-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R0RoCJCsjdtbs3E+DAen+xIprDJzvuNSuxPTxzjSX8X4YrCPlH8Giz0TOguUXCjL PGL0W2R9TJ4nv/lK/Tn2DA== 0000950124-98-006807.txt : 19981123 0000950124-98-006807.hdr.sgml : 19981123 ACCESSION NUMBER: 0000950124-98-006807 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WABASH NATIONAL CORP /DE CENTRAL INDEX KEY: 0000879526 STANDARD INDUSTRIAL CLASSIFICATION: 3715 IRS NUMBER: 521375208 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10883 FILM NUMBER: 98753292 BUSINESS ADDRESS: STREET 1: 1000 SAGAMORE PKWY S STREET 2: P O BOX 6129 CITY: LAFAYETTE STATE: IN ZIP: 47905 BUSINESS PHONE: 7654481591 MAIL ADDRESS: STREET 1: 1000 SAGAMORE PARKWAY SOUTH STREET 2: P O BOX 6129 CITY: LAFAYETTE STATE: IN ZIP: 47905 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [X] SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1998 OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE [ ] SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _______________________ Commission File Number: 1-10883 ------------------------------------------------------- WABASH NATIONAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 52-1375208 -------- ---------- (State of Incorporation) (IRS Employer Identification Number) 1000 Sagamore Parkway South, Lafayette, Indiana 47905 ------------------ ----- (Address of Principal (Zip Code) Executive Offices) Registrant's telephone number, including area code: (765)448-1591 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (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 13, 1998 was 22,962,245. 2 WABASH NATIONAL CORPORATION INDEX FORM 10-Q
Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at September 30, 1998 and December 31, 1997 1 Condensed Consolidated Statements of Income for the three and nine months ended September 30, 1998 and 1997 2 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk (Not Applicable) - PART II - OTHER INFORMATION Item 2. Changes in Securities 14 Item 6. Exhibits and Reports on Form 8-K 14
3 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, December 31, 1998 1997 ------------- ------------ (Unaudited) (Note 1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 25,503 $ 14,647 Accounts receivable, net 161,039 161,249 Current portion of finance contracts 7,594 7,697 Inventories 259,747 211,359 Prepaid expenses and other 14,990 12,962 --------- --------- Total current assets 468,873 407,914 --------- --------- PROPERTY, PLANT AND EQUIPMENT, net 132,885 108,798 --------- --------- EQUIPMENT LEASED TO OTHERS, net 38,443 43,986 --------- --------- FINANCE CONTRACTS, net of current portion 67,613 51,539 --------- --------- INTANGIBLE ASSETS, net 32,027 11,152 --------- --------- OTHER ASSETS 7,875 6,481 --------- --------- TOTAL ASSETS $ 747,716 $ 629,870 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 2,931 $ 4,148 Accounts payable 123,980 94,083 Accrued liabilities 38,832 29,471 --------- --------- Total current liabilities 165,743 127,702 --------- --------- LONG-TERM DEBT, net of current maturities 181,913 231,880 --------- --------- DEFERRED INCOME TAXES 32,255 26,440 --------- --------- OTHER NONCURRENT LIABILITIES AND CONTINGENCIES 17,913 17,332 --------- --------- STOCKHOLDERS' EQUITY: Preferred stock 5 4 Common stock, 22,962,245 and 19,954,874 shares issued and outstanding, respectively 230 200 Additional paid-in capital 236,218 135,611 Retained earnings 114,718 91,980 Treasury stock at cost, 59,600 shares (1,279) (1,279) --------- --------- Total stockholders equity 349,892 226,516 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 747,716 $ 629,870 ========= =========
See Notes to Condensed Consolidated Financial Statements. 1 4 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share amounts)
Three Months Nine Months Ended September 30, Ended September 30, -------------------------- --------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (Unaudited) (Unaudited) NET SALES $ 334,113 $ 246,403 $965,458 $577,897 COST OF SALES 303,279 225,236 879,698 533,987 --------- --------- -------- -------- Gross Profit 30,834 21,167 85,760 43,910 GENERAL AND ADMINISTRATIVE EXPENSES 7,469 5,538 20,833 12,130 SELLING EXPENSE 3,286 2,583 9,483 5,802 --------- --------- -------- -------- Income from operations 20,079 13,046 55,444 25,978 OTHER INCOME (EXPENSE): Interest Expense (3,382) (4,467) (11,558) (11,572) Other, net (406) 223 (699) 461 --------- --------- -------- -------- Income before income taxes 16,291 8,802 43,187 14,867 PROVISION FOR INCOME TAXES 6,462 3,750 17,197 6,104 --------- --------- -------- -------- Net Income $ 9,829 $ 5,052 $ 25,990 $ 8,763 --------- --------- -------- -------- PREFERRED STOCK DIVIDENDS 418 264 946 478 --------- --------- -------- -------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 9,411 $ 4,788 $ 25,044 $ 8,285 ========= ========= ======== ======== Earnings per share: Basic $ 0.41 $ 0.24 $ 1.16 $ 0.43 ========= ========= ======== ======== Diluted $ 0.41 $ 0.24 $ 1.14 $ 0.42 ========= ========= ======== ======== CASH DIVIDENDS PER SHARE $ 0.035 $ 0.035 $ 0.105 $ 0.095 ========= ========= ======== ========
See Notes to Condensed Consolidated Financial Statements. 2 5 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Nine Months Ended September 30, ----------------------- 1998 1997 --------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 25,990 $ 8,763 Adjustments to reconcile net income to net cash provided by (used in) operating activities- Depreciation and amortization 12,606 13,986 Bad debt provision 614 424 Deferred income taxes 6,370 2,302 Equity in losses of unconsolidated affiliate 2,200 -- Change in operating assets and liabilities, excluding effects of the acquisitions-- Accounts receivable 4,548 (51,302) Inventories (31,983) (48,242) Prepaid expenses and other (575) 743 Accounts payable and accrued liabilities 31,969 59,713 Other, net (634) (1,147) --------- --------- Net cash provided by (used in) operating activities 51,105 (14,760) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (22,847) (16,696) Investment in equipment leased to others (9,619) (34,987) Investment in finance contracts (24,645) (19,343) Acquisitions, net of cash acquired, (Note 6) (9,515) (15,129) Investment in unconsolidated affiliate (1,965) -- Payments for RoadRailer technology -- (1,086) Proceeds from sale of leased equipment and finance contracts 11,119 58,778 Principal payments on finance contracts 5,495 3,897 Other, net 117 60 --------- --------- Net cash used in investing activities (51,860) (24,506) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Long-term debt -- 25,000 Long-term revolver 247,400 272,500 Common stock, net of expenses 87,484 742 Payments: Long term debt (28,280) (2,956) Long-term revolver (292,000) (248,500) Common stock dividends (2,201) (1,733) Preferred stock dividends (792) (437) Net cash provided by --------- --------- financing activities 11,611 44,616 --------- --------- NET INCREASE IN CASH 10,856 5,350 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,647 5,514 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,503 $ 10,864 ========= =========
See Notes to Condensed Consolidated Financial Statements. 3 6 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, Unaudited) 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 1997 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, 1998 and December 31, 1997 and its results of operations for the three and nine month periods ended September 30, 1998 and 1997 and cash flows for the nine month period ended September 30, 1998 and 1997. NOTE 2. INTANGIBLE ASSETS Intangible assets, net of accumulated amortization of $7.2 million and $6.4 million at September 30, 1998 and December 31, 1997, respectively, relate primarily to goodwill and other intangible assets associated with the Cloud Acquisition (See Note 6 for further discussion) and RoadRailer acquisition costs. These amounts are being amortized on a straight-line basis over periods ranging from five to forty years. NOTE 3. INVENTORIES Inventories consisted of the following:
September 30, December 31, 1998 1997 ------------- ----------- (Unaudited) Raw material and components $143,551 $ 75,629 Work in process 18,740 16,892 Finished goods 32,692 68,164 Aftermarket parts 27,096 25,386 Used trailers 37,668 25,288 -------- -------- $259,747 $211,359 ======== ========
4 7 NOTE 4. EARNINGS PER SHARE The Company adopted Statement of Financial Accounting Standards (SFAS No. 128, "Earnings Per Share") during 1997. SFAS No. 128 simplifies the computation of earnings per share (EPS) and requires the presentation of two amounts: basic and diluted EPS. As required, all prior period EPS data has been restated to conform with the provisions of this statement. A reconciliation of the numerators and denominators of the basic and diluted EPS computations, as required by SFAS No. 128, is presented below:
Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------- 1998 1997 1998 1997 -------- ------- -------- ------- BASIC: Net income 9,829 5,052 25,990 8,763 Preferred stock dividends (418) (264) (946) (478) ------- ------- ------- ------- Net income, basic 9,411 4,788 25,044 8,285 ------- ------- ------- ------- Common shares, basic 22,962 19,939 21,662 19,463 ------- ------- ------- ------- BASIC EPS $ 0.41 $ 0.24 $ 1.16 $ 0.43 ======= ======= ======= ======= DILUTED: Net income, basic 9,411 4,788 25,044 8,285 Effect of dilutive securities: Convertible preferred stock 264 -- 792 -- ------- ------- ------- ------- Net income, assuming full dilution 9,675 4,788 25,836 8,285 ------- ------- ------- ------- Common shares, basic 22,962 19,939 21,662 19,463 Effect of dilutive securities: Convertible preferred stock 823 -- 823 -- Stock Options 26 126 98 54 ------- ------- ------- ------- Common shares, assuming full dilution 23,811 20,065 22,583 19,517 ------- ------- ------- ------- DILUTED EPS $ 0.41 $ 0.24 $ 1.14 $ 0.42 ======= ======= ======= =======
NOTE 5. 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 lease revenues, excluding revenue from the sale of leased trailers of $2.4 million and $3.5 million, were $16.4 million and $16.1 million during the nine months ended September 30, 1998 and 1997 respectively. Income before income taxes was $2.0 million and $0.6 million during the nine months ended September 30, 1998 and 1997 respectively. 5 8 At September 30, 1998 and December 31, 1997 respectively, the Finance Company had $66.5 million and $54.9 million in long-term debt, comprised of $59.0 million and $39.0 million in intercompany debt to the Company and $7.5 and $15.9 million in debt due to third parties, of which $6.9 million and $8.4 was guaranteed by the Company. Also at September 30, 1998 and December 31, 1997 respectively, the Finance Company had total assets of $117.4 million and $107.1 million, consisting primarily of Equipment Held for Lease of $38.4 million and $44.0 million and Finance Contracts, including current portion, of $75.2 million and $59.2 million. During March 1998, the Finance Company sold approximately $8.8 million of its equipment leased to others to a large financial institution. Simultaneously, the Finance Company leased the equipment back and entered into a sublease arrangement with a customer. This lease is accounted for as an operating lease. The lease with the financial institution provides for approximately $2.6 million of end of lease term residual value commitments. NOTE 6. ACQUISITIONS On July 14, 1998, the Company acquired Cloud Corporation and Cloud Oak Flooring Company, Inc. (the Cloud Acquisition) in a merger and stock purchase, respectively, manufacturers of laminated hardwood floors for the truck body and trailer industry. For financial statement purposes the Cloud Acquisition was accounted for as a purchase and, accordingly, Cloud's combined results are included in the consolidated financial statements since the date of acquisition. The aggregate consideration for this transaction included $9.7 million in cash, $13.2 million in convertible preferred stock and the assumption of $32.1 million in liabilities. The excess of the purchase price over the underlying assets acquired is approximately $21.9 million. This amount has been allocated to goodwill and other intangible assets based upon a preliminary estimate of fair values. These amounts are being amortized on a straight-line basis over periods of five to forty years. The values assigned to the acquired assets and liabilities could change following the resolution of certain pre-acquisition contingencies related to environmental laws and ERISA. While these matters are at an early stage and it is not possible to predict the outcome with certainty, based on currently available information the Company does not believe the outcome of these matters will be material to the consolidated results of operations or financial condition of the Company. The Company is indemnified by the sellers of the acquired companies and the Company believes that these contingencies would be covered by the indemnification provisions of those agreements. On April 16, 1997, the Company acquired substantially all of the remaining assets of Fruehauf Trailer Corporation (Fruehauf), a manufacturer and marketer of truck trailers and related parts. The following unaudited pro forma consolidated results of operations of the Company and the acquired assets of Fruehauf assume the acquisition occurred as of January 1, 1997 (in millions, except per share data): 6 9
Nine Months Ended Sept.30, 1998 1997 - - ------------------------------------------------------------------------------- Net Sales $ 965.5 $ 607.6 Net Income $ 26.0 $ 8.3 Net Income per common share $ 1.14 $ 0.42 - - -------------------------------------------------------------------------------
In management's opinion, the unaudited pro forma combined results of operations are not indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of 1997 or of future results of the combined operations under the ownership and management of the Company. NOTE 7. SUPPLEMENTAL CASH FLOW INFORMATION
Nine Months Ended September 30, (In thousands) 1998 1997 - - -------------------------------------------------------------------------------- Cash paid during the period for: Interest $ 10,752 $ 13,248 Income taxes 10,464 845 - - -------------------------------------------------------------------------------- Noncash investing and financing activities: Preferred stock issued for acquisitions 13,153 17,600 Common stock issued for acquisition -- 17,750 - - -------------------------------------------------------------------------------- Acquisitions, net of cash acquired: Accounts receivable, net $ 4,952 $ 13,955 Inventory, net 16,405 20,163 Prepaid expenses and other 743 4,072 Property, plant and equipment 8,334 25,269 Goodwill and other intangibles 21,891 -- Deferred income taxes 1,265 -- Other Assets 1,203 -- Current liabilities (25,783) (8,980) Non-current liabilities (6,342) (4,000) Stock issued (13,153) (35,350) - - -------------------------------------------------------------------------------- Net cash paid for acquisitions $ (9,515) $(15,129) - - --------------------------------------------------------------------------------
NOTE 8. ACCOUNTS RECEIVABLE SECURITIZATION On March 31, 1998, Wabash National Corporation replaced its existing $40 million receivable sale and servicing agreement with a new three-year trade receivable securitization facility. The new facility allows the Company to sell, without recourse on an ongoing basis, all of their accounts receivable to Wabash Funding Corporation (Funding Corp.), a wholly-owned unconsolidated subsidiary of the Company. Simultaneously, the Funding Corp. has sold and, subject to certain conditions, may from time to time sell an undivided interest in those receivables to a large financial institution. At September 30, 1998, $83 million of proceeds have been received under the new facility. No gain or loss was recorded during the first quarter of 1998 as a result of this transaction. Amounts reflected as Accounts Receivable in the accompanying Condensed Consolidated Balance Sheets as of September 30, 1998 include an interest in receivables sold to the Funding Corp. in excess of proceeds received. 7 10 Proceeds from the sale were used to reduce outstanding borrowings under the Company's Revolving Credit Agreement and are reflected as operating cash flows in the accompanying Condensed Consolidated Statement of Cash Flows. Costs associated with this facility are classified as Selling, General and Administrative Expenses in the consolidated statement of income. In order to operate this facility on an on-going basis, the Funding Corp. is required to meet certain covenants primarily related to the performance of the accounts receivable portfolio. Servicing responsibility for these receivables resides with the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NOTE: This discussion contains forward-looking statements. These statements should be viewed in connection with the risk factors disclosed in the Company's Registration Statement on Form S-3 (SEC File No. 333-48589). Net Sales Net sales for the three month period ended September 30, 1998 increased $87.7 million or 35.6% compared to the same period in 1997 and were $387.6 million or 67.1% higher for the nine month period ended September 30, 1998 compared to the same period in 1997. The increase in net sales for the three and nine month periods were primarily attributable to an increase in new trailer sales of $73.0 million and $317.4 million, respectively, an increase in used trailer sales of $9.1 million and $29.3 million, respectively, and an increase in aftermarket parts and service revenues of $5.7 million and $40.9 million, respectively. The increases in new trailer sales of $73.0 million and $317.4 million for the three and nine month periods, respectively, were caused by a 24.3% and 48.8% increase in units sold, along with an increase of 10.0% and 12.3% in the average sales price per unit during the same periods. These favorable conditions are the result of continued sales growth at the Company's retail outlets, increased production capabilities, increased production of the Company's composite trailer and a continued strong demand for the Company's products. The increase in used trailer sales and aftermarket parts and service revenues reflects increased volume through the Company's existing parts distribution business as well as the 31 retail outlets acquired. The Company plans to expand its retail distribution network from its current level of 31 retail outlets to approximately 50 retail outlets within 24 months. 8 11 Gross Profit Gross profit as a percentage of net sales totaled 9.2% for the three month period ended September 30, 1998 compared to 8.6% for the same period in 1997. The gross profit margin for the nine-month period ended September 30, 1998 as a percentage of sales was 8.9% versus 7.6% for the same period in 1997. The increase in the gross profit margins reflects the impact of higher margin sales of new and used trailers and aftermarket parts and service revenues generated from the retail branch outlets acquired in 1997. In addition, the improvement in product mix resulting from the completion of the Company's composite material facility in the third quarter of 1997 has allowed the Company to increase its production rates, thereby improving production efficiencies at the Company's manufacturing facilities. Income From Operations Income from operations for the three and nine month periods ended September 30, 1998 as a percentage of net sales was 6.0% and 5.7% compared to 5.3% and 4.5% for the same periods in 1997. Income from operations in 1998 was impacted primarily by the increase in the gross profit margins previously discussed offset somewhat by increased selling, general and administrative expenses. The increase in selling, general and administrative expenses primarily reflects higher levels of expense associated with the retail outlets acquired in April, 1997 as well as costs associated with the Company's new accounts receivable securitization facility. Interest Expense Interest expense for the three and nine month periods ended September 30, 1998 totaled $3.4 million and $11.6 million compared to $4.5 million and $11.6 million for the same periods in 1997. The decrease in interest expense during the third quarter is primarily due to the use of proceeds from the Company's new trade receivable securitization facility which closed on March 31, 1998 coupled with proceeds from the Company's April, 1998 common stock offering to reduce the Company's long-term debt. Taxes The provision for income taxes for the three and nine month periods ended September 30, 1998 of $6.5 million and $17.2 million, respectively, represents 39.7% and 39.8% of pre-tax income for the periods compared to the provision of $3.8 million and $6.1 million, or 42.6% and 41.1% of pretax income, respectively, for the same periods in 1997. The effective tax rates are higher than the Federal statutory rates of 35% due primarily to state income taxes. 9 12 LIQUIDITY AND CAPITAL RESOURCES Operating Activities For the nine months ended September 30, 1998, cash provided by operating activities amounted to $51.1 million primarily due to net income, the add-back of non-cash charges for depreciation and amortization expense, and as discussed in more detail below, the proceeds from the sale of accounts receivable. Increased raw material inventory levels resulting from higher new trailer production was offset by related increases in accounts payable and accrued liabilities. Investing Activities For the nine months ended September 30, 1998, cash used in investing activities amounted to $51.9 million primarily due to the expansion of the Finance Company's leasing operation ($34.3 million), capital expenditures ($22.8 million) and the Cloud Acquisition ($9.5 million) offset somewhat by the sale of leased equipment and finance contracts ($11.1 million). Capital expenditures during the period were associated with increasing the Company's manufacturing operations in Lafayette, Indiana, the development of a new state of the art painting and coating system at its trailer manufacturing facility in Huntsville, Tennessee, the acquisition of a new consolidated parts center in Lafayette, increasing capacity and manufacturing productivity at its recently acquired flooring operation in Harrison, Arkansas and other operating purposes. The flooring operations were acquired in July 1998 through the merger of Cloud Corporation with a newly-formed subsidiary of Wabash and the acquisition of all of the outstanding stock of Cloud Oak Flooring. The acquisition agreements include customary representations and warranties by the sellers. Wabash is in the process of looking into certain pre-acquisition contingencies of the acquired companies relating to compliance with environmental laws and ERISA. While these matters are at an early stage and it is not possible to predict the outcome with certainty, based on currently available information the Company does not believe the outcome of these matters will be material to the consolidated results of operations or financial condition of the Company. The Company is indemnified by the sellers of the acquired companies and the Company believes that these contingencies would be covered by the indemnification provisions of those agreements. The Company continues to pursue its branch expansion strategy although no firm commitments have been entered into to date. The Company anticipates future capital expenditures related to its branch expansion strategy, the development of a new computer system in its retail network, the continuation of the capital projects previously discussed, and other activities to be $80-$100 million over the next 12 to 24 months. 10 13 During March, 1998, the Finance Company sold and leased back approximately $8.8 million of its Equipment Leased to Others with a large financial institution. Financing Activities For the nine months ended September 30, 1998, cash provided by financing activities amounted to $11.6 million primarily due to the issuance of common stock ($87.5 million), a net reduction in the Company's long-term revolver ($44.6 million) and a pay-down of long-term debt ($28.3 million) primarily associated with the Cloud Acquisition. On March 31, 1998, the Company replaced its existing $40 million receivable sale and servicing agreement with a new three-year trade receivable securitization facility. The new facility allows the Company to sell, without recourse on an ongoing basis, all of its accounts receivable to Wabash Funding Corporation (Funding Corp.), a wholly-owned unconsolidated subsidiary of the Company. Simultaneously, the Funding Corp. has sold and, subject to certain conditions, may from time to time sell an undivided interest in those receivables to a large financial institution. At September 30, 1998, $83 million of proceeds were received by the Company related to this new facility. Proceeds from the sale were used to reduce outstanding borrowings under the Company's Revolving Credit Agreement and are reflected as operating cash flows in the accompanying Consolidated Statement of Cash Flows. On April 28, 1998, the Company sold three million shares of its common stock in a registered public offering at a public-offering price of $30.75 per share, for net proceeds to the Company of $87.5 million. Other Other sources of funds for capital expenditures, continued expansion of businesses, dividends, principal repayments on debt, stock repurchase and working capital requirements are expected to be cash from operations, additional borrowings under the credit facilities and term borrowings and equity offerings. The Company believes that these funding sources will be adequate for its anticipated requirements. BACKLOG The Company's backlog of orders was approximately $906 million at September 30, 1998 and $832 million at December 31, 1997. 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 14 NEW ACCOUNTING PRONOUNCEMENTS The Company adopted Statement of Financial Accounting Standards (SFAS No. 128, "Earnings Per Share"), during 1997. SFAS No. 128 simplifies the computation of earnings per share (EPS) and requires the presentation of two new amounts, basic and diluted EPS. As required by SFAS No. 128, all prior period EPS data have been restated to conform with the provisions of this Statement. The adoption of Statement resulted in an immaterial difference in its computation of basic and dilutive EPS. The Company adopted SFAS No. 130, "Reporting Comprehensive Income", on January 1, 1998. SFAS No. 130 was effective for fiscal years beginning after December 15, 1997. SFAS No. 130 established standards for reporting and display of "comprehensive income" and its components. Comprehensive income is not reported in the accompanying Condensed Consolidated Financial Statements as the Company had no items of Other Comprehensive Income for the periods presented. In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" was issued. The statement must be adopted by the Company on December 31, 1998. Under provisions of this statement, the Company will be required to modify or expand the financial statement disclosures for operating segments, products and services, and geographic areas. Implementation of this disclosure standard will not affect the Company's financial position or results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (beginning of fiscal year 2000 for the Company). This statement requires that all derivative instruments be recorded on the balance sheet at their fair value. Management of the Company has not yet determined the impact that the adoption of SFAS 133 will have on its earnings or statement of financial position. However, management anticipates that, due to its limited use of derivative instruments, the adoption of SFAS 133 will not have a significant effect on the Company's results of operations or its financial position. YEAR 2000 COMPLIANCE The Company continues to address the impact of the Year 2000 issue on its business. If not corrected certain computer applications may fail or create erroneous results at the year 2000. Specifically, with respect to the Company, this includes applications within information technology (IT) as well as non-IT equipment and machinery that may contain embedded date-sensitive microcontrollers or microchips. 12 15 Information Technology Systems The Company's assessment of all business critical IT hardware and software is 90-95% complete. It has been determined that many of the Company's applications and systems are already Year 2000 compliant, however, it will be necessary to modify or replace other applications and systems. During this assessment, it was determined that systems in place within the Company's retail and distribution network and certain of its manufacturing operations are not Year 2000 compliant. As a result, during 1998 and 1999, the Company will install new application systems within these areas which will be Year 2000 compliant. Other maintenance and project activities to be conducted in 1998 and 1999 have been initiated to bring the remaining hardware and software into compliance. If such projects are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company. The Company's plan for IT items includes the following phases and timeline: (1) Assessment and Strategy - completed in 1998 and (2) Design, Implementation, Testing and Validation - in process and scheduled to be substantially completed by mid 1999. Non-Information Technology Systems The Company's assessment of non-IT systems is approximately 75% complete. It is expected that the assessment and necessary replacements or upgrades will be substantially completed by the second quarter in 1999. External Parties The Company has contacted its vendors and suppliers regarding the status of their Year 2000 compliance. Many vendors have given a positive indication that they are or will be compliant. A follow-up inquiry is being conducted with the parties identified as business critical. This process is approximately 60% complete and is expected to be substantially completed by the first quarter in 1999. While compliance issues may be identified and addressed, this process may not fully ensure these parties' Year 2000 compliance. Disruptions in the operations of these parties could have an adverse financial and operational effect on the Company. The Company is currently in the process of formulating a contingency plan in the event business critical vendors do not achieve Year 2000 compliance and suffer substantial disruptions in their operations. This plan will include identifying alternate vendors to replace those that are positively identified to be Year 2000 non-compliant and also to identify back-up vendors for those whom represent compliance in the event that their systems fail. This plan is expected to be substantially completed by mid 1999. The Company has requested compliance information from its banks and it has been determined that they expect to be compliant by the second quarter in 1999. In the event that these banks are not compliant at that time, the Company will review the possibility of relocating its banking relationships to back-up financial institutions currently being identified. 13 16 Costs of Compliance The Company estimates the total costs to be incurred in installing new application systems in the retail and distribution network and certain manufacturing operations, along with costs associated with Year 2000 compliance to be between $4.0 to $5.0 million. Through September 30, 1998, the Company has spent approximately $0.5 million related to such activities. Management believes that, with modifications to existing software and conversions to new software and hardware, the Year 2000 issue is not likely to materially impact the Company's results of operations or financial position. The Company expects all of its internal business critical IT and non-IT systems to be Year 2000 compliant and therefore no contingency plan is in place in the event of a particular system not being Year 2000 compliant. Such a plan will be developed if it becomes clear that the Company is not going to achieve its scheduled compliance objectives. However, because most computer systems are interdependent by nature, there can be no assurance that the systems of other companies on which the Company's systems rely, will be timely converted and not have an adverse effect on the Company's systems. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES Series C 5.5% Convertible Preferred Stock On July 14, 1998, the Company issued the following as part of the consideration paid in connection with its acquisition of substantially all of the assets of Cloud Corporation and Cloud Oak Flooring Company, Inc.: 131,530 shares of Series C 5.5% Cumulative Convertible Exchangeable Preferred Stock. This stock is convertible at any time at the option of the holder, at a conversion price of $35 per share, into up to 375,800 shares of Common Stock, subject to adjustment. The Preferred Stock is subject to mandatory conversion if the average trading price of the Common Stock for 20 consecutive trading days exceeds the conversion price, or if dividends on the Preferred Stock are in arrears for at least two full quarterly periods. These securities were sold pursuant to the exemption available under Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder as a transaction not involving a public offering. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 3.5 Certificate of Designations of Series C 5.5% Convertible Preferred Stock 15.1 Report of Independent Public Accountants (b) Reports on Form 8-K: 1. Form 8-K dated October 19, 1998 reporting an amendment to the Shareholders Rights Agreement to eliminate those provisions that require that certain actions may only be taken by "Continuing Directors." 14 17 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 16, 1998 By: /s/ Rick B. Davis ----------------- ------------------ Rick B. Davis Corporate Controller and Executive Officer 15 EX-3.5 2 CERTIFICATE OF DESIGNATION 1 EXHIBIT 3.5 CERTIFICATE OF DESIGNATION OF SERIES C 5.5% CONVERTIBLE PREFERRED STOCK OF WABASH NATIONAL CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware I, Donald J. Ehrlich, President and Chief Executive Officer of Wabash National Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board by the Certificate of Incorporation of the Corporation, the said Board on May 4, 1998 adopted the following resolution creating a series of 170,000 shares of Preferred Stock designated as "Series C 5.5% Convertible Preferred Stock": RESOLVED, that pursuant to the authority vested in the Board of this Corporation (the "Board") in accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of the Corporation be and it is hereby created, and the designation and amount thereof and the voting rights or powers (including voting powers), preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. 1A. The designation of the series of Preferred Stock, $.01 par value per share, provided for herein shall be "Series C 5.5% Convertible Preferred Stock" (hereinafter referred to as the "Series C Preferred"), and the number of shares constituting the Series C Preferred shall be 170,000. 1B. All shares of Series C Preferred purchased or otherwise acquired by the Corporation shall be retired and canceled and shall be restored to the status of authorized but unissued shares PAGE 1 2 existing or hereafter created (the "Senior Preferred Stock"), (ii) on a parity with any other series of Preferred Stock duly established by the Board, the terms of which do not provide that such series shall rank junior to the Series C Preferred, whether now existing or hereafter created (the "Parity Preferred Stock") including, without limitation, the Corporation's Series B 7% Cumulative Convertible Exchangeable Preferred Stock, and (iii) prior to any other series of Preferred Stock duly established by the Board, the terms of which provide that such series shall rank junior to the Series C Preferred (the "Junior Preferred Stock") and any other class or series of capital stock of the Corporation, including, without limitation, all classes of the Common Stock, par value $0.01 per share, of the Corporation, whether now existing or hereafter created (the "Common Stock"); all of such classes or series of capital stock of the Corporation to which the Series C Preferred ranks prior, including without limitation the Junior Preferred Stock and the Common Stock, and including, without limitation, junior securities convertible into or exchangeable for other junior securities or phantom stock representing junior securities, are collectively referred to herein as "Junior Securities." Section 2. Dividends. 2A. Holders of the Series C Preferred shall receive, when, as and if declared by the Board out of the funds of the Corporation legally available therefor, cash dividends at the annual rate of 5.5% per share, subject to adjustment as provided below. Dividends with respect to the Series C Preferred shall be declared and paid quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing September 15, 1998, each a "Dividend Payment Date" (and, in the case of any accrued but unpaid dividends, at such additional times and for such interim periods, if any, as determined by the Board). Dividends on the Series C Preferred shall be cumulative (whether or not declared by the Board) and will accrue from the date of original issuance whether or not at the time such dividend shall accrue or become due or at any time there shall be funds legally available for the payment of dividends. Any dividend that is declared but not paid on the respective dividend payment date shall be increased by an amount equal to the London Interbank offered rate plus 50 basis points on the unpaid amount beginning on the date immediately following the Dividend Payment Date and ending on the date such dividend is paid. Dividends shall be payable to the holders of record as they appear on the stock books of the transfer agent for the Corporation on such record dates, which shall be not more than 30 days preceding each Dividend Payment Date, as shall be fixed by the Board. Dividends payable on the Series C Preferred for any period shorter or longer than a full dividend period will be computed on the basis of a PAGE 2 3 360-day year consisting of twelve 30-day months. Dividends on the Series C Preferred for each full dividend period shall be computed by dividing the annual dividend rate by four. 2B. If dividends are not paid in full upon the Series C Preferred and any other Parity Preferred Stock, all dividends declared upon shares of Series C Preferred and such other Parity Preferred Stock shall be declared pro rata so that in all cases the amount of dividends declared per share on the Series C Preferred and the other Parity Preferred Stock bear to each other the same proportion that the respective dividend rates of such shares of the Series C Preferred and the other Parity Preferred Stock bear to each other. Except as set forth above, unless full cumulative dividends on the Series C Preferred have been paid and funds set aside, dividends (other than dividends paid solely in Common Stock or Junior Securities or rights to acquire the foregoing) may not be paid or declared and set aside for payment and other distributions may not be made upon the Common Stock or Junior Securities nor may any Common Stock, Junior Securities or rights to acquire the foregoing be redeemed, purchased, or otherwise acquired for any consideration by the Corporation (except for repurchases from employees under employee benefit plans and by conversion into or exchange for Common Stock or Junior Securities). Section 3. Liquidation. In the event of any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of shares of Series C Preferred shall be entitled to receive out of the assets of the Corporation legally available for distribution to stockholders (whether representing capital or surplus), before any payment or distribution shall be made on the Common Stock or any other Junior Securities (but after distribution of such assets among, or payment thereof over to, creditors of the Corporation and to holders of any stock of the Corporation with liquidation rights senior to the Series C Preferred, including holders of Senior Preferred Stock), the Liquidation Value Per Share plus the amount of any dividends accrued thereon through the date of distribution (the "Series C Preferred Liquidation Distribution"). After the Series C Preferred Liquidation Distribution has been made, the holders of shares of Series C Preferred shall not be entitled to any further participation in any distribution of assets of the Corporation. If the assets distributable upon such dissolution, liquidation or winding up (as provided above) shall be insufficient to pay cash in an amount equal to the amount of the Series C Preferred Liquidation Distribution to the holders of shares of Series C Preferred and the full amounts owing upon dissolution, liquidation or winding up to holders of any class of Parity Preferred Stock, then such assets or the proceeds thereof shall be distributed among the holders of the Series C Preferred and Parity Preferred Stock ratably in proportion to the respective amounts of the Series C Preferred Liquidation Distribution and the liquidation preferences of the Parity Preferred Stock to which they otherwise would be entitled. The merger or consolidation of the Corporation into or with one or more other non-affiliated PAGE 3 4 persons or entities, a merger or consolidation of any other non-affiliated person or entity with or into the Corporation upon the completion of which the stockholders of the Corporation prior to the merger or consolidation no longer hold a majority of the outstanding equity securities of the Corporation or the transfer (by lease sale, conveyance, exchange or other transfer) of all or substantially all of the property or assets of the Corporation in a single transaction or through a series of related transactions, to another person or entity or group of affiliated persons or entities or the entering of any subsidiaries of the Corporation into any such transaction or transactions if such transactions in the aggregate would result in a sale of all or substantially all of the properties or assets of the Corporation and its subsidiaries on a consolidated basis (any such event or events, a "Reorganization Event") shall, at the option of the holders of at least 50% of the Series C Preferred, be deemed to be a Liquidation of the Corporation. In no event shall the sale, transfer, conveyance or exchange of such property to a wholly owned affiliate of the Company constitute a Reorganization Event. Section 4. Voting Rights. 4A. The holders of the Series C Preferred shall be entitled to notice of all stockholders meetings in accordance with the Corporation's bylaws, and except as otherwise required by law or hereinafter provided, the holders of the Series C Preferred shall be entitled to vote on all matters submitted to the stockholders for a vote together with the holders of the Common Stock and any other series of capital stock entitled to vote together with the Common Stock, as a single class, and each share of Series C Preferred shall be entitled to one vote for each share of Common Stock that would be issuable upon conversion of such share on the record date for determining eligibility to participate in the action being taken. 4B. Without the affirmative vote of the holders of at least a majority of the outstanding shares of Series C Preferred, voting separately as a class, the Corporation shall not directly or indirectly (i) alter or change the provisions of the Certificate of Incorporation (including through any Certificate of Amendment or Certificate of Designation relating to, or Certificate of Merger or Consolidation which alters or changes or converts pursuant to a merger or consolidation, the Series C Preferred) so as to adversely affect (within the meaning of Section 242(b)(2) of the General Corporation Law of the State of Delaware) the powers (including voting powers to which each such share is entitled relative to the shares of Common Stock or other capital stock outstanding immediately prior to such alteration, change or conversion except as such voting powers may be affected by the authorization of any new series of Parity Preferred Stock having the same voting rights (other than the right to vote as part of the same class as the Series C Preferred under the rights granted to the Series C Preferred under this Section 4) as Series C Preferred or by the authorization of any other shares of any class which are not entitled to vote together with Series C Preferred in any class vote), preferences or special rights of Series C Preferred or (ii) authorize or create any Senior Preferred Stock or any other class of stock senior to the Series C Preferred as to dividends or upon liquidation. PAGE 4 5 Section 5. Optional Conversion. 5A. At any time and from time to time after the initial issuance of Series C Preferred, any holder of a share of Series C Preferred may convert that share of Series C Preferred held by such holder into a number of shares of Common Stock obtained by dividing $100.00, plus the amount of accrued and unpaid dividends as of the date of conversion, by the applicable Conversion Price. The Conversion Price shall initially be $35.00. 5B. Conversion Procedure. (i) Any holder of shares of Series C Preferred desiring to convert any portion thereof into Common Stock shall surrender each certificate representing one or more shares of such Series C Preferred to be converted, duly endorsed in favor of the Company or in blank and accompanied by proper instruments of transfer, at the principal business office of the Company (or such other place as may be designated by the Company), and shall give written notice to the Company at that office of its election to convert the same, setting forth therein the name or names (with the address or addresses) in which the shares of Common Stock are to be issued. (ii) As soon as possible after a conversion has been effected (but in any event within three business days in the case of subparagraph (a) below), the Company shall deliver to the converting holder: (a) a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and (b) a certificate representing any shares of Series C Preferred which were represented by the certificate or certificates delivered to the Company in connection with such conversion but which were not converted. (iii) The issuance of certificates for shares of Common Stock upon conversion of Series C Preferred shall be made without charge to the holders of such Series C Preferred for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of shares of Common Stock. (iv) The Company shall not close its books against the transfer of Series C Preferred or of Common Stock issued or issuable upon conversion of Series C Preferred in any manner which interferes with the timely conversion of Series C Preferred. The Company shall assist and cooperate (but the Company shall not be PAGE 5 6 required to expend substantial efforts or funds) with any holder of Series C Preferred required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares of Series C Preferred hereunder (including, without limitation, making any filings required to be made by the Company). (v) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Series C Preferred, not less than the number of shares of Common Stock issuable upon the conversion of all outstanding Series C Preferred that may then be exercised. All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). 5C. Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, recapitalization or otherwise) the outstanding shares of Common Stock into a greater number of shares, pays a dividend or distribution on its Common Stock in shares of Common Stock, combines its outstanding Common Stock into a smaller number of shares or issues any shares of Common Stock by reclassification of its Common Stock, the Conversion Price in effect immediately prior thereto shall be proportionately adjusted so that the holder of any Series C Preferred thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which such holder would have owned or been entitled to receive after the happening of any of the events described above had such shares been converted immediately prior to the happening of such event or the record date therefor, whichever is earlier. 5D. Reorganization, Reclassification, Consolidation, Merger or Sale. In connection with any merger, consolidation, reorganization or sale of all or substantially all of the Corporation's assets (a "Reorganization Event"), (i) the holders of Series C Preferred shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series C Preferred, such shares of stock, securities, cash or other assets (or, if not practicably attainable, the reasonable equivalent thereof) as such holder would have received in connection with such Reorganization Event if such holder had converted its Series C Preferred immediately prior to such Reorganization Event, and (ii) dividends and amounts in respect of dividends hereunder payable in shares of Common Stock prior to such Reorganization Event shall be payable, in lieu of each share of Common Stock, in such shares of stock, securities, cash or other assets (or reasonable equivalent thereof) as the holder of one share of Common Stock PAGE 6 7 received in connection with such Reorganization Event. The Company shall make appropriate provisions to ensure that the requirements of the previous sentence are effected. (i) Issuance of Rights. In case at any time the Corporation shall issue to all holders of Common Stock any warrants or other rights to subscribe for or to purchase Common Stock (such warrants or rights being called "Options") whether or not such Options are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options, shall be less than the applicable current market price of the Common Stock (deemed to be the average of the last reported sales prices for the ten consecutive trading days ending two trading days before the date in question (or the average of the reported closing bid and asked prices, if last sale prices are not reported, on such principal securities exchange or quotation system on which the Common Stock is then listed)), then the Conversion Price in effect immediately prior thereto shall be adjusted by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (a) the number of shares of Common Stock outstanding on the record date for the issuance of such Options and (b) the number of shares which the aggregate proceeds from the exercise of such Options would purchase at such current market price, and the denominator of which shall be the sum of (a) the number of shares of Common Stock outstanding on such record date and (b) the number of additional shares of Common Stock offered for subscription or purchase. (ii) Change in Option Price. If the purchase price provided for in any Option referred to in subparagraph (i) shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the applicable Conversion Price for the Series C Preferred at the time of such event shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchased price, at the time initially granted, issued or sold; and on the expiration of or exchange of such Option, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option, to the extent outstanding immediately prior to such expiration or termination, never been issued. 5F. Notices. As soon as reasonably practicable following any adjustment of the Conversion Price, the Company shall give written notice thereof to all holders of Series C Preferred, setting forth in reasonable detail and certifying the calculation of such adjustment. Section 6. Mandatory Conversion (a) Each share of Series C Preferred shall automatically and without further action on the part of the holder thereof be converted into a number of shares of Common Stock determined in accordance with Paragraph 6(b) on the first business day PAGE 7 8 following the earlier to occur of the following events: (i) the average trading price of a share of Common Stock during a period of twenty (20) consecutive trading days (determined by taking the average of the last reported sale prices of a share of Common Stock on the New York Stock Exchange during those twenty trading days or, if the stock is not then traded on such exchange, the average of the reported closing prices of a share of Common Stock on any national market system on which the stock is then listed, or if the stock is not so listed, as determined in the reasonable judgment of the Board of Directors of the Corporation) exceeds the then applicable Conversion Price or (ii) whenever dividends payable on the Series C Preferred Stock shall be in arrears in an amount equal to at least two full quarterly dividends on the Series C Preferred outstanding. The Corporation shall give prompt written notice of the occurrence of any mandatory conversion event to all holders of Series C Preferred. (b) The number of shares of Common Stock issuable upon a mandatory conversion of a share of Series C Preferred shall be: (i) equal to the number of shares of Common Stock obtained by dividing $100 plus accrued and unpaid dividends as of the date of conversion by the then applicable Conversion Price in the case of a mandatory conversion in accordance with Paragraph 6(a)(i); or (ii) equal to the number of shares of Common Stock obtained by dividing $100 plus accrued and unpaid dividends as of the date of conversion by the last reported sale price of a share of Common Stock on the New York Stock Exchange on the second business day preceding such date (or, if the stock is not then traded on such exchange, the reported closing price of a share of Common Stock on any national market system on which the Common Stock is then listed, or if the Common Stock is not so listed, the fair market value of a share of Common Stock as determined in the reasonable judgment of the Board of Directors). Section 7. Registration of Transfer. The Corporation shall keep at its principal office a register for the registration of issuances and transfers of Series C Preferred. Upon the surrender of any certificate representing Series C Preferred at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of Series C Preferred represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares of Series C Preferred as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Series C Preferred represented by such new certificate from the date to which dividends have been fully paid on such Series C Preferred represented by the surrendered certificate. PAGE 8 9 Section 8. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series C Preferred, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor, its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Series C Preferred represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series C Preferred represented by such new certificate from the date to which dividends have been fully paid on the shares of Series C Preferred represented by such lost, stolen, destroyed or mutilated certificate. Section 9. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). PAGE 9 10 IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this _____ day of _____________________, 1998. ------------------------------------- Donald J. Ehrlich President and Chief Executive Officer ATTEST: - - ------------------------------ Connie L. Koleszar Secretary PAGE 10 EX-15.1 3 REPORT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 15.1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Wabash National Corporation: We have reviewed the condensed consolidated balance sheets of WABASH NATIONAL CORPORATION (a Delaware corporation) and subsidiaries as of September 30, 1998, and the related condensed consolidated statements of income for the three and nine-month periods ended September 30, 1998 and 1997, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such a opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Wabash National Corporation and subsidiaries as of December 31, 1997 (not presented herein) and, in our report dated January 19, 1998, we expressed as unqualified opinion on that statement. In our opinion, the information set forth in the condensed consolidated balance sheet of Wabash National Corporation and subsidiaries as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen LLP ----------------------------- ARTHUR ANDERSEN LLP Indianapolis, Indiana, October 16, 1998. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME AND STATEMENT OF CASH FLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENT. 1 U.S. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 25,503 0 161,039 0 259,747 468,873 132,885 0 747,716 165,743 181,913 0 5 230 344,657 747,716 965,458 965,458 879,698 879,698 30,316 0 11,558 43,187 17,197 25,990 0 0 0 25,990 1.16 1.14
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