================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR COMMISSION FILE NUMBER 1-10883ENDED DECEMBER 31, 2001 WABASH NATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 52-1375208 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1000 SAGAMORE PARKWAY SOUTH, 47905 LAFAYETTE, INDIANA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (765) 771-5300Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, $.01 Par Value New York Stock ExchangeSeries A Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. |X| Yes. | | No. Indicate by check mark if disclosure of delinquent filers pursuantto Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. | | The aggregate market value of voting stock held by non-affiliates ofthe registrant as of April 10, 2002 was $234,228,768 based upon the closingprice of the Company's common stock as quoted on the New York Stock Exchangecomposite tape on such date. The number of shares outstanding of the registrant's Common Stockand Series A Preferred Share Purchase Rights as of April 10, 2002 was23,031,344. Part III of this Form 10-K incorporates by reference certainportions of the Registrant's Proxy Statement for its Annual Meeting ofStockholders to be held May 30, 2002. ================================================================================ TABLE OF CONTENTS WABASH NATIONAL CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 PAGES ----- PART I.Item 1. Business.......................................................................... 3Item 2. Properties........................................................................ 11Item 3. Legal Proceedings................................................................. 11Item 4 Submission of Matters to Vote of Security Holders................................. 12Item 4A. Risk Factors...................................................................... 13PART II.Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.......... 15Item 6. Selected Financial Data........................................................... 16Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 17Item 7A. Quantitative and Qualitative Disclosures about Market Risk........................ 30Item 8. Financial Statements and Supplementary Data....................................... 32Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................................. 62PART III.Item 10. Directors and Executive Officers of the Registrant................................ 63Item 11. Executive Compensation............................................................ 63Item 12. Security Ownership of Certain Beneficial Owners and Management.................... 63Item 13. Certain Relationships and Related Transactions.................................... 63PART IV.Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................... 63SIGNATURES .................................................................................. 66 2PART IDisclosure Regarding Forward-Looking Statements. This report, includingdocuments incorporated herein by reference, contains forward-looking statements.Additional written or oral forward-looking statements may be made by the Companyfrom time to time in filings with the Securities and Exchange Commission orotherwise. The words "believe," "expect," "anticipate," and "project" andsimilar expressions identify forward-looking statements, which speak only as ofthe date the statement is made. Such forward-looking statements are within themeaning 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. Suchstatements may include, but are not limited to, information regarding revenues,income or loss, capital expenditures, acquisitions, number of retail branchopenings, plans for future operations, financing needs or plans, the impact ofinflation and plans relating to services of the Company, as well as assumptionsrelating to the foregoing. Forward-looking statements are inherently subject torisks 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 thisreport, including those set forth in "The Company" and "Risk Factors," and in"Business" and "Management's Discussion and Analysis of Financial Condition andResults of Operations", describe factors, among others, that could contribute toor cause such differences.ITEM 1--BUSINESS Wabash National Corporation ("Wabash" or "Company") designs,manufactures and markets standard and customized truck trailers and intermodalequipment under the Wabash(TM), Fruehauf(R) and RoadRailer(R) trademarks. TheCompany's wholly-owned subsidiary North American Trailer Centers(TM) (NATC)sells new and used trailers through its retail network, provides maintenanceservice for its own and competitors' trailers and related equipment, and offersrental, leasing and financing programs to its customers for new and usedtrailers. Wabash also purchases and produces aftermarket parts which its sellsthrough its division Wabash National Parts as well as NATC. Wabash seeks to identify and produce proprietary products in thetrucking, intermodal and rail industries that offer added value to customersand, therefore, have the potential to generate higher profit margins than thoseassociated with standardized products. Wabash has developed and/or acquiredseveral proprietary products and processes that, it believes, are recognizedwithin its markets as providing additional value to users as compared toconventional product offerings. While the Company believes it is a competitiveproducer of standardized products, it emphasizes the development and manufactureof distinctive and more customized products and believes that it has theengineering and manufacturing capability to produce these products efficiently.The Company expects to continue a program of aggressive product development andselective acquisitions of quality proprietary products that distinguish theCompany from its competitors and provide opportunities for enhanced profitmargins. The Company's factory-owned retail distribution network providesopportunities to effectively distribute its products and also offers nationalservice and support capabilities for customers. The retail sale of new and usedtrailers, aftermarket parts and maintenance service generally provides enhancedmargin opportunities. The retail distribution network also offers long and shortterm leasing programs as well as financing products for new and used trailers. Wabash was incorporated in Delaware in 1991 and is the successor bymerger to a Maryland corporation organized in 1985. Wabash operates in twosegments: (1) manufacturing and (2) retail and distribution. Financial resultsby segment and financial information regarding geographic areas and export salesare discussed in detail within Footnote 7, Segment Reporting, of theaccompanying Consolidated Financial Statements. Additional informationconcerning the Company can be found on the Company's website atwww.wabashnational.com. Information on the website is not part of this Form10-K.Manufacturing The Company believes that it is the largest United Statesmanufacturer of truck trailers, including the Company's proprietary DuraPlate(R)and RoadRailer(R) trailers. 3 Wabash markets its products directly, and through independentdealers and company-owned retail locations to truckload and less-than-truckload(LTL) common carriers, private fleet operators, leasing companies, packagecarriers and intermodal carriers including railroads. The Company hasestablished significant relationships as a supplier to many large customers inthe transportation industry, including, but not limited to, the following: - Truckload Carriers: Schneider National, Inc.; Werner Enterprises, Inc.; Swift Transportation Corporation; J.B. Hunt Transport Services, Inc.; Dart Transit; Heartland Express, Inc.; Crete Carrier Corporation; Knight Transportation, Inc.; USXpress Enterprises, Inc.; Frozen Food Express Industries (FFE); KLLM, Inc.; Interstate Distributor Co. - Leasing Companies: Transport International Pool (TIP); Penske Truck Leasing; GATX Capital. - Private Fleets: Safeway; DaimlerChrysler; The Kroger Company; Foster Farms - Less-Than-Truckload Carriers: Roadway Express, Inc.; Old Dominion Freight Line, Inc.; USF Holland; GLS Leasco; Yellow Services, Inc. - Package Carriers: Federal Express Corporation - North American Intermodal Carriers and Railroads: Triple Crown Services (Norfolk Southern); National Rail Passenger Corp. (Amtrak); Burlington Northern Santa Fe Railroad); Canadian National Railroad; Transportacion Martima Mexicana (TMM).Retail and Distribution As of December 31, 2001 the Company had 47 factory-owned retailoutlets mostly in major, metropolitan markets as well as 2 rental locations.During January 2001, the Company expanded its branch network through theacquisition of the Breadner Group of Companies, headquartered in Ontario,Canada. The Breadner Group has 10 branch locations in six Canadian Provinces andis the leading Canadian distributor of new trailers and related parts andservice. As a result, the Company believes it has the largest company-owneddistribution system in the industry that sells used trailers, aftermarket partsand maintenance service. The Company believes that the retail sale of new and used trailers,aftermarket parts and maintenance services will generally produce higher grossmargins and tend to be more stable in demand than activities at the wholesalelevel. The Company also provides rental, leasing and financing programsprimarily to retail customers for used trailers, through its subsidiaries, ApexTrailer Leasing and Rentals, L.P. and National Trailer Funding (the FinanceCompanies). Leasing can be less volatile than the sale of equipment while at thesame time providing the Company with an additional channel of distribution forused trailers taken in trade on the sale of new trailers. Due to the strategicimportance of the combined product lines of the retail and distribution segment,the Company intends to continue to place emphasis on this segment and has addedretail outlets over the past few years either through acquisition or newconstruction.THE TRUCK TRAILER INDUSTRY The United States market for truck trailers and related products hashistorically been cyclical and has been affected by overall economic conditionsin the transportation industry as well as regulatory changes. The year 2001 wasone of the most difficult years in the industry's history. It is believed thatthe decline in shipments from 2000 represents the largest decline in history.This decline was a result of general economic conditions and motor-carrierspecific problems combined to dramatically cut demand for new trailers. Management believes that customers historically have replacedtrailers in cycles that run from approximately six to twelve years, depending onservice and trailer type. Changes in both State and Federal regulation of thesize, safety features and configuration of truck trailers have led tofluctuations in demand for trailers from time to time. However, the Company doesnot expect any significant market effects from changes in government regulationin the near term. A large percentage of the new trailer market has historically been served by the ten largest truck trailer manufacturers, including the Company.Price, flexibility in design and engineering, product quality 4and durability, warranty, dealer service and parts availability are competitivefactors in the markets served. Historically, there has been manufacturingover-capacity in the truck trailer industry. The following table sets forth domestic new trailer production forthe Company, its nine largest competitors and for the trailer industry as awhole within the United States and Canada: 2001 2000 1999 1998 1997 1996 ------- ------- ------- ------- ------- ------- WABASH ....... 31,682 66,283 69,772 61,061 48,346(1) 36,517Great Dane ... 21,650 46,698 58,454 50,513 37,237 25,730Utility ...... 16,334 28,780 30,989 26,862 23,084 19,731Trailmobile .. 13,858 28,089 31,329 23,918 18,239 11,094Stoughton .... 6,250 15,050 14,673 11,750 11,700 8,300Manac ........ 5,865 8,052 8,200 * * *Strick ....... 5,500 10,500 11,000 10,959 10,488 8,141Hyundai ...... 5,413 6,261 5,716 5,200 3,445 2,007Fontaine ..... 3,100 6,000 6,500 5,894 5,063 4,613Transcraft ... 3,018 4,005 5,311 5,317 4,509 3,161Total Industry 140,084 270,817 317,388 278,821 222,550 197,519(1) Includes shipments of 1,467 units by Fruehauf in 1997 prior to the acquisition by Wabash of certain assets of Fruehauf.(2) Fontaine and Transcraft both build primarily platform types of trailers.* Data not available Sources: Individual manufacturer information provided by Southern MotorCargo Magazine(C)1999 (for 1995-1998 data) and Trailer Body BuildersMagazine(C)2002 (for 1999-2001 data). Industry totals provided by Southern MotorCargo Magazine(C)1999 (for 1995-1998 data) and A.C.T. Research Company, L.L.C.(for 1999-2001 data). Several significant events occurred within this group of competitorsduring the year 2001. These events included the filing for Chapter 11reorganization by Trailmobile LLC and the partial shutdown of many manufacturingfacilities and production lines due to weak demand. Two companies formerlyincluded in the top 10, HPA Monon and Dorsey Trailer, did not number among thetop 10 producers in 2001.REGULATION Truck trailer length, height, width, maximum weight capacity andother specifications are regulated by individual states. The Federal Governmentalso regulates certain safety features incorporated in the design of trucktrailers, including new regulations in 1998 which require anti-lock brakingsystems (ABS) on all trailers produced beginning in March 1998 and certain rearbumper strength regulations effective at the beginning of 1998. Manufacturingoperations are subject to environmental laws enforced by federal, state andlocal agencies. (See "Environmental Matters")PRODUCT LINES Manufacturing Segment Since its inception in 1985, the Company has expanded its productofferings from a single product into a broad line of transportation equipmentand related products and services. As a result of its long-term relationships,the Company has been able to work closely with customers to create competitiveadvantages through development and production of productivity-enhancingtransportation equipment. The sale of new trailers through the manufacturingsegment represented approximately 59.2%, 76.0% and 76.6% of net sales during2001, 2000 and 1999, respectively. The current transportation equipment productlines include the following: - DuraPlate(R) trailers. In late 1995, the Company introduced its DuraPlate(R) composite plate wall dry van trailer. Features of the new composite plate trailer include increased durability and greater strength than the aluminum plate trailer that it replaces. The composite material is a high-density vinyl core with a steel skin. DuraPlate(R) trailers are purchased by all segments of the dry van customer base, including truckload carriers, private fleets and LTL/Package Carriers (generally in a pup trailer version). The Company holds a number of patents regarding its composite trailer and believes this proprietary trailer will continue to become a greater source of business. 5 - Plate trailers. The aluminum plate trailer was introduced into the Company's product line in 1985. Since these trailers utilize thicker and more durable sidewalls than standard sheet and post or fiberglass reinforced plywood ("FRP") construction and avoid the use of interior liners, the life of the trailer is extended and maintenance costs are significantly reduced. In addition, the post used in constructing the sidewalls of the aluminum plate trailer is much thinner and therefore provides greater interior volume than a standard sheet and post trailer. Plate trailers are used primarily by truckload carriers. - RoadRailer(R) equipment. The RoadRailer(R) intermodal system is a patented bimodal technology consisting of a truck trailer and detachable rail "bogie" which permits a trailer to run both over the highway and directly on railroad lines. The Company believes that the RoadRailer(R) system can be operated more efficiently than alternative intermodal systems such as "piggyback" or "double-stack" railcars that require terminal operators to transfer vehicles or containers to railcars. By offering the bimodal technology in a number of variations, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customers. The current RoadRailer(R) product line includes both dry van and refrigerated "ReeferRailer(R)" trailers. The operation of RoadRailer(R) equipment on the railroads is regulated by the Federal Railroad Administration. - Refrigerated trailers. Refrigerated trailers were introduced into the product line in 1990. The Company's proprietary process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and durability of the trailers. These trailers are used by refrigerated carriers specializing in the movement of commodities that require controlled temperatures such as perishable food products. They are also used by private fleets such as those operated by large grocery companies. During 1995, the Company opened its refrigerated trailer manufacturing facility in Lafayette, Indiana. - Smooth aluminum vans and doubles. Smooth aluminum vans and doubles, also known as sheet and post trailers, were introduced into the product line in 1986 and are the standard trailer product purchased by customers in most segments of the trucking industry. These products represent the most common trailer sold throughout the Company's retail distribution network. - DuraPlate(R) domestic containers. During 2001 the Company entered the domestic container market through the introduction of a stackable 53 foot domestic container with DuraPlate(R) sidewalls. Domestic containers are utilized by intermodal carriers and are carried either on flat cars or stacked two-high in special "Double-Stack" railcars. The use of the proprietary DuraPlate(R) material provides significant advantages in customer appeal, cargo carrying capacity and damage resistance when compared to conventional domestic containers. With this introduction, the Company is the only supplier offering a complete line of intermodal equipment, including the domestic container, piggyback trailers and the RoadRailer(R) intermodal system. - Other. The Company's other transportation equipment includes container chassis, rollerbed trailers, soft-sided trailers, dumps, converter dollies and platform trailers. These items are either manufactured or are acquired, either on a private label or wholesale basis for distribution through our retail network or direct to customers. Retail and Distribution Segment The Company believes it has the largest, company-owned retail anddistribution network serving the truck trailer industry. Through its retail anddistribution segment, the Company sells the following products: - Transportation Equipment - New. The Company sells new transportation equipment such as those products offered by the manufacturing segment including DuraPlate(R) and smooth aluminum dry van trailers and refrigerated trailers. The Company also sells specialty trailers not produced by the manufacturing segment including tank trailers, dump trailers, platform trailers built for Wabash and construction trailers. Customers for this equipment typically purchase in smaller quantities for local or regional transportation needs. The sale of new 6 transportation equipment through the retail branch network represented approximately 11.9%, 6.3% and 8.1% of net sales during 2001, 2000 and 1999, respectively. - Aftermarket Parts and Service. The Company offers replacement parts and accessories and provides maintenance service both for its own and competitors' trailers and related equipment. The aftermarket parts business is less cyclical than trailer sales and generally has higher gross profit margins. The Company markets its aftermarket parts and services through its division, Wabash National Parts and through its wholly-owned subsidiary, North American Trailer Centers(TM). Management expects that the manufacture and sale of aftermarket parts and maintenance service will be a growing part of its product mix as the number and age of its manufactured trailers in service increases and the retail and distribution segment continues to grow. Sales of these products and services represented approximately 14.8%, 9.6% and 7.9% of net sales during 2001, 2000 and 1999, respectively. - Rental, Leasing and Finance. In 1991, the Company began to build its in-house capability to provide leasing programs to its customers through Wabash National Finance. In addition, in late 1998 the Company began offering a rental program for used trailers, primarily on a short-term basis, through its retail branch network. During 1999, the Company began a used trailer financing program through its subsidiary, National Trailer Funding. Through this program, the Company originates finance contracts primarily with small owner-operators with contracts typically ranging from 3 to 5 years in duration. As of December 31, 2001, the Company has a $15.9 million portfolio with an average yield of approximately 11%. In December 2000, the Company's wholly-owned subsidiary, Wabash National Finance Corporation, was merged into Apex Trailer Leasing and Rentals, L.P. as the Company consolidated its rental, leasing and finance activities into the retail and distribution segment as a separate retail product line. Leasing revenues represented approximately 4.9%, 2.5% and 1.6% of the Company's net sales during 2001, 2000 and 1999, respectively. - Transportation Equipment - Used. The Company sells used transportation equipment primarily taken in trade from its customers upon the sale of new trailers. The Company generally sells its used trailers directly through its retail and distribution segment. The ability to remarket used equipment promotes new sales by permitting trade-in allowances and offering customers an outlet for the disposal of used equipment. During 2001, used trailer values were adversely affected by the general economic slowdown and excess supply. The sale of used trailers represented approximately 8.5%, 5.6% and 5.8% of net sales during 2001, 2000 and 1999, respectively.CUSTOMERS The Company's customer base includes many of the nation's largesttruckload common carriers, leasing companies, LTL common carriers, private fleetcarriers, package carriers and domestic and international intermodal carriersincluding railroads. The Company believes it is the sole supplier of dry van andrefrigerated trailers to approximately 15 customers. Sales to these 15 customersaccounted for approximately 52.1%, 41.8% and 32.6% of the Company's new trailersales in 2001, 2000 and 1999, respectively. The retail and distribution businessprimarily services small and mid-sized fleets and individual owner operators inwhich the credit risk varies significantly from customer to customer.International sales accounted for approximately 9.2%, 3.1% and 2.0% of net salesduring 2001, 2000 and 1999, respectively. The Company had one customer, J.B. Hunt Transport Services, Inc.,which represented approximately 19.0% of net sales in 2001 and 11.4% of netsales in 2000. No other customer exceeded 10% of net sales in 2001, 2000 and1999. The Company's net sales in the aggregate to its five largest customerswere 34.4%, 30.5% and 22.2% of its net sales in 2001, 2000 and 1999,respectively. Truckload common carriers include large national lines as well asregional carriers. The large national truckload carriers, who continue to gainmarket share at the expense of both regional carriers and private fleets,typically purchase trailers in large quantities with highly individualizedspecifications. Trailers purchased by truckload common carriers includingSchneider National, Inc., Werner Enterprises, Inc., Swift TransportationCorporation, J.B. Hunt Transport Services, Inc., Heartland Express, Inc., DartTransit, Crete Carrier Corporation, Averitt Express, A-Hold, Star, SmithTransport, Knight Transportation, Inc., USXpress 7 Enterprises, Inc., and Interstate Distributor Co. represented approximately49.5%, 59.7% and 54.3% of the Company's new trailer sales in 2001, 2000 and1999, respectively. LTL carriers have experienced consolidation in recent years and theindustry is increasingly dominated by a few large national and several regionalcarriers. Since the Highway Reauthorization Act of 1983 mandated that all statespermit the use of 28-foot double trailers, there has been a conversion of nearlyall LTL carriers to doubles operations. Order sizes for LTL carriers tend to bein high volume and with standard specifications. LTL carriers who have purchasedCompany products include Roadway Express, Inc., Vitran Express, Old DominionFreight Line, Inc., USF Holland, GLS Leasco, and Yellow Services, Inc. Newtrailer sales to LTL carriers accounted for approximately 5.3%, 10.5% and 9.1%of new trailer sales in 2001, 2000 and 1999, respectively. Private fleet carriers represent the largest segment of the trucktrailer industry in terms of total units, but are dominated by small fleets of 1to 100 trailers. Among the larger private fleets, such as those of the largeretail chain stores, automotive manufacturers and paper products, truck trailersare often ordered with customized features designed to transport specializedcommodities or goods. Among private fleets, the Company's customers includeDaimlerChrysler, Caterpillar, Safeway, Foster Farms, A-Hold and The KrogerCompany. New trailer sales to private fleets represented approximately 8.4%,6.7% and 6.4% of new trailer sales in 2001, 2000 and 1999, respectively. Leasing companies include large national companies as well asregional and local companies. Among leasing companies, the Company's customersinclude Transport International Pool (TIP), National Semi-Trailer Corp., LeasePlan and Penske Truck Leasing. New trailer sales to leasing companiesrepresented 3.2%, 4.2% and 6.0% of new trailer sales in 2001, 2000 and 1999,respectively. Customers for the Company's proprietary RoadRailer(R) productsinclude North American intermodal carriers such as Triple Crown Services (asubsidiary of Norfolk Southern), Amtrak, Swift Transportation Corporation,Alliance Shippers, GATX Capital (in conjunction with Burlington Northern SantaFe Corporation and Mark VII Transportation), Canadian National Railroad andTransportacion Martima Mexicana. New trailer sales of RoadRailer(R) products tothese customers represented approximately 2.3%, 2.4% and 2.8% of new trailersales in 2001, 2000 and 1999, respectively. In the United States, FedEx Corporation is one of two primarycarriers dominating the package carrier industry. Package carriers havedeveloped rigid specifications for their highly specialized trailers and havehistorically purchased trailers from a small number of suppliers, includingWabash. New trailer sales to package carriers represented approximately 3.7%,0.7% and 0.8% of new trailer sales in 2001, 2000 and 1999, respectively. Retail sales of new trailers to independent operators through theCompany's factory-owned distribution network provide the Company with access tosmaller unit volume sales, which typically generate higher gross margins. Retailsales of new trailers represented approximately 16.8% (or 5.0% excluding theBreadner locations), 7.4% and 8.9% of total new trailer sales in 2001, 2000 and1999, respectively. The balance of new trailer sales in 2001, 2000 and 1999 were made todealers and household moving carriers.MARKETING AND DISTRIBUTIONThe Company markets and distributes its products through the following channels: - factory direct accounts; - the factory-owned distribution network; and - independent dealerships. Factory direct accounts include larger full truckload, LTL, packageand household moving carriers and certain private fleets and leasing companies.These are high volume purchasers. In the past, the Company has focused itsresources on the factory direct market, where customers are highly aware of thelife-cycle costs of trailer equipment and therefore are best equipped toappreciate the design and value-added features of the Company's product. Amongthe factory-direct customer base are national truckload fleets. These largecarriers will generally purchase the largest trailer allowed by law in the areasthat they intend to 8operate. These carriers are the largest customers of the composite platetrailers manufactured by the Company. In addition, larger LTL and private fleetsbuy factory direct with a great deal of customization. The Company's factory-owned distribution network generates retailsales of trailers as well as leasing and financing arrangements to smallerfleets and independent operators. This branch network enables the Company toprovide maintenance and other services to customers on a nationwide basis andprovides an outlet for used trailers taken in trade upon the sale of newtrailers, which is a common practice with fleet customers. In addition to the 47factory-owned retail outlets and 2 rental locations, the Company also sells itsproducts through a nationwide network of approximately 80 full-line and 150parts only independent dealerships, which generally serve the trucking andtransport industry. The dealers primarily serve intermediate and smaller sizedcarriers and private fleets in the geographic region where the dealer is locatedand on occasion may sell to large fleets. The dealers may also perform servicework for many of their customers.RAW MATERIALS The Company utilizes a variety of raw materials and componentsincluding steel, aluminum, lumber, tires and suspensions, which it purchasesfrom a limited number of suppliers. Significant price fluctuations or shortagesin raw materials or finished components may adversely affect the Company'sresults of operations. In 2001 and for the foreseeable future, the raw materialused in the greatest quantity will be composite plate material for the Company'sproprietary DuraPlate(R) trailer. The composite material is comprised of aninner and outer lining made of high strength steel surrounding a vinyl core.Currently both components are in ready supply. In August 1997, the Companycompleted construction of a composite material facility located in Lafayette,Indiana where the Company produces the composite plate material from steel andvinyl components. Due to the continued strong demand for the Company'sDuraPlate(R) trailer, additional composite material manufacturing capacity wasadded to this facility in 2000. The Company believes the addition of this newfacility will provide adequate capacity to meet its composite materialrequirements. During 1998, the Company acquired Cloud Corporation and Cloud OakFlooring Company, Inc. (Wabash Wood Products), manufacturers of laminatedhardwood floors for the truck body and trailer industry. During the course of2000, the Company increased its hardwood flooring production capacity at itsHarrison, Arkansas facility in order to accommodate 100% of the Company'strailer flooring needs. The central U.S. location of the Company's plants givesWabash a competitive advantage in the transportation cost of inbound rawmaterials as well as the cost of delivery of finished product as customers oftenuse trailers coming off the assembly line to deliver freight outbound from theMidwest.BACKLOG The Company's backlog of orders was approximately $142.1 million and$639.5 million at December 31, 2001 and 2000 respectively. Orders that comprisethe backlog may be subject to changes in quantities, delivery, specificationsand terms. During the third quarter of 2001 the Company modified its criteriafor determining backlog to reflect: (1) only orders that have been confirmed bythe customer in writing, and (2) orders that will be included in the Company'sproduction schedule during the next 18 months. The backlog reported for December 31, 2000 has not been restated to reflect this new policy. The Company expectsto fill a majority of its existing backlog of orders by the end of 2002.PATENTS AND INTELLECTUAL PROPERTY The Company holds or has applied for 79 patents in the United Stateson various components and techniques utilized in its manufacture of trucktrailers. In addition, the Company holds or has applied for 111 patents in 13foreign countries including the European patent community. The Company's patentsprimarily relate to its proprietary DuraPlate(R) product and the Companybelieves that these patents offer the Company significant competitiveadvantages. The Company also holds or has applied for 44 trademarks in theUnited States as well as 41 trademarks in foreign countries. These trademarksinclude the Wabash(TM) and Fruehauf(R) brand names as well as trademarksassociated with the Company's proprietary products such as the DuraPlate(R)trailer and the RoadRailer(R) trailer. 9RESEARCH AND DEVELOPMENT Research and development expenses are charged to earnings asincurred and were approximately $2.4 million, $2.4 million and $1.5 million in2001, 2000 and 1999, respectively.ENVIRONMENTAL MATTERS The Company is aware of soil and ground water contamination at someof its facilities. Accordingly, the Company has recorded a reserve ofapproximately $0.9 million associated with environmental remediation at thesesites. This reserve was determined based upon currently available informationand management does not believe the outcome of these matters will be material tothe consolidated annual results of operations or financial condition of theCompany. In the second quarter 2000, the Company received a grand jurysubpoena requesting certain documents relating to the discharge of wastewatersinto the environment at a Wabash facility in Huntsville, Tennessee. The subpoenasought the production of documents and related records concerning the design ofthe facility's discharge system and the particular discharge in question. On May16, 2001, the Company received a second grand jury subpoena that sought theproduction of additional documents relating to the discharge in question. TheCompany is fully cooperating with federal officials with respect to theirinvestigation into the matter. At this time, the Company is unable to predictthe outcome of federal grand jury inquiry into this matter, but does not believeit will result in a material adverse effect on its financial position or futureresults of operations; however, at this early stage of the proceedings, noassurance can be given as to the ultimate outcome of the case. On April 17, 2000, the Company received a Notice ofViolation/Request for Incident Report from the Tennessee Department ofEnvironmental Conservation (TDEC) with respect to the same matter. On September6, 2000, the Company received an Order and Assessment from TDEC directing theCompany to pay a fine of $100,000 for violations of Tennessee environmentalrequirements as a result of the discharge. The Company filed an appeal of theOrder and Assessment on October 10, 2000. The Company is currently negotiatingan agreed-upon Order with TDEC to resolve this matter. Future information and developments will require the Company tocontinually reassess the expected impact of these environmental matters.However, the Company has evaluated its total environmental exposure based oncurrently available data and believes that compliance with all applicable lawsand regulations will not have a materially adverse effect on the consolidatedfinancial position and annual results of operations. See Footnote 19 to the Consolidated Financial Statements foradditional environmental information and the Company's accounting for suchcosts.EMPLOYEES As of December 31, 2001, the Company had approximately 3,500employees, compared to approximately 5,200 employees as of December 31, 2000.The Company has no employees under a labor union contract as of December 31,2001. The Company places a strong emphasis on employee relations througheducational programs and quality control teams. The Company believes itsemployee relations are good. 10ITEM 2--PROPERTIESMANUFACTURING FACILITIES The Company owns its main facility of 1.2 million sq. ft. inLafayette, Indiana, which consists of truck trailer and composite materialproduction, tool and die operations, research laboratories, management officesand headquarters. The Company also owns another trailer manufacturing facilityin Lafayette, Indiana (572,000 sq. ft.) and a trailer flooring manufacturingfacility in Harrison, Arkansas (456,000 sq. ft.). During 2001, the Company closed three of its manufacturingfacilities. The facilities closed included two trailer manufacturing plantslocated in Ft. Madison, Iowa (255,000 sq. ft.) and Huntsville, Tennessee(287,000 sq. ft.) and a flooring operation in Sheridan, Arkansas (117,000 sq.ft.). At December 31, 2001, these properties are being held for sale and,accordingly, are classified in prepaid expenses and other in the accompanyingConsolidated Balance Sheets.RETAIL AND DISTRIBUTION FACILITIES The Company leases a facility in St. Louis, Missouri (10,261 sq.ft.) that serves as headquarters for its retail and distribution segment. Thislocation oversees the operation of 29 sales and service branches (4 of which areleased) and 18 locations that sell and rent used trailers (15 of which areleased.) These facilities are located throughout North America. The branchfacilities consist of an office, parts warehouse and service space and generallyrange in size from 20,000 to 50,000 square feet per facility. Included in theamounts above, are 10 branch locations in six Canadian provinces acquired inJanuary 2001. In addition, the Company owns an aftermarket parts distributioncenter in Lafayette, Indiana (300,000 sq. ft.) and subleases a former partscenter in Montebello, California to a third party. The Company closed three retail branches in 2000 and two in 2001. AtDecember 31, 2001 these properties are being held for sale and, accordingly, areclassified in prepaid expenses and other in the accompanying ConsolidatedBalance Sheets. The Company owned properties are subject to security interests heldby the Company's Bank and Senior Note Lenders.ITEM 3--LEGAL PROCEEDINGS There are certain lawsuits and claims pending against the Companythat arose in the normal course of business. None of these claims are expectedto have a material adverse effect on the Company's financial position or itsresults of operations. In March of 2001, Bernard Krone Industria e Comercio de MaquinasAgricolas Ltda. ("BK") filed suit against the Company in the Fourth Civil Courtof Curitiba in the State of Parana, Brazil. This action seeks recovery ofdamages plus pain and suffering. Because of the bankruptcy of BK, this proceeding is now pending before the Second Civil Court of Bankruptcies andCreditors Reorganization of Curitiba, State of Parana (No.232/99). This case grows out of a joint venture agreement between BK and theCompany, which was generally intended to permit BK and the Company to market theRoadRailer(R) trailer in Brazil and other areas of South America. When BK wasplaced into the Brazilian equivalent of bankruptcy late in the year 2000, thejoint venture was dissolved. BK subsequently filed its lawsuit against theCompany alleging that it was forced to terminate business with other companiesbecause of the exclusivity and non-compete clauses purportedly found in thejoint venture agreement. The lawsuit further alleges that Wabash did notproperly disclose technology to BK and that Wabash purportedly failed to complywith its contractual obligations in terminating the joint venture agreement. Inits complaint, BK asserts that it has been damaged by these alleged wrongs bythe Company in the approximate amount of $8.4 million (U.S.). The Company answered the complaint in May of 2001, denying anywrongdoing and pointing out that, contrary to the allegation found in thecomplaint, a merger of the Company and BK, or the acquisition of BK by theCompany, was never the purpose or intent of the joint venture agreement betweenthe parties; the only purpose was the business and marketing arrangement as setout in the agreement. The Company 11also asserted a counterclaim in the amount of $351,000 (U.S.) representingmonies advanced by the Company to BK to permit BK to import certain trailersfrom Europe, which was to be reimbursed to the Company by BK. The counterclaimwas based on the fact that this reimbursement never took place. The Company believes that the claims asserted against it by BK arewithout merit and intends to defend itself vigorously against those claims. Italso believes that the claims asserted in its counterclaim are valid andmeritorious and it intends to prosecute that claim. The Company believes thatthe resolution of this lawsuit will not have a material adverse effect on itsfinancial position or future results of operations; however, at this early stageof the proceeding, no assurance can be given as to the ultimate outcome of thecase. On September 17, 2001 the Company commenced an action against PPGIndustries, Inc. ("PPG") in the United States District Court, Northern Districtof Indiana, Hammond Division at Lafayette, Civil Action No. 4:01 CV 55. In thelawsuit, the Company alleged that it has sustained substantial damages stemmingfrom the failure of the PPG electrocoating system (the "E-coat system") andrelated products that PPG provided for the Company's Scott County Tennesseeplant. The Company alleges that PPG is responsible for defects in the design ofthe E-coat system and defects in PPG products that have resulted in malfunctionsof the E-coat system and poor quality coatings on numerous trailers. The Companyfurther alleges that the failures of PPG's E-coat system and productssubstantially contributed to the decision to shut down the Scott County plant. PPG filed a Counterclaim in that action on or about November 8,2001, seeking damages in excess of approximately $1.35 million based uponcertain provisions of the November 3, 1998 Investment Agreement between it andthe Company. The Company filed a Reply to the Counterclaim denying liability forthe claims asserted. The Company believes that the claims asserted against it by PPG inthe Counterclaim are without merit and intends to defend itself vigorouslyagainst those claims. It also believes that the claims asserted in its Complaintare valid and meritorious and it intends to prosecute those claims. The Companybelieves that the resolution of this lawsuit will not have a material adverseeffect on its financial position or future results of operations; however, atthis early stage of the proceeding, no assurance can be given as to the ultimateoutcome of the case. In the second quarter 2000, the Company received a grand jury subpoena requesting certain documents relating to the discharge of wastewatersinto the environment at a Wabash facility in Huntsville, Tennessee. The subpoenasought the production of documents and related records concerning the design ofthe facility's discharge system and the particular discharge in question. On May16, 2001, the Company received a second grand jury subpoena that sought theproduction of additional documents relating to the discharge in question. TheCompany is fully cooperating with federal officials with respect to theirinvestigation into the matter. At this time, the Company is unable to predictthe outcome of the federal grand jury inquiry into this matter, but does notbelieve it will result in a material adverse effect on its financial position orfuture results of operations; however, at this early stage of the proceedings,no assurance can be given as to the ultimate outcome of the case. On April 17, 2000, the Company received a Notice ofViolation/Request for Incident Report from the Tennessee Department ofEnvironmental Conservation (TDEC) with respect to the same matter. On September6, 2000, the Company received an Order and Assessment from TDEC directing theCompany to pay a fine of $100,000 for violations of Tennessee environmentalrequirements as a result of the discharge. The Company filed an appeal of theOrder and Assessment on October 10, 2000. The Company is currently negotiatingan agreed-upon Order with TDEC to resolve this matter. The class action against the Company in United States District Courtfor the Northern District of Indiana entitled "In re Wabash National CorporationSecurities Litigation", Civil Action No. 4:99-CV-0003-AS, originally filed in1999 and previously reported by the Company in prior filings, was dismissed withprejudice in December 2001 in connection with a final settlement entered into bythe parties, with no material effect on the Company's financial position orresults of operations.ITEM 4--SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS None to report. 12ITEM 4A--RISK FACTORS Investing in our securities involves a high degree of risk. Inaddition to the other information contained in this Form 10-K, including thereports we incorporate by reference, you should consider the following factorsbefore investing in our securities:We Face Intense Competition. The truck trailer manufacturing industry is highlycompetitive. We compete with other truck trailer manufacturers of varying sizes,some of which may have greater financial resources than we do. Barriers to entryin the truck trailer manufacturing industry are low and, therefore, it ispossible that additional competitors could enter the market at any time. Certainparticipants in the industry in which we compete may have manufacturingover-capacity and high leverage, and the industry has experienced a number ofbankruptcies and financial stresses, all of which have resulted in significantpricing pressures. Our inability to compete effectively with existing orpotential competitors would have a material adverse effect on our business,financial condition and results of operations.Our Business Is Cyclical and Has Been Adversely Affected By An EconomicDownturn. The truck trailer manufacturing industry historically has been and isexpected to continue to be cyclical and affected by overall economic conditions.New trailer production for the trailer industry as a whole decreased to 140,084units in 2001 as compared to 270,817 units in 2000 and 317,388 units in 1999 andthe current forecast for industry shipments in 2002 is between 120,000 and160,000 units. Customers have historically replaced trailers in cycles that runfrom six to twelve years depending on service and trailer type. Poor economicconditions can adversely affect demand for new trailers and in the past have ledto an overall aging of trailer fleets beyond this typical replacement cycle. Ourbusiness is likely to continue to be adversely affected unless economicconditions improve. Our New Technology and Products May Not Achieve Market Acceptance. We haverecently introduced new products including the DuraPlate(R) composite platetrailer, constructed from a high density vinyl core with a steel skin. There canbe no assurance that these or other new products or technologies will achievesustained market acceptance. There can also be no assurance that newtechnologies or products introduced by competitors will not render our productsobsolete or uncompetitive. We have taken steps to protect our proprietary rightsin these new products. However, the steps we have taken to protect them may notbe sufficient or may not be enforced by a court of law. If we are unable toprotect our proprietary rights, other parties may attempt to copy or otherwiseobtain and use our products or technology. If competitors are able to use ourtechnology, our ability to compete effectively could be harmed.We Rely on the Strength of our Corporate Partnerships and the Success of OurCustomers. We have corporate partnering relationships with a number of customerswhere we supply the requirements of these customers. To a significant extent,our success is dependent upon the continued strength of their relationships withus and the growth of our corporate partners. Our customers are often adverselyaffected by the same economic conditions that adversely affect us. Further, weoften are unable to predict the level of demand for our products from thesepartners, or their timing of orders. The loss of a significant customer orunexpected delays in product purchases could have a material adverse effect onour business, financial condition and results of operations.Some of our Customers May be Financially Unstable.Some of our customers in the transportation industry are highly leveraged andhave limited access to capital. Therefore, their continued existence may beuncertain. Our financial condition may be affected by the financial stability ofthese customers.We Have A Limited Number of Suppliers of Raw Materials and No Guarantee ofContinued Availability of Raw Materials. We currently rely on a limited numberof suppliers for certain key components in the manufacturing of truck trailers.The loss of our suppliers or the inability of the suppliers to meet our price,quality, quantity and delivery requirements could have a material adverse effecton our business, financial condition and results of operations.We Have Limited Capital Resources.Our ability to access the capital markets is dependent on perceived current andfuture business prospects, as well as the Company's current financial condition.The Company has experienced liquidity problems in the past and as of December31, 2001, the Company was in violation of its financial covenants with certainof its lenders. While the Company believes it had addressed its liquidityproblems by restructuring its 13indebtedness, there can be no assurance that it will continue to be incompliance with the terms of its new debt agreements. In addition, there can beno assurance that the Company will have sufficient resources to meet its debtservice requirements, working capital needs and capital resource requirements.If the Company is unable to comply with the terms of its new debt agreements, itcould be forced to further modify its operations or it may be unable to continueas a going concern. (As the Company's lenders could foreclose on the Company'sassets.) It is also dependent on the Company's ability to manage the business tomeet lender's financial requirements. Accordingly, the Company is limited as tothe availability of capital to fund future operations and expansions which couldadversely effect the continuing operations of the Company.We Have a Single Manufacturing Location.Our primary manufacturing operations are located in Lafayette, Indiana. If theproduction in these facilities were unexpectedly disrupted for any length oftime, it would have a material adverse effect on our business, financial condition and results of operations.Used Trailer Values May Decline.Used trailer values at any point in time are influenced by economic and industryconditions, as well as supply. The Company maintains inventories of usedtrailers, equipment held for lease, finance contracts secured by used trailersand has entered into residual guarantees and purchase commitments for usedtrailers as part of its normal business practices. Declines in the market valuefor used trailers or the need to dispose of excess inventories has had and couldin the future have a material adverse effect on our business, financialcondition and results of operations.We are Subject to Government Regulations That May Adversely Affect OurProfitability. The length, height, width, maximum weight capacity and otherspecifications of truck trailers are regulated by individual states. The FederalGovernment also regulates certain safety features incorporated in the design oftruck trailers. Changes or anticipation of changes in these regulations can havea material impact on our customers, may defer customer purchasing decisions, mayresult in reengineering and may affect our financial results. In addition, weare subject to various environmental laws and regulations dealing with thetransportation, storage, presence, use, disposal and handling of hazardousmaterials, discharge of stormwater and underground fuel storage tanks and may besubject to liability associated with operations of prior owners of acquiredproperty. If we are found to be in violation of applicable laws or regulations,it could have a material adverse effect on our business, financial condition andresults of operations.We May Not Be Successful in Integrating Businesses that We Acquire into OurBusiness. We have made and expect to make acquisitions of technology, businessesand product lines in the future. Our ability to expand successfully throughacquisitions depends on many factors, including the successful identificationand acquisition of products, technologies or businesses and management's abilityto effectively integrate and operate the acquired products, technologies orbusinesses. We may compete for acquisition opportunities with other companiesthat have significantly greater financial and management resources. There can beno assurance that the Company will be successful in acquiring or integrating anysuch products, technologies or businesses. 14PART IIITEM 5--MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange(ticker symbol: WNC). The number of record holders of the Company's common stockat February 28, 2002, was 1,039. High and low stock prices and dividends for the last two years were: DIVIDENDS DECLARED PER HIGH LOW COMMON SHARE ------ ------ ------------ 2001 Fourth Quarter .............. $ 8.74 $ 6.62 $ -- Third Quarter ............... $12.45 $ 6.32 $ 0.01 Second Quarter .............. $13.33 $ 9.75 $ 0.04 First Quarter ............... $12.00 $ 8.25 $ 0.042000 Fourth Quarter .............. $ 9.25 $ 7.25 $ 0.04 Third Quarter ............... $12.94 $ 8.31 $ 0.04 Second Quarter .............. $15.25 $10.50 $ 0.04 First Quarter ............... $17.88 $13.00 $ 0.04 On December 28, 2001, the Board of Directors suspended the Company'spayment of common stock dividends. There is no assurance that these dividendswill be paid in the future as they depend on future earnings, capitalavailability and financial conditions. 15ITEM 6--SELECTED FINANCIAL DATA The following selected consolidated financial data with respect tothe Company, for the five years in the period ended December 31, 2001, have beenderived from the Company's consolidated financial statements, which have beenaudited by Arthur Andersen LLP, independent public accountants, as indicated intheir reports. The following information should be read in conjunction withManagement's Discussion and Analysis of Financial Condition and Results ofOperations and the consolidated financial statements and notes thereto includedelsewhere herein. Years Ended December 31, ------------------------------------------------------------------------- 2001(1) 2000 1999 1998 1997 ---- ---- ---- ---- ---- (Dollar amounts in thousands, except per share data)STATEMENT OF OPERATIONS DATA:Net sales .................................. $ 863,392 $ 1,332,172 $ 1,454,570 $ 1,292,259 $ 846,082Cost of sales .............................. 982,605(2) 1,216,205(3) 1,322,852 1,192,968 778,620 --------- ----------- ----------- ----------- --------- Gross profit (loss) ................... (119,213) 115,967 131,718 99,291 67,462Selling, general and administrative expenses 82,325 55,874 50,796 38,626 26,307Restructuring charge ....................... 37,864 36,338 -- -- -- --------- ----------- ----------- ----------- --------- Income (loss) from operations ......... (239,402) 23,755 80,922 60,665 41,155Interest expense ........................... (21,292) (19,740) (12,695) (14,843) (16,100)Accounts receivable securitization costs ... (2,228) (7,060) (5,804) (3,966) --Equity in losses of unconsolidated affiliate (7,668) (3,050) (4,000) (3,100) (400)Restructuring charges, net ................. (1,590) (5,832) -- -- --Foreign exchange losses, net ............... (1,706) -- -- -- --Other, net ................................. (1,139) 877 6,310 (259) 1,135 --------- ----------- ----------- ----------- --------- Income (loss) before income taxes ..... (275,025) (11,050) 64,733 38,497 25,790Provision (benefit) for income taxes ....... (42,857) (4,314) 25,891 15,226 10,576 --------- ----------- ----------- ----------- --------- Net income (loss) ..................... $(232,168) $ (6,736) $ 38,842 $ 23,271 $ 15,214 ========= =========== =========== =========== =========Basic earnings (loss) per common share ..... $ (10.17) $ (0.38) $ 1.60 $ 1.00 $ 0.74 ========= =========== =========== =========== =========Diluted earnings (loss) per common share ... $ (10.17) $ (0.38) $ 1.59 $ 0.99 $ 0.74 ========= =========== =========== =========== =========Cash dividends declared per common share ... $ 0.09 $ 0.16 $ 0.1525 $ 0.1425 $ 0.13 ========= =========== =========== =========== =========(1) The 2001 amounts reflect the results of operations for the 10 branches acquired from Breadner on January 5, 2001.(2) Includes used trailer inventory valuation charges of $62.1 million, a restructuring related charge of $3.7 million, and loss contingencies (1) and impairment charges related to the Company's leasing operations of $37.9 million.(3) Includes a $4.5 million charge related to the Company's restructuring activities. Years Ended December 31, ---------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (Dollar amounts in thousands)BALANCE SHEET DATA: Working capital $111,299 $270,722 $228,751 $271,256 $280,212 Total equipment leased to others & finance contracts 160,098 108,451 130,626 117,038 103,222 Total assets 692,504 781,614 791,291 704,486 629,870 Total debt 334,703 238,260 167,881 168,304 236,028 Capital lease obligations 77,314 -- -- -- -- Stockholders' equity 130,985 367,233 379,365 345,776 226,516 16ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of Wabash National Corporation's (Wabash orthe Company) historical results of operations and of its liquidity and capitalresources should be read in conjunction with the consolidated financialstatements and related notes thereto. Wabash designs, manufactures and markets standard and customizedtruck trailers under the Wabash(TM), Fruehauf(R) and RoadRailer(R) trademarks.The Company produces and sells aftermarket parts through its division, WabashNational Parts and its wholly-owned subsidiary, North American TrailerCenters(TM) (NATC). In addition to its aftermarket parts sales and service, NATCsells new and used trailers through its retail network as well as providingrental, leasing and finance programs to its customers for new and used trailers.OVERVIEW In 2001, the demand for new trailers in the United States declinedsubstantially resulting in an industry decline of 48.3% in new production from270,817 units in 2000 to 140,084 units in 2001. This decline resulted fromoverall economic conditions in the US economy, which reduced the level offreight tonnage shipped in 2001, and ongoing challenges in the motor-carrierindustry principally caused by high fuel prices and lower revenues per mile dueto intense competition for shipments. The Company's market share declinedslightly to 22.6% during 2001. The Company's backlog declined from $639.5million as of December 31, 2000 to $142.1 million as of December 31, 2001. This significant reduction in demand along with historicalmanufacturing over-capacity in the truck trailer industry resulted insignificant losses being reported by the industry as a whole. Further impactingthe Company was a significant decline in the demand for used trailers caused bythe general economic and industry conditions previously discussed and theCompany's excess supply of used trailers. The Company's supply of used trailerscomes from accepting trade-ins of used trailers from its customers upon the saleof new trailers. The excess supply of used trailers was further impacted by theCompany's backlog of new trailer orders totaling $639.5 million at December 31,2000, in which the Company had previously agreed upon the pricing terms for thenew trailers and the trade-in allowance for the used trailers. This excesssupply and decline in demand coupled with the Company's decision to liquidateused trailers during the second half of 2001 resulted in significant usedtrailer market value declines during 2001. In response to the matters discussedabove, during 2001, the Company closed two of its manufacturing facilities andtwo of its sales and services branches. As a result of these items, the Companyincurred significant restructuring, impairment and inventory valuation charges(See notes 2, 4, 9 and 10 for details). Also, in January 2002, the Companycompleted its divestiture of ETZ, the majority shareholder of BTZ, a EuropeanRoadrailer(R) operating company based in Munich, Germany which had yet toachieve profitable operating results. As a result of these conditions, the Company reported a loss fromoperations of $239.4 million for the year ended December 31, 2001, compared toincome from operations of $23.8 million for the year ended December 31, 2000.The losses reported for 2001 resulted in the Company being in technicalviolation of its financial covenants with certain of its lenders at December 31,2001. In April 2002, the Company entered into an agreement with its lenders to restructure its existing revolving bank line of credit, Senior Series Notes andRental Fleet Facility and to waive violations of certain financial covenants through March 30, 2002. The restructuring changes debt maturity and principalpayment schedules, provides for all unencumbered assets to be pledged ascollateral, increases interest rates, and requires the Company to meet newlyestablished financial covenants (See note 13 for details regarding the debtrestructuring). While the Company believes that industry conditions are likely topersist throughout 2002, the Company believes it has significantly restructuredits operations and, based on its projections, the Company anticipates generatingpositive earnings before interest, taxes, depreciation and amortization in 2002.Although the Company believes that the assumptions underlying the 2002projections are reasonable, there are risks related to further declines inmarket demand and reduced sales in the U.S. and Canada, adverse interest rate orcurrency movements, realization of anticipated cost reductions and levels ofused trailer trade-ins that could cause actual results to differ from theprojections. Should results continue to decline, the Company is prepared to takeadditional cost cutting actions. While there can be no assurance that theCompany will achieve these results, the Company believes it has adequatelymodified its operations to be in compliance with its financial covenantsthroughout 2002 and believes that its existing sources of liquidity 17combined with its operating results will generate sufficient liquidity such thatthe Company has the ability to meet its obligations as they become duethroughout 2002. During 2001, the Company incurred losses of $73.4 related to thewrite-down and sale of used trailers as compared to $13.1 in 2000. Theseincreased losses were the result of decreased demand for used equipment and theCompany's excess supply of used trailer inventory which combined to decreasemarket values for equipment during 2001. The Company's supply of used trailershas grown significantly over the past two years as a result of large fleet tradedeals with certain customers. During 2001 and 2000, the Company acceptedapproximately $135.5 million and $177.0 million in trade-ins of used trailers.During the third quarter, the Company, to reduce working capital in order toaddress liquidity concerns, changed its strategy to focus on the wholesaleliquidation of used trailer inventory. This change in strategy enabled theCompany to reduce working capital needs and generate cash, but resulted infurther pressures in used trailer market values which resulted in lossesincluded in the amounts above. During the third quarter of 2001, the Company recorded restructuringand other related charges totaling $40.5 million primarily related to therationalization of the Company's manufacturing capacity resulting in the closureof the Company's platform manufacturing facility in Huntsville, Tennessee, andits dry van facility in Fort Madison, Iowa. In addition, the Company closed aparts distribution facility in Montebello, California. Included in the $40.5million restructuring charge is the write-down of certain impaired fixed assetsto their fair market value ($33.8 million charge), accrued severance benefitsfor approximately 600 employees ($0.9 million) and plant closure and other costs($2.1 million). In addition, a $3.7 million charge is included in cost of salesrelated to inventory write-downs at the closed facilities. During the fourthquarter of 2001, the Company reduced its plant closure reserve by approximately$0.9 million as a result of the Company's ability to effectively control itsclosure costs. The Company's impairment charge reflects the write-down of certainlong-lived assets that became impaired as a result of management's decision toclose its operations at the two manufacturing plants discussed above. Theimpairment was computed in accordance with the provisions of SFAS 121. Theestimated fair market value of the impaired assets totaled $6.7 million and wasdetermined by management based upon economic conditions, potential alternativeuses and potential markets for the assets which are held for sale and,accordingly, are classified in prepaid expenses and other in the accompanying Consolidated Balance Sheets. Depreciation has been discontinued on the assetsheld for sale pending their disposal. In December 2000, the Company recorded restructuring and otherrelated charges totaling $46.6 million primarily related to the Company's exitfrom manufacturing products for export outside the North American market,international leasing and financing activities and the consolidation of certaindomestic operations. Included in this total is $40.8 million that has beenincluded as a component in computing income from operations. Specifically, $19.1million of this amount represented the impairment of certain equipment subjectto leases with the Company's international customers, $8.6 million representedlosses recognized for various financial guarantees related to internationalfinancing activities, and $6.9 million was recorded for the write-down of otherassets as well as charges associated with the consolidation of certain domesticoperations including severance benefits of $0.2 million. Also included in the$40.8 million is a $4.5 million charge for inventory write-downs related to therestructuring actions which is included in cost of sales. The Company hasrecorded $5.8 million as a restructuring charge in Other Income (Expense)representing the write-off of the Company's remaining equity interest in ETZ fora decline in fair value that is deemed to be other than temporary. The total impairment charge recognized by the Company as a result ofits restructuring activities was $26.7 million. This amount was computed inaccordance with the provisions of SFAS 121. The estimated fair value of theimpaired assets totaled $3.4 million and was determined by management based uponeconomic conditions and potential alternative uses and markets for theequipment. In January 2002, the Company completed its divestiture of ETZ. As aresult of this divestiture the Company adjusted its restructuring reserve by$1.4 million during the fourth quarter. This adjustment primarily relates to theassumption of certain financial guarantees in connection with the divestiture. Under the provisions of SFAS No. 131, Disclosures about Segments ofan Enterprise and Related Information, the Company has two reportable segments:manufacturing and retail and distribution. The manufacturing segment producestrailers and sells new trailers to customers who purchase trailers direct orthrough independent dealers and also produces trailers for the retail anddistribution segment. The retail and 18distribution segment includes the sale, leasing and financing of new and usedtrailers, as well as the sale of aftermarket parts and service through itsretail branch network. In addition, the retail and distribution segment includesthe sale of aftermarket parts through Wabash National Parts. The accounting policies of the segments are the same as thosedescribed in the summary of significant accounting policies except that theCompany evaluates segment performance based on income from operations. TheCompany has not allocated certain corporate related charges such asadministrative costs, interest expense and income taxes from the manufacturingsegment to the Company's other reportable segments. The Company accounts forintersegment sales and transfers at cost plus a specified mark-up.Critical Accounting PoliciesA summary of the Company's critical accounting policies is as follows:Use of Estimates The preparation of consolidated financial statements in conformity withaccounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that directly affect the amountsreported in its consolidated financial statements and accompanying notes. Actualresults could differ from these estimates.Revenue Recognition The Company recognizes revenue from the sale of trailers and aftermarketparts when risk of ownership is transferred to the customer. Revenue isgenerally recognized upon shipment. Customers that have requested to pick uptheir trailers are invoiced prior to taking physical possession when thecustomer has made a fixed commitment to purchase the trailers, the trailers havebeen completed and are available for pickup or delivery, the customer hasrequested in writing that the Company hold the trailers until the customerdetermines the most economical means of taking possession and the customer takespossession of the trailers within a specified time period. In such cases, thetrailers, which have been produced to the customer specifications, are invoicedunder the Company's normal billing and credit terms. The Company recognizes revenue from direct finance leases based upon aconstant rate of return while revenue from operating leases is recognized on astraight-line basis in an amount equal to the invoiced rentals.Used Trailer Trade Commitments The Company has commitments with customers to accept used trailers on tradefor new trailer purchases. As of December 31, 2001, the Company hadapproximately $25.7 million of outstanding trade commitments with customers.The net realizable value of these commitments was approximately $18.0 million asof December 31, 2001. The Company's policy is to recognize losses related tothese commitments, if any, at the time the new trailer revenue is recognized.Accounts Receivable Accounts receivable as of December 31, 2001 and 2000 were $58.4 million and$49.3 million, respectively, and are shown net of allowance for doubtfulaccounts. Accounts receivable includes trade receivables and amounts due underfinance contracts. Provisions to the allowance for doubtful accounts arecharged to General and Administrative expenses on the Consolidated Statements ofOperations. Inventories Inventories are primarily stated at the lower of cost, determined on thefirst-in, first-out (FIFO) method, or market. The cost of manufacturedinventory includes raw material, labor and overhead. Inventories consist ofthe following (in thousands): December 31, 2001 2000Raw materials and components ................ $ 38,235 $ 84,167Work in progress ............................ 10,229 18,765Finished goods .............................. 58,984 93,332Aftermarket parts ........................... 22,726 33,566Used trailers ............................... 60,920 100,496 $ 191,094 $ 330,326 The Company recorded used trailer inventory valuation adjustments totaling$62.1 million and $9.6 million during 2001 and 2000, respectively. Theseadjustments, which are reflected in cost of sales on the Consolidated Statementsof Operations, were calculated in accordance with the Company's inventoryvaluation policies that are designed to state used trailers at the lower of costor market. Long-Lived Assets Long-lived assets are reviewed for impairment in accordance with Statementof Financial Accounting Standards No. 121, Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed Of, whenever factsand circumstances indicate that the carrying amount may not be recoverable.Specifically, this process involves comparing an asset's carrying value to theestimated undiscounted future cash flows the asset is expected to generate overits remaining life. If this process were to result in the conclusion that thecarrying value of a long-lived asset would not be recoverable, a write-down ofthe asset to fair value would be recorded through a charge to operations. Accrued Liabilities Accrued liabilities primarily represent accrued payroll related items, restructuring reserves, warranty reserves, loss contingencies related to usedtrailer residual commitments and self insurance reserves related to groupinsurance and workers compensation. Changes in the estimates of these reservesare charged or credited to income in the period determined. The Company is self-insured up to specified limits for medical and workers'compensation coverage. The self-insurance reserves have been recorded toreflect the undiscounted estimated liabilities, including claims incurred butnot reported. The Company recognizes a loss contingency for used trailer residualcommitments for the difference between the equipment's purchase price and itsfair market value, when it becomes probable that the purchase price at theguarantee date will exceed the equipment's fair market value at that date. The Company's warranty policy generally provides coverage for components ofthe trailer the Company produces or assembles. Typically, the coverage periodis one year for container chassis and specialty trailers and five years for dryfreight, refrigerated and flat bed trailers. The Company's policy is to accruethe estimated cost of warranty coverage at the time of the sale. The warrantyreserve at December 31, 2001 and 2000 was approximately $11.3 million and $5.2million, respectively. RESULTS OF OPERATIONS The following table sets forth certain operating data as apercentage of net sales for the periods indicated: Percentage of Net Sales Years Ended December 31, -------------------------------- 2001 2000 1999 ------ ------ ------ Net sales .................................. 100.0% 100.0% 100.0%Cost of sales .............................. 113.8(1) 91.3(2) 90.9 ------ ------ ------ Gross profit ....................... (13.8) 8.7 9.1General and administrative expense ......... 6.6 2.6 2.1Selling expense ............................ 2.9 1.6 1.4Restructuring charge ....................... 4.4 2.7 -- ------ ------ ------ Income from operations ............. (27.7) 1.8 5.6Interest expense ........................... (2.5) (1.5) (0.9)Accounts receivable securitization costs ... (0.3) (0.5) (0.4)Equity in losses of unconsolidated affiliate (0.9) (0.2) (0.3)Restructuring charge ....................... (0.2) (0.4) --Foreign exchange losses, net ............... (0.2) -- --Other, net ................................. (0.1) -- 0.4 ------ ------ ------ Income (loss) before taxes ......... (31.9) (0.8) 4.4Provision (benefit) for income taxes ....... (5.0) (0.3) 1.8 ------ ------ ------ Net income (loss) .................. (26.9)% (0.5)% 2.6% ====== ====== ====== (1) Includes used trailer inventory valuation charges of $62.1 million (7.2%), a restructuring related charge of $3.7 million (0.4%) and loss contingencies and impairment charges related to the Company's leasing operations of $37.9 million (4.4%). (2) Includes a $4.5 million charge (0.3%) related to the Company's restructuring activities.2001 Compared to 2000 Net income (loss) for 2001 was ($232.2) million as compared to($6.7) million in 2000. This sharp decrease was primarily driven by decreasednew trailer sales, restructuring and impairment charges and losses related toused trailers.Net Sales The Company finished 2001 with net sales of approximately $863.4million on a consolidated basis compared to $1,332.2 million in 2000. Thisdecrease was the result of lower net sales in the manufacturing segmentpartially offset by increased net sales in the retail and distribution segment. 19 Years Ended December 31, ------------------------------- 2001 2000 % Change --------- ---------- -------- Net External Sales by Segment: (Dollar amounts in millions) Manufacturing ......... $ 518.2 $ 1,013.1 (48.9%) Retail and Distribution 345.2 319.1 8.2% --------- ---------- -----Total Net Sales ............. $ 863.4 $ 1,332.2 (35.2%) ========= ========== ===== The manufacturing segment's external net sales decreased 48.9% (or$494.9 million) in 2001 compared to 2000 driven almost entirely by a 48.1%decrease in the number of units sold, from approximately 59,700 units in 2000 toapproximately 31,000 units in 2001. In addition, the average selling price pernew trailer sold decreased by approximately 1.2% in 2001 compared to 2000 fromapproximately $16,900 in 2000 to approximately $16,700 in 2001. These decreaseswere driven by unfavorable overall economic conditions in the trailer industry.The Company's market share in the U.S. trailer industry decreased slightlyduring 2001 from approximately 24.5% in 2000 to approximately 22.8% in 2001. Asof December 31, 2001, the Company's backlog of orders was approximately $142.1million, as compared to $639.5 million as of December 31, 2000. The retail and distribution segment's external net sales increasedby 8.2% (or $26.1 million) during 2001 compared to 2000. This increase wasprimarily driven by increased sales from new branch and rental centers openedand acquired during 2001. As on a same store basis net sales decreased by 21.7%.The total number of store locations as of December 31, 2001 was 47 as comparedto 34 as of December 31, 2000. The addition of these new stores resulted inleasing revenues and new trailer sales increasing by approximately 29.8% (or$9.8 million) and 21.9% (or $18.5 million), respectively, in 2001 as compared to2000. The increase in rental and leasing revenue reflects the Company's strategyto expand its rental and leasing operations. The increase in new trailer revenuewas driven by a 41.9% increase in the number of units sold from approximately4,300 units in 2000 to approximately 6,100 units in 2001, partially offset by a14.7% decline in the average selling price from approximately $19,700 in 2000 toapproximately $16,800 in 2001. Used trailer revenue was relatively flat in 2001as compared to 2000.Gross Profit (Loss) The Company finished 2001 with gross profit (loss) as a percent ofsales of (13.8%) on a consolidated basis as compared to 8.7% in 2000. As discussed below, both of the Company's segments contributed to this decrease. Years Ended December 31, --------------------------------- 2001 2000 % Change --------- --------- -------- Gross Profit (Loss) by Segment: (Dollar amounts in millions) Manufacturing ......... $ (73.9) $ 86.7 (185%) Retail and Distribution (47.6) 31.5 (251%) Eliminations .......... 2.3 (2.2) 205% --------- --------- ----Total Gross Profit (Loss) .... $ (119.2) $ 116.0 (203%) ========= ========= ==== The manufacturing segment's gross profit (loss) decreased by 185%(or $160.6 million) primarily as a result of the following factors: - the decrease in net sales previously discussed; - new trailer and used trailer inventory valuation adjustments of approximately $3.0 million and $62.1 million, respectively; - increased warranty expense of approximately $7.0 million; and - the impact of inventory write-downs related to the Company's 2001 restructuring actions of approximately $3.7 million These factors were offset somewhat by cost reductions realized fromthe Company's 2001 and 2000 restructuring actions. 20 The retail and distribution segment's gross profit (loss) decreasedby 251% (or $79.1 million) primarily as a result of the following factors: - decline in average selling prices for new trailer sales of 14.7%; - impairment of equipment held for lease along with certain loss contingencies recognized related to its leasing activities totaling approximately $37.9 million; - decline in used trailer margins of approximately $8.0 million primarily as a result of the liquidation of the Company's used trailer inventory - new trailer and aftermarket parts inventory valuation adjustments of approximately $3.5 million and $3.0 million, respectively; and - decline in the equipment held for lease utilization rate during 2001 These factors were somewhat offset by gross margins of approximately $2.8million generated from the recently acquired Canadian branches.Income (Loss) from Operations (before interest, taxes and other items) The Company finished 2001 with income (loss) from operations as apercent of sales of (27.7%) on a consolidated basis as compared to 1.8% in 2000.As discussed below, both of the Company's segments contributed to this decrease. Years Ended December 31, --------------------------------- 2001 2000 % Change --------- --------- -------- Operating Income (Loss) by Segment: (Dollar amounts in millions) Manufacturing $ (148.7) $ 36.9 (502%) Retail and Distribution (93.0) (10.9) (753%) Eliminations 2.3 (2.2) 205% --------- --------- ------Total Operating Income (Loss) $ (239.4) $ 23.8 (1,105%) ========= ========= ====== The manufacturing segment and the retail and distribution segment'sincome from operations decreased by 502% (or $185.6 million) and 753% (or $82.1million), respectively, primarily as a result of the decrease in gross profit(loss) previously discussed along with increased bad debt expense. Bad debtexpense for the manufacturing segment and retail and distribution segmentincreased by approximately $8.2 million and $8.7 million, respectively, in 2001compared to 2000. This increase reflects deteriorating economic conditions inthe transportation industry during 2001. The manufacturing segment also incurredhigher expenses related to professional fees and employee separation pay. Theretail and distribution segment also incurred increased selling, general andadministrative expenses to support the Company's expanding rental and leasingbusiness and to increase used trailer sales volume.Other Income (Expense) Interest expense totaled $21.3 million and $19.7 million for theyears ended December 31, 2001 and 2000, respectively. The increase in interestexpense primarily reflects higher borrowings under the Company's revolvingcredit facilities during 2001. Accounts receivable securitization costs related to the Company'saccounts receivable securitization facility, decreased from $7.1 million in 2000to $2.2 million in 2001 primarily as a result of decreased borrowings under thisfacility during 2001. Equity in losses of unconsolidated affiliate consists of theCompany's interest in the losses of ETZ, a non-operating, European holdingcompany, which is the majority shareholder of BTZ, a European RoadRailer(R)operating company based in Munich, Germany. As part of the Company's 2000restructuring activities, the Company recorded a $5.8 million charge to OtherIncome (Expense) during 2000 and an additional $1.4 million charge in 2001, aspart of its planned divestiture of this investment. In January 2001, inconnection with its restructuring activities, the Company increased itsownership interest in ETZ from 25.1% to 100%. Accordingly, the Company's equityin losses of unconsolidated affiliate increased from $3.1 million in 2000 to$7.7 million in 2001 In January 2002, the Company completed its divestiture ofETZ. As a result of this divestiture, the Company will cease reflecting anownership interest in ETZ's results of operations in 2002. 21 Foreign currency transaction losses, net totaled $1.7 million and $0for the years ended December 31, 2001 and 2000, respectively. These net losseswere primarily a result of transaction gains and losses being recorded relatedto intercompany transactions between the Company and its recently acquiredCanadian subsidiary, as well as U.S. denominated transaction between theCanadian subsidiary and unrelated parties. Other, net was $1.1 million in expense during 2001 compared to $0.9million in income during 2000. Other, net primarily includes items such as interest income, gain or loss from the sale of fixed assets and other itemsIncome Taxes The Company's effective tax rates were 15.6% and 39% of pre-taxincome (loss) for 2001 and 2000, respectively. In 2001, the effective ratediffered from the U.S. federal statutory rate of 35% primarily due to therecognition of a valuation allowance against deferred tax assets that theCompany determined were more likely than not to be realized before expiration.In 2000, the effective rate differed from the U.S. Federal Statutory rateprimarily due to state taxes and the effects of permanent differences infinancial and tax reporting of certain transactions.2000 Compared to 1999 Net income (loss) for 2000 was ($6.7) million as compared to $38.8million in 1999. This decrease was driven primarily by lower sales and theimpact of restructuring and other related charges.Net Sales The Company finished 2000 with net sales of approximately $1.3billion on a consolidated basis compared to $1.5 billion in 1999. As discussedbelow, both of the Company's segments contributed to this decrease. Years Ended December 31, ---------------------------------- 2000 1999 % Change -------- -------- -------- Net External Sales by Segment: (Dollar amounts in millions) Manufacturing $1,013.1 $1,113.9 (9.0%) Retail and Distribution 319.1 340.7 (6.3%) -------- -------- ----Total Net Sales $1,332.2 $1,454.6 (8.4%) ======== ======== ==== The manufacturing segment's external net sales decreased 9.0% (or$100.8 million) in 2000 compared to 1999, driven primarily by a 6.9% decrease inthe number of units sold, from approximately 64,100 units in 1999 toapproximately 59,700 units in 2000. In addition, the average selling price pernew trailer sold decreased 1.7% during 2000 compared to 1999. The decrease innet sales during the period was primarily driven by the continued impact of ageneral slowing in freight tonnage, increased interest rates and continued highfuel prices within the transportation industry. As a result of these unfavorableconditions, the transportation industry continues to operate in a very difficultenvironment, which has caused new trailer orders to decrease. As of December 31,2000, the Company's backlog of orders was approximately $0.7 billion, over $0.4billion of which is related to the DuraPlate(R) trailer. The retail and distribution segment's external net sales decreased6.3% (or $21.6 million) during 2000 compared to 1999 driven primarily by a 3.6%decline in same store sales during the periods along with the reduction of abranch location during 2000. The total number of store locations as of December31, 2000 was 34 as compared to 35 as of December 31, 1999. 22Gross Profit The Company finished 2000 with gross profit as a percent of sales of8.7% on a consolidated basis, as compared to 9.1% in 1999. As discussed below,both of the Company's segments contributed to this decrease. Years Ended December 31, ------------------------------------------------- 2000 1999 % Change --------- ----------- --------- Gross Profit by Segment: (Dollar amounts in millions) Manufacturing $ 86.7 $ 99.6 (13.0%) Retail and Distribution 31.5 34.3 (8.2%) Eliminations (2.2) (2.2) 0.0% ------ -------- ----- Total Gross Profit $116.0 $ 131.7 (11.9%) ====== ======== ===== The manufacturing segment's gross profit decreased by 13.0% (or$12.9 million) primarily as a result of the following factors: - the decrease in net sales previously discussed; - start-up costs related to the state-of-the-art painting and coating system at its Huntsville, Tennessee plant; - increased depreciation and amortization primarily related to several projects completed and placed in service during the year; and - the impact of other charges related to restructuring. These factors were partially offset by the Company's strategy ofincreasing the proportion of revenues attributable to proprietary products, suchas the DuraPlate(R) trailer. These proprietary products accounted forapproximately 67% of production in 2000 as compared to 59% in 1999, and havebeen successful in generating higher gross profits than have historically beenpossible with a more traditional, commodity type product mix. The retail and distribution segment's gross profit decreased by 8.2%(or $2.8 million) primarily as a result of decreased net sales previouslydiscussed. This decrease was partially offset somewhat by increased sales foraftermarket parts, service revenues and rental, leasing and finance revenueswhich typically have higher margins as compared to the segment as a whole.Income (Loss) from Operations (before interest, taxes and other items) The Company finished 2000 with income (loss) from operations as apercent of sales of 1.8% on a consolidated basis, as compared to 5.6% in 1999.As discussed below, both of the Company's segments contributed to this decrease. Years Ended December 31, -------------------------------------------------- 2000 1999 % Change ---------- ---------- ----------- Operating Income by Segment: (Dollar amounts in millions) Manufacturing $ 36.9 $ 72.0 (48.8%) Retail and Distribution (10.9) 11.1 (198.2%) Eliminations (2.2) (2.2) 0.0% ------ ------- ------ Total Operating Profit $ 23.8 $ 80.9 (70.6%) ====== ======= ====== The manufacturing segment's income from operations decreased by48.8% primarily because of a $22.8 million charge related to the Company'srestructuring activities, as well as the decrease in gross profit previouslydiscussed. The retail and distribution segment's income from operationsdecreased by $22.0 million due primarily to a $13.6 million charge related to decreased by $22.0 million due primarily to a $13.6 million charge related tothe Company's restructuring activities and a $5.7 million increase in selling,general and administrative expenses. The increase in selling, general andadministrative expenses primarily reflects increased selling expensesprincipally to support increased sales activity in its aftermarket parts,service and trailer rental, leasing and finance businesses. 23Other Income (Expense) Interest expense totaled $19.7 million and $12.7 million for theyears ended December 31, 2000 and 1999, respectively. The increase in interestexpense primarily reflects higher interest rates coupled with the issuance ofadditional term debt and higher borrowings under the Company's revolving creditfacility during 2000 to fund increased investing activities and working capitalrequirements. Accounts receivable securitization costs related to the Company'sreceivable sale and servicing agreement increased from $5.8 million in 1999 to$7.1 million in 2000 primarily as a result of higher interest rates during theyear. Equity in losses of unconsolidated affiliate consists of theCompany's 25.1% interest in the losses of ETZ, a non-operating, European holdingcompany, acquired in November 1997. ETZ is the majority shareholder of BTZ, aEuropean RoadRailer(R) operating company based in Munich, Germany, which beganoperations in 1996. As part of its restructuring activities, during the fourthquarter of 2000, the Company recorded a $5.8 million charge to Other Income(Expense) in order to reflect its planned divestiture of this investment. In January 2001, in connection with its restructuring activities,the Company assumed the remaining ownership interest in ETZ from the majorityshareholder and in January 2002, the Company completed its divestiture of ETZ. Other, net totaled income of $0.9 million in 2000 compared to incomeof $6.3 million in 1999. Included in other, net for 1999 was the reversal of$3.5 million in an accrual related to the Company's favorable resolution of atax dispute with the Internal Revenue Service. During September 2000, theCompany's finance operation sold a portion of its leasing and finance portfolioto a large financial institution. Proceeds of the sale were approximately $20.8million and resulted in a loss of approximately $0.9 million, which is reflectedin Other, net in the accompanying Consolidated Statements of Income for 2000.Interest income was approximately $0.5 million and $0.8 million in 2000 and1999, respectively.Income Taxes The Company's effective tax rates were 39.0% and 40.0% of pre-taxincome (loss) for 2000 and 1999, respectively, and differed from the U.S.Federal Statutory rate of 35% due primarily to state taxes.LIQUIDITY AND CAPITAL RESOURCES At December 31, 2001, the Company had $11.1 million in cash and cashequivalents and $75 million outstanding under its $125 million revolving creditfacility. As of December 31, 2001, the Company was in technical default with theminimum net worth and debt to capital covenants under the revolving creditfacility and the minimum net worth covenants under its Senior Series Notesagreements. In April 2002, the Company renegotiated these agreements andreceived waivers of all covenant violations through March 30, 2002. Under thenew agreements, substantially all of the Company's assets are pledged ascollateral for the loans. The new agreements also require an increase in thecost of funds and impose new financial covenants. The Company believes that existing funds, cash generated fromoperations and availability of funds from its restructured credit facilities andaccounts receivable securitization should be adequate to satisfy working capital needs, capital expenditure requirements, interest and principal repayments ondebt for the foreseeable future. Management also anticipates the completion ofthe following transactions during 2002 that will provide additional financialresources for the Company: - Sale and leaseback of certain real property - $30 million; - Sale of idle assets currently held for sale - $10 million; and - Additional income tax refunds resulting from March 2002 tax law changes - $13 million. The Company received the $13 million income tax refund in April2002, however, there can be no assurance that the proceeds from the othertransactions will be available to the Company in 2002. 24 The Company's ongoing liquidity will depend upon a number of factorsincluding its ability to manage cash resources and meet the financial covenantsunder its new debt agreements. In the event the Company is unsuccessful inmeeting its debt service obligations or if expectations regarding the managementand generation of cash resources are not met, the Company would need toimplement severe cost reductions, reduce capital expenditures, sell additionalassets, restructure all or a portion of its existing debt and/or obtainadditional financing.Debt Restructuring: In April 2002, the Company entered into an agreement with itslenders to restructure its existing revolving credit facility and Senior SeriesNotes and waive violations of its financial covenants through March 30, 2002.The amendment changes debt maturity and principal payment schedules; providesfor all unencumbered assets to be pledged as collateral equally to the lenders;increases the cost of funds; and requires the Company to meet certain additionalfinancial conditions, among other items. The amended agreements also containrestrictions on acquisitions and the payment of preferred stock dividends. The Company's existing $125 million Revolving Credit facility wasrestructured into a $107 million term loan (Bank Term Loan) and an $18 millionrevolving credit facility (Bank Line of Credit). The Bank Term Loan and BankLine of Credit both mature on March 30, 2004 and are secured by all of theunencumbered assets of the Company. The $107 million Bank Term Loan, of whichapproximately $29 million consists of outstanding letters of credit, requiresmonthly payments of principal of $3.0 million per annum in 2002, $13.8 millionper annum in 2003, and $3.4 million per annum in 2004, with the balance dueMarch 30, 2004. In addition, principal payments will be made from excess cashflow, as defined in the agreement, on a quarterly basis. Any such additionalpayments will reduce the balance of the Bank Term Loan due March 30, 2004. Interest on the $107 million Bank Term Loan is variable based uponthe adjusted London Interbank Offered Rate ("LIBOR") plus 380 basis points andis payable monthly. Interest on the borrowings under the $18 million Bank Lineof Credit is based upon adjusted LIBOR plus 355 basis points or the agent bank'salternative borrowing rate as defined in the agreement. As of December 31, 2001, the Company had $192 million of SeniorSeries Notes outstanding which originally matured in 2002 through 2008. As partof the restructuring, the original maturity dates for $72 million of SeniorSeries Notes, payable in 2002 through March 2004, have been extended to March30, 2004. The maturity dates for the other $120 million of Senior Series Notesdue subsequent to March 30, 2004, remain unchanged. As consideration for theextension of the maturity dates the Senior Series Notes are now secured by allof the unencumbered assets of the Company. In addition, monthly principalpayments totaling $7.5 million in 2002, $33.8 million in 2003 and $8.4 millionin 2004 will be made on a prorata basis to all Senior Series Notes. In addition,principal payments will be made from excess cash flow, as defined in the agreement, on a quarterly basis. Interest on the Senior Series Notes, which ispayable monthly, increased by 325 basis points, effective April 2002, and rangesfrom 9.66% to 11.29%. In December 2000, the Company entered into a sale and leasebackfacility with an independent financial institution related to its trailer rentalfleet. The total facility size was $110 million and was syndicated in the firstquarter of 2001. The facility's initial term expires in June 2002, has fourannual renewal periods and contains financial covenants substantially identicalto the Company's existing credit facilities. In April 2002, the Company entered into an agreement with thefinancial institutions that were a party to the sale and leaseback facility towaive financial covenant violations through March 30, 2002 and amend the termsof the existing agreement. The amendment provided for increased pricing andconforms the financial covenants to those in the amended Bank Term Loan, BankLine of Credit and Senior Series Notes agreements described above. The initialterm of the facility remains unchanged, expiring in June 2002, however, theannual renewal periods have been reduced to three, with the last renewal periodbeing from July 2004 to January 2005. As a result of the amendments to the sale-leaseback facility, whichhad been accounted for as an operating lease, this facility was required to beincluded on the Consolidated Balance Sheet of the Company as of December 31,2001. Accordingly, the trailer rental fleet has been recorded as equipmentleased to others at its fair market value of approximately $42 million and acapital lease obligation of approximately 25$65 million, which reflects the unamortized lease value under this agreement. Anon-cash charge to cost of sales of $23 million was recorded in the ConsolidatedStatements of Operations for the year ended December 31, 2001 related to thedifference between the fair market values of the equipment and the unamortizedlease value. Assuming all renewal periods are elected, the Company will makepayments under this facility of $14.7 million, $14.2 million and $13.3 millionin 2002, 2003 and 2004, respectively. In April 2002, the Company replaced its existing $100 millionreceivable securitization facility with a new two year $110 million TradeReceivables Facility. The new facility allows the Company to sell, withoutrecourse, on an ongoing basis predominantly all of its domestic accountsreceivable to a wholly-owned, bankruptcy remote special purpose entity (SPE).The SPE sells an undivided interest in receivables to an outside liquidityprovider who, in turn, remits cash back to the SPE for receivables eligible forfunding. This new facility includes financial covenants identical to those inthe amended Bank Term Loan, Bank Line of Credit and Senior Series Notesagreements. The Company anticipates total fees to be incurred in 2002 inconnection with restructuring its Bank Term Loan, Bank Line of Credit, SeniorSeries Notes, rental fleet facility and Trade Receivables Facility, discussedabove, to be approximately $10 million. The Company has future residual guarantees and purchase options ofapproximately $34.7 million and $104.5 million, respectively, related to certainnew and used trailer transactions as well as certain production equipment. Themajority of these do not come due until 2002 or after. To the extent that thevalue of the underlying property is less than the residual guarantee and it islikely that the value is not expected to recover, the Company has recorded aloss contingency.Contractual Obligations and Commercial Commitments: A summary of payments due by period of the Company's contractualobligations and commercial commitments as of December 31, 2001 is shown in thetable below. The table reflects the obligations under the amended and restated credit agreement which was effective April 2002. A more complete description ofthese obligations and commitments is included in the Notes to the ConsolidatedFinancial Statements.Contractual Cash Obligations $ Millions 2002 2003 2004 2005 Thereafter Total--------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- DEBT (excluding interest): Revolving Bank Line of Credit $ 14.6 $ -- $ -- $ -- $ -- $ 14.6 Receivable Securitization Facility* 17.7 -- -- -- -- 17.7 Mortgages & Other Notes Payable 17.9 3.4 3.4 4.1 6.6 35.4 Bank Term Loan 3.0 13.8 58.2 -- -- 75.0 Senior Series Notes 7.5 33.8 68.8 20.7 61.2 192.0 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL DEBT $ 60.7 $ 51.0 $ 130.4 $ 24.8 $ 67.8 $ 334.7 ========== ========== ========== ========== ========== ==========OTHER: Capital Lease Obligations $ 27.2 $ 14.2 $ 13.3 $ 36.8 $ -- $ 91.5 Operating Leases 12.2 11.0 9.3 5.5 4.2 42.2 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL OTHER $ 39.4 $ 25.2 $ 22.6 $ 42.3 $ 4.2 $ 133.7 ========== ========== ========== ========== ========== ==========TOTAL $ 100.1 $ 76.2 $ 153.0 $ 67.1 $ 72.0 $ 468.4 ========== ========== ========== ========== ========== ==========*The Receivable Securitization Facility obligation reflects advances as ofDecember 31, 2001 which will be refinanced under the new Trade ReceivableFacility. 26Other Commercial Commitments $ Millions 2002 2003 2004 2005 Thereafter Total--------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Letters of credit $ -- $ -- $ 29.0 $ -- $ -- $ 29.0Residual guarantees 1.9 3.6 8.3 5.3 15.6 34.7 ---------- ---------- ---------- ---------- ---------- ----------TOTAL $ 1.9 $ 3.6 $ 37.3 $ 37.3 $ 15.6 $ 63.7 ========== ========== ========== ========== ========== ==========Explanation of Cash Flow The Company's cash position increased $6.9 million during 2001 from$4.2 million in cash and cash equivalents at December 31, 2000 to $11.1 millionat December 31, 2001. This increase was due to cash provided by financingactivities of $41.3 million partially offset by cash used in operating andinvesting activities of $34.4 million. Operating Activities: Net cash provided by operating activities of $6.4 million in 2001 isprimarily the result of the net loss offset by changes in working capital alongwith the add back of non-cash charges for depreciation and amortization;restructuring and other related charges; provision for losses on accountsreceivable; and inventory and contingency adjustments. Changes in working capital provided $57.4 million of net cash. Thisresulted from a reduction in inventory that was partially offset by acorresponding decrease in accounts payable and accrued liabilities. In addition,refundable income taxes increased during the year. The net decrease in inventory was primarily due to overall lowerlevels of production resulting from reduced demand from customers as thetransportation industry continued to be adversely impacted by unfavorableeconomic conditions. The Company reduced all components of manufacturinginventory and aftermarket parts during the year. Used trailer inventorybalances, excluding the effects of non-cash valuation charges remainedcomparable to the prior year. Accounts payable decreased $47.6 million primarily due to the lowerlevels of production and an emphasis by management on cost containment.Refundable income taxes increased $20.1 million as the Company recorded areceivable for income taxes paid in previous years due to the utilization of anet operating loss carryback. Accrued liabilities increased approximately $13.2million due in part to increase in warranty accruals. Investing Activities: Net cash used in investing activities of $40.8 million consisted ofthe following: Capital expenditures were $5.9 million during 2001 and were largelyrelated to maintaining facilities. The Company invested approximately $70.4 million, net in its rentaland operating lease portfolio in 2001 compared to $69.6 million in 2000. Theincrease in the Company's rental and operating lease portfolio primarilyreflects the Company's strategy to expand its used trailer rental program and isoffset somewhat by $40.0 million of proceeds from a sale and leaseback facilityrelated to the Company's trailer rental facility and $9.7 million in proceedsreceived during the normal course of business. The Company's finance contract portfolio remained virtuallyunchanged. Additional investments in finance contracts of $18.7 million werepartially offset by payments received of $6.8 million and the sale ofapproximately $10.8 million of contracts sold primarily to a large financialinstitution. In January 2001, the Company acquired the stock of the BreadnerGroup of Companies (the Breadner Group), headquartered in Kitchener, Ontario,Canada for approximately $6.3 million in cash, $10.0 million in long-term notesand the assumption of certain indebtedness. This transaction was accounted foras a purchase. The purchase price in excess of the fair value of assetspurchased and liabilities assumed of 27approximately $13 million as been recorded as goodwill and is being amortizedover a twenty-five year period.Financing Activities: Net cash provided by financing activities of $41.3 million in 2001is primarily due to an increase in total debt of $46.0 million offset partiallyby the payment of common stock and preferred stock dividends of approximately$4.9 million. In connection with the aforementioned activity, the Company's totaldebt increased to $334.7 million at December 31, 2001 compared to $238.3 millionat December 31, 2000. This increase is comprised of net increases in short-termborrowings under the Company's revolving credit facilities of $46.0 million, andnon-cash transactions of approximately $18.9 million related to the acquisitionof Breadner and approximately $31.5 million of indebtedness reflected in thecurrent year which was previously accounted for as off-balance sheet financing.INFLATION The Company has been generally able to offset the impact of risingcosts through productivity improvements as well as selective price increases. Asa result, inflation is not expected to have a significant impact on theCompany's business.NEW ACCOUNTING PRONOUNCEMENTS The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities as amended by SFAS 137 and SFAS 138, as ofJanuary 1, 2001. These standards require that all derivative instruments berecorded on the balance sheet at fair value. The adoption of these standards didnot have an effect on the Company's annual results of operations or itsfinancial position. The Company adopted SFAS No. 142. Goodwill and Other IntangibleAssets, as of January 1, 2002. This new standard changes the accounting forgoodwill from an amortization method to an impairment-only approach, andintroduces a new model for determining impairment charges. SFAS No. 142 requirescompletion of the initial step of a transitional impairment test within sixmonths of the adoption of this standard and, if applicable, completion of thefinal step of the adoption by December 31, 2002. The Company is in the initialstages of evaluating the transitional impairment test and related impact, ifany, to the Company's results of operations and financial position. Goodwillamortization expense was approximately $1.1 million, $0.6 million and $0.2million, for 2001, 2000 and 1999, respectively. In June 2001, the Financial Accounting Standards Board (FASB) issuedSFAS No. 143, Accounting for Asset Retirement Obligations with an effective dateof June 15, 2002 which becomes effective for the Company on January 1, 2003.This Standard requires obligations associated with retirement of long-livedassets to be capitalized as part of the carrying value of the related asset. TheCompany does not believe the adoption of SFAS No. 143 will have a materialeffect on its financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for theImpairment or Disposal of Long-Lived Assets. Effective January 1, 2002, thisstandard sets forth a single accounting model for the accounting and reportingfor the impairment or disposal of long-lived assets. The Company is currentlyevaluating the provisions of SFAS No. 144 to determine the effect, if any, onits consolidated financial statements. 28ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In addition to the risks inherent in its operations, the Company hasexposure to financial and market risk resulting from volatility in commodityprices, interest rates and foreign exchange rates. The following discussionprovides additional detail regarding the Company's exposure to these risks. a. Commodity Price Risks The Company is exposed to fluctuation in commodity prices throughthe purchase of raw materials that are processed from commodities such asaluminum, steel, wood and virgin plastic pellets. Given the historicalvolatility of certain commodity prices, this exposure can significantly impactproduct costs. The Company manages aluminum and virgin plastic pellets pricechanges by entering into fixed price contracts with its suppliers prior to acustomer sales order being finalized. Because the Company typically does not setprices for its products in advance of its commodity purchases, it can take intoaccount the cost of the commodity in setting its prices for each order. To theextent that the Company is unable to offset the increased commodity costs in itsproduct prices, the Company's results would be materially and adverselyaffected. b. Interest Rates As of December 31, 2001, the Company had approximately $75 millionof London Interbank Rate (LIBOR) based debt outstanding under its Bank Line ofCredit, $14.6 million of outstanding borrowings under its Canadian RevolvingLine of Credit and $17.7 million of proceeds from its accounts receivablesecuritization facility, which also requires LIBOR based interest payments. Ahypothetical approximately 1.0 million increase in interest expense over aone-year period. This sensitivity analysis does not account for the change inthe Company's competitive environment indirectly related to the change in interest rates and the potential managerial action taken in response to thesechanges. c. Foreign Exchange Rates The Company has historically entered into foreign currency forwardcontracts (principally against the German Deutschemark and French Franc) tohedge the net receivable/payable position arising from trade sales (includinglease revenues) and purchases with regard to the Company's internationalactivities. The Company does not hold or issue derivative financial instrumentsfor speculative purposes. As of December 31, 2001, the Company had no foreigncurrency forward contracts outstanding. 29ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PAGES ----- Report of Independent Public Accountants...................................................... 32Consolidated Balance Sheets as of December 31, 2001 and 2000.................................. 33Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999.................................................................................... 34Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999........................................................................... 35Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.................................................................................... 36Notes to Consolidated Financial Statements.................................................... 37 30 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSTo the Shareholders of Wabash National Corporation: We have audited the accompanying consolidated balance sheets ofWABASH NATIONAL CORPORATION (a Delaware corporation) and subsidiaries as ofDecember 31, 2001 and 2000, and the related consolidated statements ofoperations, stockholders' equity and cash flows for each of the three years inthe period ended December 31, 2001. These financial statements are theresponsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standardsgenerally accepted in the United States. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion. In our opinion, the consolidated financial statements referred toabove present fairly, in all material respects, the financial position of WabashNational Corporation and subsidiaries as of December 31, 2001 and 2000, and theresults of their operations and their cash flows for each of the three years inthe period ended December 31, 2001, in conformity with accounting principlesgenerally accepted in the United States. ARTHUR ANDERSEN LLPIndianapolis, Indiana,April 12, 2002. 31 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) December 31, ------------------------ ASSETS 2001 2000 --------- --------- CURRENT ASSETS: Cash and cash equivalents ................................. $ 11,135 $ 4,194 Accounts receivable, net .................................. 58,358 49,320 Current portion of finance contracts ...................... 10,646 11,544 Inventories ............................................... 191,094 330,326 Refundable income taxes ................................... 25,673 5,552 Prepaid expenses and other ................................ 17,231 18,478 --------- --------- Total current assets ........................... 314,137 419,414 --------- ---------PROPERTY, PLANT AND EQUIPMENT, net ................................. 170,330 216,901 --------- ---------EQUIPMENT LEASED TO OTHERS, net .................................... 109,265 52,001 --------- ---------FINANCE CONTRACTS, net of current portion .......................... 40,187 44,906 --------- ---------INTANGIBLE ASSETS, net ............................................. 43,777 31,123 --------- ---------OTHER ASSETS ....................................................... 14,808 17,269 --------- --------- $ 692,504 $ 781,614 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES: Current maturities of long-term debt ...................... $ 60,682 $ 12,134 Current maturities of capital lease obligations ........... 21,559 -- Accounts payable .......................................... 51,351 94,118 Accrued liabilities ....................................... 69,246 42,440 --------- --------- Total current liabilities ...................... 202,838 148,692 --------- ---------LONG-TERM DEBT, net of current maturities .......................... 274,021 226,126 --------- ---------LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current maturities ..... 55,755 -- --------- ---------DEFERRED INCOME TAXES .............................................. -- 23,644 --------- ---------OTHER NONCURRENT LIABILITIES AND CONTINGENCIES ..................... 28,905 15,919 --------- ---------STOCKHOLDERS' EQUITY: Preferred stock, 482,041 shares issued and outstanding with an aggregate liquidation value of $30,600 ............ 5 5 Common stock, 23,013,847 and 23,002,490 shares issued and outstanding, respectively ........................ 230 230 Additional paid-in capital ................................ 236,804 236,660 Retained earnings (deficit) ............................... (104,469) 131,617 Accumulated other comprehensive loss ...................... (306) -- Treasury stock at cost, 59,600 common shares .............. (1,279) (1,279) --------- --------- Total stockholders' equity ..................... 130,985 367,233 --------- --------- $ 692,504 $ 781,614 ========= ========= The accompanying notes are an integral part of these Consolidated Statements. 32 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Years Ended December 31, ------------------------------------------- 2001 2000 1999 --------- ----------- ----------- NET SALES ........................................... $ 863,392 $ 1,332,172 $ 1,454,570COST OF SALES ....................................... 982,605 1,216,205 1,322,852 --------- ----------- ----------- Gross profit (loss) .................. (119,213) 115,967 131,718GENERAL AND ADMINISTRATIVE EXPENSES ................. 56,955 34,354 30,396SELLING EXPENSES .................................... 25,370 21,520 20,400RESTRUCTURING CHARGE ................................ 37,864 36,338 -- --------- ----------- ----------- Income (loss) from operations ........ (239,402) 23,755 80,922OTHER INCOME (EXPENSE): Interest expense ........................... (21,292) (19,740) (12,695) Accounts receivable securitization costs ... (2,228) (7,060) (5,804) Equity in losses of unconsolidated affiliate (7,668) (3,050) (4,000) Restructuring charges ...................... (1,590) (5,832) -- Foreign exchange losses, net ............... (1,706) -- -- Other, net ................................. (1,139) 877 6,310 --------- ----------- ----------- Income (loss) before income taxes .... (275,025) (11,050) 64,733PROVISION (BENEFIT) FOR INCOME TAXES ................ (42,857) (4,314) 25,891 --------- ----------- ----------- Net income (loss) .................... $(232,168) $ (6,736) $ 38,842PREFERRED STOCK DIVIDENDS ........................... 1,845 1,903 2,098 --------- ----------- -----------NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS ............................. $(234,013) $ (8,639) $ 36,744 ========= =========== ===========EARNINGS (LOSS) PER SHARE: Basic .................................... $ (10.17) $ (0.38) $ 1.60 ========= =========== =========== Diluted .................................. $ (10.17) $ (0.38) $ 1.59 ========= =========== =========== The accompanying notes are an integral part of these Consolidated Statements. 33 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS) Preferred Stock Common Stock ------------------- -------------------- Shares Amount Shares Amount ------ ------ ------ ------ BALANCES, December 31, 1998 ....... 482,041 $ 5 22,965,090 $ 230Net income for the year ........... -- -- -- --Cash dividends declared: Common stock ($0.1525 per share) -- -- -- -- Preferred stock ................ -- -- -- --Common stock issued under: Employee stock purchase plan ... -- -- 10,556 -- Employee stock bonus plan ...... -- -- 4,400 -- Stock option plan .............. -- -- 5,140 -- ------- ---------- ---------- ----------BALANCES, December 31, 1999 ....... 482,041 $ 5 22,985,186 $ 230Net loss for the year ............. -- -- -- --Cash dividends declared: Common stock ($0.16 per share) . -- -- -- -- Preferred stock ................ -- -- -- --Common stock issued under: Employee stock purchase plan ... -- -- 15,544 -- Employee stock bonus plan ...... -- -- 1,760 -- ------- ---------- ---------- ----------BALANCES, December 31, 2000 ....... 482,041 $ 5 23,002,490 $ 230Net loss for the year ............. -- -- -- --Foreign currency translation ...... -- -- -- --Cash dividends declared: Common stock ($0.09 per share) . -- -- -- -- Preferred stock ................ -- -- -- --Common stock issued under: Employee stock purchase plan ... -- -- 7,138 -- Employee stock bonus plan ...... -- -- 1,960 -- Outside directors' compensation -- -- 2,259 -- ------- ---------- ---------- ----------BALANCES, December 31, 2001 ....... 482,041 $ 5 23,013,847 $ 230 ======= ========== ========== ========== Additional Retained Other Paid-In Earnings Comprehensive Treasury Capital (Deficit) Income (Loss) Stock Total ------- --------- ------------- -------- ----- BALANCES, December 31, 1998 ....... $ 236,127 $ 110,693 $ -- $ (1,279) $ 345,776Net income for the year ........... -- 38,842 -- -- 38,842Cash dividends declared: Common stock ($0.1525 per share) -- (3,502) -- -- (3,502) Preferred stock ................ -- (2,098) -- -- (2,098)Common stock issued under: Employee stock purchase plan ... 177 -- -- -- 177 Employee stock bonus plan ...... 79 -- -- -- 79 Stock option plan .............. 91 -- -- -- 91 ---------- ---------- -------- ---------- ----------BALANCES, December 31, 1999 ....... $ 236,474 $ 143,935 $ -- $ (1,279) $ 379,365Net loss for the year ............. -- (6,736) -- -- (6,736)Cash dividends declared: Common stock ($0.16 per share) . -- (3,679) -- -- (3,679) Preferred stock ................ -- (1,903) -- -- (1,903)Common stock issued under: Employee stock purchase plan ... 158 -- -- -- 158 Employee stock bonus plan ...... 28 -- -- -- 28 ---------- ---------- -------- ---------- ----------BALANCES, December 31, 2000 ....... $ 236,660 $ 131,617 $ -- $ (1,279) $ 367,233Net loss for the year ............. -- (232,168) -- -- (232,168)Foreign currency translation ...... -- -- (306) -- (306)Cash dividends declared: Common stock ($0.09 per share) . -- (2,073) -- -- (2,073) Preferred stock ................ -- (1,845) -- -- (1,845)Common stock issued under: Employee stock purchase plan ... 70 -- -- -- 70 Employee stock bonus plan ...... 27 -- -- -- 27 Outside directors' compensation 47 -- -- -- 47 ---------- ---------- -------- ---------- ---------- BALANCES, December 31, 2001 ....... $ 236,804 $ (104,469) $ (306) $ (1,279) $ 130,985 ========== ========== ========== ========== ========== The accompanying notes are an integral part of these Consolidated Statements. 34 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) Years Ended December 31, ----------------------------------- 2001 2000 1999 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .......................................................... $(232,168) $ (6,736) $ 38,842 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization .......................................... 32,143 30,051 21,773 Net (gain) loss on the sale of assets .................................. (504) 1,474 (864) Provision for losses on accounts receivable ............................ 20,959 4,088 2,829 Deferred income taxes .................................................. (14,441) (8,906) (6,947) Equity in losses of unconsolidated affiliate ........................... 7,183 3,050 4,000 Restructuring and other related charges ................................ 41,067 46,650 -- Cash used in restructuring ............................................. (6,988) -- -- Used trailer valuation charges ......................................... 62,134 9,600 -- Loss contingencies and impairment of equipment leased to others . ...... 37,900 -- -- Change in operating assets and liabilities, excluding effects of the acquisitions Accounts receivable .................................................. 1,790 52,709 (18,810) Inventories .......................................................... 107,755 (74,479) (37,573) Refundable income taxes .............................................. (20,121) (5,552) -- Prepaid expenses and other ........................................... 3,863 5,368 8,607 Accounts payable and accrued liabilities ............................. (34,443) (69,880) 55,537 Other, net ........................................................... (261) (1,106) (3,924) --------- --------- --------- Net cash provided by (used in) operating activities ............ 6,390 (13,669) 63,470 --------- --------- ---------CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ..................................................... (5,899) (60,342) (68,119) Net additions to equipment leased to others .............................. (70,444) (69,553) (11,828) Net additions to finance contracts ....................................... (18,662) (19,400) (28,762) Investment in unconsolidated affiliate ................................... (7,183) (3,706) (3,580) Acquisitions, net of cash acquired ....................................... (6,336) -- (12,413) Proceeds from sale of leased equipment and finance contracts ............. 60,556 60,845 12,927 Principal payments received on finance contracts ......................... 6,787 12,914 10,246 Proceeds from the sale of property, plant and equipment .................. 426 9,638 7,236 --------- --------- --------- Net cash used in investing activities .......................... (40,755) (69,604) (94,293) --------- --------- ---------CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Short-term revolver ...................................................... 428,776 512,300 244,200 Long-term debt ........................................................... -- 62,500 -- Common stock, net of expenses ............................................ 144 186 347 Payments: Short-term revolver ...................................................... (361,006) (500,299) (242,200) Long-term debt ........................................................... (21,738) (4,122) (10,651) Common stock dividends ................................................... (2,991) (3,679) (3,446) Preferred dividends ...................................................... (1,879) (1,903) (2,065) --------- --------- --------- Net cash provided by (used in) financing activities ............ 41,306 64,983 (13,815) --------- --------- ---------NET (DECREASE) INCREASE IN CASH .............................................. 6,941 (18,290) (44,638)CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD ..................... 4,194 22,484 67,122 --------- --------- ---------CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD ........................... $ 11,135 $ 4,194 $ 22,484 ========= ========= ========= The accompanying notes are an integral part of these Consolidated Statements. 35 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. DESCRIPTION OF THE BUSINESS, INDUSTRY AND FINANCIAL CONDITIONS Wabash National Corporation (the Company) designs, manufactures andmarkets standard and customized truck trailers and intermodal equipment underthe Wabash(TM), Fruehauf(R) and RoadRailer(R) trademarks. The Company producesand sells aftermarket parts through its division, Wabash National Parts, and itswholly-owned subsidiary, North American Trailer Centers(TM) (NATC). In additionto aftermarket parts sales and service revenues, NATC sells new and usedtrailers through its retail network and provides maintenance service for theCompany's and competitors' trailers and related equipment. On January 5, 2001NATC acquired Canadian branch locations in connection with the Breadneracquisition. The Company's other significant wholly-owned subsidiaries includeApex Trailer Leasing and Rentals, L.P. and National Trailer Funding (the FinanceCompanies), Cloud Corporation (Wabash Wood Products) and Europaische TrailerzugBeteiligungsgessellschaft mbH (ETZ). The Finance Companies provide rental,leasing and finance programs to their customers for new and used trailersthrough the retail and distribution segment. Wabash Wood Products manufactureshardwood flooring primarily for the Company's manufacturing segment. ETZ is aEuropean RoadRailer(R) operation based in Munich, Germany and was divested inJanuary 2002. In 2001, the demand for new trailers in the United States declinedsubstantially resulting in an industry decline of 48.3% in new trailerproduction from 270,817 units in 2000 to 140,084 units in 2001. This declineresulted from overall economic conditions in the US economy, which reduced thelevel of freight tonnage shipped in 2001, and ongoing challenges in themotor-carrier industry principally caused by high fuel prices and lower revenuesper mile due to intense competition for shipments. The Company's market sharedeclined slightly to 22.6% during 2001. The Company's backlog declined from$639.5 million as of December 31, 2000 to $142.1 million as of December 31,2001. This significant reduction in demand along with historicalmanufacturing over-capacity in the truck trailer industry resulted insignificant losses being reported by the industry as a whole. Further impactingthe Company was a significant decline in the demand for used trailers caused bythe general economic and industry conditions previously discussed and theCompany's excess supply of used trailers. The Company's supply of used trailerscomes from accepting trade-ins of used trailers from its customers upon the saleof new trailers. The excess supply of used trailers was further impacted by theCompany's backlog of new trailer orders totaling $639.5 million at December 31,2000, in which the Company had previously agreed upon the pricing terms for thenew trailers and the trade-in allowance for the used trailers. This excesssupply and decline in demand coupled with the Company's decision to liquidateused trailers during the second half of 2001 resulted in significant usedtrailer market value declines during 2001. In response to the matters discussedabove, during 2001, the Company closed two of its manufacturing facilities andtwo of its sales and services branches. As a result of these items, the Companyincurred significant restructuring, impairment and inventory valuation charges(See notes 2, 4, 9 and 10 for details). Also, in January 2002, the Companycompleted its divestiture of ETZ, the majority shareholder of BTZ, a EuropeanRoadrailer(R) operating company based in Munich, Germany which had yet toachieve profitable operating results. As a result of these conditions, the Company reported a loss fromoperations of $239.4 million for the year ended December 31, 2001, compared toincome from operations of $23.8 million for the year ended December 31, 2000.The losses reported for 2001 resulted in the Company being in technicalviolation of its financial covenants with certain of its lenders at December 31,2001. In April 2002, the Company entered into an agreement with its lenders torestructure its existing revolving bank line of credit, Senior Series Notes andRental Fleet Facility and to waive violations of certain financial covenantsthrough March 30, 2002. The restructuring changes debt maturity and principalpayment schedules, provides for all unencumbered assets to be pledged ascollateral, increases interest rates, and requires the Company to meet newlyestablished financial covenants (See note 13 for details regarding the debtrestructuring). 36 While the Company believes that industry conditions are likely topersist throughout 2002, the Company believes it has significantly restructuredits operations and, based on its projections, the Company anticipates generatingpositive earnings before interest, taxes, depreciation and amortization in 2002.Although the Company believes that the assumptions underlying the 2002projections are reasonable, there are risks related to further declines inmarket demand and reduced sales in the U.S. and Canada, adverse interest rate orcurrency movements, realization of anticipated cost reductions and levels ofused trailer trade-ins that could cause actual results to differ from theprojections. Should results continue to decline, the Company is prepared to takeadditional cost cutting actions. While there can be no assurance that theCompany will achieve these results, the Company believes it has adequatelymodified its operations to be in compliance with its financial covenantsthroughout 2002 and believes that its existing sources of liquidity combinedwith its operating results will generate sufficient liquidity such that theCompany has the ability to meet its obligations as they become due throughout2002.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Consolidation The consolidated financial statements reflect the accounts of theCompany and its wholly-owned and majority-owned subsidiaries with the exceptionof ETZ since the control of this subsidiary was deemed to be temporary.Accordingly, ETZ's operating results are included in Equity in Losses ofUnconsolidated Affiliate in the Consolidated Statements of Operations. Allsignificant intercompany profits, transactions and balances have been eliminatedin consolidation. Certain reclassifications have been made to prior periods toconform to the current year presentation. These reclassifications had no effecton net income (loss) for the periods previously reported. b. Use of Estimates The preparation of consolidated financial statements in conformitywith accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that directly affect the amountsreported in its consolidated financial statements and accompanying notes. Actualresults could differ from these estimates. c. Foreign Currency Accounting The financial statements of the Company's Canadian subsidiary havebeen translated into U.S. dollars in accordance with FASB Statement No. 52,Foreign Currency Translation. Assets and liabilities have been translated usingthe exchange rate in effect at the balance sheet date. Revenues and expenseshave been translated using a weighted-average exchange rate for the period. Theresulting translation adjustments are recorded as other comprehensive income(loss) in stockholders' equity. Gains or losses resulting from foreign currencytransactions are included in Other Income (Expense) on the Company'sConsolidated Statements of Operations. The Company recorded foreign currencylosses of $1.7 million in 2001 and $0 during 2000 and 1999. d. Revenue Recognition The Company recognizes revenue from the sale of trailers andaftermarket parts when risk of ownership is transferred to the customer. Revenueis generally recognized upon shipment. Customers that have requested to pick uptheir trailers are invoiced prior to taking physical possession when thecustomer has made a fixed commitment to purchase the trailers, the trailers havebeen completed and are available for pickup or delivery, the customer hasrequested in writing that the Company hold the trailers until the customerdetermines the most economical means of taking possession and the customer takespossession of the trailers within a specified time period. In such cases, thetrailers, which have been produced to the customer specifications, are invoicedunder the Company's normal billing and credit terms. The Company recognizes revenue from direct finance leases based upona constant rate of return while revenue from operating leases is recognized on astraight-line basis in an amount equal to the invoiced rentals. 37 The Company had one customer that represented 19.0% of net sales in2001 and 11.4% of net sales in 2000. No other customer exceeded 10% of its netsales in 2001, 2000 and 1999. The Company's net sales in the aggregate to itsfive largest customers were 34.4%, 30.5% and 22.2% of its net sales in 2001,2000 and 1999, respectively. e. Used Trailer Trade Commitments The Company has commitments with customers to accept used trailerson trade for new trailer purchases. As of December 31, 2001, the Company hadapproximately $25.7 million of outstanding trade commitments with customers. Thenet realizable value of these commitments was approximately $18.0 million as ofDecember 31, 2001. The Company's policy is to recognize losses related to thesecommitments, if any, at the time the new trailer revenue is recognized. f. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments, which arereadily convertible into cash and have maturities of three months or less. g. Accounts Receivable Accounts receivable as shown in the accompanying ConsolidatedBalance Sheets are net of allowance for doubtful accounts. Accounts receivableincludes trade receivables and amounts due under finance contracts. Provisionsto the allowance for doubtful accounts are charged to General and Administrativeexpenses on the Consolidated Statements of Operations. The activity in theallowance for doubtful accounts was as follows (in thousands): Years Ended December 31, ------------------------------------------------------ 2001 2000 1999 ---------- ---------- ----------- Balance at Beginning of Year $ 3,745 $2,930 $2,251 Provision 20,959 4,088 2,829 Write-offs, net (10,223) (3,273) (2,150) -------- ------ ------ Balance at End of Year $ 14,481 $3,745 $2,930 ======== ====== ====== h. Inventories Inventories are primarily stated at the lower of cost, determined onthe first-in, first-out (FIFO) method, or market. The cost of manufacturedinventory includes raw material, labor and overhead. Inventories consist of thefollowing (in thousands): December 31, -------------------------- 2001 2000 -------- -------- Raw materials and components ............... $ 38,235 $ 84,167Work in progress ........................... 10,229 18,765 Finished goods ............................. 58,984 93,332Aftermarket parts .......................... 22,726 33,566Used trailers .............................. 60,920 100,496 -------- -------- $191,094 $330,326 ======== ======== The Company recorded used trailer inventory valuation adjustmentstotaling $62.1 million and $9.6 million during 2001 and 2000, respectively.These adjustments, which are reflected in cost of sales on the ConsolidatedStatements of Operations, were calculated in accordance with the Company'sinventory valuation policies that are designed to state used trailers at thelower of cost or market. 38 i. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Maintenance andrepairs are charged to expense as incurred, and expenditures that extend theuseful life of the asset are capitalized. Depreciation is recorded using thestraight-line method over the estimated useful lives of the depreciable assets.Estimated useful lives are 331/3 years for buildings and building improvementsand range from 3 to 10 years for machinery and equipment. Property, plant andequipment consist of the following (in thousands): December 31, -------------------------- 2001 2000 --------- --------- Land ......................................... $ 27,907 $ 29,314Buildings and building improvements .......... 92,987 109,596Machinery and equipment ...................... 122,981 123,989Construction in progress ..................... 817 18,587 --------- --------- 244,692 281,486Less--Accumulated depreciation ............... (74,362) (64,585) --------- --------- $ 170,330 $ 216,901 ========= ========= j. Equipment Leased to Others Equipment leased to others at December 31, 2001 and December 31,2000 was $109.3 million and $52.0 million, net of accumulated depreciation of$9.4 million and $11.4 million, respectively. Additions to Equipment leased toothers is classified in investing activities on the Consolidated Statements ofCash Flows. The equipment leased to others is depreciated over the estimatedlife of the equipment or the term of the underlying lease arrangement, not toexceed 15 years, with a 20% residual value or a residual value equal to theestimated market value of the equipment at lease termination. Depreciationexpense on equipment leased to others was $9.6 million, $10.9 million and $7.5million for 2001, 2000 and 1999, respectively. k. Intangible Assets Intangible assets, of $43.8 million and $31.1 million net ofaccumulated amortization of $15.1 million and $12.2 million at December 31, 2001and December 31, 2000, respectively, primarily consist of goodwill and otherintangible assets associated with recent acquisitions. The Company has amortizedgoodwill on a straight-line basis over periods ranging from 25 to 40 years andall other intangible assets over periods ranging from 3 to 20 years. See New all other intangible assets over periods ranging from 3 to 20 years. See NewAccounting Pronouncements below for a discussion of what impact the adoption ofStatement of Financial Accounting Standards (SFAS) No. 142, Goodwill and OtherIntangible Assets, will have on the Company's consolidated financial statements. l. Capitalized Software The Company capitalizes the cost of computer software developed orobtained for internal use in accordance with statement of Position No. 98-1,Accounting for the Costs of Computer Software Development or Obtained forInternal Use. Software costs capitalized, net of accumulated amortization, were$6.3 million and $8.1 million as of December 31, 2001 and December 31, 2000,respectively, and are included in other assets on the Consolidated BalanceSheets. Capitalized software is amortized using a straight-line method over 3 to5 years. m. Long-Lived Assets Long-lived assets are reviewed for impairment in accordance withStatement of Financial Accounting Standards No. 121, Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,whenever facts and circumstances indicate that the carrying amount may not berecoverable. Specifically, this process involves comparing an asset's carryingvalue to the estimated undiscounted future cash flows the asset is expected togenerate over its remaining life. If this process were to result in theconclusion that the carrying value of a long-lived asset would not berecoverable, a write-down of the asset to fair value would be recorded through acharge to operations. 39n. Accrued Liabilities Accrued liabilities primarily represent accrued payroll relateditems, restructuring reserves, warranty reserves, loss contingencies related toused trailer residual commitments and self insurance reserves related to groupinsurance and workers compensation. Changes in the estimates of these reservesare charged or credited to income in the period determined. The Company is self-insured up to specified limits for medical andworkers' compensation coverage. The self-insurance reserves have been recordedto reflect the undiscounted estimated liabilities, including claims incurred butnot reported. The Company recognizes a loss contingency for used trailer residualcommitments for the difference between the equipment's purchase price and itsfair market value, when it becomes probable that the purchase price at theguarantee date will exceed the equipment's fair market value at that date. The Company's warranty policy generally provides coverage forcomponents of the trailer the Company produces or assembles. Typically, thecoverage period is one year for container chassis and specialty trailers andfive years for dry freight, refrigerated and flat bed trailers. The Company'spolicy is to accrue the estimated cost of warranty coverage at the time of thesale. The warranty reserve at December 31, 2001 and 2000 was approximately $11.3million and $5.2 million, respectively. o. Income Taxes The Company determines its provision or benefit for income taxesunder the asset and liability method. The asset and liability method measuresthe expected tax impact at current enacted rates of future taxable income ordeductions resulting from differences in the tax and financial reporting basesof assets and liabilities reflected in the Consolidated Balance Sheets. Futuretax benefits of tax losses and credit carryforwards are recognized as deferredtax assets. Deferred tax assets are reduced by a valuation allowance to theextent the Company concludes there is uncertainty as to their realization. p. Comprehensive Income (loss) Comprehensive income (loss) for the Company includes net income(loss) and foreign currency translation adjustments. The Company's net income(loss) and total comprehensive income (loss) were $(232.2) million and $(232.5)million, respectively for 2001. Net income (loss) and comprehensive income(loss) were equal in 2000 and 1999. q. New Accounting Pronouncements The Company adopted SFAS No. 133, Accounting for DerivativeInstruments and Hedging Activities as amended by SFAS 137 and SFAS 138, as ofJanuary 1, 2001. These standards require that all derivative instruments berecorded on the balance sheet at fair value. The adoption of these standards didnot have an effect on the Company's annual results of operations or itsfinancial position. The Company adopted SFAS No. 142. Goodwill and Other IntangibleAssets, as of January 1, 2002. This new standard changes the accounting forgoodwill from an amortization method to an impairment-only approach, andintroduces a new model for determining impairment charges. SFAS No. 142 requirescompletion of the initial step of a transitional impairment test within sixmonths of the adoption of this standard and, if applicable, completion of thefinal step of the adoption by December 31, 2002. The Company is in the initialstages of evaluating the transitional impairment test and related impact, ifany, to the Company's results of operations and financial position. Goodwillamortization expense was approximately $1.1 million, $0.6 million and $0.2million, for 2001, 2000 and 1999, respectively. In June 2001, the Financial Accounting Standards Board (FASB) issuedSFAS No. 143, Accounting for Asset Retirement Obligations with an effective dateof June 15, 2002 which becomes effective for the Company on January 1, 2003.This standard requires obligations associated with retirement of long-livedassets to be capitalized as part of the carrying value of the related asset. TheCompany does not believe the adoption of SFAS No. 143 will have a materialeffect on its financial statements. 40 In August 2001, the FASB issued SFAS No. 144, Accounting for theImpairment or Disposal of Long-Lived Assets. Effective January 1, 2002, thisstandard sets forth a single accounting model for the accounting and reportingfor the impairment or disposal of long-lived assets. The Company is currentlyevaluating the provisions of SFAS No. 144 to determine the effect, if any, onits consolidated financial statements.3. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107 Disclosures About Fair Value of Financial Instruments,requires disclosure of fair value information for certain financial instruments.The differences between the carrying amounts and the estimated fair values,using the methods and assumptions listed below, of the Company's financialinstruments at December 31, 2001, and 2000 were immaterial. Cash and Cash Equivalents, Accounts Receivable and Accounts Payable.The carrying amounts reported in the Consolidated Balance Sheets approximatefair value. Long-Term Debt and Capital Lease Obligations. The fair value oflong-term debt and capital lease obligations, including the current portion, isestimated based on current quoted market prices for similar issues or debt withthe same maturities. The interest rates on the Company's bank borrowings underits long-term revolving bank line of credit agreement are adjusted regularly toreflect current market rates. The carrying values of the Company's long-termborrowings approximate fair value.4. RESTRUCTURING AND OTHER RELATED CHARGES a. 2001 Restructuring Plan During the third quarter of 2001, the Company recorded restructuringand other related charges totaling $40.5 million primarily related to therationalization of the Company's manufacturing capacity resulting in the closureof the Company's platform trailer manufacturing facility in Huntsville,Tennessee, and its dry van facility in Fort Madison, Iowa. In addition, theCompany closed a parts distribution facility in Montebello, California. Includedin the $40.5 million restructuring charge is the write-down of certain impairedfixed assets to their fair market value ($33.8 million charge), accruedseverance benefits for approximately 600 employees ($0.9 million) and plantclosure and other costs ($2.1 million). In addition, a $3.7 million charge isincluded in cost of sales related to inventory write-downs at the closedfacilities. During the fourth quarter of 2001, the Company reduced its plantclosure reserve by approximately $0.9 million as a result of the Company'sability to effectively control its closure costs. This reduction is reflected innon-cash utilization below. The Company's impairment charge reflects the write-down of certainlong-lived assets that became impaired as a result of management's decision toclose its operations at the two manufacturing plants discussed above. Theimpairment was computed in accordance with the provisions of SFAS 121. Theestimated fair market value of the impaired assets totaled $6.7 million and wasdetermined by management based upon economic conditions, potential alternativeuses and potential markets for the assets which are held for sale and,accordingly, are classified in prepaid expenses and other in the accompanyingConsolidated Balance Sheets. Depreciation has been discontinued on the assetsheld for sale pending their disposal. Details of the restructuring charges andreserve for the 2001 Restructuring Plan are as follows (in thousands): Utilized Original --------------------- Balance Provision Cash Non-cash 12/31/01 --------- -------- -------- -------- Restructuring Costs: Impairment of long-term assets $ 33,842 $ -- $(33,842) $ -- Plant closure costs 1,763 (613) (850) 300 Severance benefits 912 (912) -- -- Other 305 (105) -- 200 -------- -------- -------- -------- $ 36,822 $ (1,630) $(34,692) $ 500 ======== ======== ======== ========Inventory write-down $ 3,714 $ -- $ (3,714) $ -- -------- -------- -------- --------Total restructuring & other related charges $ 40,536 $ (1,630) $(38,406) $ 500 ======== ======== ======== ======== 41 b. 2000 Restructuring Plan In December 2000, the Company recorded restructuring and otherrelated charges totaling $46.6 million primarily related to the Company's exitfrom manufacturing products for export outside the North American market,international leasing and financing activities and the consolidation of certaindomestic operations. Included in this total is $40.8 million that has beenincluded as a component in computing income from operations. Specifically, $19.1million of this amount represented the impairment of certain equipment subjectto leases with the Company's international customers, $8.6 million representedlosses recognized for various financial guarantees related to internationalfinancing activities, and $6.9 million was recorded for the write-down of otherassets as well as charges associated with the consolidation of certain domesticoperations including severance benefits of $0.2 million. Also included in the $40.8 million is a $4.5 million charge for inventory write-downs related to therestructuring actions which is included in cost of sales. The Company hasrecorded $5.8 million as a restructuring charge in Other Income (Expense)representing the write-off of the Company's remaining equity interest in ETZ fora decline in fair value that is deemed to be other than temporary. The total impairment charge recognized by the Company as a result ofits restructuring activities was $26.7 million. This amount was computed inaccordance with the provisions of SFAS 121. The estimated fair value of theimpaired assets totaled $3.4 million and was determined by management based uponeconomic conditions and potential alternative uses and markets for theequipment. In January 2002, the Company completed its divestiture of ETZ. As aresult of this divestiture the Company adjusted its restructuring reserve by$1.4 million during the fourth quarter. This adjustment primarily relates to theassumption of certain financial guarantees in connection with the divestiture.Details of the restructuring charges and reserve for the 2000 Restructuring Planare as follows (in thousands): Utilized Original Additional ------------------------- Balance Provision Provision 2000(1) 2001(1) 12/31/01 --------- ---------- -------- -------- -------- Restructuring of majority-owned operations: Impairment of long-term assets $ 20,819 $ -- $(20,819) $ -- $ -- Loss related to equipment guarantees 8,592 -- -- (3,394) 5,198 Write-down of other assets & other charges 6,927 -- (4,187) (1,381) 1,359 -------- -------- -------- -------- -------- $ 36,338 $ -- $(25,006) $ (4,775) $ 6,557 -------- -------- -------- -------- --------Restructuring of minority interest operations: Impairment of long-term assets $ 5,832 $ -- $ (5,832) $ -- $ -- Financial Guarantees $ -- $ 1,381 $ -- $ -- $ 1,381 Inventory write-down and other charges $ 4,480 $ -- $ (3,897) $ (583) $ -- -------- -------- -------- -------- -------- Total restructuring and other related charges $ 46,650 $ 1,381 $(34,735) $ (5,358) $ 7,938 ======== ======== ======== ======== ======== (1) The amounts utilized in 2000 were all non-cash related while the amounts utilized in 2001 represented the cash elements of the restructuring charge. The Company's total restructuring reserves were $8.4 million and$11.9 million at December 31, 2001 and 2000, respectively. These reserves areincluded in accrued liabilities in the accompanying Consolidated Balance Sheets.The Company anticipates that these reserves will be adequate to cover theremaining charges to be incurred in 2002. 425. ACQUISITIONS AND DIVESTITURE a. Acquisitions On January 5, 2001, the Company acquired the Breadner Group ofCompanies (the Breadner Group) in a stock purchase agreement (the BreadnerAcquisition). The Breadner Group is headquartered in Kitchener, Ontario, Canadaand has ten branch locations in six Canadian Provinces. The Breadner Group isthe leading Canadian distributor of new trailers as well as a provider of newtrailer services and aftermarket parts. The Breadner Group had revenues andincome from operations of approximately $135 million and $X (US Dollars),respectively for its fiscal year ended September 30, 2000 and employsapproximately 130 associates. For financial statement purposes, the BreadnerAcquisition was accounted for as a purchase, and accordingly, the BreadnerGroup's assets and liabilities were recorded at fair value. The Breadner Group'soperating results are included in the Consolidated Financial Statements sincethe date of acquisition. The aggregate consideration for this transactionincluded approximately $6.3 million in cash and $10.0 million in a long-termnote and the assumption of certain liabilities. The long-term note has an annual interest rate of 7.25% and scheduled principal payments are due quarterly April2001 through January 2006. The excess of the purchase price over the underlyingassets acquired was approximately $13.0 million and is being amortized on astraight-line basis over twenty-five years. On December 1, 1999, the Company acquired Apex Trailer Service,Inc., Apex Trailer and Truck Equipment Sales, Inc. and Apex Rentals, Inc. (theApex Group) in a stock purchase agreement (the Apex Acquisition). For financialstatement purposes, the Apex Acquisition was accounted for as a purchase, andaccordingly, the Apex Group's assets and liabilities were recorded at fair valueand the operating results are included in the consolidated financial statementssince the date of acquisition. The Apex Group has four branch locations. Thesebranches sell new and used trailers, aftermarket parts and provide service work.The aggregate consideration for this transaction included approximately $12.4million in cash and the assumption of $11.3 million in liabilities. Included inthe $11.3 million of assumed liabilities was $8.2 million of debt, of which theCompany retired $6.8 million immediately following the acquisition using cashfrom operations. The excess of the purchase price over the underlying assetsacquired was approximately $1.8 million and is being amortized on a straightline basis over twenty-five years. b. Divestiture On November 4, 1997, the Company purchased a 25.1% equity interestin Europaische Trailerzug Beteiligungsgessellschaft mbH (ETZ). ETZ is themajority shareholder of Bayerische Trailerzug Gesellschaft fur BimodalenGuterverkehr mbH (BTZ), a European RoadRailer(R) operation based in Munich,Germany, which began operations in 1996 and has incurred operating losses sinceinception. The Company paid approximately $6.2 million for its ownershipinterest in ETZ during 1997 and made additional capital contributions of $7.2million, $3.7 million and $3.6 million during 2001, 2000 and 1999, respectively.During 2001, 2000 and 1999, the Company recorded approximately $7.7 million,$3.1 million and $4.0 million, respectively, for its share of ETZ losses and theamortization of the premiums. Such amounts are recorded as Equity in losses ofunconsolidated affiliate on the accompanying Consolidated Statements ofOperations. In January 2001, in connection with its restructuring activities,the Company assumed the remaining ownership interest in ETZ from the majorityshareholder with the intent to pursue an orderly divestiture of ETZ. Becausecontrol of this subsidiary was deemed to be temporary, 100% of ETZ's 2001operating results have been recorded as Equity in Losses of Unconsolidatedaffiliate in the Consolidate Statements of Operations for 2001. In January 2002,the Company completed the divestiture of ETZ. 436. EARNINGS (LOSS) PER SHARE Earnings (loss) per share (EPS) are computed in accordance with SFASNo. 128, Earnings per Share. A reconciliation of the numerators and denominatorsof the basic and diluted EPS computations, as required by SFAS No. 128, ispresented below. Neither stock options nor convertible preferred stock wereincluded in the computation of diluted EPS for 2001 and 2000 since the inclusionof these items would have resulted in an antidilutive effect (in thousandsexcept per share amounts): Net Income (Loss) Weighted Available to Average Earnings (Loss) Common Shares Per Share --------- ------ --------- 2001Basic $(234,013) 23,006 $ (10.17) Options -- -- Preferred Stock -- -- Preferred Stock -- -- --------- ------ ---------Diluted $(234,013) 23,006 $ (10.17) ========= ====== =========2000Basic $ (8,639) 22,990 $ (0.38) Options -- -- Preferred Stock -- -- --------- ------ ---------Diluted $ (8,639) 22,990 $ (0.38) ========= ====== =========1999Basic $ 36,744 22,973 $ 1.60 Options -- 30 Preferred Stock (Series B only) 1,151 823 --------- ------ ---------Diluted $ 37,895 23,826 $ 1.59 ========= ====== =========7. SEGMENTS AND RELATED INFORMATION a. Segment Reporting Under the provisions of SFAS No. 131, Disclosures about Segments ofan Enterprise and Related Information, the Company has two reportable segments:manufacturing and retail and distribution. The manufacturing segment producesand sells new trailers to the retail and distribution segment or to customerswho purchase trailers direct or through independent dealers. The retail anddistribution segment includes the sale, leasing and financing of new and usedtrailers, as well as the sale of aftermarket parts and service through itsretail branch network. In addition, the retail and distribution segment includesthe sale of aftermarket parts through Wabash National Parts. The accounting policies of the segments are the same as thosedescribed in the summary of significant accounting policies except that theCompany evaluates segment performance based on income from operations. TheCompany has not allocated certain corporate related charges such asadministrative costs, interest expense and income taxes from the manufacturingsegment to the Company's other reportable segment. The Company accounts forintersegment sales and transfers at cost plus a specified mark-up. Reportablesegment information is as follows (in thousands): 44 Retail and Combined Consolidated Manufacturing Distribution Segments Eliminations Totals -------------- ------------ ----------- ------------ ------------ 2001Revenues External customers $ 518,212 $ 345,180 $ 863,392 $ -- $ 863,392 Intersegment sales 61,854 2,427 64,281 (64,281) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 580,066 $ 347,607 $ 927,673 $ (64,281) $ 863,392 =========== =========== =========== =========== ===========Depreciation & amortization 18,191 13,952 32,143 -- 32,143Restructuring charge from operations 37,493 371 37,864 -- 37,864Income (Loss) from operations (148,727) (92,975) (241,702) 2,300 (239,402)Interest income 178 171 349 -- 349Interest expense 20,235 1,057 21,292 -- 21,292Equity in losses of unconsolidated affiliate 7,668 -- 7,668 -- 7,668Restructuring charge included in other 1,590 -- 1,590 -- 1,590Income tax (benefit) (42,038) (819) (42,857) -- (42,857)Investment in unconsolidated affiliate -- -- -- -- --Capital expenditures 4,463 1,436 5,899 -- 5,899Assets 710,683 389,263 1,099,946 (407,442) 692,5042000Revenues External customers $ 1,013,108 $ 319,064 $ 1,332,172 $ -- $ 1,332,172 Intersegment sales 83,796 1,141 84,937 (84,937) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 1,096,904 $ 320,205 $ 1,417,109 $ (84,937) $ 1,332,172 =========== =========== =========== =========== ===========Depreciation & amortization 16,390 13,661 30,051 -- 30,051Restructuring charge from operations 22,771 13,567 36,338 -- 36,338Income (Loss) from operations 36,897 (10,926) 25,971 (2,216) 23,755Interest income 340 174 514 -- 514Interest expense 18,632 1,108 19,740 -- 19,740Equity in losses of unconsolidated affiliate 3,050 -- 3,050 -- 3,050 Restructuring charge included in other 5,832 -- 5,832 -- 5,832Income tax (benefit) (4,314) -- (4,314) -- (4,314)Investment in unconsolidated affiliate -- -- -- -- --Capital expenditures 48,712 11,630 60,342 -- 60,342Assets 846,740 407,915 1,254,655 (473,041) 781,6141999Revenues External customers $ 1,113,872 $ 340,698 $ 1,454,570 $ -- $ 1,454,570 Intersegment sales 92,537 640 93,177 (93,177) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 1,206,409 $ 341,338 $ 1,547,747 $ (93,177) $ 1,454,570 =========== =========== =========== =========== ===========Depreciation & amortization 13,332 8,441 21,773 -- 21,773Restructuring charge from operations -- -- -- -- --Income (Loss) from operations 71,976 11,127 83,103 (2,181) 80,922Interest income 820 -- 820 -- 820Interest expense 12,163 532 12,695 -- 12,695Equity in losses of unconsolidated affiliate 4,000 -- 4,000 -- 4,000Restructuring charge included in other -- -- -- -- --Income tax expense 25,891 -- 25,891 -- 25,891Investment in unconsolidated affiliate 5,176 -- 5,176 -- 5,176Capital expenditures 54,945 13,174 68,119 -- 68,119Assets 768,017 355,890 1,123,907 (332,616) 791,291 b. Geographic Information International sales accounted for approximately 9.2%, 3.1% and 2.0%of net sales during 2001, 2000 and 1999, respectively. These sales consistedprimarily of new trailer sales made to Canadian customers. Sales to Canadaaccounted for approximately 8.6%, 1.4% and 1.5% of net sales during 2001, 2000and 1999. As previously discussed, the Company acquired a Canadian subsidiaryin January, 2001. At December 31, 2001, the amount reflected in property, plantand equipment net of accumulated depreciation related to this subsidiary wasapproximately $2.0 million. Fixed assets utilized outside of North Americaduring 2001, 2000 and 1999 were immaterial. 458. ACCOUNTS RECEIVABLE SECURITIZATION On October 1, 2001, the Company entered into a $100 million ConduitSecuritization Facility (the A/R Facility) to replace its previous AccountsReceivable Securitization Facility. Under the terms of the A/R Facility theCompany sells, on a revolving basis, virtually all of its domestic accountsreceivable to a wholly-owned, bankruptcy-remote special purpose entity (SPE).The SPE sells an undivided interest in receivables to an outside liquidityprovider who in turn remits cash back to the Company's SPE for receivableseligible for funding. As of December 31, 2001, the amount outstanding under theA/R Facility was $17.7 million and the amount outstanding under the Company'sprevious facility as of December 31, 2000 was $69.4 million. As of December 31, 2001, the Company was in violation of itscovenants under this facility. Therefore, all amounts under this facility weredue and payable. Accordingly, the Company has reflected the $17.7 millionoutstanding under this facility as accounts receivable and current maturities oflong-term debt on the Consolidated Balance Sheet as of December 31, 2001. In April 2002, the Company replaced this facility with a new $110million Trade Receivables Facility. Under the terms of the Trade ReceivablesFacility, the Company sells, on a revolving basis, predominately all of itsdomestic accounts receivable to a wholly-owned, bankruptcy remote SPE. The SPEsells an undivided interest in receivables to an outside liquidity provider who,in turn, remits cash back to the Company's SPE for receivables eligible forfunding. This new facility includes financial covenants identical to theCompany's debt obligations as discussed in Note 13. Proceeds advanced under the Company's A/R Facility are used toprovide liquidity in order to fund operations. The cash flows related to thissecuritization are reflected as cash flows from operating activities in theaccompanying Consolidated Statements of Cash Flows.9. EQUIPMENT LEASED TO OTHERS The Finance Companies and NATC have equipment on lease under bothshort-term and long-term lease arrangements with their customers. This equipmentincludes trailers manufactured by the Company and used trailers acquired ontrade. Equipment on short-term lease represents lease contracts that are lessthan one year and typically run month-to-month, while long-term leases haveterms ranging from one to five years in duration. Items being leased includeboth Company-owned equipment, which is reflected on the Consolidated BalanceSheets, as well as equipment that was sold by the Company and thensimultaneously leased back to the Company which are accounted for as operatingleases. a. Equipment On Balance Sheet The Company's Equipment leased to others, net was approximately$109.3 million and $52.0 million at December 31, 2001 and 2000, respectively. During 2001, the market values of used trailers declinedsignificantly. This decline led the Company to perform an impairment analysis inaccordance with SFAS 121 of its Equipment Leased to Others. This analysisindicated that the undiscounted future cash flows of this equipment was notsufficient to recover the carrying amount of certain portions of this equipment.Therefore, the Company recorded an impairment charge of approximately $10.5million to reduce these assets to fair value. This charge is included in Cost ofSales in the Consolidated Statements of Operations. During 2000, the Company entered into a sale and leaseback facilitywith an independent financial institution related to its rental equipment. As ofDecember 31, 2000, the Company had $31 million of equipment financed throughthis facility which was accounted for as an operating lease. As of December 31,2001, the Company was in technical default of financial covenants under thisfacility resulting in the unamortized lease value being due and payable. As ofDecember 31, 2001, the Company had $65.2 million of equipment financed underthis facility. In April 2002, the facility was amended which resulted in a newlease. The new lease has been accounted for as a capital lease (see Note 10).Accordingly, the Company has reflected the unamortized lease value as a capitallease obligation of $65.2 million in the Consolidated Balance Sheet as ofDecember 31, 2001. The leased equipment was recorded at fair value of $42.2million in the Consolidated Balance Sheet as of December 31, 2001. The $23.0million difference between the 46unamortized lease value and the fair value of the leased equipment was recordedas a charge to cost of sales in the Consolidated Statements of Operations forthe year ended December 31, 2001. The future minimum lease payments to be received by the FinanceCompanies and NATC under these lease transactions as of December 31, 2001 are asfollows (in thousands): Receipts -------- 2002 ................ $ 7,2792003 ................ 5,3982004 ................ 4,1062005 ................ 3,0492006 ................ 2,387Thereafter .......... 4,116 ------- $26,335 ======= b. Equipment Off Balance Sheet In certain situations, the Finance Companies have sold equipmentleased to others to independent financial institutions and simultaneously leasedthe equipment back under operating leases. All of this equipment has beensubleased to customers under long-term arrangements, typically five years. As ofDecember 31, 2001, the unamortized lease value of equipment financed under thesearrangements was approximately $24 million. Additionally, while thesearrangements do not contain financial covenants, certain non-financial covenantssuch as provisions for cross default and material adverse changes are containedin these arrangements. Rental payments made by the Finance Companies under thesetypes of transactions totaled $9.3 million, $9.1 million and $8.8 million during2001, 2000 and 1999, respectively. The future minimum noncancellable lease payments the Company isrequired to make under the above mentioned transactions along with rents to bereceived under various sublease arrangements as of December 31, 2001 are asfollows (in thousands): Payments Receipts -------- -------- 2002 ......... $ 5,674 $ 5,7522003 ......... 5,674 5,7022004 ......... 4,657 4,2332005 ......... 1,145 1,9162006 ......... -- 953Thereafter ... -- 50 ------- ------- $17,150 $18,606 ======= ======= The Company has end-of-term purchase options and residual guaranteesrelated to these transactions. These purchase options totaled $10.9 million and$24.9 million as of December 31, 2001 and 2000, respectively. These residualguarantees totaled $4.3 million and $14.8 million as of December 31, 2001 and2000, respectively. The Company recognizes a loss when the Company's operating lease paymentsexceed the anticipated rents from the sublease arrangements with customers.Included in the receipts above is approximately $12.3 million to be receivedfrom a single customer. During 2001, the Company recorded a loss, which wasincluded in cost of sales, related to this customer of approximately $4.4million. This amount represents the anticipated shortfall of sublease revenuesfrom operating lease payments.10. CAPITAL LEASES The Company entered into two capital lease arrangements in 2001,which expire in 2002 and 2005. During December 2000, the Company entered into a sale and leasebackfacility with an independent financial institution related to its rentalequipment. As of December 31, 2000, the Company had $31.0 million of equipmentfinanced through this facility which was accounted for as an operating lease.Rent expense related to this lease was approximately $9.2 million in 2001 and $0in 2000 and 1999. As of December 31, 2001, the Company was in technical defaultof financial covenants under this facility resulting 47in the unamortized lease value being due and payable. In April 2002, the facility was amended which resulted in a new lease. In accordance with statementof Financial Accounting Standards (SFAS) No. 13, Accounting for Leases, the newlease will be accounted for as a capital lease. Accordingly, the Company hasreflected the unamortized lease value as a capital lease obligation of $65.2million in the Consolidated Balance Sheet as of December 31, 2001. The leasedequipment was recorded at fair value of $42.2 million in the ConsolidatedBalance Sheet as of December 31, 2001. The $23.0 million difference between theunamortized lease value and the fair value of the leased equipment was recordedas a charge to Cost of Sales in the Consolidated Statement of Operations for theyear ended December 31, 2001. This new capital lease has financial covenantsidentical to the Company's debt as discussed in Footnote 13. During 2001 the Company renewed a lease for a corporate aircraft.This lease arrangement expires in 2002 and has been reflected as a capitallease. Assets recorded under capital lease arrangements included inproperty, plant and equipment and equipment leased to others on the ConsolidatedBalance Sheets consist of the following (in thousands): December 31, ------------------------ 2001 2000 ------- ------- Property, Plant and Equipment, net $11,503 $ --Equipment Leased to Others, net 42,233 -- ------- ------- $53,736 $ -- ======= ======= Accumulated depreciation recorded on leased assets at December 31,2001 was $0.1 million. Depreciation expense recorded on leased assets in 2001was $0.1 million. Future minimum lease payments under capital leases are as follows(in thousands): Amounts -------- 2002 .............................. $ 27,1522003 .............................. 14,2032004 .............................. 13,3262005 .............................. 36,8292006 .............................. --Thereafter ........................ -- -------- $ 91,510Amount representing interest ...... (14,196) --------Capital lease obligations ......... 77,314Obligations due within one year ... (21,559) --------Long-term capital lease obligations $ 55,755 ========11. OTHER LEASE ARRANGEMENTS a. Equipment Financing The Company has entered into agreements for the sale and leasebackof certain production equipment at its manufacturing locations. As of December31, 2001, the unamortized lease value related to these agreements wasapproximately $24.5 million. Under these agreements, the initial lease termsexpired during 2001. The Company elected to renew these agreements andanticipates renewing them through their maximum lease terms (2004-2008). Futureminimum lease payments related to these arrangements is approximately $4.2million per year and the end of term residual guarantees and purchase optionsare $2.4 million and $3.6 million, respectively. These agreements contain nofinancial covenants; however, they do contain non-financial covenants includingcross default provisions which could be triggered if the Company is not incompliance with covenants in other debt or leasing arrangements. 48 Total rent expense for these leases in 2001, 2000 and 1999 was $3.1million, $1.0 million and $1.5 million, respectively. b. Other Lease Commitments The Company leases office space, manufacturing, warehouse andservice facilities and equipment under operating leases expiring through 2007.Future minimum lease payments required under these other lease commitments as ofDecember 31, 2001 are as follows (in thousands): Amounts ------- 2002 .............................................. $2,3522003 .............................................. 1,0962004 .............................................. 4622005 .............................................. 1302006 .............................................. 15Thereafter ........................................ 15 ------ $4,070 ====== Total rental expense under operating leases was $8.2 million, $7.9million, and $5.4 million for 2001, 2000 and 1999, respectively.12. FINANCE CONTRACTS The Finance Companies provide financing for the sale of new and usedtrailers to its customers. The financing is principally structured in the formof finance leases, typically for a five-year term. Finance contracts, as shownon the accompanying Consolidated Balance Sheets, are as follows (in thousands): December 31, ---------------------------- 2001 2000 -------- -------- Lease payments receivable .............. $ 53,151 $ 53,351Estimated residual value ............... 6,589 11,041 -------- -------- 59,740 64,392Unearned finance charges ............... (11,563) (13,666) -------- -------- 48,177 50,726Other, net ............................. 2,656 5,724 -------- -------- 50,833 56,450Less: current portion .................. (10,646) (11,544) -------- -------- $ 40,187 $ 44,906 ======== ======== Other, net. Other, net includes equipment subject to capital leasethat is awaiting customer pick-up. The net amounts under such arrangementstotaled $0.6 million and $2.3 million at December 31, 2001 and 2000,respectively. In addition, Other, net also includes the sale of certain financecontracts with full recourse provisions. As a result of the recourse provision,the Finance Companies have reflected an asset and offsetting liability totaling$2.1 million and $3.4 million at December 31, 2001 and December 31, 2000,respectively, in the Company's Consolidated Balance Sheets as a Finance Contractand Other Noncurrent Liabilities and Contingencies. The future minimum leasepayments to be received from finance contracts as of December 31, 2001 are asfollows (in thousands): Amounts ------- 2002 ................................................ $19,0032003 ................................................ 11,4892004 ................................................ 8,6432005 ................................................ 5,4832006 ................................................ 3,908Thereafter .......................................... 4,625 ------- $53,151 ======= 4913. DEBT In April 2002, the Company entered into an agreement with itslenders to restructure its existing revolving credit facility and Senior SeriesNotes and waive violations of its financial covenants through March 30, 2002.The amendment changes debt maturity and principal payment schedules; providesfor all unencumbered assets to be pledged as collateral equally to the lenders;increases the cost of funds; and requires the Company to meet certain financialconditions, among other things. The amended agreements also contain certainrestrictions on acquisitions and the payment of preferred stock dividends. Thefollowing reflects the terms of the amended credit agreement. a. Long-term debt consists of the following (in thousands): DECEMBER 31, ------------------------- 2001 2000 --------- --------- Revolving Bank Line of Credit ................................ $ 14,642 $ 20,000Receivable Securitization Facility, Note 8 ................... 17,700 --Mortgage and Other Notes Payable (3.0% - 8.17%, Due 2002-2008) 35,362 18,260Bank Term Loan (Due March 2004) .............................. 75,000 --Series A Senior Notes (9.66%, Due March 2004) ................ 50,000 50,000Series C-H Senior Notes (10.41% - 10.8%, Due 2004-2008) ...... 92,000 100,000Series I Senior Notes (11.29%, Due 2005-2007) ................ 50,000 50,000 Series I Senior Notes (11.29%, Due 2005-2007) ................ 50,000 50,000 --------- --------- 334,703 238,260 Less: Current maturities ........................ (60,682) (12,134) --------- --------- $ 274,021 $ 226,126 ========= ========= b. Maturities of long-term debt at December 31, 2001, are as follows (inthousands): Amounts -------- 2002 ............................................... $ 60,6822003 ............................................... 50,9752004 ............................................... 130,4452005 ............................................... 24,7122006 ............................................... 15,924Thereafter ......................................... 51,965 -------- $334,703 ======== c. Revolving Bank Line of Credit and Bank Term Loan The Company's existing $125 million Revolving Credit Facility wasrestructured into a $107 million term loan (Bank Term Loan) and $18 millionrevolving credit facility (Bank Line of Credit). The Bank Term Loan and BankLine of Credit both mature on March 30, 2004 and are secured by all of theunencumbered assets of the Company. The $107 million Bank Term Loan, of whichapproximately $29 million consists of outstanding letters of credit, requiresmonthly payments of $3.0 million per annum in 2002, $13.8 million per annum in2003 and $3.4 million per annum in 2004, with the balance due March 30, 2004. Inaddition, principal payments will be made from excess cash flow, as defined inthe agreement, on a quarterly basis. Any such additional payments will reducethe balance of the loan due March 30, 2004. Interest on the $107 million Bank Term Loan is variable based uponthe adjusted London Interbank Offered Rate ("LIBOR") plus 380 basis points andis payable monthly. Interest on the borrowings under the $18 million Bank Lineof Credit is based upon LIBOR plus 355 basis points or the agent bank'salternative borrowing rate as defined in the agreement. The Company pays acommitment fee on the unused portion of this facility at a rate of 50 basispoints per annum. At December 31, 2001, the Company had $75 million outstanding underthe Bank Term Loan, after letters of credit, at an interest rate of 2.4375%. TheCompany had available credit under the Bank Line of Credit of approximately $18million. 50 The Company has a revolving bank line of credit in Canada thatpermits the Company to borrow up to CDN $20 million. This revolver is secured bycertain FTSI Canada Accounts Receivable balances and new and used Canadianinventory. Interest payable on such borrowings is variable based on the LondonInterbank Rate (LIBOR) plus 50 to 150 basis points, as defined, or a prime rateof interest as defined. The Company pays a commitment fee on the unused portionof this facility at rates of 15 to 30 basis points per annum, as defined. As aresult of noncompliance with the financial covenants in its other debtagreements, the Company was in technical default under this agreement atDecember 31, 2001 and will pay off the balance on this credit line in 2002. AtDecember 31, 2001, the Company had borrowings of USD $14.6 million under this facility at a weighted average interest rate of 3.13%. d. Senior Notes As of December 31, 2001 the Company had $192 million of SeniorSeries Notes outstanding which originally matured in 2002 through 2008. As partof the restructuring, the original maturity dates for $72 million of SeniorSeries Notes, payable in 2002 through March 2004, have been extended to March30, 2004. The maturity dates for the other $120 million of Senior Series Notesdue subsequent to March 30, 2004, remain unchanged. The Senior Series Notes aresecured by all of the unencumbered assets of the Company. Monthly principal payments totaling $7.5 million in 2002, $33.8million in 2003 and $8.4 million in 2004 will be made on a prorata basis to allSenior Series Notes. In addition, principal payments will be made from excesscash flow, as defined in the agreement, on a quarterly basis. Interest on theSenior Series Notes, which is payable monthly, increased by 325 basis points,effective April 2002, and ranges from 9.66% to 11.29%. e. Mortgage and Other Notes Payable Mortgage and other notes payable includes debt incurred inconnection with the acquisition discussed in Note 5, an obligation associatedwith the exercise of an equipment purchase option under an operating leasesecured by the equipment and other term borrowings secured by property. f. Covenants Prior to the new debt agreements, the Company was required undervarious loan agreements to meet certain financial covenants. As of December 31,2001, the Company was not in compliance with certain of these financialcovenants. The Company has obtained waivers from the lenders for thisnon-compliance through March 30, 2002. The Company's new debt agreements containrestrictions on excess cash flow, the amount of new finance contracts theCompany can enter into (not to exceed $5 million within any twelve monthperiod), and other restrictive covenants. These other restrictive covenantscontain minimum requirements related to the following items, as defined in theagreement: Earnings Before Interest, Taxes, Depreciation and Amortization;quarterly equity positions; debt to asset ratios; interest coverage ratios; andcapital expenditure amounts. These covenants will become effective in April of2002 and become more restrictive in 2003. 5114. STOCKHOLDERS' EQUITY a. Capital Stock DECEMBER 31, --------------(Dollars in thousands) 2001 2000 ---- ---- Preferred Stock - $0.01 par value, 25,000,000 shares authorized:Series A Junior Participating Preferred Stock 300,000 shares authorized, 0 shares issued and outstanding $ -- $ --Series B 6% Cumulative Convertible Exchangeable Preferred Stock, 352,000 shares authorized, issued and outstanding at December 31, 2001 and 2000 ($17.6 million aggregate liquidation value) 4 4Series C 5.5% Cumulative Convertible Exchangeable Preferred Stock, 130,041 shares authorized, issued and outstanding at December 31, 2001 and 2000 ($13.0 million aggregate liquidation value) 1 1 ---- ---- ---- ---- Total Preferred Stock $ 5 $ 5 ---- ----Common Stock - $0.01 par value, 75,000,000 shares authorized, 23,013,847 and 23,002,490 shares issued and outstanding at December 31, 2001 and 2000, respectively $230 $230 ==== ==== The Series B 6% Cumulative Convertible Exchangeable Preferred Stockis convertible at the discretion of the holder, at a conversion price of $21.38per share, into up to approximately 823,200 shares of common stock. Thisconversion is subject to adjustment for dilutive issuances and changes inoutstanding capitalization by reason of a stock split, stock dividend or stockcombination. The Series C 5.5% Cumulative Convertible Exchangeable PreferredStock is convertible at the discretion of the holder, at a conversion price of$35.00 per share, into up to approximately 371,500 shares of common stock,subject to adjustment. The Board of Directors has the authority to issue up to 25 millionshares of unclassified preferred stock and to fix dividends, voting andconversion rights, redemption provisions, liquidation preferences and otherrights and restrictions. b. Stockholders' Rights Plan On November 7, 1995, the Board of Directors adopted a StockholderRights Plan (the "Rights Plan"). The Rights Plan is designed to deter coerciveor unfair takeover tactics, to prevent a person or group from gaining control ofthe Company without offering fair value to all shareholders and to deter otherabusive takeover tactics, which are not in the best interest of stockholders. Under the terms of the Rights Plan, each share of common stock isaccompanied by one right; each right entitles the stockholder to purchase fromthe Company, one one-thousandth of a newly issued share of Series A PreferredStock at an exercise price of $120. The rights become exercisable ten days after a public announcementthat an acquiring person or group (as defined in the Plan) has acquired 20% ormore of the outstanding Common Stock of the Company (the Stock Acquisition Date)or ten days after the commencement of a tender offer which would result in aperson owning 20% or more of such shares. The Company can redeem the rights for$.01 per right at any time until ten days following the Stock Acquisition Date(the 10-day period can be shortened or lengthened by the Company). The rightswill expire in November 2005, unless redeemed earlier by the Company. 52 If, subsequent to the rights becoming exercisable, the Company isacquired in a merger or other business combination at any time when there is a20% or more holder, the rights will then entitle a holder to buy shares of theAcquiring Company with a market value equal to twice the exercise price of eachright. Alternatively, if a 20% holder acquires the Company by means of a mergerin which the Company and its stock survives, or if any person acquires 20% ormore of the Company's Common Stock, each right not owned by a 20% or moreshareholder, would become exercisable for Common Stock of the Company (or, incertain circumstances, other consideration) having a market value equal to twicethe exercise price of the right.15. STOCK-BASED INCENTIVE PLANS a. Stock Option and Stock Related Plans The Company has stock incentive plans that provide for the issuanceof stock appreciation rights (SAR) and the granting of common stock options to officers and other eligible employees. During 2001, the company adopted a SAR Plan giving eligibleparticipants the right to receive, upon exercise thereof, the excess of the fairmarket value of one share of stock on the date of exercise over the exerciseprice of the SAR as determined by the Company. All SARs granted expire ten yearsafter the date of grant. As of December 31, 2001 the Company had granted 130,000SAR at a weighted average exercise price of $8.64. SARs require the Company to continually adjust compensation expensefor the changes in the fair market value of the Company's stock. During 2001,expense recorded related to SARs was not material. The Company has two non-qualified stock option plans (the 1992 and2000 Stock Option Plans) which allow eligible employees to purchase shares ofcommon stock at a price not less than market price at the date of grant. Underthe terms of the Stock Option Plans, up to an aggregate of 3,750,000 shares arereserved for issuance, subject to adjustment for stock dividends,recapitalizations and the like. Options granted to employees under the StockOption Plans become exercisable in annual installments over three years foroptions granted under the 2000 Plan and five years for options granted under the1992 Plan. Options granted to non-employee Directors of the Company are fullyvested on the date of grant and are exercisable six months thereafter. Alloptions granted expire ten years after the date of grant. The Company has elected to follow APB No. 25, Accounting for StockIssued to Employees, in accounting for its stock options and, accordingly, nocompensation cost has been recognized for stock options in the consolidatedfinancial statements. Had compensation cost for these plans been determinedconsistent with SFAS No. 123, Accounting for Stock-Based Compensation, theCompany's net income (loss) available to common would have been ($235.9) million(($10.25) Basic and Diluted EPS) in 2001, ($10.6) million (($0.46) Basic andDiluted EPS) in 2000 and $35.2 million ($1.53 Basic and Diluted EPS) in 1999. A summary of stock option activity and weighted-average exerciseprices for the periods indicated are as follows: Number of Weighted-Average Options Exercise Price --------- ---------------- Outstanding at December 31, 1998 .............. 1,198,260 $ 21.57 --------- ---------- Granted ............................... 537,375 21.52 Exercised ............................. (5,140) 17.76 Cancelled ............................. (11,590) 20.05Outstanding at December 31, 1999 .............. 1,718,905 21.57 --------- ---------- Granted ............................... 277,500 7.50 Exercised ............................. -- -- Cancelled ............................. (76,780) 20.43Outstanding at December 31, 2000 .............. 1,919,625 19.59 --------- ---------- Granted ............................... 89,500 9.47 Exercised ............................. -- -- Cancelled ............................. (231,400) 16.79Outstanding at December 31, 2001 .............. 1,777,725 $ 19.39 ========= ========== 53 The following table summarizes information about stock optionsoutstanding at December 31, 2001: Weighted Weighted Weighted Range of Average Average Number Average Exercise Number Remaining Exercise Exercisable Exercise Prices Outstanding Life Price at 12/31/01 Price----------------------------------------------------------------------------------- $ 7.25 to $10.49 269,500 9.1 yrs. $ 7.59 71,536 $ 7.38$10.50 to $15.49 339,000 6.4 yrs. $15.08 208,000 $15.26$15.50 to $22.99 786,225 5.2 yrs. $20.34 535,125 $19.77$23.00 to $33.50 383,000 4.1 yrs. $29.78 346,000 $29.90 Using the Black-Scholes option valuation model, the estimated fairvalues of options granted during 2001, 2000 and 1999 were $5.20, $3.54 and$11.12 per option, respectively. Principal assumptions used in applying theBlack-Scholes model were as follows:Black-Scholes Model Assumptions 2001 2000 1999------------------------------- ---- ---- ---- Risk-free interest rate .............. 5.07% 5.32% 6.06%Expected volatility .................. 45.58% 45.38% 43.95%Expected dividend yield .............. 1.26% 2.21% 0.74%Expected term ........................ 10 yrs. 10 yrs. 7 yrs. b. Other Stock Plans During 1993, the Company adopted its 1993 Employee Stock PurchasePlan (the "Purchase Plan"), which enables eligible employees of the Company topurchase shares of the Company's $0.01 par value common stock. Eligibleemployees may contribute up to 15% of their eligible compensation toward thesemi-annual purchase of common stock. The employees' purchase price is based onthe fair market value of the common stock on the date of purchase. Nocompensation expense is recorded in connection with the Purchase Plan. During2001, 7,138 shares were issued to employees at an average price of $9.77 pershare. At December 31, 2001, there were 247,048 shares available for offeringunder this Purchase Plan. During 1997, the Company adopted its Stock Bonus Plan (the "BonusPlan"). Under the terms of the Bonus Plan, common stock may be granted toemployees under terms and conditions as determined by the Board of Directors.During 2001, 1,960 shares were issued to employees at an average price of$14.14. At December 31, 2001 there were 476,680 shares available for offeringunder this Bonus Plan.16. EMPLOYEE 401(K) SAVINGS PLAN Substantially all of the Company's employees are eligible toparticipate in a defined contribution plan that qualifies under Section 401(k)of the Internal Revenue Code. The Plan provides for the Company to match, incash, a percentage of each employee's contributions under various formulas. TheCompany's matching contribution and related expense for the plan wasapproximately $1.0 million, $1.5 million and $1.4 million for 2001, 2000 and1999, respectively. 5417. SUPPLEMENTAL CASH FLOW INFORMATION Selected cash payments and non cash activities were as follows (in thousands): DECEMBER 31, --------------------------------------- 2001 2000 1999 -------- -------- -------- Cash paid during the year for: Interest ............................................................ $ 20,230 $ 19,694 $ 13,954 Income taxes paid (refunded, net) ................................... (7,047) 18,064 20,319 -------- -------- --------Non cash transactions: Capital lease obligation incurred (Note 10) ......................... 77,363 -- -- Purchase option exercised related to equipment Guarantees (Note 13e) ............................................ 13,825 -- -- Receivable Securitization Facility (Note 8) ......................... 17,700 -- -- Acquisitions, net of cash acquired: Fair value of assets acquired ................................. 59,012 -- 23,698 Liabilities assumed ........................................... (52,676) -- (11,285) -------- -------- -------- Net cash paid ............................................ $ (6,336) $ -- $(12,413) ======== ======== ========18. INCOME TAXES a. Provisions for Income Taxes The consolidated income tax provision for 2001, 2000 and 1999consists of the following components (in thousands): 2001 2000 1999 -------- -------- -------- Current: U.S. Federal and Foreign ............................................ $(28,416) $ 3,196 $ 28,769 State ............................................................... -- 1,396 4,069Deferred ................................................................ (14,441) (8,906) (6,947) -------- -------- --------Total consolidated provision (benefit) .................................. $(42,857) $ (4,314) $ 25,891 ======== ======== ======== The Company's effective tax rates were 15.6%, 39.0% and 40.0% ofpre-tax income/(loss) for 2001, 2000 and 1999, respectively, and differed fromthe U.S. Federal statutory rate of 35% as follows: 2001 2000 1999 --------- --------- --------- Pretax book income/(loss) .............................. $(275,025) $ (11,050) $ 64,733 Federal tax expense (benefit) at 35% statutory rate (96,259) $ (3,868) $ 22,657 State, local income taxes .......................... (554) 591 2,397 Foreign income taxes - rate differential ........... (142) -- -- Valuation allowance ................................ 55,305 -- -- Other .............................................. (1,207) (1,037) 837 --------- --------- ---------Total income tax expense/(benefit) ..................... $ (42,857) $ (4,314) $ 25,891 ========= ========= ========= 55 b. Deferred Taxes Deferred income taxes are primarily due to temporary differencesbetween financial and income tax reporting for the depreciation of property,plant and equipment and equipment under lease, the recognition of income fromassets under finance leases, charges the Company recorded in 2000 and 2001related to the restructuring of certain operations, and tax credits and lossescarried forward. The Company has a federal tax net operating loss carryforward of$86.8 million, which will expire in 2022 if unused. The Company has various taxcredit carryforwards which will expire beginning in 2021 if unused. UnderStatement of Financial Accounting Standards 109, deferred tax assets are reducedby a valuation allowance when, in the opinion of management, it is more likelythan not that some portion or all of the deferred tax assets will not berealized. The Company has determined that a valuation allowance is necessaryand, accordingly, has recorded a valuation allowance for all deferred tax assetsas of December 31, 2001. The components of deferred tax assets and deferred tax liabilitiesas of December 31, 2001 and 2000 were as follows (in thousands): 2001 2000 -------- -------- Deferred tax (assets): Rentals on Finance Leases .............................. $(21,241) $(18,651) Leasing Difference ..................................... (10,284) (7,912) Operations Restructuring ............................... (26,428) (18,194) Tax credits and loss carryforwards ..................... (36,394) -- Other .................................................. (60,789) (12,481)Deferred tax liabilities: Book-Tax Basis Differences-Property, Plant and Equipment 68,343 48,158 Earned Finance Charges on Finance Leases ............... 10,138 9,241 Other .................................................. 21,350 14,280 -------- --------Net deferred tax liability/(asset), before valuation allowance . $(55,305) $ 14,441 -------- --------Valuation allowance ............................................ $ 55,305 $ -- -------- --------Net deferred tax liability/(asset) ............................. $ -- $ 14,441 ======== ======== c. Change in Tax Laws In March 2002, Congress enacted the Job Creation and WorkerAssistance Act of 2002 which allows corporate taxpayers who incur net operatinglosses in tax years ending in 2001 and 2002 to carry back such losses to offsetfederal taxable income generated in the previous five years. The Companyreceived a refund of federal income taxes of approximately $13 million in April2002 related to the carryback of losses incurred during 2001 to tax years ended1996, 1997 and 1998. The benefit associated with this tax law change will berecorded in 2002. The additional carryback period will reduce the amount offederal tax net operating losses available for carryforward to $52.1 million.19. COMMITMENTS AND CONTINGENCIES a. Litigation Various lawsuits, claims and proceedings have been or may beinstituted or asserted against the Company arising in the ordinary course ofbusiness, including those pertaining to product liability, labor and healthrelated matters, successor liability, environmental and possible taxassessments. While the amounts claimed could be substantial, the ultimateliability cannot now be determined because of the considerable uncertaintiesthat exist. Therefore, it is possible that results of operations or liquidity ina particular period could be materially affected by certain contingencies.However, based on facts currently available, management believes that thedisposition of matters that are pending or asserted will not have a materialadverse effect on the Company's financial position or its annual results ofoperations. 56 In March of 2001, Bernard Krone Industria e Comercio de MaquinasAgricolas Ltda. ("BK") filed suit against the Company in the Fourth Civil Courtof Curitiba in the State of Parana, Brazil. This action seeks recovery ofdamages plus pain and suffering. Because of the bankruptcy of BK, thisproceeding is now pending before the Second Civil Court of Bankruptcies andCreditors Reorganization of Curitiba, State of Parana (No.232/99). This case grows out of a joint venture agreement between BK and theCompany, which was generally intended to permit BK and the Company to market theRoadrailer(R) trailer in Brazil and other areas of South America. When BK wasplaced into the Brazilian equivalent of bankruptcy late in the year 2000, thejoint venture was dissolved. BK subsequently filed its lawsuit against theCompany alleging that it was forced to terminate business with other companiesbecause of the exclusivity and non-compete clauses purportedly found in thejoint venture agreement. The lawsuit further alleges that Wabash did notproperly disclose technology to BK and that Wabash purportedly failed to complywith its contractual obligations in terminating the joint venture agreement. Inits complaint, BK asserts that it has been damaged by these alleged wrongs bythe Company in the approximate amount of $8.4 million (U.S.). The Company answered the complaint in May of 2001, denying anywrongdoing and pointing out that, contrary to the allegation found in thecomplaint, a merger of the Company and BK, or the acquisition of BK by theCompany, was never the purpose or intent of the joint venture agreement betweenthe parties; the only purpose was the business and marketing arrangement as setout in the agreement. The Company also asserted a counterclaim in the amount of$351,000 (U.S.) representing monies advanced by the Company to BK to permit BKto import certain trailers from Europe, which was to be reimbursed to theCompany by BK. The counterclaim was based on the fact that this reimbursementnever took place. The Company believes that the claims asserted against it by BK arewithout merit and intends to defend itself vigorously against those claims. Italso believes that the claims asserted in its counterclaim are valid andmeritorious and it intends to prosecute that claim. The Company believes thatthe resolution of this lawsuit will not have a material adverse effect on itsfinancial position or future results of operations; however, at this early stageof the proceeding, no assurance can be given as to the ultimate outcome of thecase. On September 17, 2001 the Company commenced an action against PPGIndustries, Inc. ("PPG") in the United States District Court, Northern Districtof Indiana, Hammond Division at Lafayette, Civil Action No. 4:01 CV 55. In thelawsuit, the Company alleged that it has sustained substantial damages stemmingfrom the failure of the PPG electrocoating system (the "E-coat system") andrelated products that PPG provided for the Company's Scott County Tennesseeplant. The Company alleges that PPG is responsible for defects in the design ofthe E-coat system and defects in PPG products that have resulted in malfunctionsof the E-coat system and poor quality coatings on numerous trailers. The Companyfurther alleges that the failures of PPG's E-coat system and productssubstantially contributed to the decision to shut down the Scott County plant. PPG filed a Counterclaim in that action on or about November 8,2001, seeking damages in excess of approximately $1.35 million based uponcertain provisions of the November 3, 1998 Investment Agreement between it andthe Company. The Company filed a Reply to the Counterclaim denying liability forthe claims asserted. The Company believes that the claims asserted against it by PPG inthe Counterclaim are without merit and intends to defend itself vigorouslyagainst those claims. It also believes that the claims asserted in its Complaintare valid and meritorious and it intends to prosecute those claims. The Companybelieves that the resolution of this lawsuit will not have a material adverseeffect on its financial position or future results of operations; however, atthis early stage of the proceeding, no assurance can be given as to the ultimateoutcome of the case. In the second quarter of 2000, the Company received a grand jurysubpoena requesting certain documents relating to the discharge of wastewatersinto the environment at a Wabash facility in Huntsville, Tennessee. The subpoenasought the production of documents and related records concerning the design ofthe facility's discharge system and the particular discharge in question. On May16, 2001, the Company received a second grand jury subpoena that sought theproduction of additional documents relating to the discharge in question. TheCompany is fully cooperating with federal officials with respect to their 57investigation into the matter. At this time, the Company is unable to predictthe outcome of the federal grand jury inquiry into this matter, but does notbelieve it will result in a material adverse effect on its financial position orfuture results of operations; however, at this early stage of the proceedings,no assurance can be given as to the ultimate outcome of the case. On April 17, 2000, the Company received a Notice ofViolation/Request for Incident Report from the Tennessee Department ofEnvironmental Conservation (TDEC) with respect to the same matter. On September6, 2000, the Company received an Order and Assessment from TDEC directing theCompany to pay a fine of $100,000 for violations of Tennessee environmentalrequirements as a result of the discharge. The Company filed an appeal of theOrder and Assessment on October 10, 2000. The Company is currently negotiatingan agreed-upon Order with TDEC to resolve this matter. The class action against the Company in United States District Courtfor the Northern District of Indiana entitled "In re Wabash National CorporationSecurities Litigation", Civil Action No. 4:99-CV-0003-AS, originally filed in1999 and previously reported by the Company in prior filings, was dismissed withprejudice in December 2001 in connection with a final settlement entered into bythe parties, with no material effect on the Company's financial position orresults of operations. b. Environmental The Company generates and handles certain material, wastes andemissions in the normal course of operations that are subject to various andevolving Federal, state and local environmental laws and regulations. The Company assesses its environmental liabilities on an on-goingbasis by evaluating currently available facts, existing technology, presentlyenacted laws and regulations as well as experience in past treatment andremediation efforts. Based on these evaluations, the Company estimates a lowerand upper range for the treatment and remediation efforts and recognizes aliability for such probable costs based on the information available at thetime. As of December 31, 2001 and 2000, the estimated potential exposure forsuch costs ranges from approximately $0.5 million to approximately $1.7 million,for which the Company has a reserve of approximately $0.9 million. Thesereserves were primarily recorded for exposures associated with the costs ofenvironmental remediation projects to address soil and ground watercontamination as well as the costs of removing underground storage tanks at itsbranch service locations. The possible recovery of insurance proceeds has notbeen considered in the Company's estimated contingent environmental costs. Future information and developments will require the Company tocontinually reassess the expected impact of these environmental matters.However, the Company has evaluated its total environmental exposure based oncurrently available data and believes that compliance with all applicable lawsand regulations will not have a materially adverse effect on the consolidatedfinancial position or results of operations of the Company. c. Used Trailer Restoration Program During 1999, the Company reached a settlement with the IRS relatedto federal excise tax on certain used trailers restored by the Company during 1996 and 1997. The Company has continued the restoration program with the samecustomer since 1997. The customer has indemnified the Company for any potentialexcise tax assessed by the IRS for years subsequent to 1997. As a result, theCompany has recorded a liability and a corresponding receivable of approximately$8.3 million and $7.9 million in the accompanying Consolidated Balance Sheets atDecember 31, 2001 and 2000, respectively. During 2001, the IRS completed itsfederal excise tax audit of 1999 and 1998 resulting in an assessment ofapproximately $5.4 million. The Company believes it is fully indemnified forthis liability and that the related receivable is fully collectible. d. Letters of Credit As of December 31, 2001, the Company had standby letters of credittotaling approximately $29.0 million issued in connection with certain foreignsales transactions and other domestic purposes. 58 e. Royalty Payments The Company is obligated to make quarterly royalty payments inaccordance with a licensing agreement related to the development of theCompany's composite plate material used on its proprietary DuraPlate(R) trailer.The amount of the payments varies with the production volume of usable material,but requires minimum royalties of $0.5 million annually through 2005. Paymentsfor 2001, 2000 and 1999 were $1.4 million, $2.1 million and $2.4 million,respectively. f. Used Trailer Residual Guarantees and Purchase Commitments In connection with certain new trailer sale transactions, theCompany has entered into residual value guarantees and purchase optionagreements with customers or financing institutions whereby the Company agreesto guarantee an end-of-term residual value or has an option to purchase the usedequipment at a pre-determined price. Under these guarantees, future paymentswhich may be required as of December 31, 2001 and 2000 totaled approximately$28.1 million and $37.5 million, respectively as follows (in thousands): Purchase Option Guarantee Amount --------------- ---------------- 2002 ............................... $ 9,416 $ 1,8782003 ............................... 20,596 3,6172004 ............................... 44,800 5,0572005 ............................... 13,465 4,5712006 ............................... 1,748 10,475Thereafter ......................... -- 2,463 ------- ------- $90,025 $28,061 ======= =======20. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited quarterly results ofoperations for fiscal years 2001, 2000 and 1999 (Dollars in thousands except pershare amounts). First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- ---------2001 Net Sales .................... $ 242,629 $ 212,172 $ 241,945 $ 166,646 Gross loss ................... (1,743) (26) (32,733) (84,711) Net loss ..................... (17,730) (18,117) (61,373)(3) (134,948)(4) Basic loss per share(1) ...... $ (0.79) $ (0.81) $ (2.69) $ (5.88) Diluted loss per share(1) .... $ (0.79) $ (0.81) $ (2.69) $ (5.88)2000 Net Sales .................... $ 352,848 $ 358,729 $ 345,818 $ 274,777 Gross profit ................. 34,423 34,045 29,512 17,987 Net income (loss) ............ 9,132 7,515 4,992 (28,375)(2) Basic earnings (loss) per share(1) $ 0.38 $ 0.31 $ 0.20 $ (1.25) Diluted earnings (loss) per share(1) $ 0.38 $ 0.31 $ 0.20 $ (1.25)1999 Net Sales .................... $ 341,624 $ 380,203 $ 374,708 $ 358,035 Gross profit ................. 27,225 34,099 35,039 35,354 Net income ................... 6,367 10,347 10,365 11,762 Basic earnings per share(1) .. $ 0.26 $ 0.42 $ 0.43 $ 0.49 Diluted earnings per share(1) $ 0.26 $ 0.42 $ 0.43 $ 0.49 (1) Earnings (loss) per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share may differ from annual earnings per share due to rounding. (2) The fourth quarter 2000 results include restructuring and other related charges of $46.6 million ($28.5 million, net of tax). (3) The third quarter 2001 results include restructuring and other related charges of $40.5 million ($25.6 million, net of tax). (4) The fourth quarter 2001 results include loss contingencies and impairment charge related to the Company's leasing operations of $37.9 million and used trailer inventory valuation of $18.6 million. 59ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURENone.PART IIIITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company hereby incorporates by reference the informationcontained under the heading "Election of Directors" from its definitive ProxyStatement to be delivered to stockholders of the Company in connection with the2002 Annual Meeting of Stockholders to be held May 30, 2002. The following are the executive officers of the Company: NAME AGE POSITION ---- --- -------- Richard E. Dessimoz(1)... 54 Acting Chief Executive Officer and DirectoR Mark R. Holden(1)........ 42 Senior Vice President--Chief Financial Officer and Director Arthur R. Brown.......... 50 Senior Vice President--Chief Operating Officer Rodney P. Ehrlich........ 55 Senior Vice President--Product Development Lawrence J. Gross........ 47 Senior Vice President--Marketing Derek L. Nagle........... 51 Senior Vice President and President of North American Trailer Centers(TM) (1) Member of the Executive Committee of the Board of Directors Richard E. Dessimoz. Mr. Dessimoz has been Acting Chief ExecutiveOfficer of the Company since July 2001 and Vice President and Chief ExecutiveOfficer of Wabash National Finance Corporation since its inception in December1991. Mr. Dessimoz has been a Director of the Company since December 1995. Mark R. Holden. Mr. Holden has been Senior Vice President--Chief Financial Officer since October 2001 and a member of the Office of the ChiefExecutive Officer since July 2001. Mr. Holden has served as VicePresident--Chief Financial Officer and Director of the Company since May 1995and Vice President--Controller of the Company since 1992. Arthur R. Brown. Mr. Brown has been Senior Vice President-ChiefOperating Officer of the Company since October 2001 and Vice President-ChiefOperating Officer since August 2001. Prior to his employment with the Company,Mr. Brown served as Vice President of Fram/Autolite Operations for HoneywellCorporation since April 1998 and as Director of Operations for Vickers, Inc.from November 1995 to April 1998. Rodney P. Ehrlich. Mr. Rodney Ehrlich has been Senior VicePresident--Product Development of the Company since October 2001. Mr. Ehrlichwas Vice President-Engineering and has been in charge of the Company'sengineering operations since the Company's founding. Lawrence J. Gross. Mr. Gross has been Senior VicePresident--Marketing since October 2001. Mr. Gross had been VicePresident--Marketing of the Company since December 1994. Previously he served asPresident of the Company's RoadRailer(R)division since joining the Company inJuly 1991. Prior to his employment by the Company, he was employed as VicePresident--Marketing from 1985 until 1990 by Chamberlain of Connecticut, Inc., alicensor of bimodal technology, and as Vice President--Marketing until he beganhis employment with the Company. Derek L. Nagle. Mr. Nagle has been Senior Vice President of theCompany since October 2001. Mr. Nagle has served as Vice President of theCompany and President of North American Trailer Centers(TM)since the Company'sacquisition of certain Fruehauf assets in April 1997. Prior to his employment bythe Company, he held various senior executive positions. Fruehauf TrailerCorporation filed for bankruptcy protection in October 1996. Officers are elected for a term of one year and serve at thediscretion of the Board of Directors. 60ITEM 11--EXECUTIVE COMPENSATION The Company hereby incorporates by reference the informationcontained under the heading "Compensation" from its definitive Proxy Statementto be delivered to the stockholders of the Company in connection with the 2002Annual Meeting of Stockholders to be held May 30, 2002.ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company hereby incorporates by reference the informationcontained under the heading "Beneficial Ownership of Common Stock" from itsdefinitive Proxy Statement to be delivered to the stockholders of the Company inconnection with the 2002 Annual Meeting of Stockholders to be held on May 30,2002.ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company hereby incorporates by reference the informationcontained under the heading "Related Party Transaction" from its definitiveProxy Statement to be delivered to the stockholders of the Company in connectionwith the 2002 Annual Meeting of Stockholders to be held on May 30, 2002.PART IVITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K(a) Financial Statements: The Company has included all required financial statements in Item 8 of this Form 10-K. The financial statement schedules have been omitted as they are not applicable or the required information is included in the Notes to the consolidated financial statements. For the year ended December 31, 2000, ETZ was a significant subsidiary under Rule 3-09 of Regulation S-X. Therefore, the Company was required to file audited financial statements of ETZ for the year ended December 31, 2000 by June 30, 2001. The Company has received audited financial statements under German generally accepted accounting principles for the year ended December 31, 2000, but has not been able to obtain these financial statements in conformity with accounting principles generally accepted in the United States. For the year ended December 31, 2001, ETZ was not a significant subsidiary under Rule 3-09 of Regulation S-X. The Company divested ETZ in January 2002.(b) Reports on Form 8-K:(c) Exhibits: The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit listed below:2.01 Purchase Agreement dated March 31, 1997, as amended (Incorporated by reference from Exhibit 2.01 to Registrant's Form 8-K filed in May 1, 1997)3.01 Certificate of Incorporation of the Company (1)3.02 Certificate of Designations of Series A Junior Participating Preferred Stock (1)3.03 Amended and restated By-laws of the Company (19)3.04 Certificate of Designations of Series B 6% Cumulative Convertible Exchangeable Preferred Stock (5)3.05 Certificate of Designations of Series C 5.5% Convertible Exchangeable Preferred Stock (8)4.01 Specimen Stock Certificate (16)4.02 First Amendment to Shareholder Rights Agreement dated October 21, 1998 (9)4.03 Form of Indenture for the Company's 6% Convertible Subordinated Debentures due 2007 (5)4.04 Second Amendment to Shareholder Rights Agreement dated December 18, 2000 (13)10.01 Loan Agreement, Mortgage, Security Agreement and Financing Statement between Wabash National Corporation and City of Lafayette dated as of August 15, 1989 (1)10.02 1992 Stock Option Plan (1)10.03 Real Estate Sale Agreement by and between Kraft General Foods, Inc. and Wabash National Corporation, dated June 1, 1994 (2)10.04 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996, between certain Purchasers and Wabash National Corporation (3) 6110.05 Master Loan and Security Agreement in the amount of $10 million by Wabash National Finance Corporation in favor of Fleet Capital Corporation dated December 27, 1995 (3)10.06 First Amendment to the 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996 between certain Purchasers and Wabash National Corporation (4)10.07 Series B-H Senior Note Purchase Agreement dated December 18, 1996 between certain Purchasers and Wabash National Corporation (4)10.08 Revolving Credit Loan Agreement dated September 30, 1997, between NBD Bank, N.A. and Wabash National Corporation (6)10.09 Investment Agreement and Shareholders Agreement dated November 4, 1997, between ETZ (Europaische Trailerzug Beteiligungsgesellschaft mbH) and Wabash National Corporation (6)10.10 Receivable Sales Agreement between the Company and Wabash Funding Corporation and the Receivables Purchase Agreement between Wabash Funding Corporation and Falcon Asset Securitization Corporation (7)10.11 Indemnification Agreement between the Company and Roadway Express, Inc. (10)10.12 364-day Credit Agreement dated June 22, 2000, between Bank One, Indiana, N.A., as administrative agent and Wabash National Corporation (11)10.13 Series I Senior Note Purchase Agreement dated September 29, 2000, between Prudential Insurance Company and Wabash National Corporation (12)10.14 Share Transfer Agreement dated December 12, 2000, between Bayerische Kapitalbeteiligungsgesellschaft mBH and Wabash National Corporation (15)10.15 Participation Agreement and Equipment Lease between Apex Trailer Leasing and Rentals, L.P., as Lessee, and Wabash Statutory Trust, as Lessor, dated December 29, 2000 (15)10.16 2000 Stock Option Plan (16)10.17 Consulting and Non-Competition Agreement dated July 16, 2001 between Donald J. Ehrlich and Wabash National Corporation (17)10.18 Originators Receivables Sale Agreement dated October 4, 2001 between Wabash National LP and NOAMTC, Inc. as originators and Wabash National Financing LLC, Receivable Sales Agreement dated October 4, 2001 between Wabash Financing LLC and WNC Funding LLC and the Receivables Purchase Agreement dated October 4, 2001 between WNC Funding LLC and North Coast Funding Corporation (18)10.19 2001 Stock Appreciation Rights Plan (18)10.20 Asset Purchase Agreement dated January 11, 2002, between Bayerische Trailerzug Gesellschaft fur Bimodalen Guterverkehr mbH (ETZ) and Wabash National Corporation (19)10.21 Share Purchase Agreement dated January 11, 2002, between Brennero Trasporto Rotaia S.p.A. and Bimodal Verwaltungs Gesellschaft mbH (collectively the "Purchasers") and Wabash National Corporation (the Seller) (19)10.22 Second Addendum to the Equipment Schedule dated March 2, 2002 made under the Master Equipment Lease Agreement dated December 30, 1996 between the Company and National City Leasing Corporation (19)10.23 Master Amendment Agreement dated April 11, 2002 between the Company and various financial institutions (19) 21.00 List of Significant Subsidiaries (19)23.01 Consent of Arthur Andersen LLP (19)99.01 Representation from Arthur Andersen LLP (19) (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 33-42810) or the Registrant's Registration Statement on Form 8-A filed December 6, 1995 (item 3.02 and 4.02) (2) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1994. (3) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1995 (4) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1996 (5) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 1997 (6) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1997 (7) Incorporated by reference to the Registrant's Form 8-K filed on April 14, 1998 (8) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1998 (9) Incorporated by reference to the Registrant's Form 8-K filed on October 26, 1998 (10) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1999 (11) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 2000 (12) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 2000 (13) Incorporated by reference to the Registrant's Amended Form 8-A filed January 18, 2001 (14) Incorporated by reference to the Registrant's Form 8-K filed on February 5, 2002 62 (15) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 2000 (16) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 2001 (17) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 2001 (18) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 2001 (19) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 2001 The Registrant undertakes to provide to each shareholder requesting the same acopy of each Exhibit referred to herein upon payment of a reasonable fee limitedto the Registrant's reasonable expenses in furnishing such Exhibit. 63 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THESECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TOBE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. WABASH NATIONAL CORPORATIONApril 12, 2002 By: /s/ Mark R. Holden ----------------------------------------------- Mark R. Holden Senior Vice President - Chief Financial Officer (Principal Accounting Officer) and Duly Authorized Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THEREGISTRANT IN THE CAPACITIES AND ON THE DATED INDICATED. DATE SIGNATURE AND TITLE ---- ------------------- April 12, 2002 By: /s/ John T. Hackett ------------------------------------------- John T. Hackett Chairman of the BoardApril 12, 2002 By: /s/ Richard E. Dessimoz ------------------------------------------- Richard E. Dessimoz Acting Chief Executive Officer and Director (Principal Executive Officer)April 12, 2002 By: /s/ Mark R. Holden ------------------------------------------- Mark R. Holden Senior Vice President--Chief Financial Officer and DirectorApril 12, 2002 By: /s/ David C. Burdakin ------------------------------------------- David C. Burdakin DirectorApril 12, 2002 By: /s/ Donald J. Ehrlich ------------------------------------------- Donald J. Ehrlich DirectorApril 12, 2002 By: /s/ E. Hunter Harrison ------------------------------------------- E. Hunter Harrison DirectorApril 12, 2002 By: /s/ Dr. Martin C. Jischke -------------------------------------------- Dr. Martin C. Jischke DirectorApril 12, 2002 By: /s/ Ludvik F. Koci -------------------------------------------- Ludvik F. Koci Director 64 EXHIBIT 3.03 WABASH NATIONAL CORPORATION AMENDED AND RESTATED BYLAWS ADOPTED AS OF ____________________, 2001 TABLE OF CONTENTS Page ---- 1. OFFICES....................................................................... 1 1.1. Registered Office...................................................... 1 1.2. Other Offices.......................................................... 12. MEETINGS OF STOCKHOLDERS...................................................... 1 2.1. Place of Meetings...................................................... 1 2.2. Annual Meetings........................................................ 1 2.3. Special Meetings....................................................... 2 2.4. Notice of Meetings..................................................... 2 2.5. Waivers of Notice...................................................... 2 2.6. Notice of Business..................................................... 3 2.6.1. Annual Meeting.................................................. 3 2.6.2. Notice Procedures............................................... 3 2.6.3. Public Announcement............................................. 5 2.7. List of Stockholders................................................... 5 2.8. Quorum at Meetings..................................................... 5 2.9. Voting and Proxies..................................................... 6 2.10. Required Vote.......................................................... 7 2.11. Action Without a Meeting............................................... 73. DIRECTORS..................................................................... 8 3.1. Powers................................................................. 8 3.2. Number and Election.................................................... 8 3.3. Nomination of Directors................................................ 8 3.3.1. Annual Meetings................................................. 8 3.3.2. Special Meetings of Stockholders................................ 11 3.3.3. Public Announcement............................................. 11 3.4. Vacancies.............................................................. 12 3.5. Meetings............................................................... 12 3.5.1. Regular Meetings................................................ 12 3.5.2. Special Meetings................................................ 12 3.5.3. Telephone Meetings.............................................. 13 3.5.4. Action Without Meeting.......................................... 13 3.5.5. Waiver of Notice of Meeting..................................... 13 3.6. Quorum and Vote at Meetings............................................ 13 3.7. Committees of Directors................................................ 13 3.8. Compensation of Directors.............................................. 144. OFFICERS...................................................................... 14 4.1. Positions.............................................................. 14 - i - 4.2. Chairperson............................................................ 15 4.3. President.............................................................. 15 4.4. Vice President......................................................... 15 4.5. Secretary.............................................................. 16 4.6. Assistant Secretary.................................................... 16 4.7. Treasurer.............................................................. 16 4.8. Assistant Treasurer.................................................... 16 4.9. Term of Office......................................................... 16 4.10. Compensation........................................................... 17 4.11. Fidelity Bonds......................................................... 175. CAPITAL STOCK................................................................. 17 5.1. Certificates of Stock; Uncertificated Shares........................... 17 5.2. Lost Certificates...................................................... 17 5.3. Record Date............................................................ 18 5.3.1. Actions by Stockholders......................................... 18 5.3.2. Payments........................................................ 19 5.4. Stockholders of Record................................................. 196. INDEMNIFICATION; INSURANCE.................................................... 19 6.1. Authorization of Indemnification....................................... 19 6.2. Right of Claimant to Bring Action Against the Corporation.............. 20 6.3. Non-exclusivity........................................................ 21 6.4. Survival of Indemnification............................................ 21 6.5. Insurance.............................................................. 217. GENERAL PROVISIONS............................................................ 22 7.1. Inspection of Books and Records........................................ 22 7.2. Dividends.............................................................. 22 7.3. Reserves............................................................... 22 7.4. Execution of Instruments............................................... 23 7.5. Fiscal Year............................................................ 23 7.6. Seal................................................................... 23 7.7. Amendment.............................................................. 23 - ii- AMENDED AND RESTATED BYLAWS OF WABASH NATIONAL CORPORATION1. OFFICES 1.1. REGISTERED OFFICE The registered office of the Corporation shall be in Wilmington,Delaware, and the registered agent in charge thereof shall be [CorporationService Company]. 1.2. OTHER OFFICES The Corporation may also have offices at such other places, bothwithin and without the State of Delaware, as the Board of Directors may fromtime to time determine or as may be necessary or useful in connection with thebusiness of the Corporation.2. MEETINGS OF STOCKHOLDERS 2.1. PLACE OF MEETINGS All meetings of the stockholders shall be held at such place as maybe fixed from time to time by the Board of Directors, the Chairperson or thePresident. Notwithstanding the foregoing, the Board of Directors may determinethat the meeting shall not be held at any place, but may instead be held bymeans of remote communication. 2.2. ANNUAL MEETINGS Unless directors are elected by written consent in lieu of an annualmeeting, the Corporation shall hold annual meetings of stockholders, on suchdateand at such time as shall be designated from time to time by the Board ofDirectors, the Chairperson or the President, at which stockholders shall elect aBoard of Directors and transact such other business as may properly be broughtbefore the meeting. If a written consent electing directors is less thanunanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected atan annual meeting held at the effective time of such action are vacant and arefilled by such action. 2.3. SPECIAL MEETINGS Special meetings of the stockholders, for any purpose or purposes,unless otherwise prescribed by statute, may be called by the Board of Directors,the Chairperson or the President. Business transacted at any special meeting ofstockholders shall be limited to the purposes stated in the notice (except tothe extent that such notice is waived or is not required as provided in theDelaware General Corporation Law or these Bylaws). 2.4. NOTICE OF MEETINGS Notice of any meeting of stockholders, stating the place, if any,date and hour of the meeting, the means of remote communication, if any, bywhich stockholders and proxyholders may be deemed to be present in person andvote at such meeting, and (if it is a special meeting) the purpose or purposesfor which the meeting is called, shall be given to each stockholder entitled tovote at such meeting not less than ten nor more than sixty days before the dateof the meeting (except to the extent that such notice is waived or is notrequired as provided in the General Corporation Law of the State of Delaware(the "DELAWARE GENERAL CORPORATION LAW") or these Bylaws). Such notice shall begiven in accordance with, and shall be deemed effective as set forth in,Sections 222 and 232 (or any successor section or sections) of the DelawareGeneral Corporation Law. 2.5. WAIVERS OF NOTICE Whenever the giving of any notice is required by statute, theCertificate of Incorporation or these Bylaws, a written waiver thereof signed bythe person or persons entitled to said notice, or a waiver thereof by electronictransmission by the person entitled to said notice, delivered to theCorporation, whether before or after the event as to which such notice isrequired, shall be deemed equivalent to notice. Attendance of a stockholder at ameeting shall constitute a waiver of notice (1) of such meeting, except when thestockholder at the beginning of the meeting objects to holding the meeting ortransacting business at -2-the meeting, and (2) (if it is a special meeting) of consideration of aparticular matter at the meeting that is not within the purpose or purposesdescribed in the meeting notice, unless the stockholder objects to consideringthe matter at the beginning of the meeting. 2.6. NOTICE OF BUSINESS 2.6.1. ANNUAL MEETING At an annual meeting of the stockholders, only such business shallbe conducted as shall have been brought before the meeting (i) pursuant to theCorporation's notice of meeting (or any supplement thereto), (ii) by or at thedirection of the Board of Directors or (iii) by any stockholder of theCorporation who is a stockholder of record at the time of giving of the noticeprovided for in this SECTION 2.6, who shall be entitled to vote at such meetingand who complies with the notice procedures set forth in this SECTION 2.6. 2.6.2. NOTICE PROCEDURES (a) For business to be properly brought before an annual meeting bya stockholder, the stockholder must have given timely notice thereof in writingto the Secretary of the Corporation. To be timely, a stockholder's notice shallbe delivered to or mailed and received at the principal executive offices of theCorporation not later than the close of business on the ninetieth day norearlier than the close of business on the one hundred twentieth day prior to the first anniversary of the preceding year's annual meeting; provided, however,that in the event that the date of the annual meeting is more than thirty daysbefore or more than thirty days after such anniversary date, notice by thestockholder to be timely must be so delivered not earlier than the close ofbusiness on the one hundred twentieth day prior to such annual meeting and notlater than the close of business on the later of the ninetieth day prior to suchannual meeting or the tenth day following the day on which public disclosure ofthe date of the meeting was first made. In no event shall the publicannouncement of an adjournment or postponement of an annual meeting commence anew time period (or extend any time period) for the giving of a stockholder'snotice as described above. (b) A stockholder's notice to the Secretary shall set forth (A) asto each matter the stockholder proposes to bring before the meeting (i) a briefdescription of the business desired to be brought before the meeting and thereasons for conducting such business at the meeting, (ii) the text of theproposal or business (including the text of any resolutions proposed forconsideration and in the event that such business includes a proposal to amendthe Bylaws of the Corporation, the -3-language of the proposed amendment), (iii) any material interest in suchbusiness of such stockholder and such beneficial owner, if any, on whose behalfthe proposal is made, and (iv) any other information relating to such businessthat is required to be disclosed in a proxy statement or other filings requiredto be made in connection with solicitations of proxies in support of suchproposal or is otherwise required pursuant to Regulation 14A of the SecuritiesExchange Act of 1934, as amended (the "EXCHANGE ACT") and (B) as to thestockholder giving the notice and the beneficial owner, if any, on whose behalfthe proposal is made (i) the name and address of such stockholder, as theyappear on the Corporation's books, and of such beneficial owner, (ii) the classor series and number of shares of the Corporation which are owned beneficiallyand of record by such stockholder and by such beneficial owner, (iii) adescription of all arrangements or understandings between such stockholderand/or beneficial owner and any other person or persons (including their names)pursuant to which the proposal(s) are to be made by such stockholder, (iv) arepresentation that such stockholder is a holder of record of stock of theCorporation entitled to vote at such meeting and intends to appear in person orby proxy at the meeting to propose the items of business set forth in itsnotice, (v) a representation whether the stockholder or the beneficial owner, ifany, intends or is a part of a group which intends (a) to deliver a proxystatement and/or form of proxy to holders of at least the percentage of theCorporation's outstanding capital stock required to approve or adopt theproposal and/or (b) otherwise to solicit proxies from stockholders in support ofsuch proposal, and (vi) any other information relating to such stockholder orbeneficial owner that would be required to be disclosed in a proxy statement orother filings required to be made in connection with solicitations of proxies insupport of such proposal pursuant to Regulation 14A under the Exchange Act. (c) Notwithstanding anything in the Bylaws to the contrary, nobusiness shall be conducted at an annual stockholder meeting except inaccordance with the procedures set forth in this SECTION 2.6. The timingrequirements for advance notice of a proposal set forth in this SECTION 2.6shall be deemed satisfied by a stockholder if the stockholder has notified theCorporation of his or her intention to present a proposal at an annual meetingin compliance with Rule 14a-8 (or any successor thereof) promulgated under theExchange Act and such stockholder's proposal has been included in a proxystatement that has been prepared by the Corporation to solicit proxies for suchannual meeting. Except as otherwise provided by law, the Chair of the meetinghas the power and authority to and shall, if the facts warrant, determine anddeclare to the meeting that business was not properly brought before the meetingand in accordance with the provisions of these Bylaws, and if he should sodetermine, he shall so declare to the meeting and any such business not properlybrought before the meeting shall not be -4-transacted. Notwithstanding the foregoing provisions of this SECTION 2.6, astockholder shall also comply with all applicable requirements of the ExchangeAct and the rules and regulations promulgated thereunder with respect to thematters set forth in this Section. Nothing in this SECTION 2.6 shall be deemedto affect any rights of stockholders to request inclusion of proposals in theCorporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 2.6.3. PUBLIC ANNOUNCEMENT For purposes of this Section 2.6, "public announcement" shallinclude disclosure in a press release reported by the Dow Jones News Service,Associated Press or comparable national news service or in a document publiclyfiled by the Corporation with the Securities and Exchange Commission pursuant toSection 13, 14 or 15(d) of the Exchange Act. 2.7. LIST OF STOCKHOLDERS After the record date for a meeting of stockholders has been fixed,at least ten days before such meeting, the officer who has charge of the stockledger of the Corporation shall make a list of all stockholders entitled to voteat the meeting, arranged in alphabetical order and showing the address of eachstockholder (but not the electronic mail address or other electronic contactinformation, unless the Board of Directors so directs) and the number of sharesregistered in the name of each stockholder. Such list shall be open to theexamination of any stockholder for any purpose germane to the meeting for aperiod of at least ten days prior to the meeting: (1) on a reasonably accessibleelectronic network, provided that the information required to gain access tosuch list is provided with the notice of the meeting, or (2) during ordinarybusiness hours, at the principle place of business of the Corporation. If themeeting is to be held at a place, then such list shall also, for the duration ofthe meeting, be produced and kept open to the examination of any stockholder whois present at the time and place of the meeting. If the meeting is to be heldsolely by means of remote communication, then such list shall also be open tothe examination of any stockholder during the whole time of the meeting onreasonably accessible electronic network, and the information required to accesssuch list shall be provided with the notice of the meeting. 2.8. QUORUM AT MEETINGS Stockholders may take action on a matter at a meeting only if aquorum exists with respect to that matter. Except as otherwise provided bystatute or by the Certificate of Incorporation, the holders of a majority of theshares entitled to vote at the meeting, and who are present in person orrepresented by proxy, shall -5-constitute a quorum at all meetings of the stockholders for the transaction ofbusiness. Where a separate vote by a class or series or classes or series isrequired, a majority of the outstanding shares of such class or series orclasses or series, present in person or represented by proxy, shall constitute aquorum entitled to take action with respect to that vote on that matter. Once ashare is represented for any purpose at a meeting (other than solely to object(1) to holding the meeting or transacting business at the meeting, or (2) (if itis a special meeting) to consideration of a particular matter at the meetingthat is not within the purpose or purposes described in the meeting notice), itis deemed present for quorum purposes for the remainder of the meeting and forany adjournment of that meeting unless a new record date is or must be set forthe adjourned meeting. The holders of a majority of the voting sharesrepresented at a meeting, whether or not a quorum is present, may adjourn suchmeeting from time to time. 2.9. VOTING AND PROXIES Unless otherwise provided in the Delaware General Corporation Law or in the Corporation's Certificate of Incorporation, and subject to the otherprovisions of these Bylaws, each stockholder shall be entitled to one vote oneach matter, in person or by proxy, for each share of the Corporation's capitalstock that has voting power and that is held by such stockholder. No proxy shallbe voted or acted upon after three years from its date, unless the proxyprovides for a longer period. A duly executed appointment of proxy shall beirrevocable if the appointment form states that it is irrevocable and if, andonly as long as, it is coupled with an interest sufficient in law to support anirrevocable power. If authorized by the Board of Directors, and subject to suchguidelines as the Board of Directors may adopt, stockholders and proxyholdersnot physically present at a meeting of stockholders may, by means of remotecommunication, participate in a meeting of stockholders and be deemed present inperson and vote at such meeting whether such meeting is held at a designatedplace or solely by means of remote communication, provided that (1) theCorporation implements reasonable measures to verify that each person deemedpresent and permitted to vote at the meeting by means of remote communication isa stockholder or proxyholder, (2) the Corporation implements reasonable measuresto provide such stockholders and proxyholders a reasonable opportunity toparticipate in the meeting and to vote on matters submitted to the stockholders,including an opportunity to read or hear the proceedings of the meetingsubstantially concurrently with such proceedings, and (3) if any stockholder orproxyholder votes or takes other action at the meeting by means of remotecommunication, a record of such vote or other action is maintained by theCorporation. -6- 2.10. REQUIRED VOTE When a quorum is present at any meeting of stockholders, all mattersshall be determined, adopted and approved by the affirmative vote (which neednot be by ballot) of the holders of a majority of the shares present in personor represented by proxy at the meeting and entitled to vote with respect to thematter, unless the proposed action is one upon which, by express provision ofstatutes or of the Certificate of Incorporation, a different vote is specifiedand required, in which case such express provision shall govern and control withrespect to that vote on that matter. Where a separate vote by a class or classesis required, the affirmative vote of the holders of a majority of the shares ofsuch class or classes present in person or represented by proxy at the meetingshall be the act of such class. Notwithstanding the foregoing, directors shallbe elected by a plurality of the votes of the shares present in person orrepresented by proxy at the meeting and entitled to vote on the election ofdirectors. 2.11. ACTION WITHOUT A MEETING Any action required or permitted to be taken at a stockholders'meeting may be taken without a meeting, without prior notice and without a vote,if the action is taken by persons who would be entitled to vote at a meeting andwho hold shares having voting power equal to not less than the minimum number ofvotes that would be necessary to authorize or take the action at a meeting atwhich all shares entitled to vote were present and voted. The action must beevidenced by one or more written consents describing the action taken, signed bythe stockholders entitled to take action without a meeting, and delivered to theCorporation in the manner prescribed by the Delaware General Corporation Law forinclusion in the minute book. No consent shall be effective to take thecorporate action specified unless the number of consents required to take suchaction are delivered to the Corporation within sixty days of the delivery of theearliest-dated consent. A telegram, cablegram or other electronic transmissionconsenting to such action and transmitted by a stockholder or proxyholder, or bya person or persons authorized to act for a stockholder or proxyholder, shall bedeemed to be written, signed and dated for the purposes of this SECTION 2.11,provided that any such telegram, cablegram or other electronic transmission setsforth or is delivered with information from which the Corporation can determine(1) that the telegram, cablegram or other electronic transmission wastransmitted by the stockholder or proxyholder or by a person or personsauthorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted suchtelegram, cablegram or electronic -7-transmission. The date on which such telegram, cablegram or electronictransmission is transmitted shall be deemed to be the date on which such consentwas signed. No consent given by telegram, cablegram or other electronictransmission shall be deemed to have been delivered until such consent isdelivered to the Corporation in accordance with Section 228(d)(1) of theDelaware General Corporation Law. Written notice of the action taken shall begiven in accordance with the Delaware General Corporation Law to allstockholders who do not participate in taking the action who would have beenentitled to notice if such action had been taken at a meeting having a recorddate on the date that written consents signed by a sufficient number of holdersto take the action were delivered to the Corporation.3. DIRECTORS 3.1. POWERS The business and affairs of the Corporation shall be managed by orunder the direction of the Board of Directors, which may exercise all suchpowers of the Corporation and do all such lawful acts and things, subject to anylimitation set forth in the Certificate of Incorporation or as otherwise may beprovided in the Delaware General Corporation Law. 3.2. NUMBER AND ELECTION The number of directors which shall constitute the whole board shallnot be fewer than three nor more than twelve. Thereafter, within the limitsabove specified, the number of directors shall be determined by resolution ofthe Board of Directors. 3.3. NOMINATION OF DIRECTORS The directors shall be elected at the annual meeting of thestockholders, except as provided in SECTION 3.4 hereof, and each directorelected shall hold office until such director's successor is elected andqualified or until the director's earlier death, resignation or removal.Directors need not be stockholders. Only persons who are nominated in accordancewith the procedures set forth in the Bylaws shall be eligible to serve asdirectors. 3.3.1. ANNUAL MEETINGS. -8- (a) Nominations of persons for election to the Board of Directorsmay be made at an annual meeting of stockholders only (1) pursuant to theCorporation's notice of meeting (or any supplement thereto), (2) by or at thedirection of the Board of Directors or (3) by any stockholder of the Corporationwho is a stockholder of record at the time of giving of notice provided for inthis SECTION 3.3.1, who shall be entitled to vote for the election of directorsat the meeting and who complies with the notice procedures set forth in thisSECTION 3.3.1. (b) (1) Such nominations, other than those made by or at thedirection of the Board of Directors, shall be made pursuant to timely notice inwriting to the Secretary of the Corporation. To be timely, a stockholder'snotice shall be delivered to or mailed and received at the principal executiveoffices of the Corporation not later than the close of business on the ninetiethday nor earlier than the close of business on the one hundred twentieth dayprior to the first anniversary of the preceding year's annual meeting; provided,however, that in the event that the date of the annual meeting is more thanthirty days before or more than thirty days after such anniversary, notice by the stockholder to be timely must be so delivered not earlier than the close ofbusiness on the one hundred twentieth day prior to such annual meeting and notlater than the close of business on the later of the ninetieth day prior to suchannual meeting or the tenth day following the day on which public disclosure ofthe date of the meeting was first made. In no event shall the publicannouncement of an adjournment or postponement of an annual meeting commence anew time period (or extend any time period) for the giving of a stockholder'snotice as described above. (2) Such stockholder's notice shall set forth (a) as to each personwhom the stockholder proposes to nominate for election or reelection as adirector (i) the name, age, business address and residence address of theperson, (ii) the principal occupation or employment of the person, (iii) theclass or series and number of shares of capital stock of the Corporation whichare beneficially owned by the person and (iv) any other information relating tosuch person that is required to be disclosed in solicitations of proxies forelection of directors, or is otherwise required, in each case pursuant toRegulation 14A under the Exchange Act (including such person's written consentto being named in the proxy statement as a nominee and to serving as a directorif elected); and (b) as to the stockholder giving the notice and the beneficialowner, if any, on whose behalf the nomination is made (i) the name and addressof such stockholder, as they appear on the Corporation's books, and of suchbeneficial owner, (ii) the class or series and number of shares of theCorporation which are owned beneficially and of record by such stockholder andby such beneficial owner, (iii) a description of all arrangements orunderstandings between such stockholder and/or beneficial owner and eachproposed nominee and -9-any other person or persons (including their names) pursuant to which thenomination(s) are to be made by such stockholder, (iv) a representation thatsuch stockholder is a holder of record of stock of the Corporation entitled tovote at such meeting and intends to appear in person or by proxy at the meetingto nominate the person named in its notice, (v) a representation whether thestockholder or the beneficial owner, if any, intends or is a part of a groupwhich intends (a) to deliver a proxy statement and/or form of proxy to holdersof at least the percentage of the Corporation's outstanding capital stockrequired to elect the nominee and/or (b) otherwise to solicit proxies fromstockholders in support of such nomination, and (vi) any other informationrelating to such stockholder or beneficial owner that would be required to bedisclosed in a proxy statement or other filings required to be made inconnection with solicitations of proxies for election of directors pursuant toRegulation 14A under the Exchange Act. At the request of the Board of Directors,any person nominated by the Board of Directors for election as a director shallfurnish to the Secretary of the Corporation that information required to be setforth in a stockholder's notice of nomination which pertains to the nominee, orany other information as the Board of Directors may reasonably require todetermine the eligibility of such proposed nominee to serve as a director of theCorporation. (3) No person shall be eligible to serve as a director of theCorporation unless nominated in accordance with the procedures set forth in thisBylaw and unless qualified under the other provisions of these Bylaws. Except asotherwise provided by law, the Chair of the meeting has the power and authorityto and shall, if the facts warrant, determine and declare to the meeting that anomination was not made in accordance with the procedures prescribed by theBylaws, and if he should so determine, he shall so declare to the meeting andthe defective nomination shall be disregarded. Notwithstanding the foregoingprovisions of this SECTION 3.3, if the stockholder (or a qualifiedrepresentative of the stockholder) does not appear at the meeting ofstockholders of the Corporation to present a nomination, such nomination shallbe disregarded, notwithstanding that proxies in respect of such vote may havebeen received by the Corporation. Notwithstanding the foregoing provisions ofthis SECTION 3.3, a stockholder shall also comply with all applicablerequirements of the Exchange Act and the rules and regulations promulgatedthereunder with respect to the matters set forth in this SECTION 3.3. Nothing in this SECTION 3.3 shall be deemed to affect any rights of the holders of anyseries of preferred stock to elect directors pursuant to any applicableprovisions of the Certificate of Incorporation. (c) Notwithstanding anything in the second sentence of paragraph (b)of this SECTION 3.3.1 to the contrary, in the event that the number of directorsto be elected to the Board at an annual meeting is increased and there is nopublic -10-announcement by the Corporation naming the nominees for the additionaldirectorships at least one hundred days prior to the first anniversary of thepreceding year's annual meeting, a stockholder's notice required by this SECTION3.3 shall also be considered timely, but only with respect to nominees for theadditional directorships, if it shall be delivered to the Secretary at theprincipal executive offices of the Corporation not later than the close ofbusiness on the tenth day following the day on which such public announcement isfirst made by the Corporation. 3.3.2. SPECIAL MEETINGS OF STOCKHOLDERS. Nominations of persons for election to the Board of Directors may bemade at a special meeting of stockholders at which directors are to be electedpursuant to the Corporation's notice of meeting (1) by or at the direction ofthe Board of Directors or (2) provided that the Board of Directors hasdetermined that directors shall be elected at such meeting, by any stockholderof the Corporation who is a stockholder of record at the time the noticeprovided for in this SECTION 3.3.2 is delivered to the Secretary of theCorporation, who is entitled to vote at the meeting and upon such election andwho complied with the notice procedures set forth in this SECTION 3.3.2. In theevent the Corporation calls a special meeting of stockholders for the purpose ofelecting one or more directors to the Board of Directors, any such stockholderentitled to vote in such election of directors may nominate a person or persons(as the case may be) for election to such position(s) as specified in theCorporation's notice of meeting, if the stockholder's notice required by SECTION3.3.1(B) shall be delivered to the Secretary at the principal executive officesof the Corporation not earlier than the close of business on the one hundredtwentieth day prior to such special meeting and not later than the close ofbusiness on the later of the ninetieth day prior to such special meeting or thetenth day following the day on which public announcement is first made of thedate of the special meeting and of the nominees proposed by the Board ofDirectors to be elected at such meeting. In no event shall the publicannouncement of an adjournment or postponement of a special meeting commence anew time period (or extend any time period) for the giving of a stockholder'snotice as described above. 3.3.3. PUBLIC ANNOUNCEMENT For purposes of this SECTION 3.3, "public announcement" shallinclude disclosure in a press release reported by the Dow Jones News Service,Associated Press or comparable national news service or in a document publiclyfiled by the Corporation with the Securities and Exchange Commission pursuant toSection 13, 14 or 15(d) of the Exchange Act. -11- 3.4. VACANCIES Vacancies and newly created directorships resulting from anyincrease in the authorized number of directors elected by all of thestockholders having the right to vote as a single class may be filled by theaffirmative vote of a majority of the directors then in office, although fewerthan a quorum, or by a sole remaining director. Whenever the holders of anyclass or classes of stock or series thereof are entitled to elect one or moredirectors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled bythe affirmative vote of a majority of the directors elected by such class orclasses or series thereof then in office, or by a sole remaining director soelected. Each director so chosen shall hold office until the next election ofdirectors of the class to which such director was appointed, and until suchdirector's successor is elected and qualified, or until the director's earlierdeath, resignation or removal. In the event that one or more directors resignfrom the Board, effective at a future date, a majority of the directors then inoffice, including those who have so resigned, shall have power to fill suchvacancy or vacancies, the vote thereon to take effect when such resignation orresignations shall become effective, and each director so chosen shall holdoffice until the next election of directors, and until such director's successoris elected and qualified, or until the director's earlier death, resignation orremoval. 3.5. MEETINGS 3.5.1. REGULAR MEETINGS Regular meetings of the Board of Directors may be held withoutnotice at such time and at such place as shall from time to time be determinedby the Board of Directors. 3.5.2. SPECIAL MEETINGS Special meetings of the Board may be called by the Chairperson orPresident on one day's notice to each director, either personally or bytelephone, express delivery service (so that the scheduled delivery date of thenotice is at least one day in advance of the meeting), telegram, facsimiletransmission, electronic mail (effective when directed to an electronic mailaddress of the director), or other electronic transmission, as defined inSection 232(c) (or any successor section) of the Delaware General CorporationLaw (effective when directed to the director), and on five days' notice by mail(effective upon deposit of such notice in the mail). The notice need notdescribe the purpose of a special meeting. -12- 3.5.3. TELEPHONE MEETINGS Members of the Board of Directors may participate in a meeting ofthe board by any communication by means of which all participating directors cansimultaneously hear each other during the meeting. A director participating in ameeting by this means is deemed to be present in person at the meeting. 3.5.4. ACTION WITHOUT MEETING Any action required or permitted to be taken at any meeting of theBoard of Directors may be taken without a meeting if the action is taken by allmembers of the Board. The action must be evidenced by one or more consents inwriting or by electronic transmission describing the action taken, signed (if inwriting) by each director, and delivered to the Corporation for inclusion in theminute book. 3.5.5. WAIVER OF NOTICE OF MEETING A director may waive any notice required by statute, the Certificateof Incorporation or these Bylaws before or after the date and time stated in thenotice. Except as set forth below, the waiver must be in writing, signed by thedirector entitled to the notice, or made by electronic transmission by thedirector entitled to the notice, and delivered to the Corporation for inclusionin the minute book. Notwithstanding the foregoing, a director's attendance at orparticipation in a meeting waives any required notice to the director of themeeting unless the director at the beginning of the meeting objects to holdingthe meeting or transacting business at the meeting and does not thereafter votefor or assent to action taken at the meeting. 3.6. QUORUM AND VOTE AT MEETINGS At all meetings of the board, a quorum of the Board of Directorsconsists of a majority of the total number of directors prescribed pursuant toSECTION 3.2 of these Bylaws. The vote of a majority of the directors present atany meeting at which there is a quorum shall be the act of the Board ofDirectors, except as may be otherwise specifically provided by statute or by theCertificate of Incorporation or by these Bylaws. 3.7. COMMITTEES OF DIRECTORS The Board of Directors may designate one or more committees, eachcommittee to consist of one or more directors. The Board may designate one ormore -13-directors as alternate members of any committee, who may replace any absent ordisqualified member at any meeting of the committee. If a member of a committeeshall be absent from any meeting, or disqualified from voting thereat, theremaining member or members present and not disqualified from voting, whether ornot such member or members constitute a quorum, may, by unanimous vote, appointanother member of the Board of Directors to act at the meeting in the place ofsuch absent or disqualified member. Any such committee, to the extent providedin the resolution of the Board of Directors, shall have and may exercise all thepowers and authority of the Board of Directors in the management of the businessand affairs of the Corporation, and may authorize the seal of the Corporation tobe affixed to all papers which may require it; but no such committee shall havethe power or authority in reference to approving or adopting, or recommending tothe stockholders, any action or matter expressly required by the DelawareGeneral Corporation Law to be submitted to stockholders for approval oradopting, amending or repealing any bylaw of the Corporation; and unless theresolution designating the committee, these bylaws or the Certificate ofIncorporation expressly so provide, no such committee shall have the power orauthority to declare a dividend, to authorize the issuance of stock, or to adopta certificate of ownership and merger pursuant to Section 253 of the DelawareGeneral Corporation Law. Such committee or committees shall have such name ornames as may be determined from time to time by resolution adopted by the Boardof Directors. Each committee shall keep regular minutes of its meetings andreport the same to the Board of Directors, when required. Unless otherwisespecified in the Board resolution appointing the Committee, all provisions ofthe Delaware General Corporation Law and these Bylaws relating to meetings,action without meetings, notice (and waiver thereof), and quorum and votingrequirements of the Board of Directors apply, as well, to such committees andtheir members. 3.8. COMPENSATION OF DIRECTORS The Board of Directors shall have the authority to fix thecompensation of directors. No such payment shall preclude any director fromserving the Corporation in any other capacity and receiving compensationtherefor.4. OFFICERS 4.1. POSITIONS The officers of the Corporation shall be a Chairperson, a President,a Secretary and a Treasurer, and such other officers as the Board of Directors(or an officer authorized by the Board of Directors) from time to time mayappoint, -14-including one or more Vice Chairmen, Executive Vice Presidents, Vice Presidents,Assistant Secretaries and Assistant Treasurers. Each such officer shall exercise such powers and perform such duties as shall be set forth below and such otherpowers and duties as from time to time may be specified by the Board ofDirectors or by any officer(s) authorized by the Board of Directors to prescribethe duties of such other officers. Any number of offices may be held by the sameperson, except that in no event shall the President and the Secretary be thesame person. As set forth below, each of the Chairperson, President, and/or anyVice President may execute bonds, mortgages and other contracts under the sealof the Corporation, if required, except where required or permitted by law to beotherwise executed and except where the execution thereof shall be expresslydelegated by the Board of Directors to some other officer or agent of theCorporation. 4.2. CHAIRPERSON The Chairperson shall (when present) preside at all meetings of theBoard of Directors and stockholders, and shall ensure that all orders andresolutions of the Board of Directors and stockholders are carried into effect.The Chairperson may execute bonds, mortgages and other contracts, under the sealof the Corporation, if required, except where required or permitted by law to beotherwise signed and executed and except where the signing and execution thereofshall be expressly delegated by the Board of Directors to some other officer oragent of the Corporation. 4.3. PRESIDENT The President shall be the chief operating officer of theCorporation and shall have full responsibility and authority for management ofthe day-to-day operations of the Corporation, subject to the authority of theBoard of Directors and Chairperson. The President may execute bonds, mortgagesand other contracts, under the seal of the Corporation, if required, exceptwhere required or permitted by law to be otherwise signed and executed andexcept where the signing and execution thereof shall be expressly delegated bythe Board of Directors to some other officer or agent of the Corporation. 4.4. VICE PRESIDENT In the absence of the President or in the event of the President'sinability or refusal to act, the Vice President (or in the event there be morethan one Vice President, the Vice Presidents in the order designated, or in theabsence of any designation, then in the order of their election) shall performthe duties of the -15-President, and when so acting shall have all the powers of, and be subject toall the restrictions upon, the President. 4.5. SECRETARY The Secretary shall have responsibility for preparation of minutesof meetings of the Board of Directors and of the stockholders and forauthenticating records of the Corporation. The Secretary shall give, or cause tobe given, notice of all meetings of the stockholders and special meetings of theBoard of Directors. The Secretary or an Assistant Secretary may also attest allinstruments signed by any other officer of the Corporation. 4.6. ASSISTANT SECRETARY The Assistant Secretary, or if there be more than one, the AssistantSecretaries in the order determined by the Board of Directors (or if there shallhave been no such determination, then in the order of their election), shall, inthe absence of the Secretary or in the event of the Secretary's inability orrefusal to act, perform the duties and exercise the powers of the Secretary. 4.7. TREASURER The Treasurer shall be the chief financial officer of the Corporation and shall have responsibility for the custody of the corporate fundsand securities and shall see to it that full and accurate accounts of receiptsand disbursements are kept in books belonging to the Corporation. The Treasurershall render to the Chairperson, the President, and the Board of Directors, uponrequest, an account of all financial transactions and of the financial conditionof the Corporation. 4.8. ASSISTANT TREASURER The Assistant Treasurer, or if there shall be more than one, theAssistant Treasurers in the order determined by the Board of Directors (or ifthere shall have been no such determination, then in the order of theirelection), shall, in the absence of the Treasurer or in the event of theTreasurer's inability or refusal to act, perform the duties and exercise thepowers of the Treasurer. 4.9. TERM OF OFFICE The officers of the Corporation shall hold office until theirsuccessors are chosen and qualify or until their earlier resignation or removal.Any officer may -16-resign at any time upon written notice to the Corporation. Any officer electedor appointed by the Board of Directors may be removed at any time, with orwithout cause, by the affirmative vote of a majority of the Board of Directors. 4.10. COMPENSATION The compensation of officers of the Corporation shall be fixed bythe Board of Directors or by any officer(s) authorized by the Board of Directorsto prescribe the compensation of such other officers. 4.11. FIDELITY BONDS The Corporation may secure the fidelity of any or all of itsofficers or agents by bond or otherwise.5. CAPITAL STOCK 5.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES The shares of the Corporation shall be represented by certificates,provided that the Board of Directors may provide by resolution that some or allof any or all classes or series of the Corporation's stock shall beuncertificated shares. Any such resolution shall not apply to shares representedby a certificate until such certificate is surrendered to the Corporation.Notwithstanding the adoption of such a resolution by the Board of Directors,every holder of stock represented by certificates, and upon request every holderof uncertificated shares, shall be entitled to have a certificate (representingthe number of shares registered in certificate form) signed in the name of theCorporation by the Chairperson, President or any Vice President, and by theTreasurer, Secretary or any Assistant Treasurer or Assistant Secretary of theCorporation. Any or all the signatures on the certificate may be facsimile. Incase any officer, transfer agent or registrar whose signature or facsimilesignature appears on a certificate shall have ceased to be such officer,transfer agent or registrar before such certificate is issued, it may be issuedby the Corporation with the same effect as if such person were such officer,transfer agent or registrar at the date of issue. 5.2. LOST CERTIFICATES The Board of Directors, Chairperson, President or Secretary maydirect a new certificate of stock to be issued in place of any certificatetheretofore issued by -17-the Corporation and alleged to have been lost, stolen or destroyed, upon themaking of an affidavit of that fact by the person claiming that the certificateof stock has been lost, stolen or destroyed. When authorizing such issuance of anew certificate, the board or any such officer may, as a condition precedent tothe issuance thereof, require the owner of such lost, stolen or destroyedcertificate or certificates, or such owner's legal representative, to advertisethe same in such manner as the board or such officer shall require and/or togive the Corporation a bond or indemnity, in such sum or on such terms andconditions as the board or such officer may direct, as indemnity against anyclaim that may be made against the Corporation on account of the certificatealleged to have been lost, stolen or destroyed or on account of the issuance ofsuch new certificate or uncertificated shares. 5.3. RECORD DATE 5.3.1. ACTIONS BY STOCKHOLDERS In order that the Corporation may determine the stockholdersentitled to notice of or to vote at any meeting of stockholders, the Board ofDirectors may fix a record date, which record date shall not precede the dateupon which the resolution fixing the record date is adopted by the Board ofDirectors, and which record date shall not be more than sixty days nor less thanten days before the date of such meeting. If no record date is fixed by theBoard of Directors, the record date for determining stockholders entitled tonotice of or to vote at a meeting of stockholders shall be the close of businesson the day next preceding the day on which notice is given, or, if notice iswaived, at the close of business on the day next preceding the day on which themeeting is held. A determination of stockholders of record entitled to notice ofor to vote at a meeting of stockholders shall apply to any adjournment of themeeting, unless the Board of Directors fixes a new record date for the adjournedmeeting. In order that the Corporation may determine the stockholdersentitled to consent to corporate action in writing without a meeting, the Boardof Directors may fix a record date, which record date shall not precede the dateupon which the resolution fixing the record date is adopted by the Board ofDirectors, and which record date shall not be more than ten days after the dateupon which the resolution fixing the record date is adopted by the Board ofDirectors. If no record date has been fixed by the Board of Directors, therecord date for determining stockholders entitled to consent to corporate actionin writing without a meeting, when no prior action by the Board of Directors isrequired by the Delaware General Corporation Law, shall be the first date onwhich a signed written consent setting forth the action taken or proposed to betaken is delivered to the Corporation in the manner prescribed by Section 213(b)of the Delaware General Corporation Law. If no record -18-date has been fixed by the Board of Directors and prior action by the Board ofDirectors is required by the Delaware General Corporation Law, the record datefor determining stockholders entitled to consent to corporate action in writingwithout a meeting shall be at the close of business on the day on which theBoard of Directors adopts the resolution taking such prior action. 5.3.2. PAYMENTS In order that the Corporation may determine the stockholdersentitled to receive payment of any dividend or other distribution or allotmentof any rights or the stockholders entitled to exercise any rights in respect ofany change, conversion or exchange of stock, or for the purpose of any otherlawful action, the Board of Directors may fix a record date, which record dateshall not precede the date upon which the resolution fixing the record date isadopted, and which record date shall be not more than sixty days prior to suchaction. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which theBoard of Directors adopts the resolution relating thereto. 5.4. STOCKHOLDERS OF RECORD The Corporation shall be entitled to recognize the exclusive rightof a person registered on its books as the owner of shares to receive dividends,to receive notifications, to vote as such owner, and to exercise all the rightsand powers of an owner. The Corporation shall not be bound to recognize anyequitable or other claim to or interest in such share or shares on the part ofany other person, whether or not it shall have express or other notice thereof,except as otherwise may be provided by the Delaware General Corporation Law.6. INDEMNIFICATION; INSURANCE 6.1. AUTHORIZATION OF INDEMNIFICATION Each person who was or is a party or is threatened to be made aparty to or is involved in any threatened, pending or completed action, suit orproceeding, whether civil, criminal, administrative or investigative and whetherby or in the right of the Corporation or otherwise (a "proceeding"), by reasonof the fact that he or she, or a person of whom he or she is the legalrepresentative, is or was a director or officer of the Corporation or is or wasserving at the request of the Corporation as a director, officer, employee,partner (limited or general) or agent of another corporation or of apartnership, joint venture, limited liability company, trust or -19-other enterprise, including service with respect to an employee benefit plan,shall be (and shall be deemed to have a contractual right to be) indemnified andheld harmless by the Corporation (and any successor to the Corporation by mergeror otherwise) to the fullest extent authorized by, and subject to the conditionsand (except as provided herein) procedures set forth in the Delaware GeneralCorporation Law, as the same exists or may hereafter be amended (but any suchamendment shall not be deemed to limit or prohibit the rights of indemnificationhereunder for past acts or omissions of any such person insofar as suchamendment limits or prohibits the indemnification rights that said law permittedthe Corporation to provide prior to such amendment), against all expenses,liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxesor penalties and amounts paid or to be paid in settlement) reasonably incurredor suffered by such person in connection therewith; provided, however, that theCorporation shall indemnify any such person seeking indemnification inconnection with a proceeding (or part thereof) initiated by such person (exceptfor a suit or action pursuant to SECTION 6.2 hereof) only if such proceeding (orpart thereof) was authorized by the Board of Directors of the Corporation.Persons who are not directors or officers of the Corporation and are not soserving at the request of the Corporation may be similarly indemnified inrespect of such service to the extent authorized at any time by the Board ofDirectors of the Corporation. The indemnification conferred in this SECTION 6.1also shall include the right to be paid by the Corporation (and such successor)the expenses (including attorneys' fees) incurred in the defense of or otherinvolvement in any such proceeding in advance of its final disposition;provided, however, that, if and to the extent the Delaware General CorporationLaw requires, the payment of such expenses (including attorneys' fees) incurredby a director or officer in advance of the final disposition of a proceedingshall be made only upon delivery to the Corporation of an undertaking by or onbehalf of such director or officer to repay all amounts so paid in advance if itshall ultimately be determined that such director or officer is not entitled tobe indemnified under this SECTION 6.1 or otherwise; and provided further, that,such expenses incurred by other employees and agents may be so paid in advanceupon such terms and conditions, if any, as the Board of Directors deemsappropriate. 6.2. RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION If a claim under SECTION 6.1 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation,the claimant may at any time thereafter bring an action against the Corporationto recover the unpaid amount of the claim and, if successful in whole or inpart, the claimant shall be entitled to be paid also the expense of prosecutingsuch action. It shall be a defense to any such action (other than an actionbrought to enforce a -20-claim for expenses incurred in connection with any proceeding in advance of itsfinal disposition where the required undertaking, if any is required, has beentendered to the Corporation) that the claimant has not met the standards ofconduct which make it permissible under the Delaware General Corporation Law forthe Corporation to indemnify the claimant for the amount claimed or is otherwisenot entitled to indemnification under SECTION 6.1, but the burden of provingsuch defense shall be on the Corporation. The failure of the Corporation (in themanner provided under the Delaware General Corporation Law) to have made adetermination prior to or after the commencement of such action thatindemnification of the claimant is proper in the circumstances because he or shehas met the applicable standard of conduct set forth in the Delaware GeneralCorporation Law shall not be a defense to the action or create a presumptionthat the claimant has not met the applicable standard of conduct. Unlessotherwise specified in an agreement with the claimant, an actual determinationby the Corporation (in the manner provided under the Delaware GeneralCorporation Law) after the commencement of such action that the claimant has notmet such applicable standard of conduct shall not be a defense to the action,but shall create a presumption that the claimant has not met the applicablestandard of conduct. 6.3. NON-EXCLUSIVITY The rights to indemnification and advance payment of expensesprovided by SECTION 6.1 hereof shall not be deemed exclusive of any other rightsto which those seeking indemnification and advance payment of expenses may beentitled under any by-law, agreement, vote of stockholders or disinteresteddirectors or otherwise, both as to action in his or her official capacity and asto action in another capacity while holding such office. 6.4. SURVIVAL OF INDEMNIFICATION The indemnification and advance payment of expenses and rightsthereto provided by, or granted pursuant to, SECTION 6.1 hereof shall, unlessotherwise provided when authorized or ratified, continue as to a person who hasceased to be a director, officer, employee, partner or agent and shall inure tothe benefit of the personal representatives, heirs, executors and administratorsof such person. 6.5. INSURANCE The Corporation shall have power to purchase and maintain insuranceon behalf of any person who is or was a director, officer, employee or agent ofthe -21-Corporation, or is or was serving at the request of the Corporation as adirector, officer, employee, partner (limited or general) or agent of anothercorporation or of a partnership, joint venture, limited liability company, trustor other enterprise, against any liability asserted against such person orincurred by such person in any such capacity, or arising out of such person'sstatus as such, and related expenses, whether or not the Corporation would havethe power to indemnify such person against such liability under the provisionsof the Delaware General Corporation Law.7. GENERAL PROVISIONS 7.1. INSPECTION OF BOOKS AND RECORDS Any stockholder, in person or by attorney or other agent, shall,upon written demand under oath stating the purpose thereof, have the rightduring the usual hours for business to inspect for any proper purpose theCorporation's stock ledger, a list of its stockholders, and its other books andrecords, and to make copies or extracts therefrom. A proper purpose shall mean apurpose reasonably related to such person's interest as a stockholder. In everyinstance where an attorney or other agent shall be the person who seeks theright to inspection, the demand under oath shall be accompanied by a power ofattorney or such other writing which authorizes the attorney or other agent toso act on behalf of the stockholder. The demand under oath shall be directed tothe Corporation at its registered office or at its principal place of business. 7.2. DIVIDENDS The Board of Directors may declare dividends upon the capital stockof the Corporation, subject to the provisions of the Certificate ofIncorporation and the laws of the State of Delaware. 7.3. RESERVES The directors of the Corporation may set apart, out of the funds ofthe Corporation available for dividends, a reserve or reserves for any properpurpose and may abolish any such reserve. -22- 7.4. EXECUTION OF INSTRUMENTS All checks, drafts or other orders for the payment of money, andpromissory notes of the Corporation shall be signed by such officer or officersor such other person or persons as the Board of Directors may from time to timedesignate. 7.5. FISCAL YEAR The fiscal year of the Corporation shall be fixed by resolution ofthe Board of Directors. 7.6. SEAL The corporate seal shall be in such form as the Board of Directorsshall approve. The seal may be used by causing it or a facsimile thereof to beimpressed or affixed or otherwise reproduced. 7.7. AMENDMENT These by-laws may be amended or repealed by the Board of Directorsat any meeting or by the stockholders casting 66 2/3% of the outstanding stockof the Corporation entitled to vote thereon at any meeting. * * * * * The foregoing Bylaws were adopted by the Board of Directors on_________________, 2001. ________________________________ Secretary -23- EXHIBIT 10.18August 13, 2001Arthur R. Brown8103 North Bridge WayMaumee, OH 43537Dear Art:On behalf of Wabash National, I am pleased to offer you the position of VicePresident & Chief Operating Officer located in Lafayette, IN. In this position,you will report directly to the Chief Executive Officer.As the VP & COO, you will be considered a full partner peer with top managementand will be allowed to recruit and build your team. The functions reporting toyou will be: All Manufacturing encompassing four (4) manufacturing locations(Indiana, Iowa, Arkansas, Tennessee), Industrial Engineering, Purchasing,Manufacturing Engineering and Quality.The MINIMUM base salary for this exempt position is $25,000 per monthly payperiod, which converts to $300,000 annually. In addition, you will receive aguaranteed bonus in the amount of $100,000 for FY2001. This amount will be paidto you in February 2002. Going forward, you will be eligible to participate inthe annual Bonus Plan with a minimum target level of 50% of your base annualsalary.This offer of employment includes the following terms and conditions:- You must successfully complete and pass a company provided drug screen and physical- You are eligible for Wabash National benefits beginning your first day of employment- A sign on bonus equal to $100,000 will be paid to you within thirty (30) days from the start of your employment- Four (4) weeks of annual vacation. You will receive a prorated amount of eight (8) days for the balance of FY 2001- Wabash National will cover the full cost to enter and complete the Executive MBA program at Purdue University regardless of employment status as long as you are not released for gross misconduct or voluntarily terminate your employment- Stock options - 5k restricted stock and 10k options, each vesting over three (3) years - 100k of Phantom, or equivalent, stock issued immediately at the start of employment at current market price - vesting will be over three (3) years- If your employment terminates for any reason at the discretion of the Company, other than for reasons of gross misconduct (i.e., theft, fraud, etc.), you will vest automatically in all restricted stock, stock options and Phantom Stock- Full relocation package to include all closing costs on both ends, moving all goods, storage, temporary living for ninety (90) days, home buy out and 3 points, reimbursement will be grossed up for tax purposes- You will be guaranteed 2 years of employment from your date of hire, or pay in lieu of, if released. In addition, you will be guaranteed a two (2) year severance package (base salary) if you are released from employment by the company for any reason other than gross misconductAll associates of Wabash National are considered employees at will. Nothingcontained in this offer of employment or any other document provided to you isintended to be, nor should be, construed as a guarantee that employment,compensation, or any benefit will be continued for any period of time greaterthan those stipulated in this document.Art, provided you are in agreement and understand the terms and conditions ofthis employment offer, please endorse the enclosed copy of this letter andreturn to me. We are pleased to make you this offer and look forward to yourjoining our Wabash National Team. If you have any questions, please feel free tocontact me at 765-771-5300.Best Regards,Richard E. DessimozActing CEOI understand and accept the terms and conditions contained in this employmentoffer.--------------------------- -------------------Arthur R. Brown Date EXHIBIT 10.21 TRANSLATION FROM THE GERMAN LANGUAGE ASSET PURCHASE AGREEMENT (THE "AGREEMENT") JANUARY 11, 2002 between1. BAYERISCHE TRAILERZUG GESELLSCHAFT FUR BIMODALEN GUTERVERKEHR MBH, Poccistrasse 7, D-80336 Munich (the "Purchaser" or "BTZ" ), and2. WABASH NATIONAL CORPORATION, 1000 Sagamore Parkway South, Lafayette, Indiana 47905, U.S.A. (the "SELLER" or "WABASH").The Purchaser and the Seller, as the case may be, each are referred to herein asa "PARTY" and collectively as the "PARTIES". TRANSLATION FROM THE GERMAN LANGUAGEWHEREAS(1) The Purchaser is a company with limited liability under German law with its registered seat in Munich, Germany, and is registered in the Commercial Register Munich under registration number HRB 97439.(2) The Seller is a corporation under the laws of Delaware, with its commercial seat in Lafayette, Indiana, U.S.A.(3) ETZ Europaische Trailerzug Beteiligungsgesellschaft mbH ("ETZ" or the "COMPANY") is a company with limited liability under German law with its registered seat in Munich, Germany, registered under registration number HRB 106942 in the Commercial Register Munich. As of this date Brennero Trasporto Rotaio S.p.A., Bimodal and Wabash have concluded a Framework Agreement (the "FRAMEWORK AGREEMENT").(4) In execution of the respective terms and conditions of the Framework Agreement, the Seller wishes to sell the Purchaser, and the Purchaser wishes to purchase from the Seller the assets listed in Annex ./1 to the Framework Agreement.NOW, THEREFORE, in consideration of the mutual promises made herein and mutualbenefits to be derived from this Agreement, the Parties hereto agree as follows: ARTICLE I DEFINITIONSExcept if expressly stated otherwise in this Agreement, the defined terms inthis Agreement shall have the same meaning as in the Framework Agreement.The defined terms in this Agreement shall have the meaning as set out below: AGREEMENT This asset purchase agreement.FRAMEWORK AGREEMENT The framework agreement between the Parties as of this date.PURCHASE PRICE The aggregate purchase price for the Acquired Assets pursuant to Article IV of this Agreement.PURCHASER BTZ Bayerische Trailerzug Gesellschaft fur bimodalen Guterverkehr mbH.PARTIES Wabash and BTZ. 2 TRANSLATION FROM THE GERMAN LANGUAGE ARTICLE II PURCHASE(1) The assets to be sold are existing trailers and bogies as listed in Annex ./1 to the Framework Agreement (the "ACQUIRED ASSETS") owned by the Seller and currently operated by BTZ.(2) The Seller hereby sells to the Purchaser, and the Purchaser purchases from the Seller the Acquired Assets at the Purchase Price and under the conditions provided in this Agreement.(3) The Purchaser hereby undertakes to pay the Purchase Price set forth in Article IV to the Seller pursuant to the terms and conditions provided in this Agreement. ARTICLE III TRANSFER OF ACQUIRED ASSETS(1) This Agreement shall be enter into force upon effectiveness of the Framework Agreement. The Purchaser and the Seller agree that ownership in the Acquired Assets shall pass from the Seller to the Purchaser upon effectiveness of this Agreement and upon fulfilment of the financing obligation pursuant to Article IV of the Framework Agreement.(2) As of the date as indicated in Paragraph (1) of this Article III above, the Seller shall transfer to the Purchaser the Acquired Assets including the letters pursuant to Annex ./1 of the Framework Agreement. In the event of the Seller not being in direct possession (unmittelbarer Besitz) of the Acquired Assets, the Seller hereby assigns its claim for redelivery (Herausgabeanspruch) against the respective possessor (Besitzer) to the Purchaser. The Seller will use its best knowledge to make efforts to support the bank financing provided for under the Framework Agreement by entering into a so-called remarketing agreement in conformity with banking and referring to the Acquired Assets, such remarketing agreement corresponding to existing remarketing agreements entered into with KfW and Deutsche Bank. ARTICLE IV PURCHASE PRICE(1) The Purchase Price for the Acquired Assets sold pursuant to Article II above shall be in the total amount of (euro) 1,-- (Euro one) plus, if applicable, VAT (the "PURCHASE PRICE").(2) The Purchase Price shall be due as of the date of this Agreement and shall be paid by the Purchaser to the Seller in cash. 3 TRANSLATION FROM THE GERMAN LANGUAGE ARTICLE V LIMITATION OF WARRANTY/EXCLUSION OF FURTHER CLAIMSUnless otherwise expressly provided in this Agreement or the Framework Agreementthe following shall apply:(1) The Acquired Assets are sold "as is- where is" out of the property of the Seller, unencumbered by third party rights. All necessary and/or required technical examinations, in particular the main technical check ups and examinations of the breaks (Haupt- und Bremsuntersuchung) have been conducted in due manner and time. Considering the inspection performed by the Purchaser and the continued use of the Acquired Assets by it, any contractual liability or liability based on statue of the Seller in terms of material defects (Sachmangel) is expressly excluded. The Seller shall, however, be liable for defect of title (Rechtsmangelhaftung) according to the relevant provisions of statutory law. Rescission from (Rucktritt) and unwinding of (Wandlung) the Agreement is excluded, unless otherwise provided in the Agreement.(2) Notwithstanding Paragraph (1) of this Article V above, the provisions of the Framework Agreement shall apply to the type and volume of liability arising under this Agreement. ARTICLE VI CONFIDENTIALITY(1) The Parties agree that the existence and the substance of this Agreement including all Annexes hereto shall remain confidential and, subject to the requirements of mandatory law, shall not be announced or otherwise disclosed without the prior written consent of the other Party.(2) All communications, in particular addressed to the media, to customers, to suppliers or to distributors, shall be agreed upon in advance by the Parties.(3) This obligation of confidentiality shall not apply to information that is generally available to the public, or is required to be disclosed by law, court order or request by any governmental or regulatory authority. ARTICLE VII COSTS, STAMP DUTIES AND TAXES(1) All costs resulting from negotiation and drafting of this Agreement, including but not limited to fees charged by advisers in legal, accountancy and financial matters, shall be borne by such Party where they occurred and shall not be reimbursable by the other Party.(2) The Purchaser and the Seller shall respectively bear 50% of any transfer and sales taxes and fees, including but not limited to, notarial fees in connection with this Agreement. The Purchaser undertakes to file the transaction documents with the relevant authorities, to the extent necessary, for the assessment of transfer taxes, stamp duties and other public dues. 4 TRANSLATION FROM THE GERMAN LANGUAGE ARTICLE VIII GENERAL PROVISIONS(1) This Agreement and the Framework Agreement including its Annexes contain the entire agreement between the Parties relating to the transaction contemplated by this Agreement. They supersede respectively replace any previous agreements between the Parties relating to this transaction. Each of the Parties confirms that by agreeing to enter into this Agreement it does not rely on any representation, warranty or other assurance except as expressly set out in this Agreement.(2) The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or construction of this Agreement.(3) This Agreement shall not be amended or completed orally and shall not be amended or discharged in whole or in part, otherwise than by an instrument in writing signed by the Parties or their successors or assignees.(4) Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition of this Agreement may be waived by the Party or Parties entitled to the benefits of such obligation, covenant, agreement or condition only by an instrument in writing signed by the Party granting such waiver. Such waiver or failure to insist upon strict compliance with any such obligation, covenant, agreement or condition shall not operate as a waiver of any other obligation, covenant, agreement or condition and shall not be deemed to represent any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any Party to this Agreement, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth above.(5) Should any provision of this Agreement become wholly or partly invalid or unenforceable, this will not affect the validity or enforceability of the remaining provisions hereof. In this event, the Parties shall start negotiations without undue delay with a view to amend this Agreement so that the invalid or unenforceable provision shall be substituted by a valid or enforceable provision the essence and purpose of which comes as close as possible to the invalid or unenforceable provision.(6) The failure of any Party to enforce or exercise, at any time or for any period of time, any term of, or any right or remedy arising pursuant to, or under this Agreement, does not constitute and shall not be construed as, a waiver of such term or right or remedy and shall in no way affect the Parties' right to enforce or exercise such term or right or remedy at a later time, provided that such right is not time barred or precluded. Any waiver to this effect must be expressly in writing.(7) Neither this Agreement nor any of the rights, benefits or obligations hereunder shall be susceptible of assignment by any of the Parties hereto without the prior written consent of the other Parties.(8) This Agreement is executed in two counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. This Agreement has been produced in the German language; any translations of this 5 TRANSLATION FROM THE GERMAN LANGUAGE Agreement are for working purposes only and shall have no influence on the construction of the Agreement.(9) All notices under this Agreement shall be in writing and shall be sent to the following addresses per registered or certified mail or by confirmed facsimile transmission: For the Seller: WABASH National Corporation, Tel.:+765 771 5300 1000 Sagamore Parkway South, email: rich.dessimoz@wabashnational.com Lafayette, Indiana 47905, U.S.A. Attn.: Mr Rich Dessimoz, CEO For the Purchaser: Bayerische Trailerzug Gesellschaft fur bimodalen Guterverkehr mbH, Poccistrasse 7, D-80336 Munich Attn.: Management Board(10) All such notices shall be deemed received upon (i) actual receipt thereof by the addressee, (ii) actual delivery thereof to the appropriate address or (iii) in the case of a facsimile transmission, upon transmission thereof by the sender and by return facsimile by the addressee confirming that the number of pages constituting the notice have been received without error. In the case of notices sent by facsimile transmission, the sender shall contemporaneously send a copy of the notice by registered mail to the addressee at the address provided for above. However, such mailing shall in no way alter the time at which the facsimile notice is deemed received. ARTICLE IX APPLICABLE LAW(1) This Agreement shall be governed by and construed in accordance with the laws of Germany, without giving effect to the principles of conflicts of law thereof. The applicability of the provisions of the United Nations Convention on Contracts for the International Sale of Goods expressly excluded.(2) The courts of Munich shall have exclusive jurisdiction to decide on all litigations arising under and in connection with this Agreement including all its Annexes. [reminder of the following page intentionally left blank] 6 TRANSLATION FROM THE GERMAN LANGUAGEMunich, 11 January, 2002 FOR THE SELLER_____________________________ _______________________________ FOR THE PURCHASER_____________________________ _______________________________Agreeing to the contents of this Agreement:____________________________________Bimodal Verwaltungs Gesellschaft mbH 7 EXHIBIT 10.22 TRANSLATION FROM THE GERMAN LANGUAGE SHARE PURCHASE AGREEMENT(1) (THE "AGREEMENT") 11 JANUARY 2002 between 1. BRENNERO TRASPORTO ROTAIA S.P.A., Brennerstrasse 7, I-39100 Bozen, Italy ("STR"), 2. BIMODAL VERWALTUNGS GESELLSCHAFT MBH, Rhondorfer Strasse 85, D-53604 Bad Honnef, Germany ("BIMODAL"), (collectively the "PURCHASERS") and 3. WABASH NATIONAL CORPORATION, 1000 Sagamore Parkway South, Lafayette. Indiana 47905, U.S.A. ("WABASH" or the "SELLER").The Purchasers and the Seller, as the case may be, each are referred to hereinas a "PARTY" and collectively as the "PARTIES".----------(1) This Agreement has to be executed in the form of a German notarial deed. TRANSLATION FROM THE GERMAN LANGUAGEWHEREAS(1) The Company is a company with limited liability under German law, with its registered seat in Munich, Germany, registered under the registration number HRB 10642 in the Commercial Register Munich with a fully paid up nominal share capital of DEM 17,357,000,-- (in words: German Mark seventeen million three hundred fifty-seven thousand).(2) STR is a joint stock corporation under Italian law registered under registration number 01667390213 in the Commercial Register Bozen, Italy and having its commercial seat in Bozen, Italy.(3) Bimodal is a company with limited liability under German law which until present had been registered in the commercial register of the District Court of Frankfurt (Amtsgericht Frankfurt) under registration number HRB 53240 under the name of "Blitz F01-901 GmbH", which had had its registered seat in Frankfurt/Main and the name of which has been changed to "Bimodal Verwaltungs GmbH" by a shareholders' resolution certified by a notary public, but not registered so far and the seat of which has been transferred to Bad Honnef.(4) The Seller is a corporation under the laws of Delaware, with its registered seat in Lafayette, Indiana, U.S.A., owning 100% of the shares (Geschaftsanteile) in the Company (the "SHARES").(5) As of this date, the Seller and the Purchasers have concluded a Framework Agreement (the "FRAMEWORK AGREEMENT"). In execution of the respective terms and conditions of the Framework Agreement the Seller wishes to sell and transfer, and the Purchasers together wish to purchase and acquire 100% of the Shares in the Company representing the entire nominal share capital of the Company under the terms and conditions of this Agreement. STR wishes to purchase 49% of the Shares and Bimodal wishes to purchase 51% of the Shares.NOW, THEREFORE, in consideration of the mutual promises made herein and themutual benefits to be derived form this Agreement, and in execution of theFramework Agreement the Parties hereto agree as follows: ARTICLE I DEFINITIONSExcept if expressly defined otherwise in this Agreement, the defined terms inthis Agreement shall have the same meaning as in the Framework Agreement enteredinto between the Parties as of this date (the "FRAMEWORK AGREEMENT"). Thedefined terms in this Agreement shall have the meaning as set out below: 2 TRANSLATION FROM THE GERMAN LANGUAGE AGREEMENT This Share Purchase Agreement.FRAMEWORK AGREEMENT The Framework Agreement between Wabash, STR and Bimodal as of this date.PURCHASE PRICE The Purchase Price for all the Shares in the Company pursuant to Article III. ARTICLE II SALE AND TRANSFER OF SHARES(1) The Seller as the sole shareholder of ETZ, waiving any and all requirements in terms of form and time of a shareholders' meeting, hereby resolves to pool all shares of ETZ into one single share of the nominal value of DEM 17,357,000.00.(2) For the purpose of transfer pursuant to Paragraph 3, the Seller hereby divides the share of ETZ of the nominal value of DEM 17,357,000.00 into one share of the nominal value of DEM 8,852,160.00 and into one share of the nominal value of DEM 8,504,960.00. The Seller as the sole shareholder of ETZ, waiving all requirements in terms of form and time of a shareholders' meeting, hereby resolves that the division pursuant the first sentence shall be agreed upon.(3) The seller sells and transfers to Bimodal, which accepts this, a share of a nominal value of DEM 8,852,160.00. The Seller sells and transfers to STR, which accepts this, a share of a nominal value of DEM 8,504,960.00.(4) The Seller as the sole shareholder of ETZ, waiving any and all requirements in terms of form and time of a shareholders' meeting, that the transfer of shares pursuant to Paragraph 3 shall be agreed upon.(5) The transfer of shares pursuant to Paragraph 3 shall be effective upon the effectiveness of the Framework Agreement.(6) The transfer of shares pursuant to Paragraph 3 shall become effective on the basis of the law of obligations (schuldrechliche Wirkung) as of January 1, 2002, including any and all corresponding dividends (Gewinnbezugsrecht), irrespective of the fact that they were distributed or not. ARTICLE III PURCHASE PRICE(1) The purchase price for the Shares sold pursuant to Article II (1) above shall be in the amount of (euro) 1.-- (in words: Euro one) (the "PURCHASE PRICE").(2) The Purchase Price shall be due on the date of this Agreement and shall jointly be paid by the Purchasers to the Seller free of any charges and fees. 3 TRANSLATION FROM THE GERMAN LANGUAGE ARTICLE IV EXCLUSION OF FURTHER CLAIMS UNLESS OTHERWISE PROVIDED FOR IN EXPRESS TERMS IN THIS AGREEMENT OR THE FRAMEWORK AGREEMENT, THE PROVISIONS OF THE FRAMEWORK AGREEMENT SHALL APPLY IN TERMS OF THE TYPE AND SCOPE OF LIABILITY UNDER THIS AGREEMENT. ARTICLE V CONFIDENTIALITY(1) The Parties agree that the existence and substance of this Agreement, including all Annexes thereto, shall remain confidential and, notwithstanding the requirements of mandatory law, shall not be announced or otherwise disclosed without the prior written consent of the other Party.(2) All communications, especially to the media, to customers, to suppliers, distributors, or authorized dealers shall be agreed upon in advance by the Parties.(3) This obligation of confidentiality shall not apply to information that is generally available to the public, or is required to be disclosed by law, court order or request by any governmental or regulatory authority. ARTICLE VI COSTS AND TAXES(1) All costs resulting from negotiation and drafting of this Agreement, including but not limited to fees charged by legal, accountancy and financial advisors, shall be borne by such Party where they occurred and shall not be reimbursable by the other Party or the Company.(2) The Purchaser and the Seller shall respectively bear 50% of any transfer and sales taxes and fees, including but not limited to, notarial fees in connection with this Agreement. ARTICLE VII GENERAL PROVISIONS(1) This Agreement and the Framework Agreement including its Annexes contain the entire agreement between the Parties relating to the transaction contemplated by this Agreement and supersede and replace any previous agreements between the Parties relating to this transaction. Each of the Parties acknowledges that in agreeing to enter into this Agreement it has not relied on any representation, warranty or other assurance except as expressly set out in this Agreement or the Framework Agreement. 4 TRANSLATION FROM THE GERMAN LANGUAGE(2) The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not of the agreement between the Parties and shall not in any way affect the meaning or construction of this Agreement.(3) This Agreement shall not be amended orally and shall not be amended or discharged in whole or in part, otherwise than by an instrument in writing signed by the Parties or their successors or their assignees.(4) If one or several provisions of this Agreement should be or become invalid or unenforceable, the remaining provisions hereof shall not be affected thereby. The invalid or unenforceable provision shall be deemed to be replaced by such valid or enforceable provision as the Parties hereto would have chosen upon entering into this Agreement in order to reach the commercial effect of the provision to be replaced if they had foreseen the invalidity or unenforceability at the time of the conclusion of this Agreement. The foregoing shall also apply to matters as to which this Agreement is silent (Lucke am Vertrag). If a provision of this Agreement should be held invalid by a competent court or arbitration tribunal because of the scope of its coverage (such as territory, subject matter, time period or amount), said provision shall not be deemed to be completely invalid but shall be deemed to be valid with the permissible scope that is nearest to the scope originally agreed upon.(5) Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition of this Agreement may be waived by the Party or Parties entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with any such obligation, covenant, agreement or condition shall not be deemed a waiver of any other obligation, covenant, agreement or condition or any subsequent or other failure. IWhenever this Agreement requires or permits consent by or on behalf of any Party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth herein.(6) This Agreement has been produced in the German language; any translations thereof are for working purposes only and shall have no influence on the interpretation of the Agreement.(7) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be susceptible of assignment by any of the Parties hereto without the prior written consent of the other Party.(8) All notices under this Agreement shall be in writing and shall be sent to the following addresses per registered or certified mail or by confirmed facsimile transmission: For the Seller: WABASH National Corporation, Tel: +7657715300 1000 Sagamore Parkway South, email: rich.dessimoz@wabashnational.com Lafayette, Indiana 47905, U.S.A. Attn.: Rich Dessimoz 5 TRANSLATION FROM THE GERMAN LANGUAGE For STR: Brennero Trasporto Rotoia S.p.A. Tel.: [...] Brennerstrasse 7, I-39100 Bozen, Fax.: [...] Italy Email: [...] Attn.: [...] For Bimodal: Bimodal Verwaltungs Gesellschaft Tel.: [...] mbH, Rhondorfer Strasse 85, D-53604 Fax.: [...] Bad Honnef, Germany Email: [...] Attn.: [...] All such notices shall he deemed received upon (i) actual receipt thereof by the addressee, (ii) actual delivery thereof to the appropriate address or (iii) in the case of a facsimile transmission, upon transmission thereof by the sender and by return facsimile by the addressee confirming that the number of pages constituting the notice have been received without error. In the case of notices sent by facsimile transmission, the sender shall contemporaneously send a copy of the notice by registered mail to the addressee at the address provided for above. However, such mailing, shall in no way alter the time at which the facsimile notice is deemed received. ARTICLE VIII APPLICABLE LAW(1) This Agreement shall be governed by and construed in accordance with the laws of Germany, without giving effect to the principles of conflicts of law thereof. The application of the United Nations Convention on Contracts for the International Sale of Goods shall expressly be excluded.(2) The courts of Munich shall have exclusive jurisdiction to decide on all litigations arising under and in connection with this Agreement including all its Annexes.(3) The Agreement has to be executed in the way the Framework Agreement is executed. [Reminder of page intentionally left blank] 6 TRANSLATION FROM THE GERMAN LANGUAGEMunich, 11 January 2002 ON BEHALF OF THE SELLER_____________________________ _______________________________ [...] [...] ON BEHALF OF STR_____________________________ _______________________________ [...] [...] ON BEHALF OF BIMODAL _____________________________ _______________________________ [...] [...] 7 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK NAME OF STATE/COUNTRY OF % OF SHARES SUBSIDIARY INCORPORATION OWNED BY THE COMPANY (*) ---------- ------------- ------------------------ Wabash International, Inc. (Foreign Sales Corp.) U.S. Virgin Islands 100% Wabash National GmbH Germany 100% NOAMTC, Inc. Delaware 100% WNC Cloud Merger Sub, Inc. Arkansas 100% Cloud Oak Flooring Arkansas 100% Company, Inc. Wabash Funding Corp. Missouri 100% Wabash National L.P. Delaware 100% Apex Trailer Leasing & Rentals, L.P. Delaware 100% Wabash National Services L.P. Delaware 100% WTSI Technology Corp. Delaware 100% Wabash Technology Corp. Delaware 100% Wabash Financing LLC Delaware 100% Wabash Funding Manager Corp. Delaware 100% Wabash Funding LLC Delaware 100% RoadRailer Bimodal Ltd. United Kingdom 100% RoadRailer Mercosul, Ltda Brazil 50% Wabash do Brazil Brazil 100% RoadRailer Technology Development Company, China 81% Ltd. National Trailer Funding LLC Delaware 100% Continental Transit Corp Indiana 100% Europaische Trailerzug Germany 100% Beteiligungsgessellschaft mbH (ETZ) Bayerische Trailerzug Germany 99.89% Beteiligungsgessellschaft mbH (BTZ) FTSI Canada, Ltd. Canada 100%* Includes both direct and indirect ownership by the parent, Wabash National Corporation EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTSAs independent public accountants, we hereby consent to the incorporation of ourreport included in this Form 10-K, into the Company's previously filedRegistration Statement File Nos. 33-49256, 33-65988, 33-90826, 333-29309 and333-54714. ARTHUR ANDERSEN LLPIndianapolis, Indiana,April 12, 2002. EXHIBIT 99.01 Wabash National Corporation 1000 Sagamore Parkway South Lafayette, IN 47905 April 10, 2002Securities and Exchange Commission450 Fifth Street, N.W.Washington, D.C. 20549 Re: Wabash National Corporation Commission File No. 1-10883Ladies and Gentlemen: This letter is intended to fulfill the requirements of TemporaryNote 3T to Article 3 of Regulation S-X under the Securities Exchange Act of1934, and is being filed with the Securities and Exchange Commission as Exhibit99.01 to the Wabash National Corporation's (the "Company") Annual Report on Form10-K for the fiscal year ended December 31, 2001 (the "Form 10- K"). . Arthur Andersen LLP ("Andersen") has issued after March 14, 2002 itsaudit report on the Company's consolidated financial statements included in theForm 10-K. In a letter dated March 29, 2002, Andersen represented to the Companythat the audit was subject to Andersen's quality control system for the U.S.accounting and auditing practice to provide reasonable assurance that theengagement was conducted in compliance with professional standards and thatthere was appropriate continuity of Andersen personnel working on audits,availability of national office consultation and availability of personnel atforeign affiliates of Andersen to conduct the relevant portions of the audit. Regards, Mark R. Holden Senior VP - Chief Financial Officer