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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
[ ] THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER: 1-10883
WABASH NATIONAL CORPORATION
---------------------------
( Exact name of registrant as specified in its charter)
Delaware 52-1375208
-------- ----------
(State of Incorporation) (IRS Employer
Identification Number)
1000 Sagamore Parkway South,
Lafayette, Indiana 47905
------------------ -----
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (765) 771-5300
------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
The number of shares of common stock outstanding at May 12, 2000 was 22,986,946.
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WABASH NATIONAL CORPORATION
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Income
For the three months ended March 31, 2000 and 1999 2
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
2000 1999
----------- -----------
(Unaudited) (Note 1)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 21,314 $ 22,484
Accounts receivable, net 148,482 111,567
Current portion of finance contracts 14,602 8,423
Inventories 331,992 269,581
Prepaid expenses and other 17,057 16,962
--------- ---------
Total current assets 533,447 429,017
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, net 200,998 186,430
--------- ---------
EQUIPMENT LEASED TO OTHERS, net 52,960 50,364
--------- ---------
FINANCE CONTRACTS, net of current portion 62,984 71,839
--------- ---------
INTANGIBLE ASSETS, net 32,182 32,669
--------- ---------
OTHER ASSETS 22,370 20,972
--------- ---------
$ 904,941 $ 791,291
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,739 $ 3,514
Accounts payable 154,454 145,568
Accrued liabilities 46,015 51,184
--------- ---------
Total current liabilities 204,208 200,266
--------- ---------
LONG-TERM DEBT, net of current maturities 267,366 164,367
--------- ---------
DEFERRED INCOME TAXES 30,539 30,640
--------- ---------
OTHER NONCURRENT LIABILITIES AND CONTINGENCIES 15,699 16,653
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, aggregate liquidation value of $30,600 5 5
Common stock, 22,986,946 and 22,985,186 shares issued and 230 230
outstanding, respectively
Additional paid-in capital 236,502 236,474
Retained earnings 151,671 143,935
Treasury stock at cost, 59,600 common shares (1,279) (1,279)
--------- ---------
Total stockholders' equity 387,129 379,365
--------- ---------
$ 904,941 $ 791,291
========= =========
See Notes to Condensed Consolidated Financial Statements.
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
Three Months Ended
March 31,
------------------------
2000 1999
--------- ---------
(Unaudited) (Unaudited)
NET SALES $ 352,848 $ 341,624
COST OF SALES 318,425 314,399
--------- ---------
Gross profit 34,423 27,225
GENERAL AND ADMINISTRATIVE EXPENSES 8,076 7,180
SELLING EXPENSES 5,064 5,038
--------- ---------
Income from operations 21,283 15,007
OTHER INCOME (EXPENSE)
Interest expense (4,128) (3,013)
Accounts receivable securitization costs (1,661) (1,430)
Equity in losses of unconsolidated affiliate (850) (1,000)
Other, net 327 1,229
--------- ---------
Income before income taxes 14,971 10,793
PROVISION FOR INCOME TAXES 5,839 4,426
--------- ---------
Net income $ 9,132 $ 6,367
PREFERRED STOCK DIVIDENDS 476 443
--------- ---------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS $ 8,656 $ 5,924
========= =========
Earnings per share:
Basic $ 0.38 $ 0.26
Diluted $ 0.38 $ 0.26
========= =========
Cash dividends per share $ 0.04 $ 0.0375
========= =========
See Notes to Condensed Consolidated Financial Statements.
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months
Ended March 31,
------------------------
2000 1999
--------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 9,132 $ 6,367
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization 6,648 4,938
Gain on sale of property, plant and equipment (191) (624)
Bad debt provision 468 740
Deferred income taxes (639) (2,252)
Equity in losses of unconsolidated affiliate 850 1,000
Change in operating assets and liabilities:
Accounts receivable (37,383) (33,788)
Inventories (62,411) (33,829)
Prepaid expenses and other 580 10,378
Accounts payable and accrued liabilities 3,717 21,739
Other, net (841) (935)
--------- ---------
Net cash used in operating activities (80,070) (26,266)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,139) (14,393)
Net (addition) reduction to equipment leased to others (5,537) 1,302
Net additions to finance contracts (4,414) (3,996)
Investment in unconsolidated affiliate (916) (562)
Proceeds from the sale of property, plant and equipment 626 1,182
Proceeds from sale of leased equipment and finance contacts 3,347 7,211
Principal payments received on finance contracts 3,077 2,322
Other, net -- (109)
--------- ---------
Net cash used in investing activities (22,956) (7,043)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Long-term debt 12,500 --
Long-term revolver 171,900 --
Common stock 28 --
Payments:
Long-term debt (776) (1,836)
Long-term revolver (80,400) --
Common stock dividends (920) (860)
Preferred stock dividends (476) (443)
--------- ---------
Net cash provided by (used in) financing activities 101,856 (3,139)
--------- ---------
NET DECREASE IN CASH (1,170) (36,448)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,484 67,122
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,314 $ 30,674
========= =========
See Notes to Condensed Consolidated Financial Statements.
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL
The condensed consolidated financial statements included herein have
been prepared by Wabash National Corporation and its subsidiaries (the Company)
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. The condensed consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's 1999 Annual Report on Form 10-K.
In the opinion of the registrant, the accompanying condensed
consolidated financial statements contain all material adjustments (consisting
only of normal recurring adjustments), necessary to present fairly the
consolidated financial position of the Company at March 31, 2000 and December
31, 1999 and its results of operations and cash flows for the three months ended
March 31, 2000 and 1999.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This
pronouncement requires that all derivative instruments be recorded on the
balance sheet at their fair value. As amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133, this pronouncement is effective for the Company's
financial statements beginning January 1, 2001, with early adoption permitted.
The Company is currently evaluating the impact of adopting this pronouncement
and does not anticipate that its adoption will have a material effect on the
Company's results of operations or its financial position.
b. Inventories
Inventories consisted of the following (in thousands):
March 31, December 31,
2000 1999
---------- -----------
(Unaudited)
Raw material and components $103,505 $105,476
Work in process 15,496 11,215
Finished goods 72,680 49,906
Aftermarket parts 41,429 37,894
Used trailers 98,882 65,090
-------- --------
$331,992 $269,581
======== ========
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c. Reclassifications
Certain items previously reported in specific condensed consolidated
financial statement captions have been reclassified to conform with the 2000
presentation.
NOTE 3. SEGMENTS
Under the provisions of SFAS No. 131, the Company has three reportable
segments; manufacturing, retail and distribution and leasing and finance
operations. The manufacturing segment principally produces trailers and sells
new trailers to customers who purchase trailers direct or through independent
dealers and also produces trailers for the retail and distribution segment. The
retail and distribution segment sells new and used trailers, aftermarket parts,
and performs service repair on used trailers through its retail branch network.
In addition, the retail and distribution segment rents used trailers, primarily
on a short-term basis. The leasing and finance segment provides leasing and
finance programs to its customers for new and used trailers.
Reportable segment information is as follows (in thousands):
Three Months Ended Retail and Leasing Combined Consolidated
March 31, 2000 Manufacturing Distribution and Finance Segments Eliminations Totals
- -------------- ------------- ------------ ----------- -------- ------------ ------
(unaudited)
Revenues
External customers $272,215 $71,056 $ 9,577 $352,848 $ --- $352,848
Intersegment sales 25,174 981 2,063 28,218 (28,218) ---
-------- ------- ------- -------- -------- --------
Total Revenues $297,389 $72,037 $11,640 $381,066 $(28,218) $352,848
======== ======= ======= ======== ======== ========
Income from Operations $ 20,034 $ 742 $ 1,096 $ 21,872 $ (589) $ 21,283
Three Months Ended
March 31, 1999
- --------------
(unaudited)
Revenues
External customers $259,002 $72,530 $10,092 $341,624 --- $341,624
Intersegment sales 14,159 28 2,421 16,608 (16,608) ---
-------- ------- ------- -------- -------- --------
Total Revenues $273,161 $72,558 $12,513 $358,232 $(16,608) $341,624
======== ======= ======= ======== ======== ========
Income from Operations $ 13,266 $ 733 $ 1,293 $ 15,292 $ (285) $ 15,007
NOTE 4. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months
Ended March 31,
---------------------------
(In thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------------
(unaudited)
Cash paid during the period for:
Interest, net of amounts capitalized $3,059 $2,856
Income taxes 5,795 1,555
- --------------------------------------------------------------------------------------------------------------
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NOTE 5. EARNINGS PER SHARE
Earnings per share (EPS) are computed in accordance with SFAS No. 128,
Earnings per Share. A reconciliation of the numerators and denominators of the
basic and diluted EPS computations, as required by SFAS No. 128, is presented
below (amounts in thousands except per share amounts):
Weighted
Average Earnings
Income Shares Per Share
- ---------------------------------------------------------------------------------------------------------
(Unaudited)
Three Months Ended March 31, 2000
- ------------------------------------
Basic $8,656 22,985 $0.38
Series B Preferred Stock 297 823
- ---------------------------------------------------------------------------------------------------------
Diluted $8,953 23,808 $0.38
=========================================================================================================
Three Months Ended March 31, 1999
- ------------------------------------
Basic $5,924 22,965 $0.26
Series B Preferred Stock --- ---
- ---------------------------------------------------------------------------------------------------------
Diluted $5,924 22,965 $0.26
=========================================================================================================
NOTE 6. CONTINGENCIES
a. Litigation
Various lawsuits, claims and proceedings have been or may be instituted
or asserted against the Company arising in the ordinary course of business,
including those pertaining to product liability, labor and health related
matters, successor liability and possible tax assessments. None of these claims
are expected to have a material adverse effect on the Company's financial
position or its annual results of operations.
From January 22, 1999 through February 24, 1999, five purported class
action complaints were filed against the Company and certain of its officers in
the United States District Court for the Northern District of Indiana. The
complaints purported to be brought on behalf of a class of investors who
purchased the Company's common stock between April 20, 1998 and January 15,
1999. The complaints alleged that the Company violated Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated under the Act by
disseminating false and misleading financial statements and reports respecting
the first three quarters of the Company's fiscal year 1998. The complaints
sought unspecified compensatory damages and attorney's fees, as well as other
relief. In addition, on March 23, 1999, another purported class action lawsuit
was also filed in the United States District Court for the Northern District of
Indiana, naming the Company, its directors and the underwriters of the Company's
April 1998 public offering. That complaint alleged that the Company and the
individual defendants violated Section 11 of the Securities Act of 1933, and the
Company, the individual defendants as "controlling persons" of the Company, and
the underwriters are liable under Section 12 of that Act, by making untrue
statements of material fact in and omitting material facts from the prospectus
used in that offering.
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The complaint sought unspecified compensatory damages and attorney's fees, as
well as other relief. Both the Securities Exchange Act complaints and the
Securities Act complaint arise out of the restatement of the Company's financial
statements for the first three quarters of 1998. At a hearing on May 10, 1999
and in an order entered on June 22, 1999, Judge Allen Sharp consolidated the six
pending cases under the caption In re Wabash National Corporation Securities
Litigation, No. 4:99CV0003AS and established a schedule for further proceedings.
Pursuant to the order, selected lead plaintiffs filed a Consolidated Class
Action Complaint on July 6, 1999. The consolidated complaint repeats the claims
made in the original complaints respecting the restatement and also alleges that
the loss contingency for certain excise taxes, which Wabash disclosed on January
19, 1999, should have been recorded earlier. Under the schedule established and
modified by the Court, defendants filed motions to dismiss the consolidated
complaint on September 7, 1999, plaintiffs filed their opposing briefs on
October 4, 1999 and defendants filed their reply briefs on October 12, 1999. A
hearing on those motions was held in December 1999. On February 29, 2000 the
Court entered an order denying defendants' motions to dismiss. The defendants
requested that the Court permit an appeal to the United States Court of Appeals
for the 7th Circuit regarding certain questions of law raised in the Court's
order and the request was denied by the court on April 4, 2000. Answers to
plaintiffs complaints were filed on March 15, 2000, and discovery proceedings
have commenced.
The Company believes the allegations in the consolidated complaint are
without merit, and intends to defend itself and its directors and officers
vigorously. The Company believes the resolution of the lawsuit (as to which the
Company is self-insured), including any Company indemnification obligations to
its officers and directors and to the underwriters of its April 1998 public
offering, will not have a material adverse effect on its financial position or
future results of operations; however, at this early stage of the proceedings,
no assurance can be given as to the ultimate outcome of the case.
b. Environmental
The Company generates and handles certain material, wastes and
emissions in the normal course of operations that are subject to various and
evolving Federal, state and local environmental laws and regulations.
The Company assesses its environmental liabilities on an on-going basis
by evaluating currently available facts, existing technology, presently enacted
laws and regulations as well as experience in past treatment and remediation
efforts. Based on these evaluations, the Company estimates a lower and upper
range for the treatment and remediation efforts and recognizes a liability for
such probable costs based on the information available at the time. As of March
31, 2000, the estimated potential exposure for such costs ranges from
approximately $0.5 million to approximately $1.7 million, for which the Company
has a reserve of approximately $0.9 million. The reduction in the reserve during
the three months ending March 31, 2000 reflects payments made during the period.
These reserves were primarily recorded for exposures associated with the costs
of environmental remediation projects to address soil and ground water
contamination as well as the costs of removing underground storage tanks at its
branch service locations. The possible recovery of insurance proceeds has not
been considered in the Company's estimated contingent environmental costs.
The Company acquired two new manufacturing sites in July 1998 in
connection with the Cloud acquisition and voluntarily disclosed to the United
States Environmental Protection Agency (EPA) and the Arkansas Department of
Pollution Control and Ecology (ADPC&E) potential soil and groundwater
contamination. In association with both the EPA and the ADPC&E,
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the Company has submitted a sampling plan to ADPC&E for monitoring and any
required remediation. This matter is at an early stage and it is not possible to
predict the outcome with certainty. The Company has recorded a reserve of $1.0
million related to these issues based on current available information and does
not believe the outcome of this matter will be material to the consolidated
results of operations or financial condition of the Company. The Company is
indemnified by the Sellers of the acquired companies and the Company believes
that these matters would be covered by the indemnification.
The Company has been made aware that during the week of April 3, 2000 a
contractor working on the expansion of the Company's facility in Huntsville,
Tennessee was involved in a discharge of wastewater into a stormwater system. On
April 14, 2000, the Company received a grand jury subpoena from the United
States Attorney's Office for the Eastern District of Tennessee, in connection
with an investigation into that incident. The subpoena seeks the production of
documents and related records concerning the design of our plant's discharge
system and the particular discharge in question. The Company also received a
Notice of Violation/Request for Incident Report from the Tennessee Department of
Environmental Conservation ("TDEC") with respect to the same matter. The Company
is fully cooperating with the U.S. Attorney's Office and TDEC in this matter. At
this stage the Company is unable to predict what further action, if any, might
be taken by the U.S. Attorney's Office of TDEC as a result of the investigation
or what financial or business impact, if any, the outcome of this matter might
have on the Company.
Future information and developments will require the Company to
continually reassess the expected impact of these environmental matters.
However, the Company has evaluated its total environmental exposure based on
currently available data and believes that compliance with all applicable laws
and regulations will not have a materially adverse effect on the consolidated
financial position of the Company.
c. Used Trailer Restoration Program
During 1999, the Company reached a settlement with the Internal Revenue
Service related to federal excise tax on certain used trailers restored by the
Company during 1996 and 1997. The Company continued the restoration program with
the same customer since 1997. The customer has indemnified the Company for any
potential excise tax assessed by the IRS for years subsequent to 1997. As a
result, the Company has recorded a liability and a corresponding receivable of
approximately $5.9 million and $5.2 million in the accompanying condensed
Consolidated Balance Sheets at March 31, 2000 and December 31, 1999,
respectively.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and the information incorporated by reference may include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We intend the forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements in these sections. All statements regarding our expected financial
position, operating results and our business strategy are forward-looking
statements. These statements can sometimes be identified by our use of
forward-looking words such as "may," "will," "anticipate," "estimate," "expect,"
or "intend." Known and unknown risks, uncertainties and other factors could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.
Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from and worse than our expectations. Important risks and factors that
could cause our actual results to be materially different from our expectations
include the factors that are listed in our Registration Statement on Form S-3
(SEC File No. 333-48589).
RESULTS OF OPERATIONS
The Company has three reportable business segments;
- manufacturing,
- retail and distribution, and
- leasing and finance operations
The manufacturing segment principally produces trailers and related components
and sells to customers who purchase directly from the Company or through
independent dealers. The manufacturing segment also produces trailers and
related components for the Company's retail and distribution segment. The retail
and distribution segment sells new and used trailers, aftermarket parts, and
performs service repair on used trailers through its retail branch network. In
addition, the retail and distribution segment rents used trailers, primarily on
a short-term basis. Leasing and finance operations segment provides leasing and
finance programs to its customers for new and used trailers.
Net Sales
Consolidated net sales for the first quarter of 2000 increased
approximately $11.2 million or 3.3% compared to the same period in 1999. The
increase in consolidated net sales was primarily a result of increased sales in
the Company's manufacturing segment.
The manufacturing segment's external net sales rose 5.1% or $13.2
million in the first quarter of 2000 compared to the same period in 1999. This
increase was driven by a 2.5% increase in the average price per unit sold
coupled with an increase of 3.3% in the number of new trailers sold, from
approximately 15,200 units in the first quarter of 1999 to approximately 15,700
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in the first quarter of 2000. The manufacturing segment's production mix
continued to shift toward more of the Company's proprietary DuraPlate(TM)
trailer.
The retail and distribution segment's external net sales decreased 2.0%
or $1.5 million in the first quarter of 2000 compared to the same period in
1999. This decrease was driven by a 14.8% decrease in used trailer revenues and
a 7.9% decrease in new trailer revenues, partially offset by an increase in used
trailer rental revenues. The decrease in new and used trailer revenues was
primarily due to the impact of rising fuel costs and higher interest rates on
the Company's retail customer base. The increase in used trailer rental revenues
primarily reflects the Company's continued expansion of its used trailer rental
portfolio.
The leasing and finance segment's external net sales decreased 5.1% or
$0.5 million in the first quarter of 2000 compared to the same period in 1999
due primarily to a $2.9 million decrease in the sale of used trailers that had
previously been leased partially offset by an increase of new trailer revenues
of $2.5 million.
Gross Profit
Gross profit as a percentage of sales totaled 9.8% for the first
quarter of 2000 compared to 8.0% for the same period in 1999. Gross profit was
impacted primarily by a continued improvement in product mix toward more
proprietary products. The Company's strategy of increasing the proportion of
revenues attributable to proprietary products, such as the DuraPlate trailer,
has been successful in generating higher gross profits than has historically
been possible with a more traditional, commodity-type production mix.
Income From Operations
Income from operations for the first quarter of 2000 as a percentage of
net sales was 6.0% compared to 4.4% for the same period in 1999. Income from
operations in 2000 was impacted primarily by an increase in gross profit margins
previously discussed, partially offset by increased selling, general and
administrative expenses. The increase in selling, general and administrative
expenses primarily reflects increased selling expenses incurred in the retail
and distribution segment principally to support the build-up of the Company's
branch network.
Interest Expense
Interest expense for the three month period ended March 31, 2000
totaled $4.1 million compared to $3.0 million in the same period in 1999. The
increase in interest expense primarily reflects higher borrowings on the
Company's revolving credit facility during 2000 associated with increased
investing activities and working capital requirements.
Taxes
The provision for income taxes for the three month period ended March
31, 2000 and 1999 of $5.8 million and $4.4 million respectively, represents
39.0% and 41.0% of pre-tax income for the periods. The effective tax rates are
higher than the Federal statutory rates of 35% due primarily to state income
taxes.
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LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash used in operating activities was $80.1 million during the
first three months of 2000 primarily as a result of net income, the add-back of
non-cash charges for depreciation and amortization, and changes in working
capital. Changes in working capital consisted primarily of increased inventory
and accounts receivable balances. The increase in inventory was primarily due to
a higher level of used trailers taken in trade during the quarter and an
increase in finished trailer inventory attributable to customers temporarily
delaying taking delivery of their trailers. These increases were offset slightly
by related increases in accounts payable and accrued liabilities.
Investing Activities
Net cash used in investing activities of $23.0 million during the first
three months of 2000 was primarily due to capital expenditures of $19.1 million
and the expansion of the Company's leasing and finance operations, which
consumed a net cash outflow of $3.5 million.
Capital expenditures during the period were associated with the
following:
- increasing productivity within the Company's manufacturing
operations in Lafayette, Indiana;
- development of a new state of the art painting and coating system
and plant expansion at its trailer manufacturing facility in
Huntsville, Tennessee;
- increasing capacity and manufacturing productivity at its hardwood
flooring operations in Arkansas;
- on-going capital expenditures related to the Company's branch
expansion strategy;
- the continued development and conversion to a new computer system
in the Company's retail branch network; and
- other operating purposes.
The Company anticipates future capital expenditures related to the continuation
of the capital projects previously discussed and other activities to be $40 to
$60 million over the next 12 to 24 months.
Financing Activities
Net cash provided by financing activities of $101.9 million during the
first three months of 2000 was primarily due to a net increase in total debt of
$103.2 million and the payment of common stock dividends and preferred stock
dividends of $1.4 million in the aggregate.
Other sources of funds for capital expenditures, continued expansion of
businesses, dividends, principal repayments on debt, stock repurchase and
working capital requirements are expected to be cash from operations, additional
borrowings under the credit facilities, increases in securitization facilities
and term borrowings. The Company believes that these funding sources will be
adequate for its anticipated requirements over the next 12 months.
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BACKLOG
The Company's backlog of orders was approximately $1.0 billion and $1.1
billion at March 31, 2000 and December 31, 1999, respectively. The Company
expects to fill a majority of its backlog within the next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
pronouncement requires that all derivative instruments be recorded on the
balance sheet at their fair value. As amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133, this pronouncement is effective for the Company's
financial statements beginning January 1, 2001, with early adoption permitted.
The Company is currently evaluating the impact of adopting this pronouncement
and does not anticipate that its adoption will have a material effect on the
Company's results of operations or its financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company has limited exposure to financial risk resulting from
volatility in interest rates and foreign exchange rates. As of March 31, 2000,
the Company had approximately $100 million of LIBOR based debt outstanding under
its Revolving Credit Facility and $105 million of proceeds from its accounts
receivable securitization facility, which also requires LIBOR based interest
payments. A hypothetical 100 basis-point increase in the floating interest rate
from the current level would correspond to a $2.0 million increase in interest
expense over a one-year period. This sensitivity analysis does not account for
the change in the Company's competitive environment indirectly related to the
change in interest rates and the potential managerial action taken in response
to these changes.
The Company enters into foreign currency forward contracts (principally
against the German Deutschemark and French Franc) to hedge the net
receivable/payable position arising from trade sales (including lease revenues)
and purchases primarily with regard to the Company's European RoadRailer
operations. The Company does not hold or issue derivative financial instruments
for speculative purposes. A hypothetical 10% adverse change in foreign currency
exchange rates would have an immaterial effect on the Company's financial
position and results of operations. Additional disclosure related to the
Company's risk management policies are discussed in Note 2 to the Consolidated
Financial Statements included in the Company's 1999 Annual Report on Form 10-K.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Footnote 6 to the Condensed Consolidated Financial Statements for
information related to Legal Proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
15.01 Report of Independent Public Accountants
27.00 Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter ended
March 31, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WABASH NATIONAL CORPORATION
Date: May 12, 2000 By: /s/ Rick B. Davis
------------ -----------------
Rick B. Davis
Corporate Controller
(Principal Accounting Officer)
and
Duly Authorized Officer
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