1
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 JUNE 30, 1997
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) 448-1591
---------------
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 August 14, 1997 was
19,946,437.
2
WABASH NATIONAL CORPORATION
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1997 and December 31, 1996 1
Condensed Consolidated Statement of Income
for the three and six months ended
June 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash
Flows for the six months ended
June 30, 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 7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk (Not Applicable)
PART II - OTHER INFORMATION
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of
Security-Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
3
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1997 1996
-------- ------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,337 $ 5,514
Accounts receivable, net 106,558 71,166
Current portion of finance contracts 6,132 6,128
Inventories 194,898 140,015
Prepaid expenses and other 22,108 13,087
---------- ----------
Total current assets 331,033 235,910
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, net 115,582 81,782
---------- ----------
EQUIPMENT LEASED TO OTHERS, net 76,224 63,825
---------- ----------
FINANCE CONTRACTS, net of current portion 52,547 43,858
---------- ----------
OTHER ASSETS 13,444 14,696
---------- ----------
$ 588,830 $ 440,071
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,848 $ 3,942
Accounts payable 94,895 69,155
Accrued liabilities 29,057 14,101
---------- ----------
Total current liabilities 127,800 87,198
---------- ----------
LONG-TERM DEBT, net of current maturities 213,549 151,307
---------- ----------
DEFERRED INCOME TAXES 26,636 22,879
---------- ----------
OTHER NONCURRENT LIABILITIES 4,354 319
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
25,000,000 shares authorized: --- ---
Series A Junior Participating Preferred
Stock, 300,000 shares authorized;
no shares issued
Series B Cumulative Convertible --- ---
Exchangeable Preferred Stock, 352,000
and -0- shares authorized and outstanding
at June 30, 1997 and December, 31, 1996
($17.6 million aggregate liquidation value) 4
Common stock, $.01 par value, 75,000,000 shares ---
authorized; 19,935,137 and 18,910,923
shares issued and outstanding at June 30,
1997 and December 31, 1996 199 189
Additional paid-in capital 135,165 99,388
Retained earnings 82,402 80,070
Treasury stock, at cost, 59,600 and
59,600 shares, respectively (1,279) (1,279)
---------- ----------
216,491 178,368
---------- ----------
$ 588,830 $ 440,071
========== ==========
See Notes to Condensed Consolidated Financial Statements.
1
4
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
NET SALES $196,407 $ 140,606 $ 331,494 $ 301,828
COST OF SALES 181,697 134,726 308,751 286,879
-------- --------- --------- ---------
Gross Profit 14,710 5,880 22,743 14,949
GENERAL AND ADMINISTRATIVE
EXPENSES 4,438 1,854 6,592 3,799
SELLING EXPENSES 2,083 1,098 3,219 2,146
-------- --------- --------- ---------
Income from operations 8,189 2,928 12,932 9,004
OTHER INCOME (EXPENSE):
Interest Expense (3,736) (2,908) (7,105) (5,496)
Other, net 147 153 238 292
-------- --------- --------- ---------
Income before income taxes 4,600 173 6,065 3,800
PROVISION FOR INCOME TAXES 1,758 71 2, 354 1,494
-------- --------- --------- ---------
Net Income 2,842 102 3,711 2,306
PREFERRED STOCK DIVIDENDS 216 --- 216 ---
-------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 2,626 $ 102 $ 3,495 $ 2,306
======== ========= ========= =========
NET INCOME PER COMMON SHARE 0.13 $ 0.01 $ 0.18 $ 0.12
======== ========= ========= =========
CASH DIVIDENDS PER SHARE $ 0.03 $ 0.03 $ 0.06 $ 0.06
======== ========= ========= =========
AVERAGE SHARES OUTSTANDING 19, 745 18, 905 19,330 18,916
======== ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
2
5
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months
Ended June 30,
---------------------------
1997 1996
--------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,711 $ 2,306
Adjustments to reconcile net income to net
cash used in operating activities -
Depreciation and amortization 8,955 7,572
Bad debt provision 221 311
Deferred income taxes 5,089 1,578
Change in net operating assets-
(Increase) in accounts receivables (21,658) (4,551)
(Increase) in inventories (34,721) (27,362)
(Increase) in prepaid expenses and other (5,534) (3,581)
Increase (decrease) in accounts payable 25,740 (10,273)
Increase in accrued liabilities 5,905 3,610
Decrease (increase) in other assets 839 (923)
--------- ---------
Total adjustments (15,164) (33,619)
--------- ---------
Net cash used in operating activities (11,453) (31,313)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,536) (4,684)
Proceeds on disposal of leased equipment 2,315 11,579
Investment in equipment leased to others (18,482) (22,519)
Investments in finance contracts (11,671) (3,620)
Principal payments on finance contracts 2,513 2,398
Payments for RoadRailer technology (1,086) (1,054)
Payment for purchase of Fruehauf,
net of cash acquired (Note 5)
Other (15,129) ---
69 42
--------- ---------
Net cash used in investigating activities (54,007) (17,858)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (2,352) (5,861)
Borrowings under long-term revolver 157,500 179,000
Payments under long-term revolver (118,000) (185,000)
Proceeds from issuance of long-term debt 25,000 63,361
Proceeds from issuance of common stock,
net of expenses 443 92
Payment of common stock dividend (1,135) (1,138)
Payment of preferred stock dividend (173) ---
Payment of treasury stock --- (774)
--------- ---------
Net cash provided by financing
activities 61,283 49,680
--------- ---------
NET INCREASE (DECREASE) IN CASH (4,177) 509
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,514 2,097
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD 1,337 2,606
========= =========
See notes to Condensed Consolidated Financial Statements.
3
6
WABASH NATIONAL CORPORATION
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 June 30, 1997 and December 31, 1996 and its results of
operations and cash flows for the six months ended June 30, 1997 and 1996.
NOTE 2. INVENTORIES
Inventories consisted of the following (in thousands):
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
Raw material and components $ 84,785 $ 72,645
Work in progress 19,632 16,344
Finished goods 63,736 27,608
Used trailers 26,745 23,418
----------- ------------
$ 194,898 $ 140,015
=========== ============
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 $2,375 and $11,949, were $10,301
and $6,285 during the six months ended June 30, 1997 and 1996, respectively.
Income before income taxes was $174 and $1,160 during the six months ended June
30, 1997 and 1996, respectively. Included below is condensed balance sheet
information which segregates the assets and liabilities of the Finance Company.
4
7
All of the Finance Company's debt is on a stand alone basis without guarantees
by the Company.
June 30, 1997
-------------
(Unaudited) December 31,
Wabash Finance 1996
National Company Consolidated Consolidated
-------- ------- ------------ ------------
ASSETS:
Current assets $320,928 $ 10,105 $331,033 $235,910
Property, plant and
equipment, net 115,536 46 115,582 81,782
Equipment leased to
others, net --- 76,224 76,224 63,825
Finance contracts, net
of current portion --- 52,547 52,547 43,858
Other assets 13,389 55 13,444 14,696
Due from subsidiary/(to)
parent 202 (202) --- ---
Investment in subsidiary 34,926 --- --- ---
-------- --------- -------- --------
$484,981 $ 138,775 $588,830 $440,071
======== ========= ======== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY:
Current liabilities $123,836 $ 3,964 $127,800 $ 87,198
Long-term debt, net:
Third party 195,885 17,664 213,549 151,307
Intercompany (82,000) 82,000 --- ---
-------- --------- -------- --------
113,885 99,664 213,549 151,307
Other non-current
liabilities 30,769 221 30,990 23,198
-------- --------- -------- --------
268,490 103,849 372,339 261,703
Stockholders' equity 216,491 34,926 216,491 178,368
-------- --------- -------- --------
$484,981 $ 138,775 $588,830 $440,071
======== ========= ======== ========
NOTE 4. ACQUISITION
On April 16, 1997, the Company acquired substantially all of the remaining
assets of Fruehauf Trailer Corporation (Fruehauf), a manufacturer and marketer
of truck trailers and related parts. The purchase included 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 Ft. Madison, Iowa.
For financial statement purposes the acquisition was accounted for as a
purchase and accordingly, Fruehauf's results are included in the consolidated
financial statements since 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. Aggregate consideration for this
transaction was approximately $50.5 million consisting of $15.1 million in cash
from
5
8
credit facilities, $17.8 million in common stock and $17.6 million in preferred
stock. The fair value of the assets acquired was approximately $63.5 million
and approximately $13.0 million of liabilities were assumed in connection with
this acquisition.
The following table reflects unaudited pro forma combined results of
operations of the Company and the acquired assets as if the acquisition had
occurred January 1, 1997 and January 1, 1996.
Six Months
Ended June 30,
1997 1996
(Millions except per share amounts) (Unaudited)
- -----------------------------------------------------------------------
Net Sales $361.2 $398.4
Net Income $ 3.2 $ 1.7
Net Income per common share $ 0.14 $ 0.06
- -----------------------------------------------------------------------
In management's opinion, the unaudited pro forma combined results of operations
are not indicative of the actual results that would have occurred had the
acquisition been consummated at the beginning of 1996 or at the beginning of
1997 or of future operations of the combined companies under the ownership and
management of the Company.
NOTE 5. SUPPLEMENTAL CASH FLOW INFORMATION
Six Months
Ended June 30,
(In thousands) 1997 1996
=============================================================================
Cash paid during the period for:
Interest, net of amounts capitalized $ 6,138 $ 3,861
Income taxes 507 706
=============================================================================
Noncash investing and financing activities:
Finance contracts converted to operating leases $ 260 $ 681
Operating leases converted to finance contracts 1,720 2,198
Used trailers transferred from inventory to
operations --- 3,082
Preferred stock issued for acquisition 17,600 ---
Common stock issued for acquisition 17,750 ---
=============================================================================
Purchase of Fruehauf assets, net of cash acquired:
Accounts receivable, net $ 13,955 $ ---
Inventory, net 20,163 ---
Prepaid expenses and other 4,072 ---
Property, plant and equipment 25,269 ---
Current liabilities (8,980) ---
Non-current liabilities (4,000) ---
Stock issued (35,350) ---
=============================================================================
Net cash paid to acquire Fruehauf $ (15,129) $ ---
=============================================================================
6
9
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 three month period ended June 30, 1997 increased $55.8
million or 40% compared to the same period in 1996 and were $29.7 million or
10% higher for the six month period ended June 30, 1997 compared to the same
period in 1996. On April 16, 1997, the Company acquired substantially all of
the remaining assets of Fruehauf Trailer Corporation (Fruehauf), a manufacturer
and marketer of truck trailers and related parts. The purchase included 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, a specialty trailer manufacturing plant and a van
manufacturing plant. The acquisition was accounted for as a purchase and
accordingly, Fruehauf's results are included in the consolidated financial
statements since the date of acquisition. The increased sales for the three
and six month period were primarily attributable to an increase in new trailer
sales of $36.0 million and $9.7 million, respectively, and an increase in
aftermarket parts and service revenues of $18.3 million and $20.8 million,
respectively. The increases in new trailer sales of $36.0 million and $9.7
million for the three and six month periods, respectively, were caused by a 29%
and 8% increase in units sold as a result of increased production levels at the
Company's existing manufacturing facility and the two new manufacturing
facilities acquired. The Company's product mix continued to be impacted by the
limited supply of composite material for the Company's newly introduced
composite plate trailer. As a result, the average sales price per new trailer
sold decreased 1.3% and 4.4%, respectively, for the three and six month period
compared to the corresponding period in 1996. The increase in aftermarket
parts and service revenues reflects an increase in aftermarket parts sales
through the Company's existing parts distribution business as well as the
aftermarket parts distribution business and 31 retail outlets acquired during
the second quarter.
Gross Profit
Gross profit as a percentage of net sales totaled 7.5% for the three month
period ended June 30, 1997 compared to 4.2% for the same period in 1996. The
gross profit margin for the six-month period ended June 30, 1997 as a
percentage of sales was 6.9% versus 5.0% for the same period in 1996. The
increase in the gross profit percentage in 1997 reflects the increase in
production levels and higher levels of
7
10
aftermarket parts sales and service revenues, which are generally characterized
by higher margins.
Income From Operations
Income from operations for the three and six month period ended June 30,
1997 as a percentage of net sales was 4.2% and 3.9% compared to 2.1% and 3.0%
for the same period in 1996. Income from operations in 1997 was impacted
primarily by the increase in the gross profit margins previously discussed
offset somewhat by increased selling, general and administrative expenses. The
increase in selling, general and administrative expenses primarily reflects
higher levels of expense associated with the retail outlets acquired.
Interest Expense
Interest expense for the three and six month period ended June 30, 1997
totaled $3.7 million and $7.1 million compared to $2.9 million and $5.5 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 working capital requirements.
Taxes
The provision for income taxes for the three and six month periods ended
June 30, 1997 of $1.8 million and $2.4 million, respectively, represents 38.2%
and 38.8% of pre-tax income for the periods compared to the provision of $.1
million and $1.5 million, or 41.0% and 39.3% of pretax income, respectively, for
the same periods in 1996. The effective tax rates are higher than the Federal
statutory rates of 35% due primarily to state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Condensed Consolidated Statement of Cash Flows, net
cash used in operating activities was $11.5 million during the first six months
of 1997 primarily as a result of changes in working capital resulting from
increases in accounts receivable and inventory offset somewhat by an increase in
accounts payable. The changes in working capital were primarily the result of
increased production levels and the establishment of inventory at the retail
outlets acquired in the second quarter.
During the first six months of 1997, the lease portfolio (finance
contracts and equipment leased to others) increased $21.1 million, as the
Company continued to expand its leasing operations. In addition, the Company
used $12.5 million of cash for capital expenditures during the first six months
of 1997, principally for the purpose of improving manufacturing productivity and
for the construction of its composite material facility.
At June 30, 1997, the Company's total debt was $217.4 million compared
to $155.2 million at December 31, 1996. The net increase in the Company's debt
primarily reflects new term and bank line of credit
8
11
debt associated with the increased working capital requirements due to higher
receivables and inventory levels.
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 and
equity offerings. The Company believes that these funding sources will be
adequate for its anticipated requirements.
BACKLOG
The Company's backlog of orders was approximately $633 million at June 30,
1997 and $462 million at December 31, 1996. The Company's backlog represents
the amount of orders the Company believes to be firm. Such orders may be
subject to extension, delay or cancellation under certain circumstances.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) 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.
In addition, in June 1997 the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". This Statement is effective for fiscal periods
beginning after December 15, 1997 with early adoption permitted. The Company
is evaluating the effect this Statement will have on its financial reporting
and disclosures; however, the Statement will have no effect on the Company's
results of operations, financial position, capital resources or liquidity.
9
12
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
[c] On April 16, 1997, the Company issued and sold the following
securities to Fruehauf Trailer Corporation ("Fruehauf") in connection with the
acquisition of certain remaining assets of Fruehauf. All of these securities
were sold pursuant to the exemption available under Section 4(2) of the
Securities Act of 1933 and Regulation D promulgated thereunder as a transaction
not involving a public offering.
(i) 1,000,000 shares of Common Stock
(ii) 352,000 shares of Series B 6% Cumulative Convertible
Exchangeable Preferred Stock. Each share of Series B Preferred
Stock is initially convertible by the holder thereof into 2.3
shares of Common Stock, subject to adjustment for dilutive
issuances and changes in outstanding capitalization by reason
of a stock split, stock dividend or stock combination
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of security-holders on May 8, 1997, at
which time the following items were voted on:
(1) Nominees Elected to the Board of Directors:
WITHHOLD AUTHORITY
NOMINEES FOR TO VOTE
-------- --- -------
Richard E. Dessimoz 17,239,924 119,721
Donald J. Ehrlich 17,240,024 119,621
John T. Hackett 17,289,224 70,421
E. Hunter Harrison 17,289,324 70,321
Mark R. Holden 17,238,524 121,121
Ludvik F. Koci 17,289,205 70,440
(2) Proposal to amend the 1992 Stock Option Plan.
FOR AGAINST ABSTAIN
--- ------- -------
11,868,862 1,374,114 114,395
10
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15.01: Report of Independent Public Accountants
(b) Reports on Form 8-K:
1. Form 8-K filed May 1, 1997 reporting under Item 2: Wabash National
Corporation's acquisition of certain assets of Fruehauf Trailer
Corporation.
11
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WABASH NATIONAL CORPORATION
Date: August 13, 1997 By: /s/ Mark R. Holden
--------------- ---------------------
Mark R. Holden
Vice President-Chief
Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
12