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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 THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1997
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-10883
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WABASH NATIONAL CORPORATION
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(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
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (765) 448-1591
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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 (2) 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 14, 1997 was
19,910,923.
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WABASH NATIONAL CORPORATION
INDEX
FORM 10-Q
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income
for the three months ended
March 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash
Flows for the three months
ended March 31, 1997 and 1996 3
Notes to Condensed Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk (Not Applicable)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1997 1996
-------------- -----------
(Unaudited) (Note 1)
ASSETS
------
CURRENT ASSETS:,
Cash and cash equivalents $ 8,726 $ 5,514
Accounts receivable, net 90,005 71,166
Current portion of finance contracts 6,671 6,128
Inventories 153,694 140,015
Prepaid expenses and other 14,348 13,087
---------- ----------
Total current assets 273,444 235,910
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, net 83,980 81,782
---------- ----------
EQUIPMENT LEASED TO OTHERS, net 69,254 63,825
---------- ----------
FINANCE CONTRACTS, net of current portion 45,538 43,858
---------- ----------
OTHER ASSETS 19,372 14,696
---------- ----------
$ 491,588 $ 440,071
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,786 $ 3,942
Accounts payable 73,558 69,155
Accrued liabilities 15,484 14,101
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Total current liabilities 92,828 87,198
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LONG-TERM DEBT, net of current maturities 195,477 151,307
---------- ----------
DEFERRED INCOME TAXES 24,222 22,879
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OTHER NONCURRENT LIABILITIES 390 319
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 25,000,000
shares authorized; no shares issued --- ---
Series A Junior Participating Preferred stock,
$.01 per value, 300,000 shares authorized; no
shares issued --- ---
Common stock, $.01 par value, 75,000,000
shares authorized; 18,910,923 and 18,910,923
shares issued and outstanding, respectively 189 189
Additional paid-in capital 99,388 99,388
Retained earnings 80,373 80,070
Treasury stock, at cost, 59,600 and 59,600
shares, respectively (1,279) (1,279)
---------- ----------
178,671 178,368
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$ 491,588 $ 440,071
========== ==========
See Notes to Condensed Consolidated Financial Statements.
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
---------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
NET SALES $135,087 $161,222
COST OF SALES 127,054 152,153
-------- --------
Gross profit 8,033 9,069
GENERAL AND ADMINISTRATIVE
EXPENSES 2,154 1,945
SELLING EXPENSES 1,136 1,048
-------- --------
Income from operations 4,743 6,076
OTHER INCOME (EXPENSE)
Interest Expense (3,369) (2,588)
Other, net 91 139
-------- --------
Income before income taxes 1,465 3,627
PROVISION FOR INCOME TAXES 596 1,423
-------- --------
Net Income $ 869 $ 2,204
======== ========
NET INCOME PER SHARE $ 0.05 $ 0.12
======== ========
CASH DIVIDENDS PER SHARE $ 0.03 $ 0.03
======== ========
AVERAGE SHARES OUTSTANDING 18,910,923 18,927,101
========== ==========
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,
-------------------
1997 1996
-------- -------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 869 $ 2,204
Adjustments to reconcile net income to net
cash (used in) operating
activities-
Depreciation and amortization 4,558 3,705
Bad debt provision 138 180
Deferred income taxes 1,374 298
Change in net operating assets-
(Increase) in accounts receivable (18,977) (31,630)
(Increase) in inventories (13,679) (10,000)
Decrease (increase) in prepaid expenses and
other (543) 608
(Decrease) increase in accounts payable 4,403 (10,798)
Increase in accrued liabilities 1,384 8,747
(Increase) in other assets (4,826) (196)
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Total adjustments (26,168) (39,086)
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Net cash used in
operating activities (25,299) (36,882)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,174) (3,118)
Investment in equipment leased to others (7,421) (4,051)
Proceeds on disposal of equipment 1,719 4,993
Investment in finance contracts (5,307) (2,250)
Principal payments on finance contracts 1,263 1,215
Payments for RoadRailer technology (1,086) (638)
Other 40 (99)
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Net cash used in investing
activities (14,966) (3,948)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (1,486) (3,071)
Borrowings under long-term revolver 72,000 85,000
Payments under long-term revolver (51,500) (96,500)
Proceeds from issuance of long-term debt 25,000 55,394
Proceeds from issuance of common stock,
net of expenses --- 26
Payment of common stock dividend (567) (569)
Purchase of treasury stock --- (774)
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Net cash provided by
financing activities 43,477 39,506
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NET INCREASE/(DECREASE) IN CASH 3,212 (1,324)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,514 2,097
---------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,726 $ 773
========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 3,872 $ 1,803
========== ========
Income Taxes $ 1 $ 26
========== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Finance contracts converted to operating leases $ 1,527 2,963
Used trailers transferred from inventory for
operations $ --- 1,873
See Notes to Condensed Consolidated Financial Statements.
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WABASH NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1. GENERAL
The consolidated financial statements included herein have
been prepared by Wabash National Corporation and 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
financial statements and the notes thereto included in the Company's 1996
Annual Report on Form 10-K.
In the opinion of the registrant, the accompanying 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, 1997 and December 31, 1996 and its results
of operations and cash flows for the three months ended March 31, 1997 and
1996.
NOTE 2. INVENTORIES
Inventories consisted of the following:
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
Raw material and components $ 80,095 $ 72,645
Work in progress 22,897 16,344
Finished goods 26,839 27,608
Used trailers 23,863 23,418
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$ 153,694 $140,015
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NOTE 3. LEASING AND FINANCE OPERATIONS
Wabash National Finance Corporation (the Finance Company), a
wholly-owned subsidiary of the Company, provides leasing and finance programs
to customers for new and used trailers. The Finance Company's lease revenues,
excluding revenue from the sale of leased trailers of $1,886 and $5,407, were
$5,020 and $3,066 during the three months ended March 31, 1997 and 1996,
respectively. Income before income taxes was $82 and $721 during the three
months ended March 31, 1997 and 1996, respectively. Included below is
condensed balance sheet information, which segregates the assets and
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liabilities of the Finance Company.
March 31, 1997
------------------------------------------------
(Unaudited) December 31,
Wabash Finance 1996
National Company Consolidated Consolidated
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ASSETS:
Current assets $263,463 $ 9,981 $ 273,444 $ 235,910
Property, plant and
equipment, net 83,931 49 83,980 81,782
Equipment leased to
others, net --- 69,254 69,254 63,825
Finance contracts, net
of current portion --- 45,538 45,538 43,858
Other assets 19,337 35 19,372 14,696
Due from subsidiary to parent 349 (349) --- ---
Investment in subsidiary 33,817 --- --- ---
-------- -------- ----------- -----------
$400,897 $124,508 $ 491,588 $ 440,071
======== ======== =========== ===========
LIABILITIES AND STOCK-
HOLDERS' EQUITY:
Current liabilities $ 88,802 $ 4,026 $ 92,828 $ 87,198
Long-term debt, net:
Third party 176,885 18,592 195,477 151,307
Intercompany (68,000) 68,000 --- ---
-------- -------- ----------- -----------
108,885 86,592 195,477 151,307
Other non-current liabilities 24,539 73 24,612 23,198
-------- -------- ----------- -----------
222,226 90,691 312,917 261,703
Stockholders' equity 178,671 33,817 178,671 178,368
-------- -------- ----------- -----------
$400,897 $124,508 $ 491,588 $ 440,071
======== ======== ============ ===========
NOTE 4. SUBSEQUENT EVENT
On April 16, 1997, the Company completed its acquisition of certain
assets of Fruehauf Trailer Corporation, a manufacturer and marketer of truck
trailers and related parts. The purchase includes assets consisting of the
Fruehauf and Pro-Par(R) names, all patents and trademarks, retail outlets in 31
major metropolitan markets, the aftermarket parts distribution business based
in Grove City, Ohio, a specialty trailer manufacturing plant in Huntsville,
Tennessee and a van manufacturing plant in Fort Madison, Iowa. For financial
statement purposes the acquisition will be accounted for as a purchase and,
accordingly, the results of operations of these assets will be included in the
Company's consolidated financial statements from the date of acquisition. The
retail outlets will operate under the name of Fruehauf Trailer Services, Inc.,
a wholly owned subsidiary of Wabash National Corporation. The purchase price
consists of approximately $15.7 million in cash, 352,000 shares of a new series
of 6% Cumulative Convertible Exchangeable Preferred Stock convertible, at April
16, 1996 into approximately .8 million shares of common stock and 1 million
shares of the Company's Common Stock, valued at $17.8 million on April 16,
1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Note: This document contains various forward-looking comments. These
comments should be viewed in connection with the risk factors
disclosed in the Company's Form 8-K as filed with the Securities and
Exchange Commission on January 21, 1997.
Net Sales
Net sales for the first quarter of 1997 decreased 16.2% compared to
the same period in 1996. The decrease in net sales amounted to $26.1 million
for the first quarter, 1997 and was primarily attributable to a decrease in new
trailers sales of $25.8 million. The decrease in new trailer sales of $25.8
million for the three-month period was caused by a 12% decrease in units sold,
primarily as a result of the continued limited supply of composite material for
the Company's DuraPlate(R) trailer which significantly restricted the Company's
plate trailer production and revenues, coupled with a 6.9% decrease in the
average sales price per new trailer sold. The decrease in the average sales
price primarily reflects continued pricing pressure in the commodity trailer
market which, due to the restricted production on the Company's plate trailer
line, comprised a higher percentage of the Company's sales in 1997 compared to
1996. In order to provide adequate supply of composite material for the
Company's DuraPlate trailer, the Company is in the process of constructing its
own composite material manufacturing facility in Lafayette, Indiana with
start-up expected during the third quarter of 1997 at an estimated cost of $17
million to $20 million. Also impacting the first quarter of 1997 were lost
production days during January due to adverse weather conditions.
The Finance Company's lease portfolio increased from 6,858 trailers
at March 31, 1996 to 10,414 trailers at March 31, 1997. Lease revenues,
excluding revenue from the sale of leased trailers, increased 65% compared to
the same period in 1996. Revenues from aftermarket parts sales increased 42%
for the three month period ended March 31, 1997 compared to the same period in
1996. The increase in aftermarket parts sales reflects the Company's strategy
of continuing to increase its independent dealer network and branch operations.
Gross Profit
Gross profit as a percentage of sales totaled 5.9% for the first
quarter of 1997 compared to 5.6% for the same period in 1996. The increase in
the gross profit percentage in 1997 reflects the Company's continued efforts to
improve operating margins and manufacturing efficiencies, largely impacted by
the 17% decrease in the overall number of associates during the first quarter
of 1997 compared to the same period in 1996.
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Income From Operations
Income from operations for the first quarter of 1997 as a percentage
of net sales was 3.5% versus 3.8% for the same period in 1996. Income from
operations in 1997 was impacted primarily by the decreased sales offset
somewhat by the reduction in the overall number of associates.
Interest Expense
Interest expense for the three-month period ended March 31, 1997
totaled $3.4 million compared to $2.6 million for the same period in 1996. The
increase in interest expense primarily reflects new term and bank line of
credit debt associated with the growth in the leasing operations and increased
working capital requirements.
Taxes
The provision for income taxes for the three month period ended
March 31, 1997 and 1996 of $0.6 million and $1.4 million respectively,
represents 40.7% and 39.2% 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.
Acquisition
As mentioned in Note 4 to the condensed consolidated financial
statements, on April 16, 1997, the Company completed its acquisition of certain
assets of Fruehauf Trailer Corporation. The assets include the Fruehauf and
Pro-Par(R) names, all patents and trademarks, retail outlets in 31 major
metropolitan markets, the aftermarket parts distribution business based in
Grove City, Ohio, a specialty trailer manufacturing plant in Huntsville,
Tennessee and a van manufacturing plant in Fort Madison, Iowa. The results of
operations of these assets will be included in the Company's consolidated
financial statements from the date of acquisition.
The purchase is valued at approximately $51 million and was
comprised of $15.7 million in cash, $17.6 million in preferred stock and 1
million shares of common stock valued at $17.8 million on April 16, 1997. The
$15.7 million in cash was financed with cash from operations and borrowings
under the Company's existing line of credit.
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Condensed Consolidated Statement of Cash Flows,
net cash used in operating activities was $25.3 million during the first three
months of 1997 primarily as a result of changes in working capital. Cash was
used in operating activities primarily as a result of the increases in accounts
receivable and inventory offset partially with an increase in accounts payable.
These changes in working capital were primarily the result of the continued
weakness in the domestic trailer market as well as the Company's focus on
expansion of its product line which requires initial up front investments in
working capital.
During the first three months of 1997, the lease portfolio (finance
contracts and equipment leased to others) increased $7.7 million as the Company
continues to expand its leasing operation. In
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addition, the Company used $4.2 million of cash for capital expenditures during
the first three months of 1997, principally for the purpose of increasing
manufacturing productivity and for the construction of its composite material
facility.
At March 31, 1997, the Company's total debt was $199.3 million
compared to $155.2 million at December 31, 1996. The net increase in the
Company's debt primarily reflects new term debt associated with the increased
working capital requirements due to higher receivables and inventory levels.
Also, during March, 1997, the Company received the final installment of $25
million related to the Company's $100 million private placement issued in
December, 1996 and used the proceeds to repay amounts under the Company's
revolving line of credit.
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 and term borrowings. The
Company believes that these funding sources will be adequate for its
anticipated requirements.
BACKLOG
The Company's backlog of orders was approximately $565.7 million at
March 31, 1997 and $462.0 million at December 31, 1996. The Company builds
trailers to customer order and does not maintain an inventory of new trailers
built in anticipation of future orders.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board recently released a new
accounting rule (SFAS No. 128) on the calculation of earnings per share that is
effective at year-end 1997. This rule, which does not permit early adoption,
is not expected to have a material effect on the Company's reported earnings
per share.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.04 Certificate of Designations of Series A 6% Cumulative
Convertible Exchangeable Preferred Stock
4.03 Form of Indenture for the Company's 6% Convertible
Subordinated Debentures due 2007
10.30 Purchase Agreement dated March 31, 1997, as amended
(Incorporated by Reference from Exhibit 2.01
to Registrant's Form 8-K filed May 1, 1997)
15.01 Report of Independent Public Accountants
(a) Reports on Form 8-K:
1. Form 8-K filed January 21, 1997 reporting under
Item 5: Risk Factors filed under Safe Harbor provisions
of Private Securities Litigation Reform Act of 1995
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 14, 1997 By: /s/ Mark R. Holden
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Mark R. Holden
Vice President - Chief
Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
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