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UNITED STATES
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 SEPTEMBER 30, 2003
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES [X] NO [ ]
The number of shares of common stock outstanding at October 29, 2003 was
25,840,489.
WABASH NATIONAL CORPORATION
INDEX
FORM 10-Q
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
September 30, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2003 and 2002 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24
Item 4. Controls and Procedures 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities and Use of Proceeds 26
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 31
2
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2003 2002
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,577 $ 35,659
Accounts receivable, net 79,526 34,396
Current portion of finance contracts 7,108 9,528
Inventories 113,698 134,872
Prepaid expenses and other 13,716 18,299
--------- ---------
Total current assets 216,625 232,754
PROPERTY, PLANT AND EQUIPMENT, net 131,154 145,703
EQUIPMENT LEASED TO OTHERS, net 24,784 100,837
FINANCE CONTRACTS, net of current portion 14,962 22,488
GOODWILL, net 35,378 34,652
OTHER ASSETS 25,074 29,135
--------- ---------
$ 447,977 $ 565,569
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 13,475 $ 42,961
Current maturities of capital lease obligations 1,790 12,860
Accounts payable 66,109 60,457
Other accrued liabilities 63,492 61,424
--------- ---------
Total current liabilities 144,866 177,702
LONG-TERM DEBT, net of current maturities 261,769 239,043
LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current maturities - 51,993
OTHER NONCURRENT LIABILITIES AND CONTINGENCIES 21,383 22,847
STOCKHOLDERS' EQUITY:
Preferred stock, 352,000 shares issued and outstanding with an
aggregate liquidation value of $17,600 3 3
Common stock, $0.01 par value, 25,834,530 and 25,647,060
shares issued and outstanding, respectively 259 257
Additional paid-in capital 239,497 237,489
Retained deficit (218,493) (162,222)
Accumulated other comprehensive loss (28) (264)
Treasury stock at cost, 59,600 common shares (1,279) (1,279)
--------- ---------
Total stockholders' equity 19,959 73,984
--------- ---------
$ 447,977 $ 565,569
========= =========
See Notes to Condensed Consolidated Financial Statements.
3
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
NET SALES $ 215,450 $ 241,474 $ 668,189 $ 613,677
COST OF SALES 199,545 219,743 606,254 585,680
LOSS ON ASSET IMPAIRMENT - - 28,500 -
--------- --------- --------- ---------
Gross profit 15,905 21,731 33,435 27,997
GENERAL AND ADMINISTRATIVE EXPENSES 10,598 12,137 29,031 41,035
SELLING EXPENSES 4,714 5,774 15,954 17,553
RESTRUCTURING CHARGE - 1,717 - 1,717
--------- --------- --------- ---------
Income (loss) from operations 593 2,103 (11,550) (32,308)
OTHER INCOME (EXPENSE):
Interest expense (8,349) (8,523) (26,608) (22,012)
Trade receivables facility costs (397) (237) (1,022) (3,870)
Foreign exchange gains and losses, net (271) (1,825) 5,318 133
Loss on debt extinguishment (18,940) - (18,940) (1,314)
Other, net (2,277) 163 (2,677) 2,839
--------- --------- --------- ---------
Loss before income taxes (29,641) (8,319) (55,479) (56,532)
INCOME TAX BENEFIT - - - (11,947)
--------- --------- --------- ---------
Net loss (29,641) (8,319) (55,479) (44,585)
PREFERRED STOCK DIVIDENDS 264 409 792 1,295
--------- --------- --------- ---------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (29,905) $ (8,728) $ (56,271) $ (45,880)
========= ========= ========= =========
BASIC AND DILUTED NET LOSS PER SHARE $ (1.16) $ (0.37) $ (2.19) $ (1.98)
========= ========= ========= =========
COMPREHENSIVE LOSS
Net loss (29,641) $ (8,319) $ (55,479) $ (44,585)
Foreign currency translation adjustment (208) (135) 236 31
--------- --------- --------- ---------
NET COMPREHENSIVE LOSS $ (29,849) $ (8,454) $ (55,243) $ (44,554)
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
4
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (55,479) $ (44,585)
Adjustments to reconcile net cash provided by (used in) operating activities:
Depreciation and amortization 19,115 21,697
Net (gain) loss on the sale of assets 652 (1,133)
Provision for losses on accounts receivable and finance contracts 1,011 8,915
Cash used for restructuring activities (229) (973)
Restructuring charge - 1,717
Trailer valuation charges 2,261 7,051
Loss contingencies - 6,000
Loss on debt extinguishment 18,940 1,314
Loss on asset impairment 28,500 -
Change in operating assets and liabilities:
Accounts receivable (53,771) (51,517)
Inventories 22,732 54,065
Refundable income taxes 921 24,426
Prepaid expenses and other 4,328 858
Accounts payable and accrued liabilities 7,630 31,008
Other, net 1,526 3,227
--------- ---------
Net cash provided by (used in) operating activities (1,863) 62,070
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,747) (2,701)
Proceeds from asset sales 53,479 -
Additions to equipment leased to others - (9,030)
Additions to finance contracts - (7,718)
Proceeds from sale of leased equipment and finance contracts 5,305 5,181
Principal payments received on finance contracts 5,969 9,652
Proceeds from the sale of property, plant and equipment 1,762 5,261
--------- ---------
Net cash provided by investing activities 62,768 645
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of bank term loan and revolving credit facility 135,309 80,402
Proceeds from issuance of convertible senior notes 125,000 -
Proceeds from exercise of stock options 1,687 213
Borrowings under trade receivables and revolving credit facilities 109,618 43,998
Payments under trade receivables and revolving credit facilities (109,618) (130,691)
Payments under long-term debt and capital lease obligations (344,322) (50,150)
Preferred stock dividends paid (1,584) (443)
Debt issuance costs paid (10,077) (3,805)
--------- ---------
Net cash used in financing activities (93,987) (60,476)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,082) 2,239
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,659 11,135
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,577 $ 13,374
========= =========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 20,174 $ 20,029
Income taxes refunded, net $ (789) $ (24,642)
See Notes to Condensed Consolidated Financial Statements.
5
WABASH NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
The condensed consolidated financial statements of Wabash National Corporation
and its subsidiaries (the Company) have been prepared 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. In the opinion of
management, 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,
its results of operations and cash flows. 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 2002 Annual
Report on Form 10-K.
During the quarter, the Company completed its review of the Retail and
Distribution businesses operating structure. As a result of this review, the
Company closed 12 of its locations, including two in Canada and re-evaluated its
retail strategy. This evaluation led management to change its intent related to
the intercompany receivable due from Canada. Management's intent is to not seek
repayment of approximately $30 million CDN of this amount and to designate it as
a permanent investment in the Canadian operations. Beginning in the third
quarter of 2003, foreign currency translation gains and losses associated with
the permanent investment will be charged to accumulated other comprehensive loss
on the condensed consolidated balance sheet.
Certain items previously reported in specific condensed consolidated financial
statement captions have been reclassified to conform to the 2003 presentation.
2. INVENTORIES
Inventories consisted of the following (in thousands):
September 30, December 31,
2003 2002
------------- ------------
Raw material and components $ 26,607 $ 27,646
Work in process 10,864 14,447
Finished goods 55,281 55,523
After-market parts 5,480 15,054
Used trailers 15,466 22,202
--------- --------
$ 113,698 $134,872
========= ========
3. NEW ACCOUNTING PRONOUNCEMENTS
Variable Interest Entities
In 2003, the Financial Accounting Standards Board (FASB) issued Interpretation
No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 defines a
variable interest entity (VIE) as a corporation, partnership, trust or any other
legal structure that does not have equity investors with a controlling financial
interest or has equity investors that do not provide sufficient financial
resources for the entity to support its activities. The Company has evaluated
its financial arrangements that had
6
potential FIN 46 impact and determined that none of these arrangements are with
a VIE and that the adoption will have no impact on its consolidated results of
operations, financial position or liquidity.
Derivatives
In April 2003, the FASB issued Statement of Financial Accounting (SFAS) No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
This statement amends and clarifies financial accounting and reporting for
derivative instruments and hedging activities under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, by requiring
contracts with similar characteristics to be accounted for comparably. The
adoption of SFAS No. 149, effective for contracts entered into or modified after
June 30, 2003, did not have a material effect on financial position, results of
operations, or cash flow.
4. RESTRUCTURING AND OTHER RELATED CHARGES
Charges totaling $48.2 million ($46.6 million in 2000, $1.4 million in 2001 and
$0.2 million in 2002) were recorded in connection with the Company's exit from
manufacturing product for export outside the North American market,
international leasing and financing activities, and the consolidation of certain
domestic operations. To date, $40.1 million has been utilized. The remaining
balance at September 30, 2003 relates to the following (in thousands):
Equipment Guarantees $ 6,156
Financial Guarantees 1,194
Other Charges 757
-------
$ 8,107
=======
In October 2003, the Company was required to satisfy $3.1 million of equipment
guarantees. The Company anticipates substantially completing all activities
related to this restructuring plan by the end of 2004.
5. DEBT AND CAPITAL LEASE OBLIGATIONS
Debt Refinancing
On August 1, 2003, the Company completed the sale of $125 million of 3.25%
five-year senior unsecured convertible notes (Convertible Notes) convertible
into shares of the Company's stock, subject to market and other conditions. The
Company used the net proceeds to repay a portion of its outstanding
indebtedness. The notes have a conversion price of $19.20 or a rate of 52.0833
shares per $1,000 principal amount of note. The notes bear interest at 3.25% per
annum payable semi-annually on February 1 and August 1. Costs associated with
the transaction amounted to approximately $4.2 million and will be amortized
over the term of the notes.
On September 23, 2003, the Company entered into a $222.1 million three-year
asset-based loan (ABL Facility) that includes a $47.1 million term loan and a
$175 million revolver. The new financing replaced the existing Trade Receivables
Facility, Bank and Senior Series Notes and is expected to substantially lower
the Company's cost of debt.
The term loan is secured by the Company's property, plant and equipment. The
revolver is secured by inventory and accounts receivable and the amount
available to borrow varies in relation to the balances of those accounts.
7
Interest on the term loan is variable, based on the London Interbank Offer Rate
(LIBOR) plus 300 basis points, decreasing to 275 basis points after six months,
or the banks alternative rate as defined in the agreement. Interest on the
revolver is at LIBOR plus 275 basis points, decreasing to 250 basis points after
six months. The Company pays a commitment fee on the unused portion of the
facility at a rate of 37.5 basis points per annum. Costs associated with the
transaction amounted to approximately $4.2 million and will be amortized over
the term of the loan.
The term loan requires a $5.0 million principal payment on January 1, 2004 and
quarterly principal payments of $1.7 million commencing on January 1, 2004, with
the balance due on September 23, 2006. The revolver is due on September 23,
2006. Beginning in March 2005, excess cash flow, as defined, is required to be
used to reduce term loan indebtedness.
The loan agreement contains covenants that require, among other things, minimum
fixed charge coverage and maximum senior debt to EBITDA coverage. Also, the
agreement places limits on capital expenditures and additional borrowings.
After giving effect to the refinancing of existing indebtedness with the
Convertible Notes and ABL Facility, scheduled maturities for the remainder of
2003 and future years is as follows (in thousands):
2003 $ 854
2004 15,175
2005 10,285
2006 118,813
2007 1,476
Thereafter 128,641
---------
$ 275,244
Less: Current maturities 13,475
---------
$ 261,769
=========
Capital Leases
In conjunction with the sale of certain assets of the trailer leasing and rental
business, as discussed in Note 9, the Company paid-off a $38.6 million financing
arrangement underlying equipment included in the sale. As of September 30, 2003,
the Company had remaining capital leases of approximately $1.8 million.
6. STOCK-BASED COMPENSATION
The Company follows APB No. 25, Accounting for Stock Issued to Employees, in
accounting for its stock options and, accordingly, no compensation cost has been
recognized for stock options in the consolidated financial statements. In
accordance with SFAS No. 148, Accounting for Stock Based Compensation Transition
and Disclosure, the following table illustrates the effect on net loss and net
loss per share as if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock Based Compensation to
stock-based employee compensation (in thousands, except per share amounts):
8
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2003 2002 2003 2002
------------ ----------- ------------- ------------
Reported net loss $ (29,641) $ (8,319) $ (55,479) $ (44,585)
Pro forma stock-based compensation
expense (net of tax) (748) (502) (1,985) (1,246)
----------- ---------- ------------ -----------
Pro forma net loss $ (30,389) $ (8,821) $ (57,464) $ (45,831)
=========== ========== ============ ===========
Basic and diluted loss per share:
Reported net loss per share $ (1.16) $ (0.37) $ (2.19) $ (1.98)
Pro forma stock-based compensation
expense (net of tax) per share (0.03) (0.02) (0.07) (0.05)
----------- ---------- ------------ -----------
Pro forma net loss per share $ (1.19) $ (0.39) $ (2.26) $ (2.03)
=========== ========== ============ ===========
7. 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, environmental and possible tax assessments. While
the amounts claimed could be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist. Therefore, it
is possible that results of operations or liquidity in a particular period could
be materially affected by certain contingencies. However, based on facts
currently available, management believes that the disposition of matters that
are currently pending or asserted will not have a material adverse effect on the
Company's financial position, liquidity or results of operations.
Brazil Joint Venture
In March 2001, Bernard Krone Industria e Comercio de Maquinas Agricolas Ltda.
("BK") filed suit against the Company in the Fourth Civil Court of Curitiba in
the State of Parana, Brazil. This action seeks recovery of damages plus pain and
suffering. Because of the bankruptcy of BK, this proceeding is now pending
before the Second Civil Court of Bankruptcies and Creditors Reorganization of
Curitiba, State of Parana (No.232/99).
This case grows out of a joint venture agreement between BK and the Company,
which was generally intended to permit BK and the Company to market the
RoadRailer(R) trailer in Brazil and other areas of South America. When BK was
placed into the Brazilian equivalent of bankruptcy late in 2000, the joint
venture was dissolved. BK subsequently filed its lawsuit against the Company
alleging that it was forced to terminate business with other companies because
of the exclusivity and non-compete clauses purportedly found in the joint
venture agreement. The lawsuit further alleges that Wabash did not properly
disclose technology to BK and that Wabash purportedly failed to comply with its
contractual obligations in terminating the joint venture agreement. In its
complaint, BK asserts that it has been damaged by these alleged wrongs by the
Company in the approximate amount of $8.4 million.
The Company answered the complaint in May 2001, denying any wrongdoing and
pointing out that, contrary to the allegation found in the complaint, a merger
of the Company and BK, or the acquisition of BK by the Company, was never the
purpose or intent of the joint venture agreement between the parties; the only
purpose was the business and marketing arrangement as set out in the agreement.
9
The Company believes that the claims asserted against it by BK are without merit
and intends to defend itself vigorously against those claims. The Company
believes that the resolution of this lawsuit will not have a material adverse
effect on its financial position, liquidity or future results of operations;
however, at this early stage of the proceeding, no assurance can be given as to
the ultimate outcome of the case.
Environmental
In October 2003, the Company reached a verbal agreement with federal officials
to resolve a federal environmental investigation related to its Huntsville,
Tennessee facility. The plea agreement will include payment of a $0.4 million
fine and a plea to two misdemeanor violations of the Clean Water Act. The
resolution of this matter does not have a material impact on the Company's
financial position, liquidity or future results of operations.
8. PER SHARE OF COMMON STOCK
Per share results have been computed based on the average number of common
shares outstanding. The following table presents the number of incremental
weighted average shares used in computing diluted per share amounts (in
millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
Average shares outstanding basic 25.8 23.4 25.7 23.2
Options - - - -
Preferred Stock - - - -
---- ---- ---- ----
Average shares outstanding diluted 25.8 23.4 25.7 23.2
==== ==== ==== ====
Average shares outstanding diluted excluded the antidilutive effects of
preferred stock convertible into 823,200 shares in 2003 and 2002, and 356,787
shares and 7,552 shares of stock options for the quarter, and 179,671 shares and
32,240 shares of stock options for the nine months in 2003 and 2002,
respectively.
9. ASSET SALE
On September 19, 2003, the Company completed the sale of certain of the assets
of its trailer leasing and rental and wholesale aftermarket parts businesses for
approximately $53.5 million in cash. Net proceeds from the sale were used to
repay a portion of the Company's outstanding indebtedness. Loss on the
disposition amounted to approximately $29.5 million, including a $28.5 million
asset impairment charge recorded in the second quarter of 2003. The $1.0 million
loss was derived as follows (in thousands):
Assets sold $ 52,801
Transaction costs 1,718
Less proceeds 53,479
---------
$ 1,040
=========
For a presentation of the pro forma impact of the asset sale, see Note 11.
10. SEGMENTS
The Company has two reportable segments: manufacturing and retail and
distribution. The manufacturing segment produces and sells new trailers to the
retail and distribution segment or to
10
customers who purchase trailers direct or through independent dealers. The
retail and distribution segment includes the sale, leasing and financing of new
and used trailers, as well as the sale of aftermarket parts and service through
its retail branch network. In addition, the retail and distribution segment
includes the sale of aftermarket parts through Wabash National Parts.
Reportable segment information is as follows (in thousands):
Retail and Consolidated
Manufacturing Distribution Eliminations Totals
------------- ------------ ------------ ------------
THREE MONTHS ENDED SEPTEMBER 30, 2003
Net Sales
External customers $ 147,093 $ 68,357 $ - $ 215,450
Intersegment sales 5,707 265 (5,972) -
--------- --------- ----------- ---------
Total Net Sales $ 152,800 $ 68,622 $ (5,972) $ 215,450
--------- --------- ----------- ---------
Income (Loss) from Operations $ 2,387 $ (1,815) $ 21 $ 593
Assets $ 393,449 $ 216,407 $ (161,879) $ 447,977
THREE MONTHS ENDED SEPTEMBER 30, 2002
Net Sales
External customers $ 159,251 $ 82,223 $ - $ 241,474
Intersegment sales 7,142 325 (7,467) -
--------- --------- ----------- ---------
Total Net Sales $ 166,393 $ 82,548 $ (7,467) $ 241,474
========= ========= =========== =========
Income (Loss) from Operations $ 5,285 $ (3,188) $ 6 $ 2,103
Assets $ 430,381 $ 361,800 $ (165,013) $ 627,168
NINE MONTHS ENDED SEPTEMBER 30, 2003
Net Sales
External customers $ 446,714 $ 221,475 $ - $ 668,189
Intersegment sales 40,226 878 (41,104) -
--------- --------- ----------- ---------
Total Net Sales $ 486,940 $ 222,353 $ (41,104) $ 668,189
========= ========= =========== =========
Income (Loss) from Operations $ 21,202 $ (33,072) $ 320 $ (11,550)
Assets $ 393,449 $ 216,407 $ (161,879) $ 447,977
NINE MONTHS ENDED SEPTEMBER 30, 2002
Net Sales
External customers $ 358,605 $ 255,072 $ - $ 613,677
Intersegment sales 21,037 3,093 (24,130) -
--------- --------- ----------- ---------
Total Net Sales $ 379,642 $ 258,165 $ (24,130) $ 613,677
========= ========= =========== =========
Income (Loss) from Operations $ (12,911) $ (19,974) $ 577 $ (32,308)
Assets $ 430,381 $ 361,800 $ (165,013) $ 627,168
Retail and distribution assets decreased from December 31, 2002 primarily due to
sale of certain assets of its leasing and rental and aftermarket parts
businesses during the third quarter of 2003 as discussed in Note 9.
11
Product Information
The following table sets forth the major product category and their percentage
of total net sales (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2003 2002 2003 2002
--------------- --------------- -------------- --------------
$ % $ % $ % $ %
------- ----- ------- ----- ------- ----- ------- -----
New Trailers 162,374 75.4 178,654 74.0 499,813 74.8 418,733 68.2
Used Trailers 16,514 7.7 21,876 9.1 53,273 8.0 71,029 11.6
Parts 22,686 10.5 24,945 10.3 72,628 10.9 75,396 12.3
Other 13,876 6.4 15,999 6.6 42,475 6.3 48,519 7.9
------- ----- ------- ----- ------- ----- ------- -----
Total Net Sales 215,450 100.0 241,474 100.0 668,189 100.0 613,677 100.0
======= ===== ======= ===== ======= ===== ======= =====
11. PRO FORMA FINANCIAL INFORMATION
The Company has prepared the following Unaudited Pro Forma Consolidated
Statement of Operations for the nine months ended September 30, 2003 to
illustrate the estimated effects of the sale (the "Asset Sale") of certain of
the assets of its trailer leasing and rental, and wholesale aftermarket parts
distribution businesses to Aurora Trailer Holdings, LLC and the refinancing of
its capital structure through the sale of $125 million of 3.25% five-year senior
unsecured convertible notes and entering into a $222 million three-year
asset-based loan arrangement (the "Refinancing"). The Company believes the pro
forma data to be useful in understanding the operating results in view of the
recently completed transactions. The Unaudited Pro Forma Consolidated Statement
of Operations give effect to the transactions, described in notes 5 and 9, as if
they had occurred as of the beginning of the year. The Pro Forma Financial
Statement is based upon available information and certain assumptions that
management believes are reasonable. The Pro Forma Financial Statement does not
purport to represent what the Company's results of operations or financial
condition would actually have been had the transactions in fact occurred on such
dates or to project the Company's results of operations or financial condition
for any future period or date. The Pro Forma Financial Statements should be read
in conjunction with the historical financial statements of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company Form 10-K for the year ended December 31,
2002 and in this report.
12
Wabash National Corporation
Pro Forma Statement of Operations for the Nine Months Ended September 30, 2003
in Thousands, Except Per Share Amounts
(Unaudited)
Adjustments
------------------------
Historical Asset Sale Refinancing Pro forma
---------- ---------- ----------- ---------
Net Sales $ 668,189 $ (58,904) $ - $ 609,285
Cost of Sales 606,254 (48,639) - 557,615
Loss on Asset Impairment 28,500 (28,500) - -
--------- --------- ---------- ---------
Gross Profit 33,435 18,235 - 51,670
G & A 29,031 (1,498) (1,576) 25,957
Selling 15,954 (1,920) - 14,034
--------- --------- ---------- ---------
Income (Loss) from Operations (11,550) 21,653 1,576 11,679
Other Income (Expense):
Interest Expense (26,608) 1,745 13,663 (11,200)
Trade Receivable Facility Costs (1,022) - 1,022 -
Foreign Exchange Gains and Losses, Net 5,318 - 5,318
Loss on Debt Extinguishment (18,940) - 18,940 -
Other, net (2,677) 1,068 (1,609)
--------- --------- ---------- ---------
Income (Loss) before Income Taxes (55,479) 24,466 35,201 4,188
Income Tax (Benefit) Expense - - - -
--------- --------- ---------- ---------
Net Income (Loss) (55,479) 24,466 35,201 4,188
Preferred Stock Dividends 792 - - 792
--------- --------- ---------- ---------
Net Income (Loss) Applicable to Common Stockholders $ (56,271) $ 24,466 $ 35,201 $ 3,396
========= ========= ========== =========
Basic and Diluted Net Income (Loss) Per Share $ (2.19) $ 0.13
========= =========
Weighted Average Shares Outstanding 25,721 25,721
========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including documents incorporated herein by reference, contains
forward-looking statements. Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities and Exchange Commission or otherwise. The words "believe," "expect,"
"anticipate," and "project" and similar expressions identify forward-looking
statements, which speak only as of the date the statement is made. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements may include, but are not
limited to, information regarding revenues, income or loss, capital
expenditures, acquisitions, number of retail branch openings, plans for future
operations, financing needs or plans, the impact of inflation and plans relating
to services of the Company, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by or
underlying the forward-looking statements. Statements in this report, including
those set forth in "Risk Factors" and in "Management's Discussion and Analysis
of Financial Condition and Results of Operations," describe factors, among
others, that could contribute to or cause such differences.
13
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 disclosed in Item 5 of Part II hereof.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of net
sales for the periods indicated:
Percentage of Net Sales
--------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 92.6 91.0 90.7 95.4
Loss on asset impairment - - 4.3 -
----- ----- ----- -----
Gross profit 7.4 9.0 5.0 4.6
General and administrative expense 4.9 5.0 4.3 6.7
Selling expense 2.2 2.4 2.4 2.9
Restructuring charges - 0.7 - 0.3
----- ----- ----- -----
Income (loss) from operations 0.3 0.9 (1.7) (5.3)
Interest expense 3.9 3.5 4.0 3.6
Trade receivables facility costs 0.2 0.1 0.2 0.6
Foreign exchange gains and losses, net 0.1 0.8 (0.8) -
Loss on debt extinguishment 8.8 - 2.8 -
Other, net 1.1 (0.1) 0.4 (0.3)
----- ----- ----- -----
Loss before income taxes (13.8) (3.4) (8.3) (9.2)
Income tax benefit - - - (1.9)
----- ----- ----- -----
Net loss (13.8)% (3.4)% (8.3)% (7.3)%
===== ===== ===== =====
THREE MONTHS ENDED SEPTEMBER 30, 2003
NET SALES
Customer demand for both new and used trailers declined in the quarter resulting
in a decrease in net sales of 11% compared to the prior year and 6% compared to
the second quarter of this year. The sale of certain assets of the trailer
leasing and rental and wholesale parts businesses on September 19, 2003
negatively impacted sales by approximately $2 million. By business segment, net
external sales and related units sold were as follows (dollars in millions):
14
Three Months Ended September 30,
--------------------------------
2003 2002 % Change
------- ------- ----------
Sales by segment:
Manufacturing $ 147.1 $ 159.3 (8)%
Retail and Distribution 68.4 82.2 (17)
------- -------
Total $ 215.5 $ 241.5 (11)%
======= =======
New trailer units:
Manufacturing 8,900 10,400 (14)%
Retail and Distribution 1,000 1,000 -
------- -------
Total 9,900 11,400 (13)%
======= =======
Used trailer units 3,100 4,900 (37)%
======= =======
The manufacturing segment's sales decrease was primarily driven by a
year-over-year decrease in volume of container and chassis shipped. The third
quarter of 2002 included approximately 3,000 container and chassis units
compared to approximately 1,000 units in 2003. Sales of the new Freight Pro line
partially offset the unit decrease.
The decline in retail and distribution segment sales is attributed to:
- used trailer sales decline of $5.4 million as the Company is no
longer reducing excess inventories;
- new trailer sales reduction of $3.0 million due to weak demand
and the closing of certain locations;
- branch parts and services sales decline of $2.5 million primarily
due to closing full service branches;
- weak demand for after-market parts; and
- the Company's decision not to reinvest in the leasing business
and the August 2002 bankruptcy of a customer resulted in $2.0
million in lower revenue.
GROSS PROFIT
Gross profit for the third quarter of 2003 as a percent of sales was 7.4%,
compared to 9.0% in 2002. As discussed below, both of the Company's segments
contributed as follows (in millions):
Three Months Ended September 30,
--------------------------------
2003 2002 $ Change
------- ------- ----------
Gross Profit by segment:
Manufacturing $ 10.2 $ 14.9 $ (4.7)
Retail and Distribution 5.7 6.8 (1.1)
Eliminations - - -
------- ------- --------
Total Gross Profit $ 15.9 $ 21.7 $ (5.8)
======= ======= ========
The manufacturing segment's 2003 gross profits were negatively impacted by lower
volume and charges related to product development and insurance. Cost reductions
from continuous improvement initiatives, along with cut backs in labor and
spending were not sufficient to offset the impact of lower volume.
15
The retail and distribution segment's gross profit for 2003 was negatively
impacted by lower sales volumes associated with the closing of underperforming
or non-strategic locations. Additionally, 2003 gross profit was affected by
reduced sales in the trailer leasing, rental and financing and aftermarket parts
businesses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $1.5 million to $10.6 million for
the three months ended September 30, 2003, compared to $12.1 million for the
same period in 2002. The 2002 quarter included $1.8 million in bad debt expense
mainly related to the finance and leasing businesses and a $0.8 million
write-down in the value of the Company's airplane that was sold in December
2002.
SELLING EXPENSES
Selling expenses decreased $1.1 million to $4.7 million for the three months
ended September 30, 2003, compared to $5.8 million for the same period in 2002.
The decrease primarily reflects the impact on the retail and distribution
segment of lower payroll costs resulting from the closing of underperforming or
non-strategic locations and lower commissions due to lower net sales.
RESTRUCTURING CHARGE
Restructuring charge of $1.7 million in the third quarter of 2002 relates to
additional asset impairments for properties included in the Company's 2000 and
2001 restructurings.
OTHER INCOME (EXPENSE)
Interest expense totaled $8.3 million for the quarter, a decrease of $0.2
million from the prior year period. The decrease reflects the impact of lower
rates from the refinancing of debt beginning in August 2003 and reduced average
borrowings, offset by increased amortization in 2003 of deferred debt costs.
Foreign exchange gains and losses, net were losses of $0.3 million for the three
months ended September 30, 2003 and $1.8 million for the same period in 2002.
The 2002 losses reflect a weakening of the Canadian dollar compared to the U.S.
dollar.
Loss on debt extinguishment of $18.9 million represents the additional costs
associated with the early extinguishment of the Company's Senior Series Notes
and Bank Debt. The loss included the payment of prepayment penalties and payment
deferral fees of $21.8 million, of which $5.0 million was previously expensed,
and the write-off of $2.1 million of previously deferred debt issuance costs.
Other, net for the third quarter of 2003 was a net expense of $2.3 million
compared to a net income of $0.2 million for the same period in 2002. In 2003,
other, net included a $1.0 million loss on the sale of certain assets.
INCOME TAXES
The Company recorded no income tax benefit for the third quarter of 2003 due to
uncertainties surrounding the realizability of benefits associated with net
operating losses (NOL). Because of
16
uncertainty related to the realizability of NOLs in excess of those utilized, a
full valuation allowance is recorded against the related deferred tax assets at
September 30, 2003.
NINE MONTHS ENDED SEPTEMBER 30, 2003
NET SALES
Net sales improved 9% from 2002. The first quarter of 2002 is believed to have
been the low point of the industry downturn that began in 2000. By business
segment, net external sales and related units sold were as follows (dollars in
millions):
Nine Months Ended September 30,
-------------------------------
2003 2002 % Change
------- ------- --------
Net Sales by segment:
Manufacturing $ 446.7 $ 358.6 25%
Retail and Distribution 221.5 255.1 (13)
------- -------
Total $ 668.2 $ 613.7 9%
======= =======
New trailer units:
Manufacturing 26,600 23,100 15%
Retail and Distribution 3,100 2,900 7
------- -------
Total 29,700 26,000 14%
======= =======
Used trailer units 9,900 15,000 (34)%
======= =======
The manufacturing segment's sales improvement was driven by demand for new
trailers and improved product mix. The 2002 sales included approximately 7,100
units of lower revenue dollar containers and chassis compared to approximately
1,400 units in 2003.
The decrease in the retail and distribution segment's net sales resulted
primarily from:
- used trailer sales decline of $17.8 million as the Company is no
longer reducing excess inventories;
- new trailer sales reduction of $2.4 million due to the closing
of certain locations, offset partially by a 13% increase in
equivalent store units sold:
- branch parts and services sales decline of $7.1 million primarily
due to closing full service branches; and
- the Company's decision not to reinvest in the leasing business
and the August 2002 bankruptcy of a customer resulted in $5.9
million in lower leasing and rental revenues.
GROSS PROFIT (LOSS)
Gross profit as a percent of sales was 9.3% for the first nine months of 2003
before the $28.5 million asset impairment charge, compared to 4.6% for the same
period in 2002. The asset impairment charge was taken on certain assets of its
rental and leasing and aftermarket parts businesses. As discussed below, both of
the Company's segments contributed as follows (in millions):
17
Nine Months Ended September 30,
-------------------------------
2003 2002 $ Change
-------- ------- ---------
Gross Profit (Loss) by segment:
Manufacturing $ 44.1 $ 14.8 $ 29.3
Retail and Distribution (11.0) 12.6 (23.6)
Eliminations 0.3 0.6 (0.3)
-------- ------- --------
Total Gross Profit $ 33.4 $ 28.0 $ 5.4
======== ======= ========
The manufacturing segment's gross profit increased due to higher volumes and
improved production mix, coupled with realizing cost savings driven by the
Company's continuous improvement initiatives.
The retail and distribution segment's gross profit for 2003 was negatively
impacted by the $28.5 million asset impairment charge and $2.3 million in
trailer valuation charges. Additionally, the 2003 gross profit was affected by
reduced sales in the trailer leasing, rental and financing and aftermarket parts
businesses. Gross profit for 2002 was negatively impacted by a $6.0 million loss
provision for a customer that went into bankruptcy in August 2002 and $4.8
million in trailer valuation charges. Excluding the asset impairment charge and
the loss contingency, the gross profit percentage was 7.9% versus 7.2% in the
prior year. The higher gross profit percentage was the result of improved labor
utilization and efficiency in the service area.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $12.0 million to $29.0 million for
2003, compared to $41.0 million for the same period in 2002. The 2003 expense
included $2.6 million in debt restructuring related costs, $0.9 million related
to the branch closings, offset in part by a $1.0 million recovery of VAT taxes.
The 2002 expense included $8.9 million in bad debt expense mainly related to the
finance and leasing businesses, $2.2 million in severance accruals, $1.9 million
in write-downs in the value of the Company's airplane that was sold in December
2002 and $1.2 million in debt restructuring related costs.
SELLING EXPENSES
Selling expenses decreased $1.6 million to $16.0 million for the nine months
ended September 30, 2003, compared to $17.6 million for the same period in 2002.
The decrease primarily reflects the impact on the retail branch closings.
RESTRUCTURING CHARGE
Restructuring charge of $1.7 million in 2002 relates to additional asset
impairments for properties included in the Company's 2000 and 2001
restructurings.
OTHER INCOME (EXPENSE)
Interest expense totaled $26.6 million for 2003, an increase of $4.6 million
from the prior year period as a result of increased amortization of deferred
debt costs and higher interest rates resulting from the 2002 and 2003 debt
restructurings, offset in part by reduced average borrowings and lower interest
rates on refinanced debt beginning in the third quarter of 2003.
18
Trade receivables facility costs declined as 2002 included $3.3 million in
facility restructuring costs.
Foreign exchange gains and losses, net were gains of $5.3 million for 2003,
primarily occurring in the first six months of the year, and $0.1 million for
the same period in 2002. The 2003 gains reflect a strengthening of the Canadian
dollar compared to the U.S. dollar.
Loss on debt extinguishment of $18.9 million in 2003 represents the additional
costs associated with the early extinguishment of the Company's Senior Series
Notes and Bank Debt. The loss included the payment of prepayment penalties and
payment deferral fees of $21.8 million, of which $5.0 million was previously
expensed, and the write-off of $2.1 million of deferred debt issuance costs. The
$1.3 million loss in 2002 represents fees and the write-off of deferred debt
issuance costs associated with the April 2002 debt restructuring.
Other, net for 2003 was a net expense of $2.7 million compared to a net income
of $2.8 million for the same period in 2002. The 2003 period included a $1.3
million charge for the settlement of a legacy RoadRailer(R) transaction and a
$1.0 million loss on the sale of certain assets. The 2002 period included $2.0
million in miscellaneous income and $0.8 million in gains on the sale of branch
properties.
INCOME TAXES
The Company recorded no income tax benefit in 2003 due to uncertainties
surrounding the realizability of benefits associated with NOLs. The 2002 benefit
recorded represents an additional realizable Federal NOL carry-back claim filed
and received under the provisions of the Job Creation and Worker Assistance Act
of 2002, which revised the permitted carry-back period for NOLs generated during
2001 from two years to five years. Because of uncertainty related to the
realizability of NOLs in excess of those utilized, a full valuation allowance is
recorded against the related deferred tax assets at September 30, 2003.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Operating activities consumed $1.9 million in cash during 2003 compared to
providing $62.1 million during 2002. Operating activities for 2003 saw further
reductions in used trailer and work in process inventories offset by increased
levels of accounts receivable. The 2002 period benefited from reduced new and
used trailer inventories, the collection of tax refunds and accounts payable
timing, offset by higher levels of receivables as sales increased.
Investing activities provided $62.8 million in cash during 2003 primarily due to
the sale of certain of the assets of its trailer leasing and rental and
aftermarket parts businesses, along with the impact of the Company not
reinvesting in its financing and leasing businesses.
Net cash used in financing activities of $94.0 million during 2003 reflects
payments of $344.3 million under long-term debt and capital lease obligations
(including $223.4 million from refinancing proceeds and $53.5 million from
divestiture proceeds), and $10.1 million for debt issuance costs, which included
$1.6 million related to the April 2003 restructuring. These payments were offset
by the refinancing proceeds
19
from the issuance of bank term loan and revolving credit facility of $135.3 and
convertible senior notes of $125.0 million.
SOURCES AND USES OF CAPITAL
As of September 30, 2003, the Company's liquidity position, defined as cash on
hand and available borrowing capacity under existing credit agreements, amounted
to approximately $41 million compared to approximately $78 million as of
December 31, 2002. Debt and lease obligations, both on and off the balance
sheet, amounted to approximately $293 million (including $16 million not on the
balance sheet) compared to $367 million (including $20 million not on the
balance sheet) as of December 31, 2002.
Asset Sale
On September 19, 2003, the Company completed the sale of certain of the assets
of its trailer leasing and rental and aftermarket parts businesses for
approximately $53.5 million in cash. Net proceeds from the sale were used to
repay a portion of the Company's outstanding indebtedness. Loss on the
disposition amounted to approximately $29.5 million, including a $28.5 million
asset impairment charge recorded in the second quarter of 2003.
Refinancing
On August 1, 2003, the Company completed the sale of $125 million of 3.25%
five-year senior unsecured convertible notes convertible into shares of the
Company's stock, subject to market and other conditions. The Company used the
net proceeds to repay a portion of its outstanding indebtedness. The notes have
a conversion price of $19.20 or a rate of 52.0833 shares per $1,000 principal
amount of note. If the notes convert, the number of shares of our common stock
outstanding would increase by approximately 5.2 million shares, or approximately
20%. The notes bear interest at 3.25% per annum payable semi-annually on
February 1 and August 1. Costs associated with the transaction amounted to
approximately $4.2 million and will be amortized over the term of the notes.
On September 23, 2003, the Company entered into a $222.1 million three-year
asset-based loan arrangement that includes a $47.1 million term loan and a $175
million revolver. The new financing replaced existing indebtedness and is
expected to substantially lower the Company's cost of debt.
The term loan is secured by Company's property, plant and equipment. The
revolver is secured by inventory and accounts receivable and the amount
available to borrow varies in relation to the balances of those accounts.
Interest on the term loan is variable, based on the London Interbank Offer Rate
(LIBOR) plus 300 basis points, decreasing to 275 basis points after six months,
or the banks alternative rate as defined in the agreement. Interest on the
revolver is at LIBOR plus 275 basis points, decreasing to 250 basis points after
six months. The Company pays a commitment fee on the unused portion of the
facility at a rate of 37.5 basis points per annum. Costs associated with the
transaction amounted to approximately $4.2 million and will be amortized over
the term of the loan.
The term loan requires a $5.0 million principal payment on January 1, 2004 and
quarterly principal payments of $1.7 million commencing on January 1, 2004, with
the balance due on September 23, 2006. The revolver is due on September 23,
2006. Beginning in March 2005, excess cash flow, as defined, is required to be
used to reduce term loan indebtedness.
20
The refinancing resulted in debt extinguishment charges of approximately $18.9
million, including prepayment penalties and payment deferral fees of
approximately $21.8 million, of which $5.0 million was previously accrued, and a
non-cash charge of approximately $2.1 million for the write-off of previously
deferred debt costs.
The culmination of these two new financing arrangements, along with the sale of
certain of the assets of the Company's leasing and rental and aftermarket parts
businesses, resulted in the Company repaying and/or refinancing substantially
all of its existing indebtedness as of September 30, 2003. The Company believes
that the new arrangements will provide the Company with the resources and
flexibility to fund its operations, as well as reduce its cost of debt by more
than half.
Capital Expenditures
The Company anticipates capital spending of approximately $4 to $5 million for
2003 and approximately $10 million for 2004.
Contractual Obligations and Commercial Commitments
A summary of payments for the remainder of 2003 and future periods of the
Company's contractual obligations and commercial commitments as of September 30,
2003 is shown in the table below.
Contractual Obligations
$ Millions 2003 2004 2005 2006 2007 Thereafter Total
- ------------------------------------- ------ ------ ------ ------ ------ ---------- -------
DEBT (excluding interest):
Senior Convertible Notes $ - $ - $ - $ - $ - $125.0 $ 125.0
ABL Revolver - - - 88.2 - - 88.2
ABL Term Loan - 11.7 6.7 28.7 - - 47.1
Other Notes Payable 0.9 3.5 3.6 1.9 1.5 3.6 15.0
------ ------ ------ ------ ------ ------ -------
TOTAL DEBT $ 0.9 $ 15.2 $ 10.3 $118.8 $ 1.5 $128.6 $ 275.3
====== ====== ====== ====== ====== ====== =======
OTHER:
Capital Lease Obligations $ 0.7 $ 1.1 $ - $ - $ - $ - $ 1.8
Operating Leases 2.0 7.0 3.7 2.9 1.7 1.4 18.7
------ ------ ------ ------ ------ ------ -------
TOTAL OTHER $ 2.7 $ 8.1 $ 3.7 $ 2.9 $ 1.7 $ 1.4 $ 20.5
====== ====== ====== ====== ====== ====== =======
TOTAL $ 3.6 $ 23.3 $ 14.0 $121.7 $ 3.2 $130.0 $ 295.8
====== ====== ====== ====== ====== ====== =======
Other Commercial Commitments
$ Millions 2003 2004 2005 2006 2007 Thereafter Total
- ------------------------------------- ------ ------ ------ ------ ------ ---------- -------
Letters of credit $ - $ 11.0 $ - $ - $ - $ - $ 11.0
Residual guarantees 1.0 5.2 8.6 8.4 3.5 1.5 28.2
------ ------ ------ ------ ------ ------ -------
$ 1.0 $ 16.2 $ 8.6 $ 8.4 $ 3.5 $ 1.5 $ 39.2
====== ====== ====== ====== ====== ====== =======
21
EBITDA
The Company uses EBITDA, income (loss) before income taxes, interest expense,
depreciation and amortization, as an internal measure of performance, and
believes it is a useful and commonly used measure of financial performance in
addition to income (loss) before income taxes and other profitability measures
of performance under GAAP. EBITDA should not be construed as an alternative to
operating income and income (loss) before taxes as an indicator of the Company's
operation in accordance with GAAP. The Company does not present EBITDA as a
measure of liquidity. The Company's definition of EBITDA can differ from that of
other companies. The net loss in the 2003 third quarter includes an $18.9
million charge related to debt extinguishment. The net loss for the nine months
of 2003 includes the debt extinguishment charges and a $28.5 million asset
impairment charge recorded in June 2003.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------- -------
(in millions) 2003 2002 2003 2002
------- ------- ------- -------
EBITDA reconciliation:
Net loss $(29.6) $(8.3) $(55.5) $(44.6)
Income tax benefit - - - (11.9)
Interest expense 8.3 8.5 26.6 22.0
Depreciation and amortization 5.8 6.7 19.1 21.7
------ ----- ------ ------
EBITDA $(15.5) $ 6.9 $ (9.8) $(12.8)
====== ===== ====== ======
BRANCH NETWORK REORGANIZATION
In the third quarter of 2003, the Company closed 12 retail branch locations and
expects to close its Lafayette Modification Center by the end of the fourth
quarter. The Company currently operates 19 full service branches, four retail
only branches and three used trailer centers. The closings will reduce branch
headcount by 20% and yield an annualized cost savings of approximately $5
million. The Company recorded a charge in the third quarter of approximately $2
million in connection with the closings.
EQUIPMENT OFF BALANCE SHEET AND RELATED CUSTOMER CREDIT RISK
The Company subleased certain highly specialized RoadRailer(R) equipment to two
customers, Amtrak and Grupo Transportation Marititma Mexicana SA (TMM), who are
experiencing financial difficulties. Due to the nature of the equipment,
recovery value is considered to be minimal. As of September 30, 2003, the
unamortized lease value related to the Amtrak equipment is approximately $4.2
million; additionally, the Company has approximately $9.3 million and $5.7
million of finance contracts with Amtrak and TMM, respectively, recorded on the
condensed consolidated balance sheet. Both customers' obligations to the Company
are current and as a result no provision for losses has been recorded.
FINANCE PORTFOLIO
On October 16, 2003, the Company announced the planned sale of approximately $16
million of assets including finance contracts in its finance portfolio and
equipment on lease, including those related to Amtrak. Estimated proceeds will
be approximately $13 million and will result in a charge of
22
approximately $4 million, reflecting the Company's expected loss on the sale.
The Company expects the transactions to close during the fourth quarter of 2003
with proceeds being used to reduce indebtedness.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that directly affect the amounts
reported in its consolidated financial statements and accompanying notes.
Management bases its estimates on historical experience and other assumptions
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Management
continually evaluates the information used to make such estimates as its
business and economic environment changes and has discussed these estimates with
the Audit Committee of the Board of Directors. The use of estimates is pervasive
throughout the Company's financial statements, but the accounting polices and
estimates management considers most critical are as follows:
a. Revenue Recognition
The Company recognizes revenue from the sale of trailers and aftermarket parts
when the customer has made a fixed commitment to purchase the trailers for a
fixed or determinable sales price, collection is reasonably assured under the
Company's normal billing and credit terms and ownership and all risks of loss
have been transferred to the buyer, which is normally upon shipment or pick up
by the customer.
b. Allowance for Doubtful Accounts
The Company records and maintains a provision for doubtful accounts for
customers based upon a variety of factors including the Company's historical
experience, the length of time the receivable has been outstanding and the
financial condition of the customer. If the circumstances related to specific
customers were to change, the Company's estimates with respect to the
collectibility of the related receivables could be further adjusted.
c. Inventories
Inventories are primarily stated at the lower of cost, determined on the
first-in, first-out (FIFO) method, or market. The cost of manufactured inventory
includes raw material, labor and overhead.
d. Asset Impairment including Long-Lived Assets, Goodwill and Other
Intangible Assets
Long-lived assets are reviewed for impairment in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, whenever facts
and circumstances indicate that the carrying amount may not be recoverable.
Specifically, this process involves comparing an asset's carrying value to the
estimated undiscounted future cash flows the asset is expected to generate over
its remaining life. If this process were to result in the conclusion that the
carrying value of a long-lived asset would not be recoverable, a write-down of
the asset to fair value would be recorded through a charge to operations. Fair
value is determined based upon discounted cash flows or appraisals, as
appropriate.
Goodwill and other intangible assets are subject to periodic evaluations when
circumstances warrant, or at least once a year, in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets. This evaluation involves the comparing of
the carrying value of the goodwill or intangible assets to its fair value. The
fair value is estimated based upon the present value of future cash flows. In
estimating the future cash flows, the Company takes into consideration the
overall and industry economic conditions and
23
trends, market risk of the Company and historical information. All of the
factors involve a high degree of judgment and complexity and any changes in
these factors could affect the carrying value of the assets in the future.
e. Accrued and Contingent Liabilities
The Company's warranty policy generally provides coverage for components of the
trailers the Company produces or assembles. Typically, the coverage period is
five years. The Company's policy is to accrue the estimated cost of warranty
coverage at the time of the sale.
The Company provides for environmental and legal exposures. The Company's
environmental reserves represent the estimated cost to remediate any known
contamination at any of its current or formerly owned locations. The reserve is
evaluated quarterly to assess the range of potential clean-up cost on a
site-by-site once an environmental issue has been identified. The Company
determines its necessary legal reserves based upon a probability of potential
outcome.
f. Income Taxes
The Company currently has a full valuation allowance equal to its net deferred
tax assets based upon the realizability of those values. The level of the
Company's net operating losses over the past three years, industry economic
conditions and the financial struggles of the Company have all affected the
assessment of the Company's ability to realize the assets in the future. As of
September 30, 2003, the Company has approximately $150 million in NOLs. The
Company believes that its estimates for the valuation allowance reserved against
deferred tax assets are appropriate based on current facts and circumstances.
BACKLOG
The Company's backlog of orders was approximately $192 million and $208 million
at September 30, 2003 and December 31, 2002, respectively. Orders that comprise
the backlog may be subject to changes in quantities, delivery, specifications
and terms. Orders that have been confirmed by the customer in writing and can be
produced and/or shipped during the next 18 months are included in backlog. The
Company expects to fill a majority of its existing backlog of orders within the
next twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In addition to the risks inherent in its operations, the Company has exposure to
financial and market risk resulting from volatility in commodity prices,
interest rates and foreign exchange rates. The following discussion provides
additional detail regarding the Company's exposure to these risks.
a. COMMODITY PRICE RISKS
The Company is exposed to fluctuation in commodity prices through the purchase
of raw materials that are processed from commodities such as aluminum, steel,
wood and virgin plastic pellets. Given the historical volatility of certain
commodity prices, this exposure can significantly impact product costs. The
Company may manage aluminum price changes by entering into fixed price contracts
with its suppliers upon a customer sales order being finalized. Because the
Company typically does not set prices for its products in advance of its
commodity purchases, it can take into account the cost of the commodity in
setting its prices for each order. To the extent that the Company is unable to
offset the increased commodity costs in its product prices, the Company's
results would be materially and adversely affected.
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b. INTEREST RATES
As of September 30, 2003, the Company had approximately $135 million of floating
rate debt outstanding under its various financing agreements. A hypothetical 100
basis-point increase in the floating interest rate from the current level would
correspond to approximately a $1.4 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.
c. FOREIGN EXCHANGE RATES
The Company is subject to fluctuations in the Canadian dollar exchange rate and
that impact on intercompany transactions between the Company and its Canadian
subsidiary, as well as U.S. denominated transactions between the Canadian
subsidiaries and unrelated parties. A five cent change in the Canadian exchange
rate would result in an approximately $0.5 million impact on results of
operations. In July 2003, the Company began purchasing Canadian dollar foreign
currency forward contracts in an effort to mitigate potential Canadian currency
fluctuation impact on working capital requirements. As of September 30, 2003,
the Company had outstanding $4.1 million in forward contracts to be settled in
various increments over the next nine months. The contracts will be
marked-to-market and not subject to hedge accounting. The Company does not
hold or issue derivative financial instruments for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of the Company
have evaluated the effectiveness of the disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as required by paragraph (b) of Rules
13a-15 and 15d-15 under the Exchange Act), and have concluded that as of the end
of the period covered by this report there were instances of non-compliance with
the Company's disclosure controls and procedures. The non-compliance related to
the failure of certain employees to timely report certain concessions and
discounts provided to the Company's customers. Management devoted additional
effort and resources in order to ensure that these concessions and discounts
were properly reflected in the September 30, 2003 consolidated financial
statements. The Company is addressing these issues by (i) strengthening the
internal controls over new trailer sales orders, (ii) strengthening the
uniformity of all quote packages provided to customers, and (iii) requiring a
higher level of management approval for certain trailer orders and trailer
orders with trade-ins. Other than those instances noted above, the principal
executive officer and principal financial officer have concluded that as of the
end of the period covered by this report the disclosure controls and procedures
were effective at meeting their objectives.
The Company's remedial actions, which include changes in the company's internal
control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act
during the Company's last fiscal quarter, are reasonably likely to have a
positive material affect on the Company's internal control over financial
reporting. However, these changes did not occur during the third quarter but
will be implemented in subsequent periods.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 2000, the Company received a grand jury subpoena requesting certain documents
relating to the discharge of wastewaters into the environment at a Wabash
facility in Huntsville, Tennessee. The subpoena sought the production of
documents and related records concerning the design of the facility's discharge
system and the particular discharge in question. On May 16, 2001, the Company
received a second grand jury subpoena that sought the production of additional
documents relating to the discharge in question. In October 2003, the Company
reached a verbal agreement with federal officials to resolve environmental
litigation related to its Huntsville, Tennessee facility. The plea agreement
will include payment of a $0.4 million fine and a plea to two misdemeanor
violations of the Clean Water Act. The resolution of this matter does not have a
material impact on the Company's financial position, liquidity or future results
of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 1, 2003, we issued and sold to two initial purchasers, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and BB&T Capital Markets, a division of
Scott & Stringfellow, Inc., $125 million aggregate principal amount of 3.25%
Convertible Senior Notes Due 2008 in a transaction exempt under Section 4(2) of
the Securities Act of 1933, as amended ("the Securities Act"). We issued the
notes to the initial purchasers at a 3% discount (investment banking commission)
from the offering price to investors, which was 100% of the principal amount
(plus accrued and unpaid interest, if any, from August 1, 2003), and the initial
purchasers subsequently resold them to qualified institutional buyers in a
transaction exempt from registration in reliance on Rule 144A of the Securities
Act. The notes are convertible into shares of our common stock at any time at a
conversion price of $19.20 per share (subject to adjustment in certain events),
unless we previously have redeemed or repurchased them or unless the notes
previously have matured.
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
RISK FACTORS
You should carefully consider the risks described below. Realization of any of
the following risks could have a material adverse effect on our business,
financial condition, cash flows and results of operations.
RISKS RELATED TO OUR SUBSTANTIAL INDEBTEDNESS
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
We are highly leveraged and have substantial debt in relation to our
shareholders' equity, which is negative if intangible assets are excluded.
As of September 30, 2003, we had an aggregate of $277 million of outstanding
indebtedness. Although our recent sale of our unsecured 3.25% Convertible Senior
Notes due August 1, 2008 and the completion of a three year $222 million asset
based debt refinancing strengthen our balance sheet, we continue to be highly
leveraged.
Our high level of debt could have important consequences to our investors,
including:
- we may not be able to secure additional funds for working capital,
capital expenditures, debt service requirements or general corporate
purposes;
- we will need to use a portion of our cash flow from operations to pay
principal of and interest on our debt, which will reduce the amount of
funds available to us for other purposes;
- we may be more highly leveraged than our competitors, which could put
us at a competitive disadvantage; and
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- we may not be able to adjust rapidly to changing market conditions,
which may make us more vulnerable in the event of a downturn in
general economic conditions of our business.
RESTRICTIVE COVENANTS IN OUR DEBT INSTRUMENTS COULD LIMIT OUR FINANCIAL AND
OPERATING FLEXIBILITY AND SUBJECT US TO OTHER RISKS.
The agreements governing our indebtedness include certain covenants that
restrict, among other things, our ability to:
- incur additional debt;
- pay dividends on our equity or repurchase our equity;
- make certain investments;
- create certain liens; and
- consolidate, merge or transfer all or substantially all of our assets.
Our ability to comply with such agreements may be affected by events beyond our
control, including prevailing economic, financial and industry conditions. In
addition, upon the occurrence of an event of default under our debt agreements,
the lenders could elect to declare all amounts outstanding under our debt
agreements, together with accrued interest, to be immediately due and payable.
RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS
WE HAVE NOT GENERATED PROFITABILITY IN RECENT PERIODS.
The Company incurred significant net losses during the last three years and
during the nine months ended September 30, 2003. We have reported net losses of
$6.7 million, $232.2 million, $56.2 million and $55.5 million for the years
ended December 31, 2000, 2001 and 2002 and for the nine months ended September
30, 2003. The Company's ability to achieve and sustain profitability in the
future will depend on the successful implementation of measures to reduce costs.
We have taken steps to improve cost performance, lower operating costs and
reduce interest expense, and we cannot assure you that these measures will be
successful or return us to profitability.
OUR INVENTORIES ARE NOT MANAGED BY PERPETUAL CONTROL SYSTEMS.
Systems and processes used to manage and cost our inventories require
significant manual intervention and the verification of actual quantities
requires a physical inventory which is taken once a year. Breakdowns of these
systems and processes could go undetected until the next physical inventory and
adversely affect our operations and financial results.
AN ADVERSE CHANGE IN OUR CUSTOMER RELATIONSHIPS OR IN THE FINANCIAL CONDITION OF
OUR CUSTOMERS COULD ADVERSELY AFFECT OUR BUSINESS.
We have corporate partnering relationships with a number of customers where we
supply the requirements of these customers. Our success is dependent, to a
significant extent, upon the continued strength of these relationships and the
growth of our corporate partners. We often are unable to predict the level of
demand for our products from these partners, or the timing of their orders. In
addition, the same economic conditions that adversely affects us also often
adversely our customers. As some of our customers are highly leveraged and have
limited access to capital, their continued existence may be uncertain. One of
our customers located in Mexico is experiencing financial difficulties. Although
this customer, Grupo Transportation Marititma Mexicana SA (TMM), is current in
its payment obligation to us, the customer owes us $5.7 million secured by
highly specialized RoadRailer(R) equipment, which due to the nature of the
equipment, has a minimal recovery value. In addition, we have subleased certain
highly specialized RoadRailer(R) equipment to Amtrak, which is experiencing
financial difficulties. Due to the highly specialized nature of this equipment,
the recovery value of the equipment is considered to be minimal. The unamortized
lease value of this arrangement with Amtrak was approximately $4.2 million as of
September 30, 2003. In addition, we have approximately $9.3 million in finance
contracts related to Amtrak recorded on our balance sheet. The loss of a
significant customer or unexpected delays in product purchases could adversely
affect our business and results of operations.
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OUR TECHNOLOGY AND PRODUCTS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD
ADVERSELY AFFECT OUR COMPETITIVE POSITION.
We continue to introduce new products such as the DuraPlate(R) HD, and the
Freight-Pro(R) trailer. We cannot assure you that these or other new products or
technologies will achieve sustained market acceptance. In addition, new
technologies or products that our competitors introduce may render our products
obsolete or uncompetitive. We have taken steps to protect our proprietary rights
in our new products. However, the steps we have taken to protect them may not be
sufficient or may not be enforced by a court of law. If we are unable to protect
our proprietary rights, other parties may attempt to copy or otherwise obtain or
use our products or technology. If competitors are able to use our technology,
our ability to compete effectively could be harmed.
WE HAVE A LIMITED NUMBER OF SUPPLIERS OF RAW MATERIALS; AN INCREASE IN THE PRICE
OF RAW MATERIALS OR THE INABILITY TO OBTAIN RAW MATERIALS COULD ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS.
We currently rely on a limited number of suppliers for certain key components in
the manufacturing of truck trailers, such as landing gear, axles and specialty
steel coil used in duraplate panels. The loss of our suppliers or their
inability to meet our price, quality, quantity and delivery requirements could
have a significant impact on our results of operations.
DISRUPTION OF OUR MANUFACTURING OPERATIONS OR MANAGEMENT INFORMATION SYSTEMS
WOULD HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
We manufacture our products at two facilities in Lafayette, Indiana, with our
primary manufacturing facility accounting for approximately 85% of our
manufacturing output. An unexpected disruption in our production at either of
these facilities or in our management information systems for any length of time
would have an adverse effect on our business, financial condition and results of
operations.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Many of our executive officers, including our CEO William P. Greubel and CFO
Mark R. Holden, are critical to the management and direction of our business.
Our future success depends, in large part, on our ability to retain these
officers and other capable management personnel. The unexpected loss of the
services of any of our key personnel could have an adverse effect on the
operation of our business, as we may be unable to find suitable management to
replace departing executives on a timely basis.
THE INABILITY TO REALIZE ADDITIONAL COSTS SAVINGS COULD WEAKEN OUR COMPETITIVE
POSITION.
If we are unable to continue to successfully implement our program of cost
reduction and continuous improvement, we may not realize additional anticipated
cost savings, which could weaken our competitive position.
WE ARE SUBJECT TO CURRENCY EXCHANGE RATE FLUCTUATIONS, WHICH COULD ADVERSELY
AFFECT OUR FINANCIAL PERFORMANCE.
We are subject to currency exchange rate risk related to sales through our
factory-owned retail distribution centers in Canada. For the nine month period
ended September 30, 2003, currency exchange rate fluctuations had a favorable
impact of $5.3 million on our results of operations. However, we cannot assure
you that we will continue to experience such benefits or that currency exchange
rate fluctuations will not have an adverse affect on our results of operations.
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RISKS PARTICULAR TO THE INDUSTRIES IN WHICH WE OPERATE
OUR BUSINESS IS HIGHLY CYCLICAL, WHICH COULD ADVERSELY AFFECT OUR SALES AND
RESULTS OF OPERATIONS.
The truck trailer manufacturing industry historically has been and is expected
to continue to be cyclical, as well as affected by overall economic conditions.
New trailer production for the trailer industry as a whole decreased to 139,658
in 2002 as compared to 140,084 units in 2001, 270,817 units in 2000 and 305,869
units in 1999. According to ACT, the current forecast for industry shipments in
2003 is approximately 181,000 units. Customers historically have replaced
trailers in cycles that run from five to twelve years, depending on service and
trailer type. Poor economic conditions can adversely affect demand for new
trailers and in the past have led to an overall aging of trailer fleets beyond
this typical replacement cycle. Our business is likely to continue to be
adversely affected unless economic conditions improve. We cannot assure you that
the industry will achieve the forecasted sales for 2003 or that our unit sales
in the future will return to the levels experienced in the late 1990s and 2000.
SIGNIFICANT COMPETITION IN THE INDUSTRIES IN WHICH WE OPERATE MAY RESULT IN OUR
COMPETITORS OFFERING NEW OR BETTER PRODUCTS AND SERVICES OR LOWER PRICES, WHICH
COULD RESULT IN A LOSS OF CUSTOMERS AND A DECREASE IN OUR REVENUES.
The truck trailer manufacturing industry is highly competitive. We compete with
other manufacturers of varying sizes, some of which may have greater financial
resources than we do. Barriers to entry in the standard truck trailer
manufacturing industry are low. As a result, it is possible that additional
competitors could enter the market at any time. In addition, we believe that the
manufacturing over-capacity and high leverage of some of our competitors, along
with the recent bankruptcies and financial stresses that have affected the
industry, have contributed to significant pricing pressures.
If we are unable to compete successfully with other trailer manufacturers, we
could lose customers and our revenues may decline. In addition, competitive
pressures in the industry may affect the market prices of our new and used
equipment, which, in turn, may adversely affect our sales margins and results of
operations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL LAWS AND REGULATIONS, AND OUR COSTS
RELATED TO COMPLIANCE WITH, OR OUR FAILURE TO COMPLY WITH, EXISTING OR FUTURE
LAWS AND REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF
OPERATIONS.
The length, height, width, maximum weight capacity and other specifications of
truck trailers are regulated by individual states. The Federal government also
regulates certain truck trailer safety features, such as lamps, reflective
devices, tires, air-brake systems, and rear-impact guards. Changes or
anticipation of changes in these regulations can have a material impact on our
financial results, as our customers may defer customer purchasing decisions and
we may have to reengineer products. In addition, we are subject to various
environmental laws and regulations dealing with the transportation, storage,
presence, use, disposal and handling of hazardous materials, discharge of storm
water and underground fuel storage tanks and may be subject to liability
associated with operations of prior owners of acquired property. If we are found
to be in violation of applicable laws or regulations, it could have an adverse
effect on our business, financial condition and results of operations. Our costs
of complying with these or any other current or future environmental regulations
may be significant. In addition, if we fail to comply with existing or future
laws and regulations, we may be subject to governmental or judicial fines or
sanctions.
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A DECLINE IN THE VALUE OF USED TRAILERS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
General economic and industry conditions, as well as the supply of used
trailers, influence the value of used trailers. As part of our normal business
practices, we maintain used trailer inventories and have entered into finance
contracts secured by used trailers, as well as residual guarantees and purchase
commitments for used trailers. Declines in the market value for used trailers or
the need to dispose of excess inventories has had, and could in the future have,
an adverse effect on our business, financial condition and results of
operations.
RISKS RELATED TO AN INVESTMENT IN COMMON STOCK
OUR COMMON STOCK HAS EXPERIENCED, AND MAY CONTINUE TO EXPERIENCE, PRICE
VOLATILITY AND A LOW TRADING VOLUME.
The trading price of our common stock has been and may continue to be subject to
large fluctuations and, therefore, the trading price of the notes may fluctuate
significantly, which may result in losses to investors. Our stock price may
increase or decrease in response to a number of events and factors, including:
- trends in our industry and the markets in which we operate;
- changes in the market price of the products we sell;
- the introduction of new technologies or products by us or our
competitors;
- changes in expectations as to our future financial performance,
including financial estimates by securities analysts and investors;
- operating results that vary from the expectations of securities
analysts and investors;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures, financings or
capital commitments;
- changes in laws and regulations; and
- general economic and competitive conditions.
This volatility may adversely affect the prices of our common stock regardless
of our operating performance. The price of our common stock also may be
adversely affected by the amount of common stock issuable upon conversion of our
outstanding convertible notes and preferred stock. If all such securities are
converted, the number of shares of our common stock outstanding would increase
by approximately 5.8 million shares, or approximately 22%.
In addition, our common stock has experienced low trading volume in the past.
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WE DO NOT EXPECT TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
Since December 2001, we have not declared or paid cash or other dividends on our
common stock and do not expect to pay cash dividends on our common stock for the
foreseeable future. We currently intend to retain all future earnings for use in
the operation of our business and to fund future growth. In addition, the terms
of our existing debt agreements restrict our ability to pay cash dividends on
our common stock. We are permitted to pay preferred stock dividends on our
outstanding Series B Preferred so long as no default or event of default exists
at the time of the distribution.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as part of the report are listed below:
4.06 Indenture for the 3.25% Convertible Senior Notes due
August 1, 2008, between the registrant, as issuer, and
Wachovia Bank, National Association, as Trustee, dated as of
August 1, 2003(1)
4.07 Registration Rights Agreement for 3.25% Convertible Senior
Notes due August 1, 2008, dated as of August 1, 2003(1)
31.01 Certification of Principal Executive Officer
31.02 Certification of Principal Financial Officer
32.01 Written Statement of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
(1) Incorporated by reference to the registrant's registration
statement on Form S-3 (Registration No. 333-109375) filed on
October 1, 2003.
(b) Reports on form 8-K:
1. Form 8-K filed July 29, 2003 reporting under Item 5: Other
Events and Required FD Disclosure and Item 7: Financial
Statements, Pro Forma Financial Information and Exhibits.
2. Form 8-K filed July 31, 2003 reporting under Item 5: Other
Events and Required FD Disclosure and Item 7: Financial
Statements, Pro Forma Financial Information and Exhibits.
3. Form 8-K filed September 29, 2003 reporting under Item 2:
Acquisition or Disposition of Assets, Item 5: Other Events and
Required FD Disclosure and Item 7: Financial Statements, Pro
Forma Financial Information and Exhibits.
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 5, 2003 By: /s/ Robert J. Smith
-----------------------------------------
Robert J. Smith
Vice President and Controller
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