1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 204549 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 SEPTEMBER 30, 1996 OR TRANSITION REPORT UNDER SECTION 13 OF 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 November 14, 1996 was 18,908,424.
2 WABASH NATIONAL CORPORATION INDEX FORM 10-Q <TABLE> <CAPTION> Page ---- <S> <C> PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at 1 September 30, 1996 and December 31, 1995 Condensed Consolidated Statements of Income 2 for the three and nine months ended September 30, 1996 and 1995 Condensed Consolidated Statements of Cash 3 Flows for the nine months ended September 30, 1996 and 1995 Notes to Condensed Consolidated Financial 4 Statements Item 2. Management's Discussion and Analysis of 6 Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 </TABLE>
3 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) <TABLE> <CAPTION> September 30, December 31, 1996 1995 -------------- ------------ (Unaudited) (Note 1) <S> <C> <C> ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 6,283 $ 2,097 Accounts receivable, net 78,017 77,535 Current portion of finance contracts 5,948 5,979 Inventories 148,842 134,294 Prepaid expenses and other 12,691 7,657 -------- -------- Total current assets 251,781 227,562 -------- -------- PROPERTY, PLANT AND EQUIPMENT, net 78,664 76,192 -------- -------- EQUIPMENT LEASED TO OTHERS, net 60,377 35,362 -------- -------- FINANCE CONTRACTS, net of current portion 25,864 35,123 -------- -------- OTHER ASSETS 12,078 9,895 -------- -------- $428,764 $384,134 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------- CURRENT LIABILITIES: Current maturities of long-term debt $ 10,902 12,527 Accounts payable 66,439 88,490 Accrued liabilities 16,153 13,347 -------- -------- Total current liabilities 93,494 114,364 -------- -------- LONG-TERM DEBT, net of current maturities 137,572 73,726 -------- -------- DEFERRED INCOME TAXES 19,717 18,045 -------- -------- OTHER NONCURRENT LIABILITIES 332 368 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value 25,000,000 shares authorized; no shares issued --- --- Series A Junior Participating Preferred stock, $.01 par 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 September 30, 1996 and December 31, 1995,respectively 189 189 Additional paid-in capital 99,338 99,246 Retained earnings 79,401 78,701 Treasury stock, at cost, 59,600 and 19,600 shares, respectively (1,279) (505) -------- -------- 177,649 177,631 -------- -------- $428,764 $384,134 ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements.
4 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share amounts) <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> NET SALES $161,303 $176,128 $463,131 $547,212 COST OF SALES 155,196 162,342 442,075 501,268 -------- -------- -------- -------- Gross Profit 6,107 13,786 21,056 45,944 GENERAL AND ADMINISTRATIVE EXPENSES 2,304 1,752 6,624 5,209 SELLING EXPENSES 1,249 994 3,396 2,909 -------- -------- -------- -------- Income from operations 2,554 11,040 11,036 37,826 OTHER INCOME (EXPENSE): Interest Expense (2,567) (1,690) (7,561) (4,148) Other, net 147 196 459 727 -------- -------- -------- -------- Income before income taxes 134 9,546 3,934 34,405 PROVISION FOR INCOME TAXES 39 3,717 1,533 13,560 -------- -------- -------- -------- Net Income $ 95 $ 5,829 $ 2,401 $ 20,845 ======== ======== ======== ======== NET INCOME PER SHARE $ 0.01 $ 0.31 $ 0.13 $ 1.10 ======== ======== ======== ======== CASH DIVIDENDS PER SHARE $ .03 $ .025 $ .09 $ .075 ======== ======== ======== ======== AVERAGE SHARES OUTSTANDING 18,908 18,959 18,914 18,948 ======== ======== ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements
5 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) <TABLE> <CAPTION> Nine Months Ended September 30, ---------------------- 1996 1995 (Unaudited) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,401 $ 20,845 Adjustments to reconcile net income to net cash provided by (used in) operating activities- Depreciation and amortization 11,640 7,970 Bad debt provision 285 431 Deferred income taxes 1,234 2,060 Change in operating assets- (Increase) in accounts receivable (767) (11,508) (Increase) in inventories (16,746) (55,540) (Increase) in prepaid expenses and other (4,596) (2,324) (Decrease) increase in accounts payable (22,051) 3,005 Increase in accrued liabilities 2,806 26 (Increase) in other assets (1,898) (2,136) -------- -------- Total adjustments (30,093) (58,016) -------- -------- Net cash used in operating activities (27,692) (37,171) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,150) (32,515) Proceeds on disposal of leased equipment 17,124 --- Investment in equipment leased to others (35,431) (14,056) Investment in finance contracts (5,480) (18,073) Principal payments on finance contracts 3,654 4,276 Payments for RoadRailer technology (1,759) (41) Other 85 (48) -------- -------- Net cash used in investing activities (27,957) (60,457) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (11,739) (6,531) Borrowings under long-term revolver 310,300 228,920 Payments under long-term revolver (304,700) (175,689) Proceeds from issuance of long-term debt 68,361 15,000 Proceeds from issuance of common stock, net of expenses 92 494 Payment of cash dividend (1,705) (1,421) Purchase of treasury stock (774) --- -------- -------- Net cash provided by financing activities 59,835 60,773 -------- -------- NET INCREASE (DECREASE) IN CASH 4,186 (36,855) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,097 39,655 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,283 $ 2,800 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest 6,668 2,883 Income taxes 713 12,700 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Finance contracts converted to operating leases $ 3,201 --- Operating leases converted to finance contracts $ 998 --- Used trailers transferred from inventory into operations $ 2,198 --- </TABLE> See Notes to Condensed Consolidated Financial Statements.
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 September 30, 1996 and December 31, 1995 and its results of operations for the three and nine month periods ended September 30, 1996 and 1995 and cash flows for the nine month period ended September 30, 1996 and 1995. NOTE 2. INVENTORIES ----------- Inventories consisted of the following: <TABLE> <CAPTION> September 30, December 31, 1996 1995 ----- ---- (Unaudited) <S> <C> <C> Raw material and components $ 81,360 $ 89,961 Work in process 21,343 13,582 Finished goods 24,462 14,034 Used trailers 21,677 16,717 -------- -------- $148,842 $134,294 ======== ======== </TABLE>
7 NOTE 3. LEASING 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 $27,407 and $15,344 during the nine months ended September 30, 1996 and 1995 respectively. Income before income taxes was $1,790 and $3,214 during the nine months ended September 30, 1996 and 1995 respectively. Included below is condensed balance sheet information which segregates the assets and liabilities of the Finance Company. <TABLE> <CAPTION> September 30, 1996 ------------------ (Unaudited) December 31, Wabash Finance 1995 National Company Consolidated Consolidated --------- --------- ------------ ------------ <S> <C> <C> <C> <C> ASSETS: Current assets $242,898 $8,883 $251,781 $227,562 Property, plant and equipment, net 78,607 57 78,664 76,192 Equipment leased to others, net --- 60,377 60,377 35,362 Finance contracts, net of current portion --- 25,864 25,864 35,123 Other assets 11,943 135 12,078 9,895 Due from subsidiary/ (to parent) 5,855 (5,855) --- --- Investment in subsidiary 26,934 --- --- --- -------- -------- -------- -------- $366,237 $89,461 $428,764 $384,134 ======== ======== ======== ======== LIABILITIES AND STOCK- HOLDERS' EQUITY: Current liabilities $82,648 $10,846 $93,494 $114,364 Long-term debt, net current maturities 90,835 46,737 137,572 73,726 Other long-term liabilities 15,105 4,944 20,049 18,413 -------- -------- -------- -------- 188,588 62,527 251,115 206,503 Stockholders' equity 177,649 26,934 177,649 177,631 -------- -------- -------- -------- $366,237 $89,461 $428,764 $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. Also, on September 30, 1996, the Company amended its $90 million revolving credit facility to extend the maturity date to January 1, 1998 and to adjust certain financial covenants. In addition, during June, 1996, the Finance Company concluded a one-year extension of its existing $50 million secured, revolving bank line of
8 credit which now expires 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 three month period ended September 30, 1996, decreased $14.8 million or 8% compared to the same period in 1995 and were $84.1 million or 15% lower for the nine month period ended September 30, 1996 compared to the corresponding period in 1995. The decreased sales for the three and nine month periods were primarily attributable to a decrease in new trailer sales of $21.7 million and $103.5 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 $17 million, respectively. The decreases in new trailer sales of $21.7 million and $103.5 million for the three and nine month periods respectively, were caused by an 11% and 20% 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 third quarter of 1996 compared to the same period in 1995 were further impacted by a 2.8% decrease in the average sales price per new trailer sold, reflecting increased pricing pressure in the commodity trailer market which, due to the decreased production on the Company's plate trailer line, comprised a higher percentage of the Company's sales in 1996 compared to 1995. For the nine month period ended September 30, 1996, the average sales price per new trailer sold was approximately 1% lower compared with the same period in 1995. The Company anticipates supply of the composite material to improve over the next several quarters as its supplier increases manufacturing capacity; however, this increased capacity is not expected to fulfill the Company's long-term demand for this product and as a result the Company plans to construct its own composite manufacturing facility in Lafayette, Indiana during 1997 at an estimated cost of approximately $20 million. Furthermore, the Company expects pricing to improve in the commodity trailer market as overall manufacturing capacity decreases in the domestic trailer market during this period of consolidation as two of the top ten trailer manufacturers have filed Chapter 11 bankruptcy. The foregoing paragraph contains forward-looking information; actual results may differ materially due to such factors as the Company's current dependence on a single supplier for composite material and the unpredictability of that supplier's performance; low barriers to entry in the commodity trailer market and the possibility that currently troubled competitors may continue to cut prices to sustain demand; and the unpredictability of overall market demand due to the cyclical nature of the trucking industry. The Finance Company's lease portfolio decreased from 7,500 trailers at September 30, 1995 to 7,200 trailers at September 30, 1996,
9 primarily due to the sale of certain trailers under lease to Finance Company customers during the term of the respective leases. Lease revenues, for the three and nine month periods ended September 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 52% and 29% for the three and nine month periods ended September 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. Gross Profit Gross profit as a percentage of sales totaled 3.8% for the third quarter of 1996 compared to 7.8% for the same period in 1995. The gross profit margin for the nine month period ended September 30, 1996 as a percentage of sales was 4.5% versus 8.4% 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 nine month periods ended September 30, 1996. Income From Operations Income from operations for the three months ended September 30, 1996 as a percentage of sales was 1.6% versus 6.3% for the same period in 1995. Income from operations for the nine month period ended September 30, 1996 as a percentage of sales was 2.4% versus 6.9% for the same period in 1995. The decrease in the percent of income from operations for the three and nine months ended September 30, 1996 was a result of the decrease in the gross profit margins previously discussed as well as increased SG&A costs as a percent of sales resulting from decreased sales volume coupled with increased use of the Company's receivables sale and servicing agreement which led to higher discount costs. Interest Expense Interest expense for the three and nine month periods ended September 30, 1996 totaled $2.6 million and $7.6 million compared to $1.7 million and $4.1 million for the same periods 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, higher capital expenditures and increased working capital requirements, primarily due to the increase in inventory. Taxes The provision for income taxes for the nine month period ended September 30, 1996 of $1.5 million represents 39.0% of pre-tax income for the period compared to the provision of $13.6 million or 39.4% of pretax income for the same period in 1995. The effective tax rates are higher than the Federal statutory rates of 35% due primarily to state income taxes.
10 LIQUIDITY AND CAPITAL RESOURCES As presented in the Condensed Consolidated Statements of Cash Flows, net cash used in operating activities was $27.7 million during the first nine months of 1996 primarily as a result of changes in working capital resulting from an increase in 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 expansion of its product line which requires initial up front investments in working capital. During the first nine months of 1996, the lease portfolio (finance contracts and equipment leased to others) increased $15.7 million, as the Company continued to expand its leasing operations. In addition, the Company used $8.3 million of cash for capital expenditures during the first nine months of 1996, principally for the purpose of achieving improved manufacturing productivity. At September 30, 1996, the Company's total debt was $148.5 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 with growth in the Finance Company's leasing operations as well as increased working capital requirements. 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. In addition, the Company anticipates closing on a $100 million Senior Note institutional private placement during the fourth quarter of 1996. The proceeds are expected to be drawn down in several installments over the next six months and will primarily be used to recapitalize the Finance Company by repaying certain of the Finance Company's debt. 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. The Company believes that these funding sources will be adequate for its anticipated requirements. BACKLOG The Company's backlog of orders was approximately $475 million at September 30, 1996 and $858 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.
11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------------- (a) Exhibits: (Numbered in accordance with Item 601 of Regulation S-K) 10.43 Commercial Note and Security Agreements in the principal amount of $5,000,000 between Wabash National Finance Company and National City Bank of Indiana dated September 30, 1996. 10.44 Second Amendment, dated September 30, 1996, to Revolving Credit Loan Agreement dated April 28, 1995, between NBD Bank, N.A. and Wabash National Corporation. 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: November 13, 1996 By: /s/ Mark R. Holden ------------------ Mark R. Holden Vice President - Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)