1 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 JUNE 30, 1996 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 - ---------------------------- ------------------------ Registrant's telephone number, including area code: (317) 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 (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 August 2, 1996 was 18,908,424.
2 WABASH NATIONAL CORPORATION INDEX FORM 10-Q PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 1996 and December 31, 1995 1 Condensed Consolidated Statements of Income for the three and six months ended June 30, 1996 and 1995 2 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of 9 Security-Holders Item 6. Exhibits and Reports on Form 8-K 9
3 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) <TABLE> <CAPTION> June 30, December 31, 1996 1995 ------------ ----------- (Unaudited) (Note 1) <S> <C> <C> ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 2,606 $ 2,097 Accounts receivable, net 81,775 77,535 Current portion of finance contracts 5,364 5,979 Inventories 159,458 134,294 Prepaid expenses and other 11,677 7,657 ------------ ----------- Total current assets 260,880 227,562 ------------ ----------- PROPERTY, PLANT AND EQUIPMENT, net 79,122 76,192 ------------ ----------- EQUIPMENT LEASED TO OTHERS, net 54,525 35,362 ------------ ----------- FINANCE CONTRACTS, net of current portion 25,951 35,123 ------------ ----------- OTHER ASSETS 10,917 9,895 ------------ ----------- $ 431,395 $ 384,134 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current maturities of long-term debt $ 9,549 $ 12,527 Accounts payable 78,217 88,490 Accrued liabilities 16,956 13,347 ------------ ----------- Total current liabilities 104,722 114,364 ------------ ----------- LONG-TERM DEBT, net of current maturities 128,204 73,726 ------------ ----------- DEFERRED INCOME TAXES 20,060 18,045 ------------ ----------- OTHER NONCURRENT LIABILITIES 288 368 ------------ ----------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value 24,700,000 --- --- 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; 18,908,424 and 18,943,228 shares issued and outstanding at June 30, 1996 and December 31, 1995 189 189 Additional paid-in capital 99,339 99,246 Retained earnings 79,872 78,701 Treasury stock, at cost, 59,600 and 19,600 shares, respectively (1,279) (505) ------------ ----------- 178,121 177,631 ------------ ----------- $ 431,395 $ 384,134 ============ =========== </TABLE> 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) <TABLE> <CAPTION> Three Months Six Months Ended June 30, Ended June 30, ------------------- ------------------ 1996 1995 1996 1995 -------------- --------------- -------------- --------------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> NET SALES $ 140,606 $ 193,450 $ 301,828 $ 371,084 COST OF SALES 134,726 176,352 286,879 338,926 -------------- --------------- -------------- --------------- Gross Profit 5,880 17,098 14,949 32,158 GENERAL AND ADMINISTRATIVE EXPENSES 1,854 1,768 3,799 3,456 SELLING EXPENSES 1,098 940 2,146 1,916 -------------- --------------- -------------- --------------- Income from operations 2,928 14,390 9,004 26,786 OTHER INCOME (EXPENSE): Interest Expense ( 2,908) (1,466) (5,496) (2,458) Other, net 153 264 292 531 -------------- --------------- -------------- --------------- Income before income taxes 173 13,188 3,800 24,859 PROVISION FOR INCOME TAXES 71 5,134 1,494 9,843 -------------- --------------- -------------- --------------- Net Income $ 102 $ 8,054 $ 2,306 $ 15,016 ============== =============== ============= ============== NET INCOME PER SHARE $ 0.01 $ 0.43 $ 0.12 $ 0.79 ============== =============== ============= ============== CASH DIVIDENDS PER SHARE $ 0.03 $ 0.025 $ 0.06 $ 0.05 ============== =============== ============= ============== AVERAGE SHARES OUTSTANDING 18,905 18,945 18,916 18,942 ============== =============== ============= ============== </TABLE> See Notes to Condensed Consolidated Financial Statements. 2
5 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) <TABLE> <CAPTION> Six Months Ended June 30, ------------------------------- 1996 1995 ------------ ------------ (Unaudited) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,306 $ 15,016 Adjustments to reconcile net income to net cash used in operating activities- Depreciation and amortization 7,572 4,741 Bad debt provision 311 292 Deferred income taxes 1,578 2,375 Change in net operating assets- (Increase) in accounts receivable (4,551) (10,788) (Increase) in inventories (27,362) (36,797) (Increase) in prepaid expenses and other ( 3,581) (1,437) (Decrease) Increase in accounts payable (10,273) 20,741 Increase in accrued liabilities 3,610 1,172 (Increase) in other assets (923) (2,287) ------------ ------------ Total adjustments (33,619) (21,988) ------------ ------------ Net cash used in operating activities (31,313) (6,972) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,684) (24,490) Proceeds on disposal of leased equipment 11,579 --- Investment in equipment leased to others (22,519) (10,107) Investment in finance contracts (3,620) (14,780) Principal payments on finance contracts 2,398 2,609 Payments for RoadRailer technology (1,054) (20) Other 42 (44) ------------ ------------ Net cash used in investing activities (17,858) (46,833) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (5,861) (4,027) Borrowings under long-term revolver 179,000 132,920 Payments under long-term revolver (185,000) (119,689) Proceeds from issuance of long-term debt 63,361 10,000 Proceeds from issuance of common stock, net of expenses 92 389 Payment of common stock dividend (1,138) (947) Purchase of treasury stock (774) --- ------------ ------------ Net cash provided by financing activities 49,680 18,646 ------------ ------------ NET INCREASE(DECREASE) IN CASH 509 (35,159) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,097 39,655 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,606 $ 4,496 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Interest $ 3,861 $ 2,158 ============ ============ Income Taxes $ 706 $ 8,613 ============ ============ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Finance contracts converted to operating leases $ 3,032 --- Operating leases converted to finance contracts $ 681 --- Used trailers transferred from inventory into operations $ 2,198 --- </TABLE> See Notes to Condensed Consolidated Financial Statements. 3
6 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 1995 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, 1996 and December 31, 1995 and its results of operations and cash flows for the six months ended June 30, 1996 and 1995. NOTE 2. INVENTORIES Inventories consisted of the following: <TABLE> <CAPTION> June 30, December 31, 1996 1995 ------------ ------------ (Unaudited) <S> <C> <C> Raw material and components $ 93,718 $ 89,961 Work in progress 22,147 13,582 Finished goods 24,481 14,034 Used trailers 19,112 16,717 ------------ ------------ $159,458 $134,294 ============ ============ </TABLE> 4
7 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 revenues were $18,234 and $10,653 during the six months ended June 30, 1996 and 1995, respectively. Income before income taxes was $1,160 and $2,103 during the six months ended June 30, 1996 and 1995, respectively. Included below is condensed balance sheet information which segregates the assets and liabilities of the Finance Company. All of the Finance Company's debt is on a stand alone basis without guarantees by the Company. <TABLE> <CAPTION> June 30, 1996 -------------------------------------- (Unaudited) December 31, Wabash Finance 1995 National Company Consolidated Consolidated --------- ------------- -------------- -------------- <S> <C> <C> <C> <C> ASSETS: Current assets $ 251,698 $ 9,182 $260,880 $ 227,562 Property, plant and equipment, net 79,064 58 79,122 76,192 Equipment leased to others, net --- 54,525 54,525 35,362 Finance contracts, net of current portion --- 25,951 25,951 35,123 Other assets 10,764 153 10,917 9,895 Due from subsidiary/(to) parent 6,912 (6,912) --- --- Investment in subsidiary 26,556 --- --- --- --------- ------- -------- --------- $ 374,994 $82,957 $431,395 $ 384,134 ========= ======= ======== ========= LIABILITIES AND STOCK- HOLDERS' EQUITY: Current liabilities $ 95,000 $ 9,722 $104,722 $ 114,364 Long-term debt, net of current maturities 86,235 41,969 128,204 73,726 Other long-term liabilities 15,638 4,710 20,348 18,413 --------- ------- -------- --------- 196,873 56,401 253,274 206,503 Stockholders' equity 178,121 26,556 178,121 177,631 --------- ------- -------- --------- $ 374,994 $82,957 $431,395 $ 384,134 ========= ======= ======== ========= </TABLE> NOTE 4. LONG-TERM DEBT On January 31, 1996, the Company issued $50 million of unsecured 6.41% Series A Senior Notes due on January 31, 2003. The proceeds were used to repay amounts outstanding under the Company's revolving line of credit. 5
8 In addition, during June, 1996, the Finance Company concluded a one-year extension of its existing $50 million secured, revolving bank line of credit which will now expire on June 10, 1997, at which time the terms of the credit facility can be renegotiated, or at the election of the Finance Company, the outstanding principal balance can be paid down in 36 equal monthly installments. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Sales Net sales for the second quarter of 1996 decreased $53 million or 27% compared to the same period in 1995 and were $69 million or 19% lower for the six month period ended June 30, 1996 compared to the corresponding period in 1995. The decreased sales for the second quarter and six month period were primarily attributable to a decrease in new trailer sales of $59.9 million and $81.8 million, respectively, offset in part by an increase in sales of used trailers which were previously under lease by the Finance Company of $6 million and $11 million, respectively. The decreases in new trailer sales of $59.9 million and $81.8 million for the three and six month periods, respectively, were caused by a 31% and 24% decrease in units sold, primarily as a result of weak market conditions in the domestic trailer industry and decreased production on the Company's plate trailer line as a result of a limited supply of composite material for the Company's newly introduced composite plate trailer. New trailer sales in the second quarter of 1996 compared to the same period in 1995 were further impacted by a 2.7% decrease in the average sales price per new trailer sold, reflecting the shift in production mix during the quarter to lower priced doubles and away from higher priced plate trailers. For the six month period ended June 30, 1996, the average sales price per new trailer sold was approximately even with the same period in 1995. The Finance Company's lease portfolio increased from 6,800 new trailers at June 30, 1995 to 7,083 trailers at June 30, 1996. Lease revenues, for the three and six month periods ended June 30, 1996, excluding revenue from the sale of leased trailers, are even with revenues in the same periods in 1995. Revenues from aftermarket parts sales increased 30% and 17% for the three and six month periods ended June 30, 1996 compared to the same periods in 1995. The increase in aftermarket parts sales reflects the Company's strategy of continuing to increase its independent dealer network and branch operations. 6
9 Gross Profit Gross profit as a percentage of sales totaled 4.2% for the second quarter of 1996 compared to 8.8% for the same period in 1995. The gross profit margin for the six-month period ended June 30, 1996 as a percentage of sales was 5.0% versus 8.7% for the same period in 1995. The decrease in the gross profit percentage in 1996 reflects the decrease in sales volume, changes in product mix and increased costs related to the significant expansion of capacity during 1995. The expansion related costs included, among other things, increased depreciation and labor in both the three and six month periods ended June 30, 1996. Income From Operations Income from operations for the three and six month period ended June 30, 1996 as a percentage of net sales was 2.1% and 3.0% compared to 7.4% and 8.7% for the same period in 1995. Income from operations in 1996 was impacted primarily by the decrease in the gross profit margins previously discussed. Interest Expense Interest expense for the three and six month period ended June 30, 1996 totaled $2.9 million and $5.5 million compared to $1.5 million and $2.5 million for the same period in 1995. 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, primarily due to the increase in inventory. Taxes The provision for income taxes for the three and six month periods ended June 30, 1996 of $.1 million and $1.5 million, respectively, represents 41.0% and 39.3% of pre-tax income for the periods compared to the provision of $5.1 million and $9.8 million, or 38.9% and 39.6% of pretax income, respectively, for the same periods in 1995. The effective tax rates are higher than the Federal statutory rates of 35% due primarily to state income taxes. 7
10 LIQUIDITY AND CAPITAL RESOURCES As presented in the Condensed Consolidated Statement of Cash Flows, net cash used in operating activities was $31.3 million during the first six months of 1996 primarily as a result of changes in working capital resulting from increases in accounts receivable and inventory coupled with a decrease 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 new product introduction. During the first six months of 1996, the lease portfolio (finance contracts and equipment leased to others) increased $9.4 million, as the Company continued to expand its leasing operations. In addition, the Company used $4.7 million of cash for capital expenditures during the first six months of 1996, principally for the purpose of achieving increased manufacturing capacity and improved manufacturing productivity. At June 30, 1996, the Company's total debt was $137.8 million compared to $86.3 million at December 31, 1995. The net increase in the Company's debt primarily reflects new term and bank line of credit debt associated the increased working capital requirements due to higher receivables and inventory levels. Also, during January, 1996, the Company issued $50 million of unsecured 6.41% Series A Senior Notes due January 31,2003 and used the proceeds to repay amounts under the Company's revolving line of credit. On April 27, 1995, the Company announced that the Board of Directors authorized a common stock repurchase plan of up to $30 million in the aggregate. The Company may purchase its common stock in the open market or in block transactions from time to time as it deems appropriate. Other sources of funds for capital expenditures, continued expansion of businesses, potential contingent payments associated with the acquisition of RoadRailer technology, 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 which are negotiated by the Finance Company related to specific new lease arrangements. The Company believes that these funding sources will be adequate for its anticipated requirements. 8
11 BACKLOG The Company's backlog of orders was approximately $590 million at June 30, 1996 and $1,028 million at December 31, 1995. The Company builds trailers to customer order and does not maintain an inventory of new trailers built in anticipation of future orders. 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. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS The Company held its annual meeting of security-holders on May 14, 1996, at which security-holders elected the Board of Directors for the ensuing year. (1) Nominees Elected to the Board of Directors: <TABLE> <CAPTION> WITHHOLD AUTHORITY NOMINEES FOR TO VOTE -------- --- ------- <S> <C> <C> Richard E. Dessimoz 17,400,021 80,494 Donald J. Ehrlich 17,400,710 79,805 John T. Hackett 17,400,210 80,305 E. Hunter Harrison 17,400,110 80,405 Mark R. Holden 17,400,110 80,405 Ludvik F. Koci 17,398,971 81,544 </TABLE> ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.40 First Amendment, dated December 5, 1995, to Credit Agreement dated June 13, 1995, between Core States Bank, N.A. and certain other banking institutions and Wabash National Finance Corporation. 10.41 Second Amendment, dated June 11, 1996, to Credit Agreement dated June 13, 1995, between Core States Bank, N.A. and certain other banking institutions and Wabash National Finance Corporation. 10.42 Third Amendment, dated June 11, 1996 to Credit Agreement dated June 13, 1995, between Core States Bank, N.A. and certain other banking institutions and Wabash National Finance Corporation. 9
12 15.01 Report of Independent Public Accountants (b) Reports on Form 8-K: None 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 4, 1996 By: /s/ Mark R. Holden ------------------------ -------------------------------- Mark R. Holden Vice President - Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 10