | 180,735 | |||||
Prepaid expenses and other | 51,261 | 57,299 | |||||
Total current assets | 549,419 | 576,391 | |||||
Property, plant, and equipment, net | 206,991 | 195,363 | |||||
Goodwill | 311,084 | 317,464 | |||||
Intangible assets | 210,328 | 237,030 | |||||
Other assets | 26,571 | 25,265 | |||||
Total assets | $ | 1,304,393 | $ | 1,351,513 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 1,880 | $ | 46,020 | |||
Current portion of capital lease obligations | 299 | 290 | |||||
Accounts payable | 153,113 | 108,448 | |||||
Other accrued liabilities | 116,384 | 128,910 | |||||
Total current liabilities | 271,676 | 283,668 | |||||
Long-term debt | 503,018 | 504,091 | |||||
Capital lease obligations | 714 | 1,012 | |||||
Deferred income taxes | 34,905 | 36,955 | |||||
Other non-current liabilities | 20,231 | 19,724 | |||||
Total liabilities | 830,544 | 845,450 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Common stock, $0.01 par value: 200,000,000 shares authorized; 55,135,788 and 57,564,493 shares outstanding, respectively | 744 | 737 | |||||
Additional paid-in capital | 629,039 | 653,435 | |||||
Retained earnings | 150,244 | 98,728 | |||||
Accumulated other comprehensive loss | (3,343 | ) | (2,385 | ) | |||
Treasury stock, at cost: 19,372,735 and 16,207,740 common shares, respectively | (302,835 | ) | (244,452 | ) | |||
Total stockholders' equity | 473,849 | 506,063 | |||||
Total liabilities and stockholders' equity | $ | 1,304,393 | $ | 1,351,513 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Net sales | $ | 2,267,278 | $ | 1,767,161 | $ | 1,845,444 | |||||
Cost of sales | 1,983,627 | 1,506,286 | 1,519,910 | ||||||||
Gross profit | 283,651 | 260,875 | 325,534 | ||||||||
General and administrative expenses | 95,114 | 77,825 | 74,129 | ||||||||
Selling expenses | 33,046 | 25,588 | 27,270 | ||||||||
Amortization of intangible assets | 19,468 | 17,041 | 19,940 | ||||||||
Acquisition expenses | 68 | 9,605 | — | ||||||||
Impairment | 24,968 | — | 1,663 | ||||||||
Income from operations | 110,987 | 130,816 | 202,532 | ||||||||
Other income (expense): | |||||||||||
Interest expense | (28,759 | ) | (16,400 | ) | (15,663 | ) | |||||
Other, net | 13,776 | 8,122 | (1,452 | ) | |||||||
Other expense, net | (14,983 | ) | (8,278 | ) | (17,115 | ) | |||||
Income before income tax | 96,004 | 122,538 | 185,417 | ||||||||
Income tax expense | 26,583 | 11,116 | 65,984 | ||||||||
Net income | $ | 69,421 | $ | 111,422 | $ | 119,433 | |||||
Net income per share: | |||||||||||
Basic | $ | 1.22 | $ | 1.88 | $ | 1.87 | |||||
Diluted | $ | 1.19 | $ | 1.78 | $ | 1.82 | |||||
Weighted average common shares outstanding (in thousands): | |||||||||||
Basic | 56,996 | 59,358 | 63,729 | ||||||||
Diluted | 58,430 | 62,599 | 65,762 | ||||||||
Dividends declared per share | $ | 0.305 | $ | 0.255 | $ | 0.060 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Net income | $ | 69,421 | $ | 111,422 | $ | 119,433 | |||||
Other comprehensive (loss) income, net of tax: | |||||||||||
Foreign currency translation adjustment and other | (193 | ) | 462 | (1,347 | ) | ||||||
Unrealized loss on derivative instruments | (765 | ) | — | — | |||||||
Total other comprehensive (loss) income | (958 | ) | 462 | (1,347 | ) | ||||||
Comprehensive income | $ | 68,463 | $ | 111,884 | $ | 118,086 |
Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Losses | Treasury Stock | Total | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balances at December 31, 2015 | 64,929,510 | $ | 715 | $ | 642,908 | $ | (111,909 | ) | $ | (1,500 | ) | $ | (90,405 | ) | $ | 439,809 | ||||||||||
Net income for the year | 119,433 | 119,433 | ||||||||||||||||||||||||
Foreign currency translation and other | (1,347 | ) | (1,347 | ) | ||||||||||||||||||||||
Stock-based compensation | 615,066 | 6 | 12,031 | 12,037 | ||||||||||||||||||||||
Stock repurchase | (5,832,387 | ) | (79,556 | ) | (79,556 | ) | ||||||||||||||||||||
Equity component of convertible senior notes repurchase | (18,883 | ) | (18,883 | ) | ||||||||||||||||||||||
Common stock dividends | (3,933 | ) | (3,933 | ) | ||||||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||
Stock option exercises | 417,442 | 4 | 4,827 | 4,831 | ||||||||||||||||||||||
Balances at December 31, 2016 | 60,129,631 | $ | 725 | $ | 640,883 | $ | 3,591 | $ | (2,847 | ) | $ | (169,961 | ) | $ | 472,391 | |||||||||||
Net income for the year | 111,422 | 111,422 | ||||||||||||||||||||||||
Foreign currency translation and other | 462 | 462 | ||||||||||||||||||||||||
Stock-based compensation | 650,218 | 7 | 10,422 | 10,429 | ||||||||||||||||||||||
Stock repurchase | (3,726,809 | ) | (74,491 | ) | (74,491 | ) | ||||||||||||||||||||
Equity component of convertible senior notes repurchase | (3,655 | ) | (3,655 | ) | ||||||||||||||||||||||
Common stock dividends | (16,285 | ) | (16,285 | ) | ||||||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||
Stock option exercises | 511,453 | 5 | 5,785 | 5,790 | ||||||||||||||||||||||
Balances at December 31, 2017 | 57,564,493 | $ | 737 | $ | 653,435 | $ | 98,728 | $ | (2,385 | ) | $ | (244,452 | ) | $ | 506,063 | |||||||||||
Net income for the year | 69,421 | 69,421 | ||||||||||||||||||||||||
Foreign currency translation and other | (193 | ) | (193 | ) | ||||||||||||||||||||||
Stock-based compensation | 404,628 | 6 | 10,163 | 10,169 | ||||||||||||||||||||||
Stock repurchase | (2,935,978 | ) | (58,383 | ) | (58,383 | ) | ||||||||||||||||||||
Equity component of convertible senior notes repurchase | (35,519 | ) | (35,519 | ) | ||||||||||||||||||||||
Common stock dividends | (17,905 | ) | (17,905 | ) | ||||||||||||||||||||||
Unrealized loss on derivative instruments, net of tax | (765 | ) | (765 | ) | ||||||||||||||||||||||
Common stock issued in connection with: | ||||||||||||||||||||||||||
Stock option exercises | 102,645 | 1 | 960 | 961 | ||||||||||||||||||||||
Balances at December 31, 2018 | 55,135,788 | $ | 744 | $ | 629,039 | $ | 150,244 | $ | (3,343 | ) | $ | (302,835 | ) | $ | 473,849 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | 69,421 | $ | 111,422 | $ | 119,433 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation | 21,215 | 18,012 | 16,830 | ||||||||
Amortization of intangibles | 19,468 | 17,041 | 19,940 | ||||||||
Net (gain) loss on sale of property, plant and equipment | (10,148 | ) | (8,046 | ) | 101 | ||||||
Loss on debt extinguishment | 280 | 799 | 1,895 | ||||||||
Deferred income taxes | (2,976 | ) | (14,682 | ) | 4,044 | ||||||
Stock-based compensation | 10,169 | 10,429 | 12,038 | ||||||||
Non-cash interest expense | 1,745 | 2,258 | 3,475 | ||||||||
Impairment of goodwill and other intangibles | 24,968 | — | 1,663 | ||||||||
Accounts receivable | (39,539 | ) | 31,943 | (809 | ) | ||||||
Inventories | (18,713 | ) | (13,158 | ) | 24,969 | ||||||
Prepaid expenses and other | 4,548 | (2,014 | ) | (10,147 | ) | ||||||
Accounts payable and accrued liabilities | 32,653 | (963 | ) | (13,002 | ) | ||||||
Other, net | (620 | ) | (8,662 | ) | (1,680 | ) | |||||
Net cash provided by operating activities | 112,471 | 144,379 | 178,750 | ||||||||
Cash flows from investing activities | |||||||||||
Capital expenditures | (34,009 | ) | (26,056 | ) | (20,342 | ) | |||||
Proceeds from sale of property, plant and equipment | 17,776 | 10,860 | 19 | ||||||||
Acquisitions, net of cash acquired | — | (323,487 | ) | — | |||||||
Other, net | 3,060 | 6,443 | 3,014 | ||||||||
Net cash used in investing activities | (13,173 | ) | (332,240 | ) | (17,309 | ) | |||||
Cash flows from financing activities | |||||||||||
Proceeds from exercise of stock options | 961 | 5,790 | 4,831 | ||||||||
Borrowings under senior notes | — | 325,000 | — | ||||||||
Dividends paid | (17,768 | ) | (15,315 | ) | — | ||||||
Borrowings under revolving credit facilities | 937 | 713 | 618 | ||||||||
Payments under revolving credit facilities | (937 | ) | (713 | ) | (618 | ) | |||||
Principal payments under capital lease obligations | (290 | ) | (600 | ) | (779 | ) | |||||
Proceeds from issuance of term loan credit facility | — | 377,519 | — | ||||||||
Principal payments under term loan credit facility | (1,880 | ) | (386,577 | ) | (1,928 | ) | |||||
Principal payments under industrial revenue bond | (93 | ) | (583 | ) | (473 | ) | |||||
Debt issuance costs paid | (476 | ) | (6,783 | ) | — | ||||||
Convertible senior notes repurchase | (80,200 | ) | (8,045 | ) | (98,922 | ) | |||||
Stock repurchase | (58,383 | ) | (74,491 | ) | (79,556 | ) | |||||
Net cash provided by (used in) financing activities | (158,129 | ) | 215,915 | (176,827 | ) | ||||||
Cash and cash equivalents: | |||||||||||
Net increase (decrease) in cash and cash equivalents | (58,831 | ) | 28,054 | (15,386 | ) | ||||||
Cash and cash equivalents at beginning of year | 191,521 | 163,467 | 178,853 | ||||||||
Cash and cash equivalents at end of year | $ | 132,690 | $ | 191,521 | $ | 163,467 | |||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | 27,386 | $ | 9,479 | $ | 12,656 | |||||
Cash paid for income taxes | $ | 24,243 | $ | 41,391 | $ | 68,870 |
Years ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Balance at beginning of year | $ | 869 | $ | 951 | $ | 956 | |||||
Provision | 63 | 119 | 117 | ||||||||
Write-offs, net of recoveries | (267 | ) | (201 | ) | (122 | ) | |||||
Balance at end of year | $ | 665 | $ | 869 | $ | 951 |
December 31, | |||||||
2018 | 2017 | ||||||
Chassis converter pool agreements | $ | 22,273 | $ | 18,326 | |||
Income tax receivables | 9,872 | 10,821 | |||||
Insurance premiums & maintenance agreements | 3,313 | 6,860 | |||||
Assets held for sale | 3,039 | 10,777 | |||||
All other | 12,764 | 10,515 | |||||
$ | 51,261 | $ | 57,299 |
2018 | 2017 | ||||||
Balance as of January 1 | $ | 20,132 | $ | 20,520 | |||
Provision for warranties issued in current year | 8,026 | 5,873 | |||||
Liability adjustment due to divestiture of business | (420 | ) | — | ||||
Supreme acquisition | — | 1,421 | |||||
Provision for pre-existing warranties | — | (970 | ) | ||||
Payments | (5,491 | ) | (6,712 | ) | |||
Balance as of December 31 | $ | 22,247 | $ | 20,132 |
2018 | 2017 | ||||||
Balance as of January 1 | $ | 9,996 | $ | 8,387 | |||
Expense | 66,493 | 38,817 | |||||
Supreme Acquisition | — | 2,555 | |||||
Payments | (66,599 | ) | (39,763 | ) | |||
Balance as of December 31 | $ | 9,890 | $ | 9,996 |
Acquisition Date | |||
Cash | $ | 36,878 | |
Accounts receivable | 25,196 | ||
Inventories | 33,471 | ||
Prepaid expense and other | 23,916 | ||
Property, plant, and equipment | 59,891 | ||
Intangible assets | 161,200 | ||
Goodwill | 167,714 | ||
Other assets | 127 | ||
Total assets acquired | 508,393 | ||
Current portion of long-term debt | 7,167 | ||
Accounts payable | 10,546 | ||
Other accrued liabilities | 55,518 | ||
Deferred income taxes | 71,880 | ||
Long-term liabilities | 2,918 | ||
Total liabilities assumed | 148,029 | ||
Net assets acquired | $ | 360,364 | |
Acquisition, net of cash acquired | $ | 323,486 |
Amount | Useful Life | ||||
Tradename | $ | 20,000 | 20 years | ||
Customer relationships | 139,000 | 15 years | |||
Backlog | 2,200 | Less than 1 year | |||
$ | 161,200 |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
Sales | $ | 1,998,043 | $ | 2,139,404 | |||
Net income | $ | 117,786 | $ | 124,323 |
Commercial Trailer Products | Diversified Products | Final Mile Products | Total | ||||||||||||
Balance at December 31, 2016 | |||||||||||||||
Goodwill | $ | 4,288 | $ | 145,742 | $ | — | $ | 150,030 | |||||||
Accumulated impairment losses | (1,663 | ) | — | — | (1,663 | ) | |||||||||
Net balance at December 31, 2016 | 2,625 | 145,742 | — | 148,367 | |||||||||||
Acquisition of Supreme | — | — | 169,235 | 169,235 | |||||||||||
Effects of foreign currency | — | (138 | ) | — | (138 | ) | |||||||||
Goodwill impairments during 2017 | — | — | — | — | |||||||||||
Balance at December 31, 2017 | |||||||||||||||
Goodwill | 4,288 | 145,604 | 169,235 | 319,127 | |||||||||||
Accumulated impairment losses | (1,663 | ) | — | — | (1,663 | ) | |||||||||
Net balance as of December 31, 2017 | 2,625 | 145,604 | 169,235 | 317,464 | |||||||||||
Acquisition of Supreme | — | — | (1,520 | ) | (1,520 | ) | |||||||||
Effects of foreign currency | — | 84 | — | 84 | |||||||||||
Goodwill impairments during 2018 | — | (4,944 | ) | — | (4,944 | ) | |||||||||
Balance as of December 31, 2018 | |||||||||||||||
Goodwill | 4,288 | 145,688 | 167,715 | 317,691 | |||||||||||
Accumulated impairment losses | (1,663 | ) | (4,944 | ) | — | (6,607 | ) | ||||||||
Net balance as of December 31, 2018 | $ | 2,625 | $ | 140,744 | $ | 167,715 | $ | 311,084 |
Weighted Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | ||||||||||
Tradenames and trademarks | 20 years | $ | 53,103 | $ | (15,307 | ) | $ | 37,796 | |||||
Customer relationships | 13 years | 282,736 | (116,222 | ) | 166,514 | ||||||||
Technology | 12 years | 14,045 | (8,027 | ) | 6,018 | ||||||||
Total | $ | 349,884 | $ | (139,556 | ) | $ | 210,328 |
Weighted Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | ||||||||||
Tradenames and trademarks | 20 years | $ | 57,894 | $ | (14,034 | ) | $ | 43,860 | |||||
Customer relationships | 10 years | 290,415 | (105,567 | ) | 184,848 | ||||||||
Technology | 12 years | 16,517 | (8,694 | ) | 7,823 | ||||||||
Backlog | less than 1 year | 2,200 | (1,701 | ) | 499 | ||||||||
Total | $ | 367,026 | $ | (129,996 | ) | $ | 237,030 |
December 31, | |||||||
2018 | 2017 | ||||||
Raw materials and components | $ | 115,083 | $ | 83,834 | |||
Finished goods | 48,698 | 54,000 | |||||
Work in progress | 13,119 | 29,123 | |||||
Used trailers | 1,083 | 7,330 | |||||
Aftermarket parts | 6,421 | 6,448 | |||||
$ | 184,404 | $ | 180,735 |
December 31, | |||||||
2018 | 2017 | ||||||
Land | $ | 35,485 | $ | 34,493 | |||
Buildings and building improvements | 141,098 | 139,636 | |||||
Machinery and equipment | 266,803 | 254,544 | |||||
Construction in progress | 31,772 | 17,672 | |||||
475,158 | 446,345 | ||||||
Less: accumulated depreciation | (268,167 | ) | (250,982 | ) | |||
$ | 206,991 | $ | 195,363 |
December 31, | |||||||
2018 | 2017 | ||||||
Customer deposits | $ | 23,483 | $ | 26,059 | |||
Chassis converter pool agreements | 22,273 | 18,326 | |||||
Warranty | 22,247 | 20,132 | |||||
Payroll and related taxes | 16,096 | 27,840 | |||||
Self-insurance | 9,890 | 9,996 | |||||
Accrued taxes | 7,653 | 9,224 | |||||
All other | 14,742 | 17,333 | |||||
$ | 116,384 | $ | 128,910 |
December 31, 2018 | December 31, 2017 | ||||||
Senior notes due 2025 | $ | 325,000 | $ | 325,000 | |||
Term loan credit agreement | 185,699 | 187,579 | |||||
Convertible senior notes due 2018 | — | 44,561 | |||||
Other debt | — | 93 | |||||
510,699 | 557,233 | ||||||
Less: unamortized discount and fees | (5,801 | ) | (7,122 | ) | |||
Less: current portion | (1,880 | ) | (46,020 | ) | |||
$ | 503,018 | $ | 504,091 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Contractual coupon interest expense | $ | 470 | $ | 1,570 | $ | 3,198 | |||||
Accretion of discount and fees on the liability component | $ | 461 | $ | 1,537 | $ | 2,902 |
Term Loan Credit Agreement
In April 2013, the Company entered into Amendment No.1 to Credit Agreement (the “Amendment No. 1”), which became effective on May 9, 2013. As of the Amendment No. 1 date, there was $297.0 million of term loans outstanding under the Term Loan Credit Agreement (the “Initial Loans”), of which the Company paid $20.0 million in connection with Amendment No. 1. Under Amendment No. 1, the lenders agreed to provide to the Company term loans inand (y) an aggregate principal amount of $277.0 million, which were exchanged for and used to refinance the Initial Loans (the “Tranche B-1 Loans”).
In March 2015, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”). As of the Amendment No. 2 date, there was $192.8 million of the Tranche B-1 Loans outstanding. Under Amendment No. 2, the lenders agreed to provide to the Company term loans in an aggregate principal amount of $192.8 million (the “Tranche B-2 Loans”), which were used to refinance the outstanding Tranche B-1 Loans. The Tranche B-2 Loans mature in March 2022, but provide for an accelerated maturity in the event the Company’s outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is 91 days prior to the maturity date thereof and the Company is not then maintaining, and continues to maintain until the Notes are converted, redeemed, repurchased or refinanced in full, liquidity of at least $125 million. Liquidity, as defined in the Term Loan Credit Agreement, reflects the difference between (i) the sum of (A) unrestricted cash and cash equivalents and (B) the amount available and permitted to be drawn under the Company’s existing Credit Agreement and (ii) the amount necessary to fully redeem the Notes. The Tranche B-2 Loans shall amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the original principal amount of the Tranche B-2 Loans, with the balance payable at maturity, and will bear interest at a rate, at the Company’s election, equal to (i) LIBOR (subject to a floor of 1.00%) plus a margin of 3.25% or (ii) a base rate plus a margin of 2.25%.
Amendment No. 2 also amended the Term Loan Credit Agreement by (i) removing the maximum senior secured leverage ratio test, (ii) modifying theuncommitted accordion feature as described in the Term Loan Credit Agreement, to provide for aadditional senior secured incremental term loan facility in an aggregate amount notloans of up to exceed the greater of (A) $75 million (less the aggregateplus an unlimited amount of (1) any increases in the maximum revolver amount under the Company’s existing Credit Agreement and (2) certain permitted indebtedness incurred for the purpose of prepaying or repurchasing the Notes) and (B) an amount suchprovided that the senior secured leverage ratio would not be greater than 3.0exceed 3.00 to 1.0,1.00, subject to certain conditions including obtaining commitments from any one or more lenders, whether or not currently party to the Term(the “Term Loan Credit Agreement, to provide such increased amounts, and (iii) amending certain negative covenants. The senior secured leverage ratio is defined in the Term Loan Credit Agreement and reflects a ratio of consolidated net total secured indebtedness to consolidated EBITDA.
Furthermore, onFacility”).
Term Loan Facility.
Subject to the terms of the Intercreditor Agreement, if the covenants under the Term Loan Credit Agreement as amended, are breached, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral. Other customary events of default in the Term Loan Credit Agreement as amended, include, without limitation, failure to pay obligations when due, initiation of insolvency proceedings, defaults on certain other indebtedness, and the incurrence of certain judgments that are not stayed, satisfied, bonded or discharged within 60 days.
For the years ended December 31, 2016, 20152018, 2017 and 2014,2016, under the Term Loan Credit Agreement the Company paid interest of $8.3$8.0 million, $8.5$7.4 million and $10.0,$8.3 million, respectively, and principal of $1.9 million $1.4in each period. In connection with Amendment No. 3 and Amendment No. 5, the Company recognized a loss on debt extinguishment of $0.7 million and $42.1 million, respectively.during 2017 which is included in Other, net on the Company’s Consolidated Statements of Operations. As of December 31, 2016,2018, the Company had $189.5$185.7 million outstanding under the Term Loan Credit Agreement, of which $1.9 million was classified as current on the Company’s Consolidated Balance Sheet.
Asset / (Liability) Derivatives | ||||||||||
Balance Sheet Caption | December 31, 2018 | December 31, 2017 | ||||||||
Derivatives designated as hedging instruments | ||||||||||
Commodity swap contracts | Prepaid expenses and other | $ | 17 | $ | — | |||||
Commodity swap contracts | Other accrued liabilities | (1,146 | ) | — | ||||||
Total derivatives designated as hedging instruments | $ | (1,129 | ) | $ | — |
Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion, net of tax) | Location of Gain (Loss) Reclassified from AOCI into Earnings (Effective Portion) | Amount of Gain (Loss) Reclassified from AOCI into Earnings | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||
December 31, 2018 | December 31, 2017 | 2018 | 2017 | 2016 | ||||||||||||||||||
Derivatives instruments | ||||||||||||||||||||||
Commodity swap contracts | $ | (765 | ) | $ | — | Cost of sales | $ | 142 | $ | — | $ | — |
Capital Leases | Operating Leases | ||||||
2019 | $ | 361 | $ | 3,253 | |||
2020 | 361 | 2,612 | |||||
2021 | 361 | 2,095 | |||||
2022 | 30 | 862 | |||||
2023 | — | 649 | |||||
Thereafter | — | 1,733 | |||||
Total minimum lease payments | $ | 1,113 | $ | 11,204 | |||
Interest | (100 | ) | |||||
Present value of net minimum lease payments | $ | 1,013 |
▪ | Level 1 — Valuation is based on quoted prices for identical assets or liabilities in active markets; |
▪ | Level 2 — Valuation is based on quoted prices for similar assets or liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for the full term of the financial instrument; and |
▪ | Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement. |
Additionally, upon the Company’s acquisition of Supreme, the Company acquired a pool of investments made by a wholly owned captive insurance subsidiary. These investments are comprised of mutual funds, which are classified as Level 1. The Company’s carrying and estimated fair value of debt at December 31, (asset) include mutual funds, $2.2 million of which are classified as Level 1, and life-insurance contracts valued based on the performance of underlying mutual funds, $10.4 million of which are classified as Level 2. Frequency Asset / (Liability) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)December 31, 2018 Commodity swap contracts Recurring $ (1,129 ) $ — $ (1,129 ) $ — Mutual funds Recurring $ 4,140 $ 4,140 $ — $ — Life-insurance contracts Recurring $ 15,333 $ — $ 15,333 $ — December 31, 2017 Commodity swap contracts Recurring $ — $ — $ — $ — Mutual funds Recurring $ 4,284 $ 4,284 $ — $ — Life-insurance contracts Recurring $ 13,806 $ — $ 13,806 $ — long-term debt at December 31, 20162018 consists primarily of the Senior Notes due 2025 and borrowings under the Term Loan Credit Agreement (see Note 3)10). The fair value of the Senior Notes thedue 2025, Term Loan Credit Agreement, and the Revolving Credit Facility are based upon third party pricing sources, which generally do not represent daily market activity or represent data obtained from an exchange, and are classified as Level 2. The interest rates on the Company’s borrowings under the Revolving Credit Facility are adjusted regularly to reflect current market rates and thus carrying value approximates fair value for these borrowings. All other debt and capital lease obligations approximate their fair value as determined by discounted cash flows and are classified as Level 3.7020162018 and December 31, 2015 were as follows: December 31, 2016 December 31, 2015 Carrying Fair Value Carrying Fair Value Value Level 1 Level 2 Level 3 Value Level 1 Level 2 Level 3 Instrument Convertible senior notes $ 46,768 $ - $ 69,721 $ - $ 121,112 $ - $ 155,694 $ - Term loan credit agreement 188,540 - 189,470 - 190,311 - 190,442 - Other debt 653 - - 653 1,106 - - 1,106 Capital lease obligations 1,875 - - 1,875 2,648 - - 2,648 $ 237,836 $ - $ 259,191 $ 2,528 $ 315,177 $ - $ 346,136 $ 3,754 7.STOCKHOLDERS’ EQUITYOn February 1, 2016, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $100 million of its common stock over a two year period. Stock repurchases under this program may be made in open market or in private transactions at times and in amounts that management deems appropriate. As of December 31, 2016, $23.0 million remained available under the program.The Board of Directors has the authority to issue common and unclassed preferred stock of up to 200 million shares and 25 million shares, respectively, with par value of $0.01 per share as well as to fix dividends, voting and conversion rights, redemption provisions, liquidation preferences and other rights and restrictions.8.STOCK-BASED COMPENSATIONIn May 2011, the Company adopted and shareholders approved the 2011 Omnibus Incentive Plan (the “Omnibus Plan”). This plan provides for the issuance of stock options, restricted stock, stock appreciation rights and performance units to directors, officers and other eligible employees of the Company. The Omnibus Plan makes available approximately 7.5 million shares for issuance, subject to adjustments for stock dividends, recapitalizations and the like.The Company recognizes all share-based awards to eligible employees based upon their fair value. The Company’s policy is to recognize expense for awards that have service conditions only subject to graded vesting using the straight-line attribution method. Total stock-based compensation expense was $12.0 million, $10.0 million and $7.8 million in 2016, 2015 and 2014, respectively. The amount of compensation costs related to nonvested stock options and restricted stock not yet recognized was $12.0 million at December 31, 2016, for which the weighted average remaining life was 1.7 years.Stock OptionsStock options are awarded with an exercise price equal to the market price of the underlying stock on the date of grant, become fully exercisable three years after the date of grant and expire ten years after the date of grant. No stock options were granted by the Company in 2016. The fair value of stock option awards is estimated on the date of grant using a binomial option-pricing model that uses the assumptions noted in the following table:Valuation Assumptions 2015 2014 Risk-free interest rate 2.14 % 2.73 % Expected volatility 72.5 % 72.0 % Expected dividend yield 0.00 % 0.00 % Expected term 5 yrs. 5 yrs. The expected volatility is based upon the Company’s historical experience. The expected term represents the period of time that options granted are expected to be outstanding. The risk-free interest rate utilized for periods throughout the contractual life of the options are based on U.S. Treasury security yields at the time of grant.71A summary of all stock option activity during 2016 is as follows: Number of
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life Aggregate
Intrinsic
Value ($ in
millions) Options Outstanding at December 31, 2015 1,820,956 $ 11.61 5.2 $ 2.3 Exercised (417,442 ) $ 11.57 $ 1.3 Forfeited (17,300 ) $ 14.64 Expired (112,460 ) $ 16.71 Options Outstanding at December 31, 2016 1,273,754 $ 11.13 5.1 $ 6.0 Options Exercisable at December 31, 2016 1,093,165 $ 10.67 4.6 $ 5.6 The Company granted 190,810 and 200,720 stock options in 2015 and 2014, respectively, with aggregate fair values on the date of grant of $1.7 million for both years. The weighted average estimated fair value of the stock options granted in 2015 and 2014 were $8.82 and $8.34 per stock option, respectively. The total intrinsic value of stock options exercised during 2016, 2015 and 2014 was $1.3 million, $0.6 million and $0.7 million, respectively.Restricted StockRestricted stock awards vest over a period of one to three years and may be based on the achievement of specific financial performance metrics. These shares are valued at the market price on the date of grant, are forfeitable in the event of terminated employment prior to vesting and could include the right to vote and receive dividends.A summary of all restricted stock activity during 2016 is as follows: Number of
Shares Weighted
Average
Grant Date
Fair Value Restricted Stock Outstanding at December 31, 2015 1,538,116 $ 13.25 Granted 1,105,010 $ 13.26 Vested (618,145 ) $ 9.91 Forfeited (61,256 ) $ 14.36 Restricted Stock Outstanding at December 31, 2016 1,963,725 $ 14.20 During 2016, 2015 and 2014, the Company granted 1,105,010, 667,126 and 572,052 shares of restricted stock, respectively, with aggregate fair values on the date of grant of $14.7 million, $9.9 million and $7.9 million, respectively. The total fair value of restricted stock that vested during 2016, 2015 and 2014 was $7.4 million, $5.6 million and $5.2 million, respectively.9.EMPLOYEE SAVINGS PLANSSubstantially all of the Company’s employees are eligible to participate in a defined contribution plan under Section 401(k) of the Internal Revenue Code. The Company also provides a non-qualified defined contribution plan for senior management and certain key employees. Both plans provide for the Company to match, in cash, a percentage of each employee’s contributions up to certain limits. The Company’s matching contribution and related expense for these plans was approximately $7.0 million, $7.3 million, and $5.9 million for 2016, 2015, and 2014, respectively.7210.INCOME TAXESa.Income Before Income TaxesThe consolidated income (loss) before income taxes for 2016, 2015 and 2014 consists of the following (in thousands): 2016 2015 2014 Domestic $ 185,042 $ 163,325 $ 98,246 Foreign 375 (14 ) 216 Total income before income taxes $ 185,417 $ 163,311 $ 98,462 b.Income Tax ExpenseThe consolidated income tax expense for 2016, 2015 and 2014 consists of the following components (in thousands): 2016 2015 2014 Current Federal $ 51,489 $ 58,090 $ 19,036 State 10,307 8,627 1,805 Foreign 144 54 118 $ 61,940 $ 66,771 $ 20,959 Deferred Federal $ 3,448 $ (7,930 ) $ 12,913 State 686 288 3,778 Foreign (90 ) (107 ) (118 ) $ 4,044 $ (7,749 ) $ 16,573 Total consolidated expense $ 65,984 $ 59,022 $ 37,532 The following table provides a reconciliation of differences from the U.S. Federal statutory rate of 35% as follows (in thousands): 2016 2015 2014 Pretax book income $ 185,417 $ 163,311 $ 98,462 Federal tax expense at 35% statutory rate 64,896 57,159 34,462 State and local income taxes 7,145 6,190 4,808 Benefit of domestic production deduction (5,065 ) (5,255 ) (2,010 ) Other (992 ) 928 272 Total income tax expense $ 65,984 $ 59,022 $ 37,532 c.Deferred TaxesThe Company’s deferred income taxes are primarily due to temporary differences between financial and income tax reporting for incentive compensation, depreciation of property, plant and equipment, amortization of intangibles, inventory adjustments, other accrued liabilities and net operating loss carryforwards (“NOLs”).Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Companies are required to assess whether valuation allowances should be established against their deferred tax assets based on the consideration of all available evidence, both positive and negative, using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified.73The Company assesses, on a quarterly basis, the realizability of its deferred tax assets by evaluating all available evidence, both positive and negative, including: (1) the cumulative results of operations in recent years, (2) the nature of recent losses, if applicable, (3) estimates of future taxable income, (4) the length of NOLs and (5) the uncertainty associated with a possible change in ownership, which imposes an annual limitation on the use of these carryforwards.As of December 31, 2016 and 2015, the Company retained a valuation allowance of $1.2 and $1.2 million, respectively, against deferred tax assets related to various state and local NOLs that are subject to restrictive rules for future utilization.As of December 31, 2016, the Company had no U.S. federal tax NOLs. The Company had various multistate income tax NOLs, which have been recorded as a deferred income tax asset of approximately $2.3 million, before valuation allowances. These NOLs will expire beginning in 2017 if unused.The components of deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2015 were as follows (in thousands): 2016 2015 Deferred tax assets Tax credits and loss carryforwards $ 260 $ 563 Accrued liabilities 9,852 9,211 Incentive compensation 21,206 24,682 Other 4,084 3,909 $ 35,402 $ 38,365 Deferred tax liabilities Property, plant and equipment (5,823 ) (4,000 ) Intangibles (5,299 ) (5,325 ) Prepaid assets (689 ) (697 ) Convertible note discount (715 ) (3,234 ) Other (1,860 ) (1,658 ) $ (14,386 ) $ (14,914 ) Net deferred tax asset before valuation allowances and reserves $ 21,016 $ 23,451 Valuation allowances (1,172 ) (1,159 ) Net deferred tax asset $ 19,844 $ 22,292 December 31, 2018 December 31, 2017 Fair Value Fair Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Instrument Senior notes due 2025 $ 319,941 $ — $ 278,688 $ — $ 319,377 $ — $ 328,250 $ — Term loan credit agreement 184,957 — 181,985 — 186,620 — 188,048 — Convertible senior notes due 2018 — — — — 44,046 — 83,605 — Other debt — — — — 67 — — 67 Capital lease obligations 1,013 — — 1,013 1,302 — — 1,302 $ 505,911 $ — $ 460,673 $ 1,013 $ 551,412 $ — $ 599,903 $ 1,369 d.Tax Reserves
The Company’s policy with respect to interest and penalties associated with reserves or allowances for uncertain tax positions is to classify such interest and penalties inIncome Tax Expense on the Consolidated Statement of Operations. As of December 31, 2016 and 2015, the total amount of unrecognized income tax benefits was approximately $12.7 million and $11.7 million, respectively, all of which, if recognized, would impact the effective income tax rate of the Company. As of December 31, 2016 and 2015, the Company had recorded a total of $1.8 and $1.1 million, respectively of accrued interest and penalties related to uncertain tax positions. The Company foresees no significant changes to the facts and circumstances underlying its reserves and allowances for uncertain income tax positions as reasonably possible during the next 12 months. As of December 31, 2016, the Company is subject to unexpired statutes of limitation for U.S. federal income taxes for the years 2003 through 2016. The Company is also subject to unexpired statutes of limitation for Indiana state income taxes for the years 2014 through 2016.
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows (in thousands) and all balances as of December 31, 2016 were included in eitherOther Noncurrent Liabilities orDeferred Income Taxesin the Company’s Consolidated Balance Sheet:
Balance at January 1, 2015 | $ | 10,648 | ||
Decrease in prior year tax positions | (23 | ) | ||
Balance at December 31, 2015 | $ | 10,625 | ||
Decrease in prior year tax positions | - | |||
Balance at December 31, 2016 | $ | 10,625 |
COMMITMENTS AND CONTINGENCIES |
The Company is involved in a number of legal proceedings concerning matters arising in connection with the conduct of its business activities, and is periodically subject to governmental examinations (including by regulatory and tax authorities), and information gathering requests (collectively, "governmental examinations").
The Company has recorded liabilities for certain On the basis of its outstanding legalinformation currently available to it, management does not believe that existing proceedings and governmental examinations. A liability is accrued when it is both (a) probable that a loss with respect to the legal proceeding has occurred and (b) the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the liability that has been previously accrued. These legal proceedings, as well as governmental examinations, involve various lines of business of the Company and a variety of claims (including, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against the Company specify the damages claimed by the plaintiff, many seek a not-yet-quantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated and/or unsupported. As a result, it is not currently possible to estimate a range of possible loss beyond previously accrued liabilities relating to some matters including those described below. Such previously accrued liabilities may not represent the Company's maximum loss exposure. The legal proceedings and governmental examinations underlying the estimated rangeinvestigations will change from time to time and actual results may vary significantly from the currently accrued liabilities.
Based on its current knowledge, and taking into consideration its litigation-related liabilities, the Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding or governmental examination other than the matters below, which are addressed individually, that would have a material adverse effectimpact on the Company'sour consolidated financial condition or liquidity if determined in a manner adverse to the Company. However, in light of the uncertainties involved in such matters the ultimate outcome of a particular matterare unpredictable, and we could be material to the Company's operating resultsincur judgments or enter into settlements for a particular period depending on, among other factors, the size of the losscurrent or liability imposedfuture claims that could materially and the level of the Company's income for that period.adversely affect our financial statements. Costs associated with the litigation
Brazil Joint Venture
In March 2001, Bernard Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against the Company in the Fourth Civil Court of Curitiba in the State of Paraná, Brazil. Because of the bankruptcy of BK, this proceeding is now pending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99).
The case grows out of a joint venture agreement between BK and the Company related to marketing of RoadRailer trailers in Brazil and other areas of South America. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the joint venture was dissolved. BK subsequently filed its lawsuit against the Company alleging that it was forced to terminate business with other companies because of the exclusivity and non-compete clauses purportedly found in the joint venture agreement. BK asserted damages, exclusive of any potentially court-imposed interest or inflation adjustments, of approximately R$20.8 million (Brazilian Reais). BK did not change the amount of damages it asserted following its filing of the case in 2001.
A bench (non-jury) trial was held on March 30, 2010 in Curitiba, Paraná, Brazil. On November 22, 2011, the Fourth Civil Court of Curitiba partially granted BK’s claims, and ordered Wabash to pay BK lost profits, compensatory, economic and moral damages in excess of the amount of compensatory damages asserted by BK. The total ordered damages amount was approximately R$26.7 million (Brazilian Reais), which was approximately $8.2 million U.S. dollars using the exchange rate as of December 31, 2016 and exclusive of any potentially court-imposed interest, fees or inflation adjustments. On October 5, 2016, the Court of Appeals re-heard all facts and legal questions presented in the case, and ruled in favor of the Company on all claims at issue. In doing so, the Court of Appeals dismissed all claims against the Company and vacated the judgment and damages previously ordered by the Fourth Civil Court of Curitiba. Unless BK appeals the ruling and a higher court finds in favor of BK on any of its claims, the judgment of the Court of Appeals is final. As a result of the Court of Appeals ruling, the Company does not expect that this proceeding will have a material adverse effect on its financial condition or results of operations; however, it will continue to monitor these legal proceedings in the event BK further appeals the ruling of the Court of Appeals.
Intellectual Property
In October 2006, the Company filed a patent infringement suit against Vanguard National Corporation (“Vanguard”) regarding the Company’s U.S. Patent Nos. 6,986,546 and 6,220,651 in the U.S. District Court for the Northern District of Indiana (Civil Action No. 4:06-cv-135). The Company amended the Complaint in April 2007. In May 2007, Vanguard filed its Answer to the Amended Complaint, along with Counterclaims seeking findings of non-infringement, invalidity, and unenforceability of the subject patents. The Company filed a reply to Vanguard’s counterclaims in May 2007, denying any wrongdoing or merit to the allegations as set forth in the counterclaims. The case was stayed by agreement of the parties while the U.S. Patent and Trademark Office (“Patent Office”) undertook a reexamination of U.S. Patent No. 6,986,546. In June 2010, the Patent Office notified the Company that the reexamination was completed and the Patent Office reissued U.S. Patent No. 6,986,546 without cancelling any claims of the patent. The parties have not yet petitioned the Court to lift the stay, and it is unknown at this time when the parties may do so.
The Company believes that its claims against Vanguard have merit and that the claims asserted by Vanguard are without merit. The Company intends to vigorously defend its position and intellectual property. The Company believes that the resolution of this lawsuit will not have a material adverse effect on its financial position, liquidity or future results of operations. However, at this stage of the proceeding, no assurance can be given as to the ultimate outcome of the case.
Walker Acquisition
In connection with the Company’s acquisition of Walker in May 2012, there is an outstanding claim of approximately $2.9 million for unpaid benefits that is currently in dispute and that, if required to be paid by the Company, is not expected to have a material adverse effect on the Company’s financial condition or results of operations
Environmental Disputes
Bulk Tank International, S. de R.L. de C.V. (“Bulk”) entered into agreements
In January 2006, the Company received a letter from the North Carolina Department of Environment
Contingencies
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Basic net income per share: | |||||||||||
Net income applicable to common stockholders | $ | 69,421 | $ | 111,422 | $ | 119,433 | |||||
Weighted average common shares outstanding | 56,996 | 59,358 | 63,729 | ||||||||
Basic net income per share | $ | 1.22 | $ | 1.88 | $ | 1.87 | |||||
Diluted net income per share: | |||||||||||
Net income applicable to common stockholders | $ | 69,421 | $ | 111,422 | $ | 119,433 | |||||
Weighted average common shares outstanding | 56,996 | 59,358 | 63,729 | ||||||||
Dilutive shares from assumed conversion of convertible senior notes | 455 | 1,726 | 794 | ||||||||
Dilutive stock options and restricted stock | 979 | 1,515 | 1,239 | ||||||||
Diluted weighted average common shares outstanding | 58,430 | 62,599 | 65,762 | ||||||||
Diluted net income per share | $ | 1.19 | $ | 1.78 | $ | 1.82 |
Number of Shares | Weighted Average Grant Date Fair Value | |||||
Restricted Stock Outstanding at December 31, 2017 | 1,845,627 | $ | 17.11 | |||
Granted | 593,705 | 24.79 | ||||
Vested | (633,645 | ) | 16.49 | |||
Forfeited | (310,123 | ) | 18.50 | |||
Restricted Stock Outstanding at December 31, 2018 | 1,495,564 | $ | 20.77 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value ($ in millions) | |||||||||
Options Outstanding at December 31, 2017 | 753,038 | $ | 10.96 | 4.4 | $ | 8.1 | ||||||
Exercised | (102,645 | ) | $ | 9.37 | $ | 1.5 | ||||||
Forfeited | (3,000 | ) | $ | 13.74 | ||||||||
Expired | (13,800 | ) | $ | 8.57 | ||||||||
Options Outstanding at December 31, 2018 | 633,593 | $ | 11.26 | 3.8 | $ | 1.3 | ||||||
Options Exercisable at December 31, 2018 | 633,593 | $ | 11.26 | 3.8 | $ | 1.3 |
Foreign Currency Translation and Other | Derivative Instruments | Total | ||||||||||
Balances at December 31, 2015 | $ | (1,500 | ) | $ | — | $ | (1,500 | ) | ||||
Net unrealized gains (losses) arising during the period | (1,347 | ) | — | (1,347 | ) | |||||||
Less: Net realized gains (losses) reclassified to net income | — | — | — | |||||||||
Net change during the period | (1,347 | ) | — | (1,347 | ) | |||||||
Balances at December 31, 2016 | (2,847 | ) | — | (2,847 | ) | |||||||
Net unrealized gains (losses) arising during the period | 462 | — | 462 | |||||||||
Less: Net realized gains (losses) reclassified to net income | — | — | — | |||||||||
Net change during the period | 462 | — | 462 | |||||||||
Balances at December 31, 2017 | (2,385 | ) | — | (2,385 | ) | |||||||
Net unrealized gains (losses) arising during the period(a) | (193 | ) | (660 | ) | (853 | ) | ||||||
Less: Net realized gains (losses) reclassified to net income(b) | — | 105 | 105 | |||||||||
Net change during the period | (193 | ) | (765 | ) | (958 | ) | ||||||
Balances at December 31, 2018 | $ | (2,578 | ) | $ | (765 | ) | $ | (3,343 | ) |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Domestic | $ | 94,978 | $ | 121,897 | $ | 185,042 | |||||
Foreign | 1,026 | 641 | 375 | ||||||||
Total income before income taxes | $ | 96,004 | $ | 122,538 | $ | 185,417 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Current | |||||||||||
Federal | $ | 22,120 | $ | 21,316 | $ | 51,489 | |||||
State | 7,271 | 4,327 | 10,307 | ||||||||
Foreign | 168 | 155 | 144 | ||||||||
29,559 | 25,798 | 61,940 | |||||||||
Deferred | |||||||||||
Federal | (1,613 | ) | (16,065 | ) | 3,448 | ||||||
State | (1,312 | ) | 1,459 | 686 | |||||||
Foreign | (51 | ) | (76 | ) | (90 | ) | |||||
(2,976 | ) | (14,682 | ) | 4,044 | |||||||
Total consolidated expense | $ | 26,583 | $ | 11,116 | $ | 65,984 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Pretax book income | $ | 96,004 | $ | 122,538 | $ | 185,417 | |||||
Federal tax expense at applicable statutory rate | 20,161 | 42,888 | 64,896 | ||||||||
State and local income taxes (net of federal benefit) | 4,737 | 5,047 | 7,145 | ||||||||
Benefit of domestic production deduction | — | (3,450 | ) | (5,065 | ) | ||||||
Change in income tax reserves | — | (11,925 | ) | 862 | |||||||
Remeasurement of deferred taxes | (421 | ) | (19,796 | ) | — | ||||||
Nondeductible officer compensation | 1,152 | — | 163 | ||||||||
Stock based compensation expense | (1,009 | ) | (1,943 | ) | (225 | ) | |||||
Other | 1,963 | 295 | (1,792 | ) | |||||||
Total income tax expense | $ | 26,583 | $ | 11,116 | $ | 65,984 |
December 31, | |||||||
2018 | 2017 | ||||||
Deferred tax assets | |||||||
Tax credits and loss carryforwards | $ | 657 | $ | 1,710 | |||
Accrued liabilities | 7,285 | 6,629 | |||||
Incentive compensation | 12,132 | 13,867 | |||||
Other | 6,747 | 2,852 | |||||
26,821 | 25,058 | ||||||
Deferred tax liabilities | |||||||
Property, plant and equipment | (14,695 | ) | (12,813 | ) | |||
Intangibles | (42,343 | ) | (45,960 | ) | |||
Other | (3,841 | ) | (2,003 | ) | |||
(60,879 | ) | (60,776 | ) | ||||
Net deferred tax asset before valuation allowances and reserves | (34,058 | ) | (35,718 | ) | |||
Valuation allowances | (847 | ) | (1,237 | ) | |||
Net deferred tax asset or liability | $ | (34,905 | ) | $ | (36,955 | ) |
Unrecognized Tax Benefits | |||
Balance at January 1, 2017 | $ | 10,625 | |
Decrease in prior year tax positions | (10,130 | ) | |
Balance at December 31, 2017 | 495 | ||
Increase in prior year tax positions | 682 | ||
Balance at December 31, 2018 | $ | 1,177 |
The Commercial Trailer Products segment manufactures standard and customized van and platform trailers truck bodies and other transportation related equipment tofor customers who purchase directly from the Company or through independent dealers or Company owned branch locations through which the Company offers additional service and support.dealers. The Diversified Products
and periods.
Reportable segment information is as follows (in thousands):
Commercial | Diversified | Corporate and | ||||||||||||||
Trailer Products | Products | Eliminations | Consolidated | |||||||||||||
2016 | ||||||||||||||||
Net sales | ||||||||||||||||
External customers | $ | 1,506,070 | $ | 339,374 | $ | - | $ | 1,845,444 | ||||||||
Intersegment sales | 40 | 13,030 | (13,070 | ) | - | |||||||||||
Total net sales | $ | 1,506,110 | $ | 352,404 | $ | (13,070 | ) | $ | 1,845,444 | |||||||
Depreciation and amortization | 12,345 | 22,970 | 1,454 | 36,769 | ||||||||||||
Income (Loss) from operations | 212,351 | 24,595 | (34,414 | ) | 202,532 | |||||||||||
Reconciling items to net income | ||||||||||||||||
Interest expense | 15,663 | |||||||||||||||
Other, net | 1,452 | |||||||||||||||
Income tax expense | 65,984 | |||||||||||||||
Net income | $ | 119,433 | ||||||||||||||
Assets | $ | 312,848 | $ | 370,338 | $ | 215,547 | $ | 898,733 | ||||||||
2015 | ||||||||||||||||
Net sales | ||||||||||||||||
External customers | $ | 1,582,019 | $ | 445,470 | $ | - | $ | 2,027,489 | ||||||||
Intersegment sales | 222 | 11,457 | (11,679 | ) | - | |||||||||||
Total net sales | $ | 1,582,241 | $ | 456,927 | $ | (11,679 | ) | $ | 2,027,489 | |||||||
Depreciation and amortization | 12,674 | 23,888 | 1,436 | 37,998 | ||||||||||||
Income (Loss) from operations | 159,385 | 51,078 | (30,094 | ) | 180,369 | |||||||||||
Reconciling items to net income | ||||||||||||||||
Interest expense | 19,548 | |||||||||||||||
Other, net | (2,490 | ) | ||||||||||||||
Income tax expense | 59,022 | |||||||||||||||
Net income | $ | 104,289 | ||||||||||||||
Assets | $ | 336,235 | $ | 397,892 | $ | 215,543 | $ | 949,670 | ||||||||
2014 | ||||||||||||||||
Net sales | ||||||||||||||||
External customers | $ | 1,380,195 | $ | 483,120 | $ | - | $ | 1,863,315 | ||||||||
Intersegment sales | 428 | 11,872 | (12,300 | ) | - | |||||||||||
Total net sales | $ | 1,380,623 | $ | 494,992 | $ | (12,300 | ) | $ | 1,863,315 | |||||||
Depreciation and amortization | 12,331 | 24,868 | 1,630 | 38,829 | ||||||||||||
Income (Loss) from operations | 82,290 | 57,635 | (17,539 | ) | 122,386 | |||||||||||
Reconciling items to net income | ||||||||||||||||
Interest expense | 22,165 | |||||||||||||||
Other, net | 1,759 | |||||||||||||||
Income tax expense | 37,532 | |||||||||||||||
Net income | $ | 60,930 | ||||||||||||||
Assets | $ | 342,015 | $ | 422,322 | $ | 163,109 | $ | 927,446 |
Commercial Trailer Products | Diversified Products | Final Mile Products | Corporate and Eliminations | Consolidated | |||||||||||||||
2018 | |||||||||||||||||||
Net sales | |||||||||||||||||||
External customers | $ | 1,536,687 | $ | 372,342 | $ | 358,249 | $ | — | $ | 2,267,278 | |||||||||
Intersegment sales | 252 | 21,629 | — | (21,881 | ) | — | |||||||||||||
Total net sales | $ | 1,536,939 | $ | 393,971 | $ | 358,249 | $ | (21,881 | ) | $ | 2,267,278 | ||||||||
Depreciation and amortization | $ | 9,631 | $ | 21,177 | $ | 8,314 | $ | 1,560 | $ | 40,682 | |||||||||
Income (Loss) from operations | $ | 141,795 | $ | (3,033 | ) | $ | 7,907 | $ | (35,682 | ) | $ | 110,987 | |||||||
Assets | $ | 355,183 | $ | 349,423 | $ | 484,634 | $ | 115,153 | $ | 1,304,393 | |||||||||
2017 | |||||||||||||||||||
Net sales | |||||||||||||||||||
External customers | $ | 1,348,251 | $ | 348,449 | $ | 70,461 | $ | — | $ | 1,767,161 | |||||||||
Intersegment sales | 131 | 12,909 | — | (13,040 | ) | — | |||||||||||||
Total net sales | $ | 1,348,382 | $ | 361,358 | $ | 70,461 | $ | (13,040 | ) | $ | 1,767,161 | ||||||||
Depreciation and amortization | $ | 9,975 | $ | 22,236 | $ | 1,152 | $ | 1,690 | $ | 35,053 | |||||||||
Income (Loss) from operations | $ | 151,999 | $ | 20,376 | $ | (2,098 | ) | $ | (39,461 | ) | $ | 130,816 | |||||||
Assets | $ | 311,705 | $ | 340,651 | $ | 404,246 | $ | 294,911 | $ | 1,351,513 | |||||||||
2016 | |||||||||||||||||||
Net sales | |||||||||||||||||||
External customers | $ | 1,506,070 | $ | 339,374 | $ | — | $ | — | $ | 1,845,444 | |||||||||
Intersegment sales | 40 | 13,030 | — | (13,070 | ) | — | |||||||||||||
Total net sales | $ | 1,506,110 | $ | 352,404 | $ | — | $ | (13,070 | ) | $ | 1,845,444 | ||||||||
Depreciation and amortization | $ | 12,345 | $ | 22,970 | $ | — | $ | 1,454 | $ | 36,769 | |||||||||
Income (Loss) from operations | $ | 212,351 | $ | 24,595 | $ | — | $ | (34,414 | ) | $ | 202,532 | ||||||||
Assets | $ | 312,848 | $ | 370,338 | $ | — | $ | 215,547 | $ | 898,733 |
Commercial | Diversified | |||||||||||||||||||
Year ended December 31, | Trailer Products | Products | Eliminations | Consolidated | ||||||||||||||||
2016 | $ | $ | $ | $ | % | |||||||||||||||
New trailers | 1,421,586 | 129,639 | (89 | ) | 1,551,136 | 84.1 | ||||||||||||||
Used trailers | 11,998 | 3,176 | - | 15,174 | 0.8 | |||||||||||||||
Components, parts and service | 56,191 | 111,519 | (12,955 | ) | 154,755 | 8.4 | ||||||||||||||
Equipment and other | 16,335 | 108,070 | (26 | ) | 124,379 | 6.7 | ||||||||||||||
Total net external sales | 1,506,110 | 352,404 | (13,070 | ) | 1,845,444 | 100.0 | ||||||||||||||
Commercial | Diversified | |||||||||||||||||||
Trailer Products | Products | Eliminations | Consolidated | |||||||||||||||||
2015 | $ | $ | $ | $ | % | |||||||||||||||
New trailers | 1,474,201 | 218,028 | - | 1,692,229 | 83.5 | |||||||||||||||
Used trailers | 31,022 | 4,558 | - | 35,580 | 1.8 | |||||||||||||||
Components, parts and service | 60,482 | 119,696 | (11,628 | ) | 168,550 | 8.3 | ||||||||||||||
Equipment and other | 16,536 | 114,645 | (51 | ) | 131,130 | 6.4 | ||||||||||||||
Total net external sales | 1,582,241 | 456,927 | (11,679 | ) | 2,027,489 | 100.0 | ||||||||||||||
Commercial | Diversified | |||||||||||||||||||
Trailer Products | Products | Eliminations | Consolidated | |||||||||||||||||
2014 | $ | $ | $ | $ | % | |||||||||||||||
New trailers | 1,267,610 | 226,215 | - | 1,493,825 | 80.2 | |||||||||||||||
Used trailers | 41,027 | 4,088 | - | 45,115 | 2.4 | |||||||||||||||
Components, parts and service | 55,429 | 127,460 | (12,300 | ) | 170,589 | 9.2 | ||||||||||||||
Equipment and other | 16,557 | 137,229 | - | 153,786 | 8.2 | |||||||||||||||
Total net external sales | 1,380,623 | 494,992 | (12,300 | ) | 1,863,315 | 100.0 |
Year ended December 31, 2018 | Commercial Trailer Products | Diversified Products | Final Mile Products | Eliminations | Consolidated | ||||||||||||||||||
New trailers | $ | 1,473,583 | $ | 164,790 | $ | — | $ | — | $ | 1,638,373 | 72.2 | % | |||||||||||
Used trailers | 9,618 | 3,514 | — | — | 13,132 | 0.6 | % | ||||||||||||||||
Components, parts and service | 34,994 | 122,099 | 9,968 | (21,811 | ) | 145,250 | 6.4 | % | |||||||||||||||
Equipment and other | 18,744 | 103,568 | 348,281 | (70 | ) | 470,523 | 20.8 | % | |||||||||||||||
Total net external sales | $ | 1,536,939 | $ | 393,971 | $ | 358,249 | $ | (21,881 | ) | $ | 2,267,278 | 100.0 | % |
Year ended December 31, 2017 | Commercial Trailer Products | Diversified Products | Final Mile Products | Eliminations | Consolidated | ||||||||||||||||||
New trailers | $ | 1,273,584 | $ | 140,105 | $ | — | $ | — | $ | 1,413,689 | 80.0 | % | |||||||||||
Used trailers | 10,720 | 3,278 | — | — | 13,998 | 0.8 | % | ||||||||||||||||
Components, parts and service | 48,008 | 117,681 | 1,877 | (13,040 | ) | 154,526 | 8.7 | % | |||||||||||||||
Equipment and other | 16,070 | 100,294 | 68,584 | 184,948 | 10.5 | % | |||||||||||||||||
Total net external sales | $ | 1,348,382 | $ | 361,358 | $ | 70,461 | $ | (13,040 | ) | $ | 1,767,161 | 100.0 | % |
Year ended December 31, 2016 | Commercial Trailer Products | Diversified Products | Final Mile Products | Eliminations | Consolidated | ||||||||||||||||||
New trailers | $ | 1,421,586 | $ | 129,639 | $ | — | $ | (89 | ) | $ | 1,551,136 | 84.1 | % | ||||||||||
Used trailers | 11,998 | 3,176 | — | �� | — | 15,174 | 0.8 | % | |||||||||||||||
Components, parts and service | 56,191 | 111,519 | — | (12,955 | ) | 154,755 | 8.4 | % | |||||||||||||||
Equipment and other | 16,335 | 108,070 | — | (26 | ) | 124,379 | 6.7 | % | |||||||||||||||
Total net external sales | $ | 1,506,110 | $ | 352,404 | $ | — | $ | (13,070 | ) | $ | 1,845,444 | 100.0 | % |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
2016 | ||||||||||||||||
Net sales | $ | 447,676 | $ | 471,439 | $ | 464,272 | $ | 462,057 | ||||||||
Gross profit | 79,526 | 91,064 | 83,459 | 71,485 | ||||||||||||
Net income | 27,523 | 35,532 | 33,378 | 23,000 | ||||||||||||
Basic net income per share(1) | 0.42 | 0.55 | 0.52 | 0.37 | ||||||||||||
Diluted net income per share(1) | 0.42 | 0.53 | 0.51 | 0.36 | ||||||||||||
2015 | ||||||||||||||||
Net sales | $ | 437,597 | $ | 514,831 | $ | 531,350 | $ | 543,711 | ||||||||
Gross profit | 57,197 | 72,405 | 86,022 | 87,819 | ||||||||||||
Net income | 10,474 | 28,649 | 31,880 | 33,286 | ||||||||||||
Basic net income per share(1) | 0.15 | 0.42 | 0.48 | 0.50 | ||||||||||||
Diluted net income per share(1) | 0.15 | 0.41 | 0.47 | 0.50 | ||||||||||||
2014 | ||||||||||||||||
Net sales | $ | 358,120 | $ | 486,021 | $ | 491,697 | $ | 527,477 | ||||||||
Gross profit | 46,672 | 61,613 | 61,628 | 62,721 | ||||||||||||
Net income | 7,296 | 16,239 | 18,307 | 19,088 | ||||||||||||
Basic net income per share(1) | 0.11 | 0.23 | 0.26 | 0.28 | ||||||||||||
Diluted net income per share(1) | 0.10 | 0.23 | 0.25 | 0.27 |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2018 | ||||||||||||||||
Net sales | $ | 491,319 | $ | 612,690 | $ | 553,073 | $ | 610,196 | ||||||||
Gross profit | $ | 64,119 | $ | 85,315 | $ | 65,162 | $ | 69,056 | ||||||||
Net income | $ | 21,272 | $ | 31,902 | $ | 4,664 | $ | 11,584 | ||||||||
Basic net income per share(1) | $ | 0.37 | $ | 0.55 | $ | 0.08 | $ | 0.21 | ||||||||
Diluted net income per share(1) | $ | 0.35 | $ | 0.54 | $ | 0.08 | $ | 0.21 | ||||||||
2017 | ||||||||||||||||
Net sales | $ | 362,716 | $ | 435,903 | $ | 425,098 | $ | 543,444 | ||||||||
Gross profit | $ | 59,357 | $ | 67,679 | $ | 60,963 | $ | 72,876 | ||||||||
Net income | $ | 20,173 | $ | 22,945 | $ | 18,947 | $ | 49,357 | ||||||||
Basic net income per share(1) | $ | 0.34 | $ | 0.38 | $ | 0.32 | $ | 0.84 | ||||||||
Diluted net income per share(1) | $ | 0.32 | $ | 0.36 | $ | 0.30 | $ | 0.80 | ||||||||
2016 | ||||||||||||||||
Net sales | $ | 447,676 | $ | 471,439 | $ | 464,272 | $ | 462,057 | ||||||||
Gross profit | $ | 79,526 | $ | 91,064 | $ | 83,459 | $ | 71,485 | ||||||||
Net income | $ | 27,523 | $ | 35,532 | $ | 33,378 | $ | 23,000 | ||||||||
Basic net income per share(1) | $ | 0.42 | $ | 0.55 | $ | 0.52 | $ | 0.37 | ||||||||
Diluted net income per share(1) | $ | 0.42 | $ | 0.53 | $ | 0.51 | $ | 0.36 |
(1) | Basic and diluted net income per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly net income per share may differ from annual net income per share due to rounding. |
Report of Management on Internal Control over Financial Reporting 2018. Corporation We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 22, 2019. 22, 2019. 22, 2019. 22, 2019.None2016,2018, including those procedures described below, we, including our Chief Executive Officer and our Chief Financial Officer, determined that those controls and procedures were effective.2016year 2018 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.812016,2018, based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)framework) (COSO). Based on this assessment, management has concluded that internal control over financial reporting is effective as of December 31, 2016.2016,2018, and its report on internal controls over financial reporting as of December 31, 20162018 appears on the following page.Richard J. GirominiBrent L. Yeagy President and Chief Executive Officer Jeffery L. Taylor Senior Vice President and Chief Financial Officer February 27, 2017 82February 28, 2019 Theand Stockholders of Wabash National Corporation:2016,2018, based on criteria established in Internal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wabash National Corporation’sCorporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.company’sCompany’s internal control over financial reporting based on our audit.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.In our opinion, Wabash National Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Wabash National Corporation as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February 27, 2017 expressed an unqualified opinion thereon./s/ Ernst & Young LLPIndianapolis, IndianaFebruary 27, 2017/s/ ERNST & YOUNG LLP 83Indianapolis, Indiana February 28, 2019 20172019 Annual Meeting of Stockholders to be held May 18, 2017.Compensation"Compensation” and “Director Compensation” from its definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20172019 Annual Meeting of Stockholders to be held May 18, 2017."Beneficial“Beneficial Ownership of Common Stock” and “Equity Compensation Plan Information” from its definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20172019 Annual Meeting of Stockholders to be held on May 18, 2017.20172019 Annual Meeting of Stockholders to be held on May 18, 2017.20172019 Annual Meeting of Stockholders to be held on May 18, 2017.
22, 2019.84(a)
(b) | Exhibits: |
No. | Description | ||
101 | Interactive Data File Pursuant to Rule 405 of Regulation S-T (28) |
# | Management contract or compensatory plan |
(1 |
Incorporated by reference to the Registrant’s registration statement on Form S-3 (Registration No. 333-27317) filed on May 16, 1997 |
(2 | Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended |
(3 |
Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended March 31, 2005 (File No. |
(4 | Incorporated by reference to the Registrant’s Form 8-K filed on December 16, 2015 (File No. |
(5 | Reserved |
(6 | Incorporated by reference to the Registrant’s Form 8-K filed on May 24, 2007 (File No. |
(7 | Incorporated by reference to the Registrant’s Form 10-K for the year ended December 31, 2007 (File No. |
(8 | Incorporated by reference to the Registrant’s Form 8-K filed on June 10, 2015 (File No. |
(9 | Incorporated by reference to the Registrant’s Form 8-K filed on August 4, 2009 (File No. |
(10 | Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended September 30, 2011 (File No. |
(11 | Incorporated by reference to the Registrant’s Form 8-K filed on May 25, 2011 (File No. |
(12 | Incorporated by reference to the Registrant’s Form 8-K filed on September 14, 2011 (File No. |
(13 | Incorporated by reference to the Registrant’s Form 8-K filed on |
(14 | Incorporated by reference to the Registrant’s Form 8-K filed on April 23, 2012 (File No.001-10883) |
(15 | Incorporated by reference to the Registrant’s Form 8-K filed on May 14, 2012 (File No 001-10883) |
(16 | Incorporated by reference to the Registrant’s Form 8-K filed on April 29, 2013 (File No 001-10883) |
(17 | Incorporated by reference to the Registrant’s Form 8-K filed on March 23, 2015 (File No 001-10883) |
(18 | Incorporated by reference to the Registrant’s Form 8-K filed on February 27, 2017 (File No 001-10883) | ||
(19 | Reserved | ||
(20 | ) | Incorporated by reference to the Registrant’s Form S-8 filed on May 18, 2017 (File No. 333-218085) | |
(21 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on August 9, 2017 (File No. 001-10883) | |
(22 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on August 22, 2017 (File No. 001-10883) | |
(23 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on September 15, 2017 (File No. 001-10883) | |
(24 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on September 26, 2017 (File No. 001-10883) | |
(25 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on November 22, 2017 (File No. 001-10883) | |
(26 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on December 15, 2017 (File No. 001-10883) | |
(27 | ) | Incorporated by reference to the Registrant’s Form 8-K filed on December 15, 2017 (File No. 001-10883) | |
(28 | ) | Filed herewith |
February 27, 201728, 2019By: /s/ Jeffery L. Taylor Jeffery L. Taylor Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date Signature and Title February 27, 201728, 2019 By: /s/ Richard J. GirominiBrent L. Yeagy Richard J. GirominiBrent L. Yeagy President and Chief Executive Officer, Director (Principal Executive Officer) February 27, 201728, 2019 By: /s/ Jeffery L. Taylor Jeffery L. Taylor Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 27, 2017By:/s/ Brent L. YeagyBrent L. YeagyPresident and Chief Operating Officer, DirectorFebruary 27, 201728, 2019 By: /s/ Martin C. Jischke Dr. Martin C. Jischke Chairman of the Board of Directors February 27, 201728, 2019 By: /s/ James D. KellyJohn G. Boss James D. KellyJohn G. Boss Director February 27, 201728, 2019By: /s/ Richard J. Giromini Richard J. Giromini Director February 28, 2019 By: /s/ John E. Kunz John E. Kunz Director February 27, 201728, 2019 By: /s/ Larry J. Magee Larry J. Magee Director February 27, 201728, 2019 By: /s/ Ann D. Murtlow Ann D. Murtlow Director February 27, 201728, 2019 By: /s/ Scott K. Sorensen Scott K. Sorensen Director 87