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Wabash NationalUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGEACT OF 1934For the Fiscal Year Ended December 31, 2005OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from to Commission File Number: 1-10883WABASH NATIONAL CORPORATION(Exact name of registrant as specified in its charter) Delaware(State or other jurisdiction ofincorporation or organization) 52-1375208(IRS EmployerIdentification Number)1000 Sagamore Parkway SouthLafayette, Indiana 47905(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: Title of each class Name of each exchange on which registeredCommon Stock, $.01 Par Value New York Stock ExchangeSeries D Preferred Share Purchase Rights New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filerand large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer o Non-accelerated filer o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2005 was $762,556,020 based upon the closing price ofthe Company’s common stock as quoted on the New York Stock Exchange composite tape on such date. The number of shares outstanding of the registrant’s common stock as of February 21, 2006 was 31,121,768. Part III of this Form 10-K incorporates by reference certain portions of the registrant’s Proxy Statement for its Annual Meeting of Stockholders to be filedwithin 120 days after December 31, 2005. TABLE OF CONTENTSWABASH NATIONAL CORPORATIONFORM 10-K FOR THE FISCALYEAR ENDED DECEMBER 31, 2005 PagesPART I Item 1 Business 3 Item 1A Risk Factors 10 Item 1B Unresolved Staff Comments 14 Item 2 Properties 14 Item 3 Legal Proceedings 14 Item 4 Submission of Matters to a Vote of Security Holders 15 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 15 Item 6 Selected Financial Data 17 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 7A Quantitative and Qualitative Disclosures about Market Risk 29 Item 8 Financial Statements and Supplementary Data 31 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A Controls and Procedures 55 Item 9B Other Information 57 PART III Item 10 Directors and Executive Officers of the Registrant 57 Item 11 Executive Compensation 58 Item 12 Security Ownership of Certain Beneficial Owners and Management 58 Item 13 Certain Relationships and Related Transactions 58 Item 14 Principal Accountant Fees and Services 58 PART IV Item 15 Exhibits and Financial Statement Schedules 58 SIGNATURES 61 List of Significant Subsidiaries Consent of Ernst & Young LLP Certification of Principal Executive Officer Certification of Principal Financial Officer Written Statement of CEO and CFO2 FORWARD LOOKING STATEMENTS This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Actof 1934 (the “Exchange Act”). Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan”or “anticipate” and other similar words. Our “forwarding-looking statements” include, but are not limited to, statements regarding: • our business plan; • our expected revenues, income or loss and capital expenditures; • plans for future operations; • financing needs, plans and liquidity; • our ability to achieve sustained profitability; • reliance on certain customers and corporate partnerships; • availability and pricing of raw materials; • availability of capital; • dependence on industry trends; • the outcome of any pending litigation; • export sales and new markets; • engineering and manufacturing capabilities and capacity; • acceptance of new technology and products; • government regulation; and • assumptions relating to the foregoing. Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from thoseprojected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements,are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in this Report. Each forward-looking statement contained inthis Report reflects our management’s view only as of the date on which that forward-looking statement was made. We are not obligated to update forward-looking statements or publicly release the result of any revisions to them to reflect events or circumstances after the date of this Report or to reflect theoccurrence of unanticipated events. Currently known risk factors that could cause actual results to differ materially from our expectations are described below in this Report “in Item 1A. RiskFactors.” We urge you to carefully review that section for a more complete discussion of the risks of an investment in our securities.PART IITEM 1—BUSINESS Wabash National Corporation (“Wabash,” “Company,” “us,” “we” or “our”) is one of North America’s leaders in designing, manufacturing andmarketing standard and customized truck trailers and related transportation equipment. Founded in 1985 as a start-up, Wabash has grown to be one ofFortune’s 1000 largest companies and had annual sales of approximately $1.2 billion in 2005. We believe our success has been the result of our longstandingrelationships with our core customers, broad product line and large distribution and service network. Our management team is focused on becoming the low-cost producer in the truck trailer industry through continuous improvement, lean manufacturing initiatives and automation. We seek to identify and produce proprietary products that offer exceptional value to customers with the potential to generate higher profit margins than thoseof standardized products. We believe that we have the3 engineering and manufacturing capability to produce these products efficiently. Our proprietary DuraPlate composite truck trailer, which we introduced in1996, has achieved widespread acceptance by our customers. For the last three years, sales of our DuraPlate trailers represented approximately 80% of ourtotal new trailer sales. We are also a competitive producer of standardized sheet and post and refrigerated trailer products, and strive to become a low-costproducer of these products within our industry. We expect to continue a program of product development and selective acquisitions of quality proprietaryproducts that further differentiate us from our competitors and increase profit opportunities. We market our transportation equipment under the Wabash, DuraPlate, DuraPlateHD, FreightPro, Arcticlite® and RoadRailer® trademarksdirectly to customers, through independent dealers and through our factory-owned retail branch network. Historically, our marketing effort focused on ourlongstanding core customers representing many of the largest companies in the trucking industry. Our relationship with our core customers has been central toour growth since inception. Beginning in the fourth quarter of 2003, we have actively pursued the diversification of our customer base by focusing on what werefer to as the mid-market. These carriers, which represent approximately 1,250 carriers, operate fleets of between 250 to 7,500 trailers, which we estimate intotal account for approximately one million trailers. Longstanding core customers include — Schneider National, Inc.; J.B. Hunt Transport Services, Inc.; Swift Transportation Corporation; WernerEnterprises, Inc.; Heartland Express, Inc.; Crete Carrier Corporation; U.S. Xpress Enterprises, Inc.; Knight Transportation, Inc.; Interstate Distributor Co.;YRC Worldwide, Inc.; Old Dominion Freight Lines, Inc.; SAIA Motor Freightlines, Inc.; and FedEx Corp. Mid-market customers include — CR England, Inc.; Marten Transport, Inc. LTD; USA Logistics; ESTES Express Line, Inc.; CovenantTransportation, Inc.; Celadon Group, Inc.; Jacobson Companies, Inc.; Aurora LLC; Landair Transport, Inc.; Xtra Lease, Inc.; USF Corporation; and NewPenn Motor Express, Inc. Our factory-owned retail branch network provides additional opportunities to distribute our products and also offers national service and supportcapabilities for our customers. The retail sale of new and used trailers, aftermarket parts and service through our retail branch network generally providesenhanced margin opportunities. Additionally, we utilize a network of 29 independent dealers with 55 locations. Wabash was incorporated in Delaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985. We operate in two reportablebusiness segments: (1) manufacturing and (2) retail and distribution. Financial results by segment, including information about revenues from customers,measures of profit and loss, and total assets, and financial information regarding geographic areas and export sales are discussed in Footnote 15, Segmentsand Related Information, of the accompanying Consolidated Financial Statements. Additional information concerning Wabash can be found on our website atwww.wabashnational.com. We make our electronic filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K and amendments to these reports available on our website free of charge as soon as practicable after we file or furnish them with the SEC.Information on the website is not part of this Form 10-K.Repositioning Activities This past year, 2005, marks the third year of recovery for the industry after the 2001-2002 downturn. During the last several years, we repositionedWabash by focusing on continuous improvement of our manufacturing and retail operations, expanding our customer base, introducing products that betteraddress customers’ needs, exiting non-core operations and strengthening our capital structure. We believe Wabash is well positioned to participate in the marketgrowth that ACT Research Company, LLC (ACT) is predicting will continue through 2008.Strategy We are committed to an operating strategy that seeks to deliver profitability throughout industry cycles by executing on the core elements of our strategicplan: • Corporate Focus. We intend to continue our focus on improved earnings and cash flow.4 • Product and Service Differentiation. We intend to continue to provide differentiated products and services that generate enhanced profit margins. • Continuous Improvements. We are focused on reducing our cost structure by adhering to continuous improvement and lean manufacturinginitiatives. • Core Customers. We intend to maintain and enhance our longstanding customer partnerships and create new revenue opportunities by offeringtailored transportation solutions. • Customer Diversification. We expect to continue to expand and diversify our customer base by focusing on middle market carriers with trailer fleetsranging from 250 to 7,500 units. • Trailer Performance Improvements. We are working on the development of a DuraPlate® trailer that minimizes maintenance for up to 10 years. • Strengthen Balance Sheet. We intend to continue to enhance financial flexibility enabling us to capitalize on future market opportunities.Industry and Competition Trucking in the United States (U.S.), according to the American Trucking Association (ATA), was estimated to be a $671 billion industry in 2004 (thelatest date such information is available), leading all other modes of transportation. ATA estimates that approximately 68% of all freight tonnage is carried bytruck at some point during its shipment, accounting for approximately 88% of freight industry revenues. Trailer demand is a direct function of the amount offreight to be transported. As the economy improves, it is forecasted that truck carriers will need to expand their fleets, which typically results in increasedtrailer orders. According to ACT, there are approximately 3.2 million trailers in use today and the trailer replacement demand is estimated at around 225,000trailers per year. In general, the U.S. trucking industry grew throughout the 1990’s and peaked in 1999. A number of factors, including an economic downturn,fluctuations in fuel prices, declining asset values, limited capital, record trucking company failures and industry consolidation led to a historic reduction of54% in trailer purchases from 1999 to 2002. The industry began its recovery in 2003, and year-over-year trailer production improvements of 24%, 31% and10% were recorded for 2003, 2004 and 2005, respectively. Most trucking companies experienced very strong financial performances in 2004 and 2005, as acapacity constrained freight environment allowed trucking companies to raise freight rates, in-turn improving profitability, despite increased fuel costs. New U.S. federal truck emission regulations will take effect in 2007, resulting in cleaner, yet less fuel-efficient and costlier tractor engines. As aconsequence, many trucking firms are accelerating purchases of tractors prior to the effective date of the regulation, significantly reducing the historical trailer-to-tractor ratio of 1.5 to 1, to closer to 1 to 1 during 2004 and 2005, according to ACT. While we foresee the trailer-to-tractor ratio continuing at this level in2006, we believe that the ratio will rebound thereafter, but is unlikely to return to prior historic norms, which could result in a significant increased demand intrailers. Wabash, Great Dane and Utility are generally viewed as the top three trailer manufacturers and have accounted for greater than 56% of new trailer marketshare in recent years. During the severe industry downturn in 2001 and 2002, a number of trailer manufacturers went out of business, resulting in greaterindustry consolidation. Despite market concentration, price competition is fierce, as production capacity exceeds current demand. Trailer differentiation ismade primarily through superior products, customer relationships, service availability and cost. The table below sets forth new trailer production for Wabash, its largest competitors and for the trailer industry as a whole within North America. The datarepresents all segments of the market, except containers and chassis, including vans, dumps, flats, etc. Since 2002, with the exception of intermodalcontainers, we have primarily participated in the van segment of the market. The van production has grown from a low of approximately 102,000 units in2002 to approximately 181,000 units in 2005, an improvement of 77%. During this period, we have seen our market share grow from approximately 26% to29%.5 2005 2004 2003 2002 2001 2000Wabash(1) 52,000 48,000 36,000 27,000 32,000 66,000 Great Dane 55,000 55,000 41,000 33,000(2) 22,000 47,000 Utility 34,000 31,000 24,000 18,000 16,000 29,000 Stoughton 17,000 15,000 9,900 10,000 6,000 15,000 Other principal producers 46,000 42,000 34,000 28,000 32,000 63,000 Total Industry 251,000 228,000 174,000(3) 140,000 140,000 271,000 (1) Does not include approximately 2,300, 1,500, 1,300 and 6,000 intermodal containers in 2005, 2004, 2003 and 2002, respectively. (2) Data revised by publisher in 2004. (3) Data revised by publisher in 2005. Sources: Individual manufacturer information, some of which is estimated, provided by Trailer Body Builders Magazine. Industry totals provided byA.C.T. Research Company, L.L.C.Competitive Strengths We believe our core competitive strengths include: • Long Term Core Customer Relationships — We are the lead provider of trailers to a significant number of top tier trucking companies, generatinga revenue base that has helped to sustain us as one of the market leaders. • Innovative Product Offerings — Our DuraPlate proprietary technology offers what we believe to be a superior trailer to our customers, whichcommands premium pricing. A DuraPlate trailer is a composite plate trailer constructed using material containing a high-density polyethylene corebonded between a high-strength steel skin. We believe that the competitive advantages of our DuraPlate trailers compared to standard trailersinclude the following: - Extended Service Life — operate three to five years longer; - Lower Total Cost of Ownership — less costly to maintain; and - Improved Resale — higher trade-in values. We have also successfully introduced innovations in our refrigerated trailers and other product lines. For example, we introduced the DuraPlateHD®trailer and the FreightPro® sheet and post trailer in 2003, and wide-bodied DuraPlate® intermodal containers in 2004. • Significant Market Share and Brand Recognition — We have been one of the two largest manufacturers of trailers in North America in each ofthe last 10 years, with one of the most widely recognized brands in the industry. We believe we are currently the largest producer of van trailers inNorth America. • Committed Focus on Operational Excellence — Safety, quality, on-time delivery, productivity and cost reduction are the core elements of ourprogram of continuous improvement. In 2005, we received ISO 14001 registration of our Environmental Management System. • Technology — We are recognized by the trucking industry as being a leader in developing technology to reduce trailer maintenance. During 2004, weintroduced the Truck-Lite® Model 33® LED Mini-Marker Light which is designed to be less susceptible to physical damage and resistant tocorrosion, as well as exceeds legal lighting requirements. • Corporate Culture — We benefit from a value driven management team and dedicated workforce. • Extensive Distribution Network — Seventeen factory-owned retail branch locations extend our sales network throughout North America,diversifying our factory direct sales, providing an outlet for used trailer sales and supporting our national service contracts.6 Regulation Truck trailer length, height, width, maximum weight capacity and other specifications are regulated by individual states. The federal government alsoregulates certain safety features incorporated in the design of truck trailers, including regulations that require anti-lock braking systems (ABS) and define rearimpact guard standards. Manufacturing operations are subject to environmental laws enforced by federal, state and local agencies (See “EnvironmentalMatters”).Products Since our inception, we have expanded our product offerings from a single truck trailer product to a broad range of trailer-related transportation equipment.Our manufacturing segment specializes in the development of innovative proprietary products for our key markets. Manufacturing segment sales representedapproximately 80%, 77%, and 70% of consolidated Wabash net sales in 2005, 2004 and 2003, respectively. Our current transportation equipment productsinclude the following: • DuraPlate Trailers. DuraPlate trailers utilize a proprietary technology that consists of a composite plate wall for increased durability and greaterstrength. Our DuraPlate trailers include our DuraPlateHD, a heavy duty version of our regular DuraPlate trailers. • DuraPlate Domestic Containers. DuraPlate domestic containers utilize the same proprietary technology as our Duraplate® trailers and consistof stackable containers, carried either on flat cars or stacked two-high on special “Double-Stack” railcars. • Smooth Aluminum Trailers. Smooth aluminum trailers, commonly known as “sheet and post” trailers, are the commodity trailer product purchasedby the trucking industry. Starting in 2003, we commercialized our FreightPro® trailer to provide a competitive offering for this segment of the market. • Refrigerated Trailers. Refrigerated trailers have insulating foam in the sidewalls and roof, which improves both the insulation capabilities anddurability of the trailers. Our refrigerated trailers use our proprietary SolarGuard® technology, coupled with our novel foaming process, which webelieve enables customers to achieve lower costs through reduced fuel consumption and reduced operating hours. • RoadRailer® Equipment. The RoadRailer® intermodal system is a patented bimodal technology consisting of a truck trailer and detachable rail“bogie” that permits a trailer to run both over the highway and directly on railroad lines. • Other. Our other transportation equipment includes container chassis and converter dollies. Our retail and distribution segment focuses on the sale of new and used trailers and providing parts and service as described below. • We sell new trailers produced by the manufacturing segment. Additionally, we sell specialty trailers including tank trailers, dump trailers andplatform trailers produced by third parties, which are purchased in smaller quantities for local or regional transportation needs. The sale of newtransportation equipment through the retail branch network represented 11.3%, 12.2% and 9.4% of net sales during 2005, 2004 and 2003,respectively. • We provide replacement parts and accessories and maintenance service for our own and competitors’ trailers and related equipment. Sales of theseproducts and service represented 4.1%, 5.0% and 10.8% of net sales during 2005, 2004 and 2003, respectively. • We sell used transportation equipment including units taken in trade from our customers upon the sale of new trailers. The ability to remarket usedequipment promotes new sales by permitting trade-in allowances and offering customers an outlet for the disposal of used equipment. The sale ofused trailers represented 4.6%, 4.8% and 7.3% of net sales during 2005, 2004 and 2003, respectively.7 Customers Our customer base has historically included many of the nation’s largest truckload common carriers, leasing companies, private fleet carriers, less-than-truckload (LTL) common carriers, and package carriers. We successfully diversified our customer base from 61% of total units sold to large core customersin 2002 to 36% in 2005 by expanding our customer base. This has been accomplished while maintaining our relationship with these core customers. Our fivelargest customers accounted for 22%, 23% and 27% of our aggregate net sales in 2005, 2004 and 2003, respectively. In 2005 and 2004, no single customer represented 10% or greater of net sales. In 2003, Schneider National, Inc. accounted for approximately 14% of netsales. International sales, primarily to Canadian customers, accounted for less than 10% of net sales for each of the last three years. We have establishedrelationships as a supplier to many large customers in the transportation industry, including the following: • Truckload Carriers: Schneider National, Inc.; J.B. Hunt Transport Services, Inc.; Swift Transportation Corporation; Werner Enterprises, Inc.;Heartland Express, Inc.; Crete Carrier Corporation; U.S. Xpress Enterprises, Inc.; Knight Transportation, Inc.; and Interstate Distributor Co. • Leasing Companies: GE Trailer Fleet Services; Wells Fargo Equipment Finance, Inc.; Xtra Lease, Inc.; Transport Services, Inc.; and Aurora LLC. • Private Fleets: Safeway, Inc.; The Home Depot, Inc.; The Kroger Co.; and Sysco Corporation. • Less-Than-Truckload Carriers: YRC Worldwide, Inc.; Old Dominion Freight Lines, Inc.; SAIA Motor Freightlines, Inc.; FedEx Corp.; and VitranExpress, Inc.Marketing and Distribution We market and distribute our products through the following channels: • factory direct accounts; • factory-owned distribution network; and • independent dealerships. Factory direct accounts are generally large fleets, over 7,500 trailers that are high volume purchasers. Historically, we have focused on the factory directmarket where customers are highly knowledgeable of the life-cycle costs of trailer equipment and, therefore, are best equipped to appreciate the design andvalue-added features of our products. Beginning in late 2003, we have actively pursued the diversification of our customer base focusing what we refer to asthe mid-market. These carriers, which represent approximately 1,250 carriers, operate fleets of between 250 to 7,500 trailers, which we estimate in totalaccount for approximately one million trailers. Since implementing our mid-market sales strategy two years ago, we have added over 130 new customersaccounting for orders for over 10,000 new trailers. Our factory-owned distribution network generates retail sales of trailers to smaller fleets and independent operators located in geographic regions where ourbranches are located. This branch network enables us to provide maintenance and other services to customers. The branch network and our used trailercenters provide an outlet for used trailers taken in trade upon the sale of new trailers, which is a common practice with fleet customers. We also sell our products through a nationwide network of 29 independent dealerships with 55 locations. The dealers primarily serve mid-market andsmaller sized carriers and private fleets in the geographic region where the dealer is located and occasionally may sell to large fleets. The dealers may alsoperform service work for their customers.8 Raw Materials We utilize a variety of raw materials and components including steel, polyethylene, aluminum, lumber, tires and suspensions, which we purchase from alimited number of suppliers. Significant price fluctuations or shortages in raw materials or finished components may adversely affect our results ofoperations. In 2005 and for the foreseeable future, we expect that the raw materials used in the greatest quantity will be the steel, aluminum, polyethylene andwood used in our trailers. Our component suppliers have advised us that they have adequate capacity to meet our current and expected demands in 2006.However, unprecedented industry tire demand and escalating raw material costs in 2005 have resulted in higher tire costs. The price increases in our principalraw materials — aluminum, steel, plastic and timber — that materialized beginning in 2003 and continued through 2005, are expected to impact 2006 as well.Recently, we have experienced further increases in aluminum prices, which we expect will have the greatest impact on our sheet and post and refrigerated trailerproducts. Our Harrison, Arkansas laminated hardwood floor facility provides the majority of our requirements for trailer floors.Backlog Orders that have been confirmed by the customer in writing and can be produced during the next 18 months are included in our backlog. Orders thatcomprise backlog may be subject to changes in quantities, delivery, specifications and terms. Our backlog of orders at December 31, 2005 and 2004 wereapproximately $516 million and $280 million, respectively. We expect to complete the majority of our backlog orders within the next 12 months.Patents and Intellectual Property Wabash holds or has applied for 58 patents in the United States on various components and techniques utilized in our manufacture of truck trailers. Inaddition, we hold or have applied for 39 patents in three foreign countries. Our patents include intellectual property related to the manufacture of trailers usingour proprietary DuraPlate product, which we believe offers us a significant competitive advantage. Wabash also holds or has applied for 31 trademarks in the United States, as well as 18 trademarks in foreign countries. These trademarks include theWabash® and Wabash National® brand names as well as trademarks associated with our proprietary products such as the DuraPlate trailer and theRoadRailer trailer.Research and Development Research and development expenses are charged to Cost of Sales on the Consolidated Statements of Operations as incurred and were $2.6 million,$2.6 million and $2.1 million in 2005, 2004 and 2003, respectively.Environmental Matters Our facilities are subject to various environmental laws and regulations, including those relating to air emissions, wastewater discharges, the handling anddisposal of solid and hazardous wastes, and occupational safety and health. Our operations and facilities have been and in the future may become the subjectof enforcement actions or proceedings for non-compliance with such laws or for remediation of company-related releases of substances into the environment.Resolution of such matters with regulators can result in commitments to compliance abatement or remediation programs and in some cases the payment ofpenalties. (See Item 3 “Legal Proceedings.”) We believe that our facilities are in substantial compliance with applicable environmental laws and regulations. Our facilities have incurred, and willcontinue to incur, capital and operating expenditures and other costs in complying with these laws and regulations in both the United States and abroad.However, we currently do not anticipate that the future costs of environmental compliance will have a material adverse effect on our business, financialcondition or results of operations.Employees As of December 31, 2005 and 2004, we had approximately 3,600 and 3,300 full-time associates, respectively. There were no full-time associates under laborunion contracts as of December 31, 2005. We place a9 strong emphasis on employee relations through educational programs and quality improvement teams. We believe our employee relations are good.Additionally, we had temporary employees of approximately 600 and approximately 700 at December 31, 2005 and 2004, respectively. On average, temporaryemployees represented 25% of our production workforce during 2005.ITEM 1A—RISK FACTORS You should carefully consider the risks described below in addition to other information contained or incorporated by reference in this Report beforeinvesting in our securities. Realization of any of the following risks could have a material adverse effect on our business, financial condition, cash flows andresults of operations.Risks Related to Our Business, Strategy and OperationsWe have generated significant losses in the past. In 2005 and 2004, we reported net income of $111.1 million and $58.4 million, respectively, but we reported net losses of $57.2 million, $56.2 millionand $232.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. Our ability to sustain profitability in the future will depend on thesuccessful continued implementation of measures to reduce costs and achieve sales goals, as well as the ability to pass on to customers increases in the pricesof raw materials and component parts. While we have taken steps to lower operating costs and reduce interest expense, and have seen our sales improve inrecent periods, we cannot assure you that our cost-reduction measures will be successful, sales will be sustained or increased or that we will achieve asustained return to profitability.Our inventories are not managed by perpetual inventory control systems. The systems and processes we use to manage and value our inventories require significant manual intervention and the verification of actual quantitiesrequires physical inventories, which we take several times a year. Breakdowns of these systems and processes, and errors in inventory estimates derived fromthese systems and processes, could go undetected until the next physical inventory and adversely affect our operations and financial results.An adverse change in our customer relationships or in the financial condition of our customers could adversely affect our business. We have relationships with a number of customers where we supply the requirements of these customers. We do not have long-term agreements with thesecustomers. Our success is dependent, to a significant extent, upon the continued strength of these relationships and the growth of our core customers. We oftenare unable to predict the level of demand for our products from these customers, or the timing of their orders. In addition, the same economic conditions thatadversely affect us also often adversely affect our customers. As some of our customers are highly leveraged and have limited access to capital, their continuedexistence may be uncertain. One of our customers, Grupo Transportation Marititma Mexicana SA (TMM), which is located in Mexico, has been experiencingfinancial difficulties, which led it to restructure its debt in August 2004, and subsequently sell certain of its assets. TMM owes us $5.8 million as ofDecember 31, 2005 secured by highly specialized RoadRailer® equipment, which due to the nature of the equipment, has a minimal recovery value. The lossof a significant customer or unexpected delays in product purchases could adversely affect our business and results of operations.Our technology and products may not achieve market acceptance, which could adversely affect our competitive position. We continue to introduce new products, such as the DuraPlateHD® and the FreightPro® trailer. We cannot assure that these or other new products ortechnologies will achieve sustained market acceptance. In addition, new technologies or products that our competitors introduce may render our productsobsolete or uncompetitive. We have taken steps to protect our proprietary rights in our new products. However, the steps we have taken to protect them may notbe sufficient or may not be enforced by a court of law. If we are unable to protect our proprietary rights, other parties may attempt to copy or otherwise obtainor use our products or technology. If competitors are able to use our technology, our ability to compete effectively could be harmed.10 We have a limited number of suppliers of raw materials; an increase in the price of raw materials or the inability to obtain raw materialscould adversely affect our results of operations. We currently rely on a limited number of suppliers for certain key components in the manufacturing of truck trailers, such as tires, landing gear, axles andspecialty steel coil used in DuraPlate® panels. From time to time, there have been and may in the future continue to be shortages of supplies of raw materials orour suppliers may place us on allocation, which would have an adverse impact on our ability to meet demand for our products. Raw material shortages andallocations may result in inefficient operations and a build-up of inventory, which can negatively affect our working capital position. In addition, if the priceof raw materials were to increase and we were unable to increase our selling prices or reduce our operating costs to offset the price increases, our operatingmargins would be adversely affected. The loss of any of our suppliers or their inability to meet our price, quality, quantity and delivery requirements couldhave a significant impact on our results of operations.Disruption of our manufacturing operations or management information systems would have an adverse effect on our financial condition andresults of operations. We manufacture our products at two trailer manufacturing facilities in Lafayette, Indiana, and one hardwood floor facility in Harrison, Arkansas. Ourprimary manufacturing facility accounts for approximately 85% of our manufacturing output. An unexpected disruption in our production at either of thesefacilities or in our management information systems for any length of time would have an adverse effect on our business, financial condition and results ofoperations.The loss of key personnel could adversely affect our results of operations. Many of our executive officers, including our CEO William P. Greubel and President and COO Richard J. Giromini, are critical to the management anddirection of our business. Our future success depends, in large part, on our ability to retain these officers and other capable management personnel. Theunexpected loss of the services of any of our key personnel could have an adverse effect on the operation of our business, as we may be unable to find suitablemanagement to replace departing executives on a timely basis.The inability to realize additional costs savings could weaken our competitive position. If we are unable to continue to successfully implement our program of cost reduction and continuous improvement, we may not realize additionalanticipated cost savings, which could weaken our competitive position.Restrictive covenants in our debt instruments could limit our financial and operating flexibility and subject us to other risks. The agreements governing our indebtedness include certain covenants that restrict, among other things, our ability to: - incur additional debt; - pay dividends on our common stock in excess of $20 million per year; - repurchase our common stock up to $50 million over the remaining term of the agreement; - consolidate, merge or transfer all or substantially all of our assets; - make certain investments, mergers and acquisitions; and - create certain liens. Additionally, should our available borrowing capacity drop below $40 million, we would be subject to a minimum fixed charge coverage ratio which couldlimit our ability to make capital expenditures and further limit the amount of dividends we could pay. Our ability to comply with such agreements may be affected by events beyond our control, including prevailing economic, financial and industryconditions. In addition, upon the occurrence of an event of default under our debt agreements, the lenders could elect to declare all amounts outstanding underour debt agreements, together with accrued interest, to be immediately due and payable.11 We are in the second half of a project to implement a company-wide Enterprise Resource Planning (ERP) system, and if our implementation isunsuccessful or proves more costly than expected our business could be harmed. The project to implement a new ERP system is in the conversion and testing stages. Our new ERP system is expected to integrate departments and functionsacross Wabash, enhance the ability to service customers and improve our control environment. We may encounter delays and unforeseen costs in this process.If we are unable to implement the ERP system successfully, we may not be able to properly serve our customers or realize expected efficiencies.We may not be successful in our plans to upgrade our production lines and realize increased levels of efficiency. In 2005, we began the first phase of what is planned to be a four-phase multi-year project to replace four trailer assembly lines using technology adaptedfrom the automotive industry at a cost of approximately $10 million per line. Our costs to replace the lines could exceed our estimates, the technology may notwork as planned and we may not be able to meet our estimated timeline. Even if we are successful in replacing the production lines, we may not realize thelevel of costs savings that we estimate.Risks Particular to the Industry in Which We OperateOur business is highly cyclical, which could adversely affect our sales and results of operations. The truck trailer manufacturing industry historically has been and is expected to continue to be cyclical, as well as affected by overall economicconditions. New trailer production for the trailer industry reached its most recent peak of approximately 306,000 units in 1999, falling to approximately140,000 by 2001 and rebounding to approximately 254,000 units in 2005. Customers historically have replaced trailers in cycles that run from five to twelveyears, depending on service and trailer type. Poor economic conditions can adversely affect demand for new trailers and in the past have led to an overall agingof trailer fleets beyond this typical replacement cycle. Customers’ buying patterns can also reflect regulatory changes, such as the new federal hours-of-servicerules and anticipated 2007 federal emissions standards. Our business is likely to continue to be highly cyclical based on current and expected economicconditions and regulatory factors.Significant competition in the industry in which we operate may result in our competitors offering new or better products and services or lowerprices, which could result in a loss of customers and a decrease in our revenues. The truck trailer manufacturing industry is highly competitive. We compete with other manufacturers of varying sizes, some of which may have greaterfinancial resources than we do. Barriers to entry in the standard truck trailer manufacturing industry are low. As a result, it is possible that additionalcompetitors could enter the market at any time. In the recent past, the manufacturing over-capacity and high leverage of some of our competitors, along with thebankruptcies and financial stresses that affected the industry, contributed to significant pricing pressures. If we are unable to compete successfully with other trailer manufacturers, we could lose customers and our revenues may decline. In addition, competitivepressures in the industry may affect the market prices of our new and used equipment, which, in turn, may adversely affect our sales margins and results ofoperations.We are subject to extensive governmental laws and regulations, and our costs related to compliance with, or our failure to comply with, existing orfuture laws and regulations could adversely affect our business and results of operations. The length, height, width, maximum weight capacity and other specifications of truck trailers are regulated by individual states. The federal governmentalso regulates certain truck trailer safety features, such as lamps, reflective devices, tires, air-brake systems and rear-impact guards. Changes or anticipationof changes in these regulations can have a material impact on our financial results, as our customers may defer purchasing decisions and we may have toreengineer products. In addition, we are subject to various environmental laws and regulations dealing with the transportation, storage, presence, use, disposaland handling of hazardous materials, discharge of12 storm water and underground fuel storage tanks and may be subject to liability associated with operations of prior owners of acquired property. In 2004, wepaid $0.4 million and agreed to a compliance agreement with the EPA related to violations of the federal Clean Water Act at our former Huntsville, Tennesseemanufacturing facility. If we are found to be in violation of applicable laws or regulations in the future, it could have an adverse effect on our business, financial condition andresults of operations. Our costs of complying with these or any other current or future environmental regulations may be significant. In addition, if we fail tocomply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions.A decline in the value of used trailers could adversely affect our results of operations. General economic and industry conditions, as well as the supply of used trailers, influence the value of used trailers. As part of our normal businesspractices, we maintain used trailer inventories and have entered into finance contracts secured by used trailers, as well as residual guarantees and purchasecommitments for used trailers. Declines in the market value for used trailers or the need to dispose of excess inventories has had, and could in the future have,an adverse effect on our business, financial condition and results of operations.Product liability and other claims. As a manufacturer of products widely used in commerce, we are subject to regular product liability claims as well as warranty and similar claims allegingdefective products. From time to time claims may involve material amounts and novel legal theories, and any insurance we carry may prove inadequate toinsulate us from material liabilities for these claims.Risks Related to an Investment in Our Common StockOur common stock has experienced, and may continue to experience, price volatility and a low trading volume. The trading price of our common stock has been and may continue to be subject to large fluctuations. Our common stock price may increase or decrease inresponse to a number of events and factors, including: - trends in our industry and the markets in which we operate; - changes in the market price of the products we sell; - the introduction of new technologies or products by us or our competitors; - changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; - operating results that vary from the expectations of securities analysts and investors; - announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, financings or capitalcommitments; - changes in laws and regulations; and - general economic and competitive conditions. This volatility may adversely affect the prices of our common stock regardless of our operating performance. The price of our common stock also may beadversely affected by the amount of common stock issuable upon conversion of our 3 1/4% convertible senior notes due 2008. Assuming $125 million inaggregate principal amount of these notes are converted at a conversion price of $19.05, which has been adjusted for the impact of dividend payments, thenumber of shares of our common stock outstanding would increase by 6.6 million, or approximately 21%. The conversion feature of these senior notes issubject to further adjustment in connection with the payment of future cash dividends. As a result of any future payment of a cash dividend, upon anyconversion of the notes, we would be required to issue additional shares of common stock. In addition, our common stock has experienced low trading volume in the past.13 ITEM 1B—UNRESOLVED STAFF COMMENTS None.ITEM 2—PROPERTIESManufacturing Facilities We own and operate two trailer manufacturing facilities in Lafayette, Indiana and a trailer floor manufacturing facility, 0.5 million square feet, in Harrison,Arkansas. Our main Lafayette facility is a 1.2 million square foot facility that houses truck trailer and composite material production, tool and die operations,research laboratories and offices. The second Lafayette facility is 0.6 million square feet, primarily used for the production of refrigerated trailers. In total, ourfacilities have the capacity to produce in excess of 75,000 trailers annually on a three-shift, five-day workweek schedule. During 2001, we closed a trailer manufacturing plant located in Ft. Madison, Iowa (255,000 square feet), which is classified as held for sale and isreported in Prepaid Expenses and Other in the accompanying Consolidated Balance Sheets.Retail and Distribution Facilities Retail and distribution facilities include 11 sales and service branches and six locations that sell new and used trailers (six of which are leased). Each salesand service branch consists of an office, parts warehouse and service space, and ranges in size from 20,000 to 50,000 square feet per facility. Fourteenbranches are located in 11 states and three branches are located in three Canadian provinces. We own a 0.3 million sq. ft. warehouse facility in Lafayette, Indiana. Wabash owned properties are subject to security interests held by our bank lenders.ITEM 3—LEGAL PROCEEDINGS There are certain lawsuits and claims pending against Wabash that arose in the normal course of business. None of these claims are expected to have amaterial adverse effect on our financial position or our results of operations. Brazil Joint Venture In March 2001, Bernard Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against Wabash in the Fourth Civil Court of Curitibain the State of Paraná, Brazil. This action seeks recovery of damages plus pain and suffering. Because of the bankruptcy of BK, this proceeding is nowpending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99). This case grows out of a joint venture agreement between BK and Wabash related to marketing the RoadRailer trailer in Brazil and other areas of SouthAmerica. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the joint venture was dissolved. BK subsequently filed its lawsuitagainst Wabash alleging that it was forced to terminate business with other companies because of exclusivity and non-compete clauses purportedly found inthe joint venture agreement. BK asserts damages of approximately $8.4 million. We answered the complaint in May 2001, denying any wrongdoing. We believe that the claims asserted by BK are without merit and we intend to defendour position. We believe that the resolution of this lawsuit will not have a material adverse effect on our financial position, liquidity or future results ofoperations; however, at this stage of the proceeding, no assurance can be given as to the ultimate outcome of the case. Environmental In September 2003, Wabash was noticed as a potentially responsible party (PRP) by the United States Environmental Protection Agency pertaining to theMotorola 52nd Street (Phoenix, Arizona) Superfund Site pursuant14 to the Comprehensive Environmental Response, Compensation and Liability Act. PRPs include current and former owners and operators of facilities at whichhazardous substances were disposed of. EPA’s allegation that we were a PRP arises out of the operation of a former branch facility located approximately fivemiles from the original site, which we acquired and subsequently disposed of. According to the notice, the site currently encompasses an area of groundwatercontaminated by volatile organic compounds seven miles long and one mile wide. The site was placed on the National Priorities List in 1989. Motorola hasbeen operating an interim groundwater containment remedy since 2001. Wabash does not expect that these proceedings will have a material adverse effect onour financial condition or results of operations. In January 2006, Wabash received a letter from the North Carolina Department of Environment and Natural Resources indicating that a site that Wabashformerly owned near Charlotte, North Carolina has been included on the state’s October 2005 Inactive Hazardous Waste Sites Priority List. The letter statesthat Wabash was being notified in fulfillment of the state’s “statutory duty” to notify those who own and those who at present are known to be responsible foreach Site on the Priority List. No action is being requested from Wabash at this time. Wabash does not expect that this designation will have a material adverseeffect on our financial condition or results of operations.ITEM 4—SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None to report.PART II ITEM 5—MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESInformation Regarding our Common Stock Our common stock is traded on the New York Stock Exchange (ticker symbol: WNC). The number of record holders of our common stock atFebruary 21, 2006 was 1,131. We paid quarterly dividends of $0.045 per share on our common stock in 2005. Prior to 2005, no dividends had been paid since the third quarter of 2001.Our amended asset-based loan agreement limits the payment of cash dividends to up to $20 million per year. Payments of cash dividends depend on futureearnings, capital availability and financial condition. High and low stock prices as reported on the New York Stock Exchange for the last two years were: High Low2004 First Quarter $30.73 $22.16 Second Quarter $29.53 $22.00 Third Quarter $30.91 $24.90 Fourth Quarter $28.55 $21.82 2005 First Quarter $27.77 $24.00 Second Quarter $27.98 $23.18 Third Quarter $25.16 $19.24 Fourth Quarter $20.39 $16.91 15 Purchases of Our Equity Securities Total Number of Maximum Number Total Number Shares Purchased of Shares that May of Shares Average Price as Part of Publicly Yet Be Purchased Period Purchased Paid Per Share Announced Plans* Under The Plans October 1 - 31, 2005 — $— — 2,000,000 November 1 - 30, 2005 189,000 $17.81 189,000 1,811,000 December 1 - 31, 2005 — $— — 1,811,000 Total 189,000 $17.81 189,000 1,811,000 On September 26, 2005, we announced that our Board of Directors had approved a share repurchase program to repurchase up to two million shares ofour common stock. The repurchase program will expire on September 15, 2007 unless we terminate or limit it prior to that time.16 ITEM 6—SELECTED FINANCIAL DATA The following selected consolidated financial data with respect to Wabash for each of the five years in the period ended December 31, 2005, have beenderived from our consolidated financial statements. The following information should be read in conjunction with Management’s Discussion and Analysis ofFinancial Condition and Results of Operations and the consolidated financial statements and notes thereto included elsewhere in this Report. Years Ended December 31, 2005 2004 2003 2002 2001 (Dollars in thousands, except per share data) Statement of Operations Data: Net sales $1,213,711 $1,041,096 $887,940 $819,568 $863,392 Cost of sales 1,079,196 915,310 806,963 773,756 970,066 Loss on asset impairment — — 28,500 2,000 10,500 Gross profit (loss) 134,515 125,786 52,477 43,812 (117,174) Selling, general and administrative expenses 54,521 57,003 61,724 80,759 84,364 Restructuring charges — — — 1,813 37,864 Income (loss) from operations 79,994 68,783 (9,247) (38,760) (239,402) Interest expense (6,431) (10,809) (31,184) (34,945) (23,520)Foreign exchange gains and losses, net 231 463 5,291 5 (1,706)Equity in losses of unconsolidated affiliate — — — — (7,668)Restructuring charges — — — — (1,590)Loss on debt extinguishment — (607) (19,840) (1,314) — Other, net 262 1,175 (2,247) 3,546 (1,139) Income (loss) before income taxes 74,056 59,005 (57,227) (71,468) (275,025) Income tax (benefit) expense (37,031) 600 — (15,278) (42,857) Net income (loss) $111,087 $58,405 $(57,227) $(56,190) $(232,168) Basic earnings (loss) per common share $3.57 $2.10 $(2.26) $(2.43) $(10.17) Diluted earnings (loss) per common share $3.06 $1.80 $(2.26) $(2.43) $(10.17) Cash dividends declared per common share $0.18 $— $— $— $0.09 Years Ended December 31, 2005 2004 2003 2002 2001 (Dollars in thousands)Balance Sheet Data: Working capital $213,201 $108,101 $41,970 $55,052 $111,299 Total equipment leased to others and financecontracts $9,150 $19,534 $32,069 $132,853 $160,098 Total assets $548,653 $432,046 $397,036 $565,569 $692,504 Total debt and capital leases $125,500 $127,500 $227,316 $346,857 $412,017 Stockholders’ equity $278,702 $164,574 $22,162 $73,984 $130,985 17 ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes the matters that we consider to beimportant to understanding the results of our operations for each of the three years in the period ended December 31, 2005, and our capital resources andliquidity as of December 31, 2005. Our discussion begins with our assessment of the condition of the North American trailer industry along with a summaryof the actions we have taken to reposition Wabash. We then analyze the results of our operations for the last three years, including the trends in the overallbusiness and our operations segments, followed by a discussion of our cash flows and liquidity, capital markets events and transactions, our new creditfacility, and contractual commitments. We then provide a review of the critical accounting judgments and estimates that we have made that we believe are mostimportant to an understanding of our MD&A and our consolidated financial statements. These are the critical accounting policies that affect the recognitionand measurement of our transactions and the balances in our consolidated financial statements. We conclude our MD&A with information on recentaccounting pronouncements that we adopted during the year, as well as those not yet adopted that are expected to have an impact on our financial accountingpractices. We have two reportable segments: manufacturing and retail and distribution. The manufacturing segment produces trailers that are sold to customers whopurchase trailers directly or through independent dealers and to the retail and distribution segment. The retail and distribution segment includes the sale of newand used trailers, as well as the sale of aftermarket parts and service through its retail branch network.Executive Summary The year 2005 marks the third year of recovery for the industry after a three-year downturn. During this period, we repositioned Wabash by focusing onthe continuous improvement of our manufacturing and retail operations, expanding our customer base, introducing products that meet customers’ needs,exiting non-core operations and strengthening our capital structure. We believe Wabash is positioned to fully participate in the market growth that analysts arepredicting will continue through 2008.Operating Performance We measure our operating performance in four key areas – Safety/Environmental, Quality, Productivity and Cost Reduction. Our objective of being bettertomorrow than we are today is simple, straightforward and easily understood by all our associates. • Safety/Environmental. We have maintained our four-fold reduction in total recordable incident rate since June 2002. We have reduced our workerscompensation costs in 2005 by approximately 30% from 2004. We maintain ISO 14001 registration of our Environmental Management System. Webelieve that our improved environmental, health and safety management translates into higher labor productivity and lower costs as a result of less timeaway from work and improved system management. • Quality. We monitor product quality on a continual basis through a number of means for both internal and external performance as follows: - Internal performance. In 2005, we abandoned the more limited measurement of monitoring workmanship issues (First Pass Yield) and introducedProcess Yield (PY), which measures the performance impact from all aspects of the supply chain manufacturing process has on our ability to shiptrailers at the end of the production process. - External performance. We measure warranty claims per 100 units produced among other measures. We utilize this information, along with otherdata, to drive continuous improvement initiatives relative to product quality and reliability. Through these efforts, second half 2005 warranty claimrates reflected an improvement of 7% compared to 2004.18 • Productivity. We measure productivity on many fronts. Some key indicators include production line speed, man-hours per trailer and inventory levels.Improvements over the last several years in these areas translate into: - Increased available capacity, which we estimate to be over 75,000 units annually based on a three-shift, five-day work week. - Effective management of inventory has resulted in inventory turns, which is a commonly used measure of working capital efficiency, of currently11 turns per year compared to approximately six turns in 2002. • Cost Reduction. During 2002, we introduced our continuous improvement initiative (CI). Since introduction, over 400 CI events have been completedwith 125 coming in 2005 of which 100 were conducted at retail branch locations. As of December 2005, CI has become a way of life, not only in ourmanufacturing operations, but also in our branch operations as well. CI events have been successful in improving our overall trailer productionprocess including labor hours per trailer, as well as the ability to better manage inventory levels and improve efficiency of branch service work.Industry Trends Freight transportation in the United States, according to the American Trucking Association (ATA), was estimated to be a $671 billion industry in 2004(the latest date such information is available). ATA estimates that approximately 68% of all freight tonnage is carried by trucks at some point during itsshipment, accounting for approximately 88% of freight industry revenue in the United States. Trailer demand is a direct function of the amount of freight to betransported. To monitor the state of the industry, we evaluate a number of indicators related to trailer manufacturing and the transportation industry.Information is obtained from sources such as A.C.T. Research Co., LLC (ACT), ATA, Cass Logistics, and Eno Transportation Foundation. Recent trends wehave observed include the following: • Improvement in the Number of Units Shipped. After reaching a high of approximately 306,000 units shipped in 1999, shipments by the U.S.trailer industry declined to approximately 140,000 units in each of 2001 and 2002. Unit shipments rebounded to approximately 174,000, 229,000 and254,000 in 2003, 2004 and 2005, respectively. ACT estimates shipments will be approximately 263,000 in both 2006 and 2007. Our view is thatshipments will be approximately 5% to 10% lower than the ACT forecast due to the impact of raw material costs on trailer prices and tractor purchasesin advance of new emission regulations. • Increasing Age of Truckload Motor Carrier Trailer Fleets. During the three-year period ending December 31, 2004, (the latest date suchinformation is available) the average age of trailer fleets increased from approximately 53 months to 57 months. We believe this increase resulted inpart from deferred purchases by many motor carriers. This trend suggests to us that there may be pent-up replacement demand for trailers. • Continuing Strong Rate of New Trailer Orders. According to ACT, quarterly industry order placement rates remain strong, achieving per monthranges of 18,500 to 26,000 in 2004, and 16,500 to 27,100 in 2005. Total trailer orders in 2005 were 262,000 units, a 2% increase from 256,000units ordered in 2004. The average order rates experienced in the first and fourth quarters of 2005 of 27,100 units and 26,900 units, respectively, werethe strongest quarterly average order rates since 1999. • Other Developments. Other developments and our view of their potential impact on the industry include: §§ New U.S. federal truck emission regulations will take effect in 2007, resulting in cleaner, yet less fuel-efficient and costlier tractor engines. As aconsequence, many trucking firms are accelerating purchases of tractors prior to the effective date of the regulation, significantly reducing thehistorical trailer-to-tractor ratio of 1.5 to 1, to closer to 1 to 1 during 2004 and 2005, according to ACT. While we foresee the trailer-to-tractor ratiocontinuing at this level19 in 2006, we believe the ratio will rebound thereafter, but is unlikely to return to prior historic norms and could result in a significant increaseddemand in trailers. §§ Technology advances in trailer tracking and route management implemented by motor carriers, which have led to increased trailer utilization andlowered trailer-to-tractor ratios and could result in reduced trailer demand. §§ New federal hours-of-service rules became effective in January 2004 and to date, the regulations regarding driver hours have had no discernibleimpact on our business. §§ Truck driver shortages experienced over the past several years have constrained freight market capacity growth in large part due to the difficulty inhiring and retaining drivers. As a result, trucking companies are under increased pressure to look for alternative ways to move freight leading tomore intermodal freight movement. We believe that railroads are at or near capacity, which will limit their ability to grow and we therefore expect thatthe majority of freight will still be moved by truck.Results of Operations The following table sets forth certain operating data as a percentage of net sales for the periods indicated: Years Ended December 31, 2005 2004 2003 (Percentage of Net Sales) Net sales 100.0% 100.0% 100.0%Cost of sales 88.9 87.9 90.9 Loss on asset impairment — — 3.2 Gross profit 11.1 12.1 5.9 General and administrative expense 3.2 4.0 4.7 Selling expense 1.3 1.5 2.2 Income (loss) from operations 6.6 6.6 (1.0)Interest expense (0.5) (1.0) (3.5)Foreign exchange gains and losses, net — 0.1 0.6 Loss on debt extinguishment — (0.1) (2.2)Other, net — 0.1 (0.3) Income (loss) before income taxes 6.1 5.7 (6.4)Income tax expense (benefit) (3.1) 0.1 — Net income (loss) 9.2% 5.6% (6.4)%20 2005 Compared to 2004Net Sales Net sales in 2005 increased $172.6 million compared to the 2004 period. By business segment, net external sales and related units sold were as follows (inmillions, except unit data): Year Ended December 31, 2005 2004 % Change Sales by Segment: Manufacturing $968.4 $806.0 20%Retail and Distribution 245.3 235.1 4%Total $1,213.7 $1,041.1 17% New trailers (units): Manufacturing 50,500 45,100 12%Retail and Distribution 5,600 6,100 (8%)Total 56,100 51,200 10% Used trailers 6,000 6,900 (13%) Manufacturing segment sales increased due to higher unit volumes and prices, which were offset, in part, by a change in product mix resulting from anincreased percentage of lower priced double, container and converter dolly units in 2005 as compared to 2004. The increase in sales prices resulted from ourability to pass through most increases in raw material costs. The volume increase was driven by increases in the overall van industry, as well as our increasedmarket share, penetration into the mid-market and ability to add customers. Sales for 2005 in the retail and distribution segment were up $10.2 million compared to the prior year. New trailer sales in this segment increased$9.9 million primarily as a result of higher selling prices, which outpaced the impact of a decline in unit volume. An increase in used trailer sales of$5.1 million was achieved despite inventory constraints through the first three quarters of 2005, as selling prices were positively impacted by marketconditions and product mix. Sales for parts and service declined $2.8 million compared to the 2004 period, due to having seven fewer full-service branchesduring part or all of 2005. Leasing revenues declined $2.0 million in 2005 from 2004, as we continue to wind-down that business.Gross Profit Gross profit in 2005 increased $8.7 million to $134.5 million compared to $125.8 million in 2004. Gross profit as a percent of sales was 11.1% comparedto 12.1% in 2004. As discussed below, both of our segments were impacted as follows (in millions): Year Ended December 31, 2005 2004 % Change Gross Profit by Segment: Manufacturing $112.9 $110.8 2%Retail and Distribution 19.8 16.8 18%Intercompany Profit Eliminations 1.8 (1.8) Total Gross Profit $134.5 $125.8 7% The manufacturing segment’s gross profit in 2005 was positively impacted by an increase in unit volume over 2004 and our ability to raise prices to offsetincreases in average per trailer raw material costs, including the effects of product mix. Gross profit as a percentage of sales was 11.7% in 2005, a2.0 percentage point decrease from 2004. The decrease in margin percentage was impacted by: - Product mix including a larger percentage of lower margin units being sold in 2005 as compared 2004; - Manufacturing inefficiencies that arose towards the end of the second quarter 2005 related to the utilization of personnel, parts shortages and anincreased focus on product quality; and21 - Start-up inefficiencies in the production of a new container product resulted in higher material, labor and overhead costs per unit.Further, gross profit in 2005 was negatively impacted by higher warranty expense of $3.1 million due in large part to additional provision for trailers producedprior to 2003. We also incurred additional trailer delivery costs of $1.5 million in 2005 compared to 2004. The 2004 period benefited from the favorableoutcome of residual contingencies of $0.8 million. The retail and distribution segment attained improved gross profit in 2005 through favorable market conditions and internal initiatives. The retail anddistribution segment’s gross profit as a percent of sales increased to 8.1% in 2005 from 7.1% in 2004. Parts and service margins as a percent of sales were upin 2005 compared to 2004 due to favorable parts pricing policy changes and service productivity gains from CI initiatives. Used trailer margins were up in2005 due to the overall strength of the used trailer market. New trailer margins declined slightly in 2005 as selling price increases were unable to fully offsetmaterial cost increases. The 2004 period includes $1.1 million of profit related to RoadRailer® bogies from our finance and leasing business and $2.0 millionof expense related to software that become fully amortized in 2004.General and Administrative Expenses General and administrative expenses decreased $2.7 million to $39.3 million in 2005 from $42.0 million in 2004 primarily due to reductions in outsideprofessional fees and compensation costs. The 2004 period included a recovery of taxes of $0.6 million.Other Income (Expense) Interest expense totaled $6.4 million in 2005, a decrease of $4.4 million from 2004 primarily due to reduced borrowings. Loss on debt extinguishment in 2004 of $0.6 million represents the write-off of deferred debt costs associated with the pay-off of our Bank Term Loanwith proceeds from the issuance of common stock. Other, net in 2005 was income of $0.3 million compared to income of $1.2 million in 2004. The income in 2004 was primarily related to gains on the saleof properties.Income Taxes In 2005, we analyzed our projected future income and determined that a portion of our previously reserved deferred tax assets were more likely than notrealizable based on criteria set forth in SFAS No. 109. As a result, we have reversed $37.3 million of valuation allowance previously recorded. In addition, weutilized $30.0 million of net operating losses (NOL) to offset current year income. We recognized income tax expense of $0.6 million in the 2004 periodprimarily related to federal and state alternative minimum tax (AMT). We also have a U.S. federal tax net operating loss carryforward of approximately$96 million, which will expire beginning in 2022, if unused, and which may be subject to other limitations under IRS rules.22 2004 Compared to 2003Net Sales Net sales in 2004 increased $153.2 million compared to the 2003 period. The 2003 year included $58.9 million of sales associated with our rental andleasing and aftermarket parts distribution businesses sold in September 2003 (Asset Sale). By business segment, net sales to external customers and relatedunits sold were as follows (in millions) : Year Ended December 31, 2004 2003 % Change Net Sales by segment: Manufacturing $806.0 $620.1 30%Retail and Distribution 235.1 267.8 (12%)Total $1,041.1 $887.9 17% New trailer units: Manufacturing 45,100 36,900 22%Retail and Distribution 6,100 4,100 49%Total 51,200 41,000 25% Used trailer units 6,900 11,700 (41%) Improved conditions in both the overall economy and the transportation industry coupled with the expansion of our customer base, drove a 22% increase inunit volume in our manufacturing segment in 2004. In response to significant increases in raw material prices, we increased our average selling pricethroughout the year. In the fourth quarter of 2004, our average selling price increased approximately 10% compared to the 2003 period with the full year increasebeing approximately 6%. The 2004 sales in our retail and distribution segment were lower than in the prior year period, which included $58.9 million of sales associated with theaforementioned Asset Sale. A $44.2 million increase in new trailer sales resulting from a 49% increase in units, which was partially offset by reductions inused trailer sales. The decrease in used trailer sales resulted from constrained used equipment availability, as transportation companies retained equipment tomeet requirements. Branch parts and service sales were up approximately 3% despite closing four full service locations in 2003 and one during 2004.Gross Profit Gross profit as a percent of sales was 12.1% in 2004 compared to 5.9% in 2003, which included a $28.5 million asset impairment charge taken on certainassets of our rental and leasing and aftermarket parts assets. As discussed below, both of our segments contributed to the increase in gross profit from 2003 to2004 as follows (in millions): Years Ended December 31, 2004 2003 $ Change Gross Profit (loss) by segment: Manufacturing $110.8 $61.3 $49.5 Retail and Distribution 16.8 (9.2) 26.0 Intercompany Profit Eliminations (1.8) 0.4 (2.2)Total Gross Profit $125.8 $52.5 $73.3 The manufacturing segment’s gross profit as a percentage of sales was 13.7% in 2004, a 3.8 percentage point increase from the prior year period. During2004, due to increases in our key raw materials – principally steel and wood, our average per trailer raw material costs, including the effects of product mixincreased 9.7% from the prior period, which exceeded increases in our average selling prices resulting in a negative impact on gross profit of23 $6.5 million. The shortfall from rising material costs was more than offset by the continued improvement in our labor and overhead utilization of$32.3 million, the impact of higher volumes of $21.3 million and a reduction in warranty expense of $1.4 million. The 2004 gross profit in our retail and distribution segment improved $26.0 million from the prior year, despite the loss of $10.3 million of gross profitattributable to the Asset Sale in 2003. The 2003 period also included a $28.5 million asset impairment charge associated with the Asset Sale. Gross profit in2004 was positively impacted by higher new trailer volumes and margins and improved used trailer margins, offset by continued constraints on used trailervolumes. The 2004 period included $1.1 million of profit related to the sale of used RoadRailer® bogies.General and Administrative Expenses General and administrative expenses for 2004 of $42.0 million were flat compared to the prior year. The 2004 period included $2.3 million in increasedtechnology costs and charges of $1.0 million related to legal settlements. The 2003 period included $2.6 million in debt refinancing costs, $2.0 million in costsfrom operations affected by the Asset Sale and $0.9 million related to branch closings.Selling Expense Selling expense decreased $4.9 million to $15.0 million in 2004, compared to $19.9 million in the prior year due to the impact of the Asset Sale and theclosing of 12 branch locations during 2003.Other Income (Expense) Interest expense totaled $10.8 million in 2004; a decrease of $20.4 million from the prior year due to lower effective interest rates resulting from our debtrefinancing completed in the third quarter of 2003 and reduced average borrowings. Foreign exchange gains were $0.5 million in 2004 and $5.3 million in 2003. The large gain in 2003 reflected the significant weakening of the US dollarrelative to the Canadian dollar. Loss on debt extinguishment was $19.8 million in 2003 and $0.6 million in 2004. The 2003 loss represents the additional costs associated with the earlyextinguishment of our senior notes and certain bank debt. The 2004 loss represents the write-off of deferred debt costs associated with the pay-off of a termloan in the fourth quarter with proceeds from a common stock issuance. Other, net was income of $1.2 million in 2004, compared to an expense of $2.2 million for 2003. The 2004 period included gains of $2.1 million on thesale of closed locations, offset by a $1.2 million write-down of branch locations to be disposed of. The 2003 period included a $3.2 million loss on the sale ofa large portion of our finance portfolio, a $1.3 million charge for the settlement of a legacy RoadRailer® transaction and a $0.8 million loss on the sale ofcertain assets, offset by $2.9 million of gains on the sale of closed branch properties.Income Taxes In 2004, we recognized income tax expense of $0.6 million primarily related to federal and state AMT. The 2004 income tax expense is significantly belowthe normal statutory tax rate primarily because of the utilization of NOL carryforwards. No income tax expense or benefit was recognized in 2003. Because ofuncertainty related to the realizability of NOLs in excess of those utilized, a full valuation allowance was recorded against deferred tax assets at December 31,2004.Liquidity and Capital ResourcesCapital Structure Today, our capital structure is comprised of a mix of equity and debt. As of December 31, 2005, our debt to equity ratio is approximately 1:2. Ourobjective is to generate operating cash flows sufficient to fund normal working capital requirements and capital expenditures and be positioned to takeadvantage of market opportunities.24 Debt Amendment On February 14, 2006, we entered into a consent and second amendment of our amended and restated loan and security agreement with our lenders. Theconsent allows the completion of an acquisition currently being considered, as long as the total consideration paid in the acquisition does not exceed$75.5 million. Additionally, the definition of earnings before interest, taxes, depreciation and amortization (EBITDA) was amended to exclude expensesrelating to stock options and restricted stock grants, which are additional add-backs to EBITDA. On September 23, 2005, we entered into an amendment of our loan and security agreement with our lenders to, among other things, allow dividendpayments up to $20 million per fiscal year and allow the repurchase of up to $50 million of common stock over the remaining term of the agreement. Underthe repurchase program, adopted by our Board of Directors on September 26, 2005, we may repurchase up to two million shares of our common stock on theopen market or in private transactions, at times and amounts deemed appropriate. We may limit or terminate the program at any time. During the fourthquarter of 2005, we repurchased 189,000 shares at a cost of $3.4 million. Also during 2005, we declared dividends of approximately $5.6 million, of which$4.2 million was paid during 2005.Cash Flow Operating activities provided $50.5 million in cash in 2005 compared to $56.9 million in 2004. Increased working capital requirements more than offsetimproved net income (adjusted for non-cash items) of $13.0 million as outlined below: - Accounts receivables increased $43.6 million during 2005 compared to an increase of $20.9 million in 2004, reflecting the higher level of fourthquarter sales in both years. Days sales outstanding (DSO), a measure of working capital efficiency that measures the amount of time a receivable isoutstanding, was approximately 35 days in 2005 compared to 28 days in 2004. The increase in DSO from 2004 was primarily due to the timing ofcollections. - Inventory increased $13.9 million during 2005 compared to an increase of $8.5 million in 2004. The 2005 increase includes higher raw material,work in process (WIP) and used trailer inventories as follows: • Raw materials inventory — higher raw material costs and inventory levels to meet year-end production; • WIP — higher number of units off-line awaiting customer inspection; and • Used trailer inventories — increased fleet trade activity during the second half of the year.The 2004 increase resulted from: • Raw materials cost increases of approximately 9.7% and early purchase of approximately $6.0 million in raw materials in advance ofannounced price increases, partially offset by; • Reductions in new and used trailer units.Inventory turns, a commonly used measure of working capital efficiency that measures how quickly inventory turns, were 11 times in 2005 and2004. Investing activities used $19.1 million in cash during 2005, an increase of $10.4 million from 2004. The increase reflects increased capital expendituresassociated with production line automation and implementation of an enterprise resource system. Financing activities used $5.8 million of cash during 2005, a decrease of $13.0 million from 2004. The cash used in 2005 primarily reflects payments ofdividends and repurchase of common stock, as revolver borrowing activity was minimal. The 2004 period includes the repayment of $99.8 million in debtfrom proceeds of a $75.7 million issuance of common stock with the remainder coming from operating cash flows.25 Capital Expenditures Capital spending amounted to approximately $30.9 million for 2005 and is anticipated to be in the range of $30-35 million for 2006. Spending in 2006 isplanned to include approximately $19 million for the second and third phases of a $40 million multi-year program to replace four trailer assembly lines andapproximately $10 million or roughly half of a two-year ERP project with the remainder targeted for normal maintenance and continuous improvementinitiatives.Outlook For Wabash and the trailer industry, 2005 was another year of growth. The industry recovery that began in 2003 continued in 2005 and is expected tocontinue into 2006 and beyond. ACT is forecasting trailer industry production of approximately 263,000 units in both 2006 and 2007. ACT has furtherreported that industry order rates continue to be healthy with cancellations remaining lower than expected. As we look ahead to 2006, we anticipate only a modest increase in van industry production. ACT is estimating that the industry will ship 187,000 units in2006 compared to 181,000 shipped in 2005. We expect to sell 60,000 vans in 2006, compared to 52,000 in 2005. This modest industry growth reflects theimpact of expected tractor purchases in advance of emission regulations that become effective in 2007. Although industry growth overall is expected to bemodest, we expect to achieve a 2% market share growth in 2006 through the continued emphasis on our DuraPlate® and refrigerated trailer products andexpanded mid-market presence. We expect to participate in the industry growth because (1) our core customers are among the dominant participants in the trucking industry, (2) ourDuraPlate® trailer continues to have increased market acceptance, (3) our focus is on developing solutions that reduce our customers trailers maintenancecosts, and (4) we expect some expansion of our presence into the middle market carriers. In 2005, we added approximately 80 new ‘mid-market’ customersand sold approximately 6,000 units to this segment of the market. Since implementing our mid-market sales strategy two years ago, we have added over 130new customers accounting for orders for over 10,000 new trailers. The 2006 year will also see us facing continued pressures from raw material and component pricing and evaluating our container business. Recently, wehave seen a return of aluminum price increases, and we regularly experienced tire surcharges in 2005. As has been our policy, we expect to attempt to passalong raw material and component price increases to our customers. On the container front, we continue to face pricing pressures from comparable containerproducts manufactured overseas, and therefore will be undertaking an evaluation of our container business to determine if it can continue to be a profitableproduct offering. Finally, in 2006 we expect to roll-out the first two (Alpha and Beta) of four automated production lines, which we anticipate will provide uscosts savings as well as continue our product standardization efforts. As of December 31, 2005, our cash on hand and available borrowing capacity amounted to approximately $184.7 million and debt and lease obligations,both on and off the balance sheet, amounted to approximately $130.6 million (including $5.1 million of off-balance sheet operating leases). We expect that in2006, Wabash will be able to generate sufficient cash flow from operations to fund working capital and capital expenditure requirements.26 Contractual Obligations and Commercial Commitments A summary of payments of our contractual obligations and commercial commitments, both on and off balance sheet, as of December 31, 2005 are asfollows: $ Millions 2006 2007 2008 2009 2010 Thereafter Total DEBT (excluding interest): Senior Convertible Notes $— $— $125.0 $— $— $— $125.0 Bank Revolver — — — — — — — Other Notes Payable 0.5 — — — — — 0.5 TOTAL DEBT $0.5 $— $125.0 $— $— $— $125.5 OTHER: Currency Forward Contracts $1.7 $— $— $— $— $— $1.7 Operating Leases 2.6 1.2 0.7 0.2 0.1 0.3 5.1 TOTAL OTHER $4.3 $1.2 $0.7 $0.2 $0.1 $0.3 $6.8 OTHER COMMERCIALCOMMITMENTS: Letters of Credit $7.7 $— $— $— $— $— $7.7 Purchase Commitments 9.2 — — — — — 9.2 Residual Guarantees 8.4 1.8 0.2 — — — 10.4 $25.3 $1.8 $0.2 $— $— $— $27.3 TOTAL OBLIGATIONS $30.1 $3.0 $125.9 $0.2 $0.1 $0.3 $159.6 Residual Guarantees represent purchase commitments related to certain new and used trailer transactions as well as certain equipment. We also havepurchase options of $29.8 million on the aforementioned trailers and equipment. To the extent that the value of the underlying property is less than the residualguarantee and the value is not expected to be recovered, we have recorded a loss contingency. Purchase Commitments are minimum purchase commitments under a parts purchase agreement we entered into in connection with the sale of certain assetsof our aftermarket parts distribution business. We do not believe the purchase commitments will exceed business requirements. Operating leases represent the total future minimum lease payments.Off-Balance Sheet Transactions During the second quarter of 2005, we entered into a $2.2 million three-year lease of computer equipment with future minimum lease payments of$0.8 million per year. As of December 31, 2005, we have operating leases with future minimum lease payments of $5.1 million, as disclosed in the precedingtable.Significant Accounting Policies and Critical Accounting Estimates Our significant accounting policies are more fully described in Footnote 2 to our consolidated financial statements. Certain of our accounting policiesrequire the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature,these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, ourevaluation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. We consider an accounting estimate to be critical if: • it requires us to make assumptions about matters that were uncertain at the time we were making the estimate; and • changes in the estimate or different estimates that we could have selected would have had a material impact on our financial or results of operations.27 The table below presents information about the nature and rationale for Wabash’s critical accounting estimates: Critical Estimate Nature of Estimates Assumptions/ Balance Sheet Caption Item Required Approaches Used Key FactorsAccrued liabilities andother long-term liabilities Warranty Estimating warranty requires usto forecast the resolution ofexisting claims and expectedfuture claims on products sold. We base our estimate on historicaltrends of units sold and paymentamounts, combined with ourcurrent understanding of thestatus of existing claims, recallcampaigns and discussions withour customers. Failure rates and estimatedrepair costs Accounts Receivable -allowance for doubtfulaccounts Allowance fordoubtful accounts Estimating the allowance fordoubtful accounts requires us toestimate the financial capabilityof customers to pay forproducts. We base our estimates onhistorical experience, the time anaccount is outstanding,customer’s financial condition andinformation from credit ratingservices. Customer financialcondition Inventory Lower of cost or market write-downs We evaluate future demand forproducts, market conditions andincentive programs. Estimates are based on recent salesdata, historical experience, externalmarket analysis and third partyappraisal services. Market conditionsProduct type Property, plant andequipment, goodwill andother long-term assets Valuation of long-lived assetsand investments We are required from time-to-timeto review the recoverability ofcertain of our assets based onprojections of anticipated futurecash flows, including futureprofitability assessments ofvarious product lines. We estimate cash flows usinginternal budgets based on recentsales data, and independent trailerproduction volume estimates. Future productionestimatesDiscount rate Deferred income taxes Recoverability of deferred taxassets - in particular, netoperating loss carry-forwards We are required to estimatewhether recoverability of ourdeferred tax assets is more likelythan not based on forecasts oftaxable earnings. We use projected future operatingresults, based upon our businessplans, including a review of theeligible carry-forward period, taxplanning opportunities and otherrelevant considerations. Variances in futureprojectedprofitability,including by taxingentityTax law changes In addition, there are other items within our financial statements that require estimation, but are not as critical as those discussed above. Changes inestimates used in these and other items could have a significant effect on our consolidated financial statements. The determination of the fair market value ofnew and used trailers is subject to variation particularly in times of rapidly changing market conditions. A 5% change in the valuation of our inventorieswould be approximately $5 million.Other Inflation We have historically been able to offset the impact of rising costs through productivity improvements as well as selective price increases. As a result,inflation has not had, and is not expected to have a significant impact on our business. Customer Credit Risk We sublease certain highly specialized RoadRailer equipment to Grupo Transportation Marititma Mexicana SA (TMM), who is experiencing financialdifficulties. In August 2004, TMM completed the restructuring28 of its debt agreements and subsequently sold certain assets. Customer payments are current as of December 31, 2005. The customer owes us $5.8 millionsecured by highly specialized RoadRailer® equipment, which due to the nature of the equipment, has a minimal recovery value. New Accounting Pronouncements Inventory Costs In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting (SFAS) No. 151, Inventory Costs — anamendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4. The Statement clarifies that abnormal amounts of idle facility expense, freight,handling costs and wasted materials should be recognized as current-period expenses regardless of how abnormal the circumstances. In addition, thisStatement requires that the allocation of fixed overheads to the costs of conversion be based upon normal production capacity levels. The Statement is effectivefor inventory costs incurred during fiscal years beginning after June 15, 2005. We do not anticipate that this Statement will have a material effect on ourfinancial position, results of operations and cash flows. Share-Based Payments In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123(R), which is a revision of SFAS No. 123,Accounting for Stock-Based Compensation, superseded APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95,Statements of Cash Flows. Statement No. 123 (R) requires that all share-based payments to employees, including grants of employee stock options, to berecognized in the financial statements based upon their fair value. The current pro forma disclosure of the impact on earnings is no longer allowed. TheStatement will be effective for us beginning in the first quarter of 2006. Based upon outstanding options as of December 31, 2005, the after-tax expense, ascalculated using the Black-Scholes model, would be approximately $1.0 million in 2006. Potential Acquisition On February 8, 2006, we announced that we are in discussions to acquire Transcraft Corporation, a portfolio company of Lincolnshire Management Inc.,a leading middle-market private equity investment firm. Transcraft, with annual sales of approximately $120 million, is one of the nation’s largest designersand manufacturers of flatbed and drop deck trailers. Subject to completion of contract negotiations and bank and Board approvals, the parties believe that thepossible transaction could be completed during the first quarter of 2006. However, there is no assurance that it will occur.ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In addition to the risks inherent in our operations, we have exposure to financial and market risk resulting from volatility in commodity prices, interestrates and foreign exchange rates. The following discussion provides additional detail regarding our exposure to these risks. a. Commodity Price Risks We are exposed to fluctuation in commodity prices through the purchase of raw materials that are processed from commodities such as aluminum, steel,wood and polyethylene. Given the historical volatility of certain commodity prices, this exposure can significantly impact product costs. Historically, we havemanaged price changes by entering into fixed price contracts with our suppliers. As of December 31, 2005, we had no outstanding raw material purchasecommitments. If prices rise in the future, we will resume entering into fixed price contracts to limit our exposure. Because we typically do not set prices for ourproducts more than 45-90 days in advance of our commodity purchases, we can take into account the cost of the commodity in setting our prices for eachorder. To the extent that we are unable to offset the increased commodity costs in our product prices, our results would be materially and adversely affected.29 b. Interest Rates As of December 31, 2005, we had no floating rate debt outstanding. c. Foreign Exchange Rates We are subject to fluctuations in the Canadian dollar exchange rate that impact intercompany transactions with our Canadian subsidiary, as well as U.S.denominated transactions between the Canadian subsidiaries and unrelated parties. A five cent change in the Canadian exchange rate would result in anapproximately $0.5 million impact on results of operations. We have purchased Canadian dollar foreign currency forward contracts in an effort to mitigatepotential Canadian currency fluctuation impact on working capital requirements. As of December 31, 2005, we had outstanding $1.7 million in forwardcontracts to be settled in various increments over the next two months. The contracts are marked-to-market and not subject to hedge accounting. We do not holdor issue derivative financial instruments for speculative purposes.30 ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PagesReport of Independent Registered Public Accounting Firm 32 Consolidated Balance Sheets as of December 31, 2005 and 2004 33 Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003 34 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004 and 2003 35 Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 36 Notes on Consolidated Financial Statements 37 31 Report of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Wabash National CorporationWe have audited the accompanying consolidated balance sheets of Wabash National Corporation as of December 31, 2005 and 2004, and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wabash NationalCorporation at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2005, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of WabashNational Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2006 expressed anunqualified opinion thereon. ERNST & YOUNG LLPIndianapolis, IndianaFebruary 21, 200632 WABASH NATIONAL CORPORATIONCONSOLIDATED BALANCE SHEETS(Dollars in thousands) December 31, 2005 2004 ASSETSCURRENT ASSETS: Cash and cash equivalents $67,437 $41,928 Accounts receivable, net 131,241 87,512 Current portion of finance contracts 1,472 2,185 Inventories 108,044 94,600 Deferred income taxes 40,550 — Prepaid expenses and other 7,855 14,425 Total current assets 356,599 240,650 PROPERTY, PLANT AND EQUIPMENT, net 131,561 124,701 EQUIPMENT LEASED TO OTHERS, net 7,646 14,030 FINANCE CONTRACTS, net of current portion 32 3,319 GOODWILL 33,018 34,511 DEFERRED INCOME TAXES 3,050 — OTHER ASSETS 16,747 14,835 $548,653 $432,046 LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIES: Accounts payable $84,147 $78,107 Current maturities of long-term debt 500 2,000 Other accrued liabilities 58,751 52,442 Total current liabilities 143,398 132,549 LONG-TERM DEBT, net of current maturities 125,000 125,500 OTHER NONCURRENT LIABILITIES AND CONTINGENCIES 1,553 9,423 STOCKHOLDERS’ EQUITY: Preferred stock, 25,000,000 shares authorized, no shares issued or outstanding — — Common stock 75,000,000 shares authorized, $0.01 par value, 31,079,958 and 30,807,370 shares issued andoutstanding, respectively 315 309 Additional paid-in capital 337,327 325,512 Retained deficit (56,653) (162,097)Accumulated other comprehensive income 2,358 2,129 Treasury stock at cost, 248,600 and 59,600 common shares, respectively (4,645) (1,279)Total stockholders’ equity 278,702 164,574 $548,653 $432,046 The accompanying notes are an integral part of these Consolidated Statements.33 WABASH NATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts) Years Ended December 31, 2005 2004 2003 NET SALES $1,213,711 $1,041,096 $887,940 COST OF SALES 1,079,196 915,310 806,963 LOSS ON ASSET IMPAIRMENT — — 28,500 Gross profit 134,515 125,786 52,477 GENERAL AND ADMINISTRATIVE EXPENSES 39,301 42,026 41,860 SELLING EXPENSES 15,220 14,977 19,864 Income (loss) from operations 79,994 68,783 (9,247) OTHER INCOME (EXPENSE): Interest expense (6,431) (10,809) (31,184)Foreign exchange gains, net 231 463 5,291 Loss on debt extinguishment — (607) (19,840)Other, net 262 1,175 (2,247) Income (loss) before income taxes 74,056 59,005 (57,227) INCOME TAX (BENEFIT) EXPENSE (37,031) 600 — Net income (loss) 111,087 58,405 (57,227) PREFERRED STOCK DIVIDENDS — — 1,053 NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $111,087 $58,405 $(58,280) COMMON STOCK DIVIDENDS DECLARED $0.18 $— $— BASIC NET INCOME (LOSS) PER SHARE $3.57 $2.10 $(2.26) DILUTED NET INCOME (LOSS) PER SHARE $3.06 $1.80 $(2.26) COMPREHENSIVE INCOME (LOSS) Net income (loss) $111,087 $58,405 $(57,227)Foreign currency translation adjustment 649 1,137 1,256 NET COMPREHENSIVE INCOME (LOSS) $111,736 $59,542 $(55,971)The accompanying notes are an integral part of these Consolidated Statements.34 WABASH NATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(Dollars in thousands) Additional Retained Other Preferred Stock Common Stock Paid-In Earnings Comprehensive Treasury Shares Amount Shares Amount Capital (Deficit) Income (Loss) Stock TotalBALANCES,December 31, 2002 352,000 $3 25,647,060 $257 $237,489 $(162,222) $(264) $(1,279) $73,984 Net loss for the year — — — — — (57,227) — — (57,227)Foreign currencytranslation — — — — — — 1,256 — 1,256 Preferred stockdividends — — — — — (1,053) — — (1,053)Preferred stockconversion (352,000) (3) 823,256 8 (7) — — — (2)Restricted stockamortization — — — — 225 — — — 225 Common stock issuedunder: Employee stockbonus plan — — 6,370 — 74 — — — 74 Stock option plan — — 360,114 4 4,800 — — — 4,804 Outside directors’plan — — 12,457 — 101 — — — 101 BALANCES,December 31, 2003 — $— 26,849,257 $269 $242,682 $(220,502) $992 $(1,279) $22,162 Net income for the year — — — — — 58,405 — — 58,405 Foreign currencytranslation — — — — — — 1,137 — 1,137 Restricted stockamortization — — 20,242 — 425 — — — 425 Common stock issuedunder: Equity offering — — 3,450,000 35 75,667 — — — 75,702 Employee stockbonus plan — — 7,720 — 224 — — — 224 Stock option plan — — 476,498 4 6,407 — — — 6,411 Outside directors’plan — — 3,653 1 107 — — — 108 BALANCES,December 31, 2004 — $— 30,807,370 $309 $325,512 $(162,097) $2,129 $(1,279) $164,574 Net income for the year 111,087 111,087 Foreign currencytranslation 649 649 Foreign currencytranslation realized onasset disposal (420) (420)Restricted stockamortization 58,867 2 1,545 1,547 Stock repurchase (189,000) (3,366) (3,366)Common stockdividends (5,643) (5,643)Tax benefit from theexercise of stockoptions 6,253 6,253 Common stock issuedunder: Employee stockbonus plan 5,220 116 116 Stock option plan 391,281 4 3,751 3,755 Outside directors’plan 6,220 150 150 BALANCES,December 31, 2005 — $— 31,079,958 $315 $337,327 $(56,653) $2,358 $(4,645) $278,702 The accompanying notes are an integral part of these Consolidated Statements.35 WABASH NATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands) Years Ended December 31, 2005 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $111,087 $58,405 $(57,227)Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 15,547 19,441 23,788 Net (gain) loss on the sale of assets 344 (2,089) 723 Deferred income taxes (37,347) — — Cash used for restructuring activities — (3,007) (3,372)Trailer valuation charges 195 448 2,562 Loss on debt extinguishments — 607 19,840 Loss on asset impairment — — 28,500 Changes in operating assets and liabilities: Accounts receivable (43,565) (20,871) (40,275)Finance contracts 3,623 5,070 16,469 Inventories (13,899) (8,485) 51,416 Prepaid expenses and other (141) (716) 5,833 Accounts payable and accrued liabilities 12,395 5,081 11,286 Other, net 2,261 3,040 (1,280)Net cash provided by operating activities 50,500 56,924 58,263 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (30,880) (15,495) (6,518)Proceeds from Asset Sale — — 53,479 Proceeds from sale of leased equipment — — 6,498 Proceeds from the sale of property, plant and equipment 11,736 6,800 6,861 Net cash (used in) provided by investing activities (19,144) (8,695) 60,320 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of bank term loans and revolving credit facility — — 135,309 Proceeds from issuance of convertible senior notes — — 125,000 Proceeds from exercise of stock options 3,755 5,261 4,804 Proceeds from issuance of common stock — 75,702 — Borrowings under trade receivables and revolving credit facilities 15,414 667,522 197,650 Payments under trade receivables and revolving credit facilities (15,414) (727,879) (225,501)Payments under long-term debt and capital lease obligations (2,000) (39,459) (367,089)Repurchase of common stock (3,366) — — Common stock dividends paid (4,236) — — Preferred stock dividends paid — — (1,584)Debt issuance costs paid — — (10,279)Net cash used in financing activities (5,847) (18,853) (141,690) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,509 29,376 (23,107)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 41,928 12,552 35,659 CASH AND CASH EQUIVALENTS AT END OF PERIOD $67,437 $41,928 $12,552 Supplemental disclosures of cash flow information: Cash paid (refunded) during the period for: Interest $4,814 $9,021 $21,774 Income taxes paid (refunded), net $739 $1,137 $(832)The accompanying notes are an integral part of these Consolidated Statements.36 WABASH NATIONAL CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. DESCRIPTION OF THE BUSINESS Wabash National Corporation (the Company) designs, manufactures and markets standard and customized truck trailers and intermodal equipment underthe Wabash, FreightPro, Articlite® and RoadRailer trademarks. The Company’s wholly-owned subsidiary, Wabash National Trailer Centers, Inc.(WNTC), sells new and used trailers through its retail network and provides aftermarket parts and service for the Company’s and competitors’ trailers andrelated equipment.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Consolidation The consolidated financial statements reflect the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significantintercompany profits, transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods to conform tothe current year presentation. These reclassifications had no effect on net income or losses for the periods previously reported. b. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to makeestimates and assumptions that directly affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results coulddiffer from these estimates. c. Foreign Currency Accounting The financial statements of the Company’s Canadian subsidiary have been translated into U.S. dollars in accordance with Financial AccountingStandards Board (FASB) Statement No. 52, Foreign Currency Translation. Assets and liabilities have been translated using the exchange rate in effect at thebalance sheet date. Revenues and expenses have been translated using a weighted-average exchange rate for the period. The resulting translation adjustments arerecorded as Accumulated Other Comprehensive Income (Loss) in Stockholders’ Equity. Gains or losses resulting from foreign currency transactions areincluded in Foreign Exchange Gains and Losses, net on the Company’s Consolidated Statements of Operations. As a result of a reevaluation of the retail and distribution business in 2003, the Company concluded to close 12 locations, including two in Canada. Inaddition, the review resulted in management designating $30 million CDN of intercompany loans to its Canadian subsidiary as a permanent investment.Accordingly, beginning July 1, 2003, gains and losses associated with the permanent investment were charged to Accumulated Other ComprehensiveIncome (Loss) on the Consolidated Balance Sheets. As of December 31, 2005, 2004 and 2003, accumulated gains of $3.5 million, $2.6 million and$0.9 million, respectively, have been recorded related to this permanent investment. d. Revenue Recognition The Company recognizes revenue from the sale of trailers and aftermarket parts when the customer has made a fixed commitment to purchase the trailersfor a fixed or determinable price, collection is reasonably assured under the Company’s billing and credit terms and ownership and all risk of loss has beentransferred to the buyer, which is normally upon shipment or pick up by the customer. The Company recognizes revenue from direct finance leases based upon a constant rate of return while revenue from operating leases is recognized on astraight-line basis in an amount equal to the invoiced rentals.37 e. Used Trailer Trade Commitments The Company has commitments with certain customers to accept used trailers on trade for new trailer purchases. These commitments arise in the normalcourse of business related to future new trailer orders. The Company has accepted trade-ins from customers of approximately $55.3 million, $37.9 millionand $32.8 million in 2005, 2004 and 2003, respectively. As of December 31, 2005 and 2004, the Company had approximately $10.9 million and$4.4 million, respectively, of outstanding trade commitments. The net realizable value of these commitments was approximately $9.8 million and $4.3 millionas of December 31, 2005 and 2004, respectively. The Company’s policy is to recognize losses related to these commitments, if any, at the time the new trailerrevenue is recognized. f. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have maturities of three months or less. g. Accounts Receivable and Finance Contracts Accounts receivable and finance contracts are shown net of allowance for doubtful accounts. Accounts receivable primarily includes trade receivables. TheCompany records and maintains a provision for doubtful accounts for customers based upon a variety of factors including the Company’s historicalexperience, the length of time the account has been outstanding and the financial condition of the customer. If the circumstances related to specific customerswere to change, the Company’s estimates with respect to the collectibility of the related accounts could be further adjusted. Provisions to the allowance fordoubtful accounts are charged to General and Administrative Expenses on the Consolidated Statements of Operations. The activity in the allowance fordoubtful accounts was as follows (in thousands): Years Ended December 31, 2005 2004 2003 Balance at beginning of year $2,985 $4,160 $16,217 Expense (income) (98) (231) 474 Write-offs, net (1,080) (944) (12,531)Balance at end of year $1,807 $2,985 $4,160 h. Inventories Inventories are primarily stated at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. The cost of manufactured inventoryincludes raw material, labor and overhead. Inventories consist of the following (in thousands): December 31, 2005 2004 Raw materials and components $42,886 $35,941 Work in progress 10,537 4,653 Finished goods 27,392 35,222 Aftermarket parts 4,975 6,115 Used trailers 22,254 12,669 $108,044 $94,600 The Company continually reviews the valuation of the used trailer inventory and writes down the value of individual units when the carrying value exceedsthe estimated market value. Write-downs amounted to $0.2 million, $0.4 million and $2.6 million and were charged to Cost of Sales on the ConsolidatedStatement of Operations for 2005, 2004 and 2003, respectively. i. Prepaid Expenses and Other Prepaid expenses and other at December 31, 2005 and 2004 were $7.9 million and $14.4 million, respectively. Prepaid expenses and other primarilyincluded prepaid expenses, such as insurance premiums and38 computer software maintenance, and assets held for sale. Assets held for sale, which included closed manufacturing facilities and branch locations, were$1.8 million and $10.4 million at December 31, 2005 and 2004, respectively. In accordance with Statement of Financial Accounting Standard(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company continues to review the assets for potential impairmentand appropriate classification as an asset held for sale. During the fourth quarter of 2004, the Company committed to a plan to dispose of certain branch locations. In accordance with SFAS No. 144,$7.3 million of property, plant and equipment and, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, $2.4 million of goodwillallocated from the retail and distribution segment were reclassified to assets held for sale (see Footnote 2(l) for further discussion). Additionally, the carryingvalue of those assets was reviewed for recoverability resulting in a write-down of $1.2 million charged to Other, net in the Consolidated Statement ofOperations. j. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred, while expenditures that extend the usefullife of an asset are capitalized. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. The estimateduseful lives are 33 years for buildings and building improvements and a range of three to 10 years for machinery and equipment. Depreciation expense onproperty, plant and equipment was $12.3 million, $13.0 million and $13.4 million for 2005, 2004 and 2003, respectively. Property, plant and equipment consist of the following (in thousands): December 31, 2005 2004 Land $20,820 $20,183 Buildings and building improvements 85,301 84,355 Machinery and equipment 129,780 124,364 Construction in progress 12,398 2,433 248,299 231,335 Less—accumulated depreciation (116,738) (106,634) $131,561 $124,701 In the second quarter of 2003, as part of an evaluation of certain assets of its aftermarket parts business, the Company recorded a loss on assetimpairment, which included $5.1 million for property, plant and equipment. See Footnote 5 for further discussion of this impairment. In the fourth quarter of 2004, $7.3 million of property, plant and equipment was reclassified to Prepaid Expenses and Other as assets held for sale. SeeFootnote 2(i) for further discussion. k. Equipment Leased to Others Equipment leased to others at December 31, 2005 and 2004 was $7.6 million and $14.0 million, net of accumulated depreciation of $5.3 million and$9.3 million, respectively. Equipment leased to others is depreciated over the estimated life of the equipment or the term of the underlying lease arrangement,not to exceed 15 years, with a 20% residual value or a residual value equal to the estimated market value of the equipment at lease termination. Depreciationexpense on equipment leased to others, including capital lease assets, was $2.2 million, $3.1 million and $6.4 million for 2005, 2004 and 2003, respectively.The future minimum lease payments to be received under the lease arrangements are $1.1 million per year for 2006-2009, $0.4 million for 2010 and$1.1 million thereafter. During the second quarter of 2003, the Company recorded an asset impairment charge of approximately $22 million on certain assets of its trailer leasingand rental business and later on September 19, 2003, completed the sale of these assets, which were included in Equipment Leased to Others on theConsolidated Balance Sheets. See Footnote 5 for further discussion of this transaction.39 l. Goodwill The changes in the carrying amount of goodwill, net of accumulated amortization of $1.7 million for the years ended December 31, 2005 and 2004 byreportable segment are as follows (in thousands): Retail and Manufacturing Distribution Total Balance as of January 1, 2004 $18,357 $17,688 $36,045 Effects of foreign currency — 862 862 Allocated to disposals — (2,396) (2,396)Balance as of December 31, 2004 18,357 16,154 34,511 Effects of foreign currency — 534 534 Allocated to disposals — (2,027) (2,027)Balance as of December 31, 2005 $18,357 $14,661 $33,018 In accordance with SFAS No. 142, the Company tests goodwill for impairment on an annual basis or more frequently if an event occurs or circumstanceschange that could more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company estimates fair value based upon thepresent value of future cash flows. In estimating the future cash flows, the Company takes into consideration the overall and industry economic conditionsand trends, market risk of the Company and historical information. The Company has conducted its annual impairment test as of October 1, 2005 anddetermined that no impairment of goodwill existed. In 2003, as part of an evaluation of certain assets of its aftermarket parts business, the Company recorded a loss on asset impairment, which included$1.4 million of goodwill related to its aftermarket parts business. See Footnote 5 for further discussion of this impairment. During the fourth quarter of 2004, as part of a plan to dispose of certain branch locations, $2.4 million of goodwill in retail and distribution was allocatedto the disposed locations and reclassified to Prepaid Expenses and Other as assets held for sale. The allocation was based on the relative fair values of theretained and to be disposed of businesses. During December 2005, the Company sold three of its Canadian branch locations. As part of the transaction, $2.0 million of goodwill was allocated to thedisposal. A net loss of $0.9 million was recorded on the sale in Other, net in the Consolidated Statements of Operations. The allocation was based on therelative fair values of the retained and to be disposed of businesses. m. Other Assets The Company has other intangible assets including patents and licenses, non-compete agreements and technology costs which are being amortized on astraight-line basis over periods ranging from two to 12 years. As of December 31, 2005 and 2004, the Company had gross intangible assets of $15.5 million($2.1 million net of amortization) and $15.5 million ($3.0 million net of amortization), respectively. Amortization expense for 2005, 2004 and 2003 was$0.9 million, $1.3 million and $1.8 million, respectively, and is estimated to be $0.7 million, $0.5 million, $0.4 million, $0.2 million and $0.1 million for2006, 2007, 2008, 2009 and 2010, respectively. The Company capitalizes the cost of computer software developed or obtained for internal use in accordance with Statement of Position No. 98-1,Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Capitalized software is amortized using the straight-line methodover three to seven years. In 2005, the Company began a $20 million project to implement a new enterprise resource planning system, which is scheduled to becompleted during 2006. As of December 31, 2005, $9.9 million of costs has been capitalized related to the project. As of December 31, 2005 and 2004, theCompany had software costs, net of amortization of $10.1 million and $0.2 million, respectively. Amortization expense for 2005, 2004 and 2003 was$0.1 million, $2.0 million and $2.1 million, respectively.40 n. Long-Lived Assets Long-lived assets are reviewed for impairment in accordance with SFAS No. 144, whenever facts and circumstances indicate that the carrying amount maynot be recoverable. Specifically, this process involves comparing an asset’s carrying value to the estimated undiscounted future cash flows the asset is expectedto generate over its remaining life. If this process were to result in the conclusion that the carrying value of a long-lived asset would not be recoverable, a write-down of the asset to fair value would be recorded through a charge to operations. Fair value is determined based upon discounted cash flows or appraisals asappropriate. o. Other Accrued Liabilities The following table presents the major components of Other Accrued Liabilities (in thousands): Years Ended December 31, 2005 2004 Customer deposits $11,067 $6,043 Warranty 10,217 8,399 Payroll and related taxes 9,832 12,716 Accrued taxes 7,851 4,525 Self-insurance 7,733 8,159 All other 12,051 12,600 $58,751 $52,442 The following table presents the changes in certain significant accruals included in Other Accrued Liabilities as follows (in thousands): Warranty Accrual Self-Insurance Accrual Balance as of January 1, 2004 $10,614 $7,446 Expense 5,148 23,413 Payments (7,363) (22,700)Balance as of December 31, 2004 $8,399 $8,159 Expense 8,272 24,442 Payments (6,454) (24,868)Balance as of December 31, 2005 $10,217 $7,733 The Company’s warranty policy generally provides coverage for components of the trailer the Company produces or assembles. Typically, the coverageperiod is five years for trailers sold prior to 2005. Beginning in 2005, the coverage period for DuraPlate® trailer panels was extended to 10 years, with all othercomponents remaining at five years. The Company’s policy is to accrue the estimated cost of warranty coverage at the time of the sale. 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 but not reported, as well as catastrophic claims as appropriate. The Company recognizes a loss contingency for used trailer residual commitments for the difference between the equipment’s purchase price and its fairmarket value when it becomes probable that the purchase price at the guarantee date will exceed the equipment’s fair market value at that date. p. Income Taxes The Company determines its provision or benefit for income taxes under the asset and liability method. The asset and liability method measures theexpected tax impact at current enacted rates of future taxable income or deductions resulting from differences in the tax and financial reporting basis of assetsand liabilities reflected in the Consolidated Balance Sheets. Future tax benefits of tax losses and credit carryforwards are recognized as deferred tax assets.Deferred tax assets are reduced by a valuation allowance to the extent the Company concludes there is uncertainty as to their realization.41 q. Stock-Based Compensation The Company follows APB No. 25, Accounting for Stock Issued to Employees, in accounting for its stock options and, accordingly, no compensationcost has been recognized for stock options in the consolidated financial statements. However, SFAS No. 123, Accounting for Stock-Based Compensation, asamended requires pro forma presentation as if compensation costs had been expensed under the fair value method. For purposes of pro forma disclosure, theestimated fair value of the options at the date of grant is amortized to expense over the vesting period. Additional information regarding stock-basedcompensation is included in Footnote 11. The following table illustrates the effect on net income (loss) and net income (loss) per share as if compensationexpense had been recognized (in thousands, except for loss-per-share amounts): Years Ended December 31, 2005 2004 2003 Reported net (income) loss $111,087 $58,405 $(57,227)Pro forma stock-based compensation expense (net of tax) (4,027) (2,613) (2,670)Stock-based employee compensation expense recorded (net of tax) 1,547 417 225 Pro forma net income (loss) $108,607 $56,209 $(59,672) Basic net income (loss) per share: Reported net income (loss) per share $3.57 $2.10 $(2.26)Pro forma net income (loss) per share $3.49 $2.02 $(2.36) Diluted net income (loss) per share: Reported net income (loss) per share $3.06 $1.80 $(2.26)Pro forma net income (loss) per share $2.99 $1.74 $(2.36) r. New Accounting Pronouncements Inventory Costs. In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting (SFAS) No. 151,Inventory Costs – an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4. The Statement clarifies that abnormal amounts of idle facilityexpense, freight, handling costs and wasted materials should be recognized as current-period expenses regardless of how abnormal the circumstances. Inaddition, this Statement requires that the allocation of fixed overheads to the costs of conversion be based upon normal production capacity levels. TheStatement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not anticipate that this Statement will have amaterial effect on our financial position, results of operations and cash flows. Share-Based Payments. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123R, which is a revisionof SFAS No. 123, Accounting for Stock-Based Compensation, superseded APB Opinion No. 25, Accounting for Stock Issued to Employees, and amendsSFAS No. 95, Statements of Cash Flows. Statement No. 123R requires that all share-based payments to employees, including grants of employee stockoptions, to be recognized in the financial statements based upon their fair value. The current pro forma disclosure of the impact on earnings is no longerallowed. The Statement will be effective for the Company beginning in the first quarter of 2006. Based upon currently outstanding options, after-tax expense,as calculated using the Black-Scholes model would be approximately $1.0 million in 2006.3. 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, 2005, and 2004 were immaterial, with the exception of the Senior Convertible Notes. Cash and Cash Equivalents, Accounts Receivable and Accounts Payable. The carrying amounts reported in the Consolidated Balance Sheetsapproximate fair value.42 Long-Term Debt. The fair value of long-term debt, including the current portion, is estimated based on current quoted market prices for similar issues ordebt with the same maturities. The interest rates on the Company’s bank borrowings under its Bank Facility are adjusted regularly to reflect current marketrates. The estimated fair value of the Company’s Senior Convertible Notes, based on market quotes, is approximately $141 million and $187 million,compared to a carrying value of $125 million, as of December 31, 2005 and 2004, respectively. The carrying values of the remainder of the Company’s long-term borrowings approximate fair value. Foreign Currency Forward Contracts. As of December 31, 2005 and 2004, the Company had $1.7 million and $0.8 million, respectively, inoutstanding foreign currency forward contracts that are not in a material gain or loss position. The contracts are held to mitigate the impact of Canadiancurrency fluctuations.4. RESTRUCTURING AND OTHER RELATED CHARGES The Company provided a total of $48.2 million in connection with a restructuring in 2000, primarily related to the Company’s exit from manufacturingproducts for export to markets outside of North America, international leasing and financing activities and the consolidation of certain domestic operations. During 2005, the Company completed the sale of a facility, which had been closed as part of its 2000 restructuring. The Company paid $2.6 million and $3.1 million to settle financial and equipment guarantees during 2004 and 2003, respectively, related to the exit of itsinternational leasing and financing activities.5. DIVESTITURES a. Asset Sale In 2003, the Company completed the sale of a portion of its trailer leasing and finance operations and a portion of its aftermarket parts distributionoperations for approximately $53.5 million in cash. The principal assets sold consisted of tangible assets (i.e., accounts receivable, inventory and equipmentheld for lease), relationships with a specific subset of the Company’s customers and a portion of the Company’s Retail and Distribution business. Inaccordance with SFAS No. 144, the Company has not reflected these sales as discontinued operations as only a portion of a component was sold, theCompany will continue to generate cash flows from these components and the Company will continue to be involved in the operations of the disposed assetsthrough, among other things, purchase and supply agreements. Net proceeds from the sale were used to repay a portion of the Company’s outstandingindebtedness. Loss on the disposition amounted to $29.3 million, including a $28.5 million asset impairment charge recorded in the second quarter of 2003 torecognize that estimated cash flows were insufficient to support the carrying value. b. Finance Portfolio Sale In 2003, the Company completed the sale of certain contracts in its finance portfolio. Proceeds were $12.2 million and resulted in a loss of $4.1 million,including $0.9 million for debt extinguishment charges.6. PER SHARE OF COMMON STOCK Per share results have been computed based on the average number of common shares outstanding. The computation of basic and diluted net income(loss) per share is determined using net income (loss) applicable to common stockholders as the numerator and the number of shares included in thedenominator as follows (in thousands):43 Years Ended December 31, 2005 2004 2003 Basic net income (loss) per share: Net income (loss) applicable to common stockholders $111,087 $58,405 $(58,280)Weighted average common shares outstanding 31,139 27,748 25,778 Basic net income (loss) per share $3.57 $2.10 $(2.26) Diluted net income (loss) per share: Net income (loss) applicable to common stockholders $111,087 $58,405 $(58,280)After-tax equivalent of interest on convertible notes 4,914 4,828 — Diluted net income (loss) applicable to common stockholders $116,001 $63,233 $(58,280) Weighted average common shares outstanding 31,139 27,748 25,778 Dilutive stock options/shares 276 832 — Convertible notes equivalent shares 6,542 6,510 — Diluted weighted average common shares outstanding 37,957 35,090 25,778 Diluted net income (loss) per share $3.06 $1.80 $(2.26) Average diluted shares outstanding in 2003 exclude the antidilutive effects of convertible preferred stock and redeemable stock options totalingapproximately 1.1 million shares.7. OTHER LEASE ARRANGEMENTS a. Equipment Financing The Company has entered into agreements for the sale and leaseback of certain production equipment at its manufacturing locations. During 2004, theCompany purchased equipment under two of the agreements for $7.1 million. As of December 31, 2005, the unamortized lease values related to the remainingagreements are approximately $1.0 million. Future minimum lease payments related to these arrangements are $0.8 million for 2006. The end of term residualguarantees and purchase options are $0.1 million and $0.3 million, respectively. These agreements contain no financial covenants; however, they do containnon-financial covenants including cross default provisions that could be triggered if the Company is not in compliance with covenants in other debt or leasingarrangements. At December 31, 2005, the Company is not in default. Total rent expense for these leases was $1.0 million, $3.9 million and $4.2 million in 2005, 2004 and 2003, respectively. b. Other Lease Commitments The Company leases office space, manufacturing, warehouse and service facilities and equipment under operating leases, the majority of which expirethrough 2009. During the second quarter of 2005, the Company entered into a $2.2 million three-year lease of computer equipment. Future minimum leasepayments required under these other lease commitments as of December 31, 2005 are as follows (in thousands): Payments 2006 $1,807 2007 1,178 2008 654 2009 200 2010 124 Thereafter 317 $4,280 Total rental expense under operating leases was $2.2 million, $2.3 million and $4.0 million for 2005, 2004 and 2003, respectively.44 8. FINANCE CONTRACTS The Company previously provided financing in the form of finance leases for the sale of new and used trailers to its customers, typically for a five-yearterm. As of December 31, 2005, the Company had finance contracts recorded of $1.5 million consisting of lease payment receivables of $1.6 million, offsetby $0.1 million of unearned finance charges. As of December 31, 2004, the Company had finance contracts recorded of $5.5 million consisting of leasepayment receivables of $5.2 million and residual values of $0.7 million offset by $0.5 million of unearned finance charges. The future minimum lease payments to be received from finance contracts as of December 31, 2005, are $1.5 million and $0.1 million in 2006 and 2007,respectively.9. DEBT a. Long-term debt consists of the following (in thousands): December 31, 2005 2004 Senior Convertible Notes (3.25% due 2008) $125,000 $125,000 Other Notes Payable (7.25% due 2006) 500 2,500 125,500 127,500 Less: Current maturities (500) (2,000) $125,000 $125,500 b. Maturities of long-term debt At December 31, 2005, maturities of long-term debt were $0.5 million and $125.0 million in 2006 and 2008, respectively. c. Senior Convertible Notes The Company had $125 million of five-year senior unsecured convertible notes (convertible notes) at December 31, 2005, which are currently convertibleinto approximately 6.6 million shares of the Company’s common stock. The convertible notes have a conversion price of $19.05, which has been adjustedfor the impact of cash dividend payments, or a rate of 52.5060 shares per $1,000 principal amount of note. The conversion feature of the convertible notes issubject to further adjustment in connection with the payment of future cash dividends. As a result of any future payment of a cash dividend, upon anyconversion of the notes, the Company would be required to issue additional shares of common stock. The convertible notes bear interest at 3.25% per annumpayable semi-annually on February 1 and August 1. If not converted, the balance is due on August 1, 2008. d. Bank Facility On February 14, 2006, the Company entered into a consent and second amendment of its amended and restated loan and security agreement (ABL Facility)with its lenders. The consent allows the completion of an acquisition currently being considered, as long as the total consideration paid in the acquisition doesnot exceed $75.5 million. Additionally, the definition of earnings before interest, taxes, depreciation and amortization (EBITDA) was amended to excludeexpenses relating to stock options and restricted stock grants, which are additional add-backs to EBITDA. On September 23, 2005, the Company entered into an amendment of its ABL Facility with its lenders to, among other things, allow dividend payments upto $20 million per fiscal year and allow the repurchase of up to $50 million of common stock over the remaining term of the agreement. In 2004, the Company paid off the $25.8 million remaining balance on its bank term loan with a portion of the proceeds from an equity offering. As aresult, the Company wrote-off $0.6 million in unamortized deferred debt costs of the bank term loan as a loss on debt extinguishment.45 On December 30, 2004, the Company amended and restated its ABL Facility. The most notable amendments to the facility included: • Reducing the capacity under the ABL Facility from $175 million to $125 million; • Extending the maturity date of the facility from September 30, 2006 to September 30, 2007; • Eliminating financial covenants and certain other restrictions so long as unused availability remains above $40 million; • Allowing the Company to pay cash dividends up to $10 million; and • Reducing the borrowing rates and fees The ABL facility is secured by the Company’s property, plant and equipment, inventory and accounts receivable and the amount available to borrowvaries in relation to the balances of those accounts among other things, as defined in the agreements. As of December 31, 2005 and 2004, borrowing capacityunder the revolver was $117.3 million and $117.6 million, respectively. Interest on the ABL Facility revolver is variable, based on the London Interbank Offer Rate (LIBOR) plus 125 basis points or the bank’s alternative rate,as defined in the agreement. At December 31, 2005, the 30-day LIBOR was 4.4%. The Company pays a commitment fee on the unused portion of the facility ata rate of 25 basis points per annum. All interest and fees are paid monthly. For the quarter ended December 31, 2005, the weighted average interest rate was6.98%. The Company is in compliance with all covenants of the ABL Facility as of December 31, 2005.10. STOCKHOLDERS’ EQUITY a. Common Stock On September 23, 2005, the Company entered into an amendment of its loan and security agreement with the Company’s lenders to, among other things,allow dividend payments up to $20 million per fiscal year and allow the repurchase of up to $50 million of common stock over the remaining term of theagreement. Under the repurchase program, adopted by the Board of Directors on September 26, 2005, the Company may repurchase stock on the openmarket or in private transactions, at times and amounts deemed appropriate. The Company may limit or terminate the program at any time. In 2005, 189,000shares were repurchased for $3.4 million. Also during 2005, the Company declared dividends of $5.6 million, of which $4.2 million were paid in 2005. On November 3, 2004, the Company completed the sale of 3,450,000 shares of its common stock at a public offering price of $23.25. The sale generatednet proceeds of $75.7 million, which were used to pay down its bank indebtedness. b. Preferred Stock Effective December 29, 2005, in connection with the expiration of the Company’s prior Stockholder Rights Plan, the Company’s Board of Directorsadopted resolutions eliminating the Series A Junior Participating Preferred Stock authorized by the Company. On December 28, 2005, in connection with the adoption of a Stockholders Rights Plan discussed further below, the Company’s Board of Directorsadopted resolutions creating a series of 300,000 shares of Preferred Stock designated as Series D Junior Participating Preferred Stock, par value $.01 per share.As of December 31, 2005, the Company had no shares issued or outstanding. The Board of Directors has the authority to issue up to 25 million shares of unclassified preferred stock and to fix dividends, voting and conversionrights, redemption provisions, liquidation preferences and other rights and restrictions.46 c. Stockholders’ Rights Plan On December 28, 2005, the Company’s Board of Directors adopted a Stockholders’ Rights Plan (the “Rights Plan”) replacing a similar plan that expired.The Rights Plan is designed to deter coercive or unfair takeover tactics in the event of an unsolicited takeover attempt. It is not intended to prevent a takeover ofWabash on terms that are favorable and fair to all stockholders and will not interfere with a merger approved by the Board of Directors. Each right entitlesstockholders to buy one one-thousandth of a share of Series D Junior Participating Preferred Stock at an exercise price of $120. The rights will be exercisableonly if a person or a group acquires or announces a tender or exchange offer to acquire 20% or more of the Company’s common stock or if the Company entersinto other business combination transactions not approved by the Board of Directors. In the event the rights become exercisable, the Rights Plan allows for theCompany’s stockholders to acquire stock of Wabash or the surviving corporation, whether or not Wabash is the surviving corporation having a value twicethat of the exercise price of the rights. The rights will expire December 28, 2015 or are redeemable for $0.01 per right by the Company’s Board of Directorsunder certain circumstances.11. STOCK-BASED INCENTIVE PLANS a. Stock Option and Stock Related Plans The Company has stock incentive plans that provide for the issuance of stock appreciation rights (SAR) and the granting of common stock options toofficers and other eligible employees. Restricted Stock. From time-to-time, the Company has granted to certain key employees and outside directors shares of the Company’s stock to be earnedover time. These shares are granted at par value and recorded at the market price on the date of grant with an offsetting balance representing the unearnedportion. These grants have been made under the 2000 Stock Option Plan and the 2004 Stock Incentive Plan. During 2005 and 2004, the Company granted171,390 and 69,510 shares, respectively, of restricted stock with aggregate fair values on the date of grant of $4.5 million and $1.7 million, respectively.The grants generally vest over periods ranging from two to five years. As of December 31, 2005 and 2004, there were 213,490 shares and 117,627 shares,respectively, of restricted stock grants outstanding and not fully vested with an unearned balance of $4.1 million and $1.5 million, respectively, included inadditional paid-in-capital. In 2005, 2004 and 2003 the Company recorded amortization expense of $1.5 million, $0.4 million and $0.2 million, respectively,related to restricted stock. Stock Options. At the Annual Meeting of Stockholders in May of 2004, the 2004 Stock Incentive Plan was approved making available 1,100,000 sharesfor issuance, as well as a reduction of shares available for granting under the 2000 Stock Option Plan to 100,000 shares. The Company has three non-qualifiedstock option plans (the 1992, 2000 and 2004 Stock Option Plans) which allow eligible employees to purchase shares of common stock at a price not less thanmarket price at the date of grant. Under the terms of the Stock Option Plans, up to an aggregate of approximately 3,850,000 shares are reserved for issuance,subject to adjustment for stock dividends, recapitalizations and the like. Options granted to employees under the Stock Option Plans generally becomeexercisable in annual installments over three to five years depending upon the grant. Options granted to non-employee directors of the Company are fully vestedand exercisable six months after the date of grant. All options granted expire 10 years after the date of grant. The Company has issued non-qualified stock options in connection with inducing certain individuals to commence employment with the Company. In theaggregate, the Company has issued options to purchase 385,000 shares of common stock to three individuals. The exercise price for each option granted wasset by the Compensation Committee at the fair market value of the shares subject to that option. The Compensation Committee set vesting schedules that vestover three years. Upon a change in control of the Company, all outstanding shares subject to these options vest. The options expire in 10 years if not exercised.47 A summary of stock option activity and weighted-average exercise prices for the periods indicated are as follows: Number of Weighted-Average Options Exercise PriceOutstanding at December 31, 2002 1,846,576 $17.93 Granted 953,250 $8.46 Exercised (360,114) $13.34 Cancelled (563,360) $25.16 Outstanding at December 31, 2003 1,876,352 $11.83 Granted 241,055 $25.12 Exercised (476,498) $13.35 Cancelled (281,374) $13.47 Outstanding at December 31, 2004 1,359,535 $13.31 Granted 168,965 $26.52 Exercised (391,281) $9.60 Cancelled (145,344) $18.81 Outstanding at December 31, 2005 991,875 The following table summarizes information about stock options outstanding at December 31, 2005: Weighted Weighted WeightedRange of Average Average Number AverageExercise Number Remaining Exercise Exercisable ExercisePrices Outstanding Life Price at 12/31/05 Price$ 6.68 - $10.01 508,952 6.7 $8.76 345,170 $8.99 $10.02 - $13.35 1,500 5.4 $12.95 1,500 $12.95 $13.36 - $16.69 27,500 2.8 $15.34 27,500 $15.34 $16.70 - $20.03 18,050 2.7 $18.68 14,550 $18.94 $20.04 - $23.36 74,875 4.0 $21.42 69,542 $21.50 $23.37 - $26.70 180,513 8.5 $24.02 59,547 $23.92 $26.71 - $30.04 180,485 6.9 $27.50 56,000 $28.75 Using the Black-Scholes option valuation model, the estimated fair values of options granted during 2005, 2004 and 2003 were $12.29, $15.35 and$4.61 per option, respectively. Principal assumptions used in applying the Black-Scholes model were as follows: Black-Scholes Model Assumptions 2005 2004 2003Risk-free interest rate 3.99% 4.70% 4.02%Expected volatility 51.45% 52.09% 53.50%Expected dividend yield 0.68% 0.50% 1.30%Expected term 5 yrs. 10 yrs. 10 yrs. b. Other Stock Plans The Company has a Stock Bonus Plan (the “Bonus Plan”). Under the terms of the Bonus Plan, common stock may be granted to employees under termsand conditions as determined by the Board of Directors. During 2005, 2004 and 2003, 5,220, 7,720 and 6,370, respectively, were issued to employees at anaverage price of $22.22, $28.95 and $11.58, respectively. The expense associated with the grants is recognized when the shares are granted and amounted to$116,000, $224,000 and $74,000 in 2005, 2004 and 2003, respectively. At December 31, 2005 and 2004, there were 447,070 and 452,290 shares,respectively, available for offering under the Bonus Plan.48 12. EMPLOYEE 401(k) SAVINGS PLAN Substantially all of the Company’s employees are eligible to participate in a defined contribution plan that qualifies as a safe harbor plan under Section401(k) of the Internal Revenue Code. The Plan provides for the Company to match, in cash, a percentage of each employee’s contributions up to certain limits.The Company’s matching contribution and related expense for the plan was approximately $3.2 million, $2.8 million and $2.6 million for 2005, 2004 and2003, respectively.13. INCOME TAXES a. Income Tax Expense (Benefit) The consolidated income tax expense (benefit) for 2005, 2004 and 2003 consists of the following components (in thousands): 2005 2004 2003 Current: U.S. Federal $1,301 $102 $— Foreign — — — State (985) 498 — Deferred (37,347) — — Total consolidated expense (benefit) $(37,031) $600 $— The Company’s effective tax rate differed from the U.S. Federal statutory rate of 35% as follows: 2005 2004 2003 Pretax book income (loss) $74,056 $59,005 $(57,227)Federal tax expense (benefit) at 35% statutory rate 25,920 20,652 (20,029)State and local income taxes 3,625 498 — U.S. federal alternative minimum tax 1,095 400 — Reversal of tax valuation allowance (37,347) — — Current utilization of and valuation allowance for net operating losses (29,981) (20,317) 18,857 Other (343) (633) 1,172 Total income tax expense (benefit) $(37,031) $600 $— b. Deferred Taxes The Company’s deferred income taxes are primarily due to temporary differences between financial and income tax reporting for the depreciation ofproperty, plant and equipment and tax credits and losses carried forward. Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it ismore likely than not that some portion or all of the deferred tax assets will not be realized. The Company determined that a valuation allowance was necessaryand recorded a full valuation allowance for all deferred tax assets as of December 31, 2004. In the second quarter of 2005, the Company determined that thecriteria for reversal of a portion of the income tax asset valuation allowance, including materially all valuation allowance recorded against U.S. federal losscarryforward tax assets were met. Accordingly, the Company recorded a tax benefit of $37.3 million for the release of the valuation allowance. In futureperiods, the Company will evaluate the remaining deferred income tax asset valuation allowance and adjust (reduce) the allowance when management hasdetermined that impairment to future realizability of the related deferred tax assets, or a portion thereof, has been removed as provided in the criteria set forth inSFAS No. 109. The Company has a U.S. federal tax net operating loss carryforward of approximately $96 million, which will expire beginning in 2022, if unused, andwhich may be subject to other limitations under IRS rules. The Company has various, multistate income tax net operating loss carryforwards which have beenrecorded as a deferred income tax asset of approximately $16 million, before valuation allowances. The Company has various U.S. federal income tax creditcarryforwards which will expire beginning in 2013, if unused.49 The components of deferred tax assets and deferred tax liabilities as of December 31, 2005 and 2004 were as follows (in thousands): 2005 2004 Deferred tax assets: Tax credits and loss carryforwards $55,936 $85,453 Accrued liabilities 4,049 3,329 Other 8,928 8,499 68,913 97,281 Deferred tax liabilities: Property, plant and equipment (4,882) (6,048)Intangibles (2,058) (2,457)Prepaid insurance (858) (908)Sale — leaseback (256) (589)Other (503) (450) (8,557) (10,452)Net deferred tax asset before valuation allowance 60,356 86,829 Valuation allowance (16,756) (86,829)Net deferred tax asset $43,600 $— 14. COMMITMENTS AND CONTINGENCIES a. Litigation Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company arising in the ordinary course of business,including those pertaining to product liability, labor and health related matters, successor liability, environmental and possible tax assessments. While theamounts claimed could be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it ispossible that results of operations or liquidity in a particular period could be materially affected by certain contingencies. However, based on facts currentlyavailable, management believes that the disposition of matters that are currently pending or asserted will not have a material adverse effect on the Company’sfinancial position, liquidity or results of operations.Brazil Joint Venture In March 2001, Bernard Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against the Company in the Fourth Civil Court ofCuritiba in the State of Paraná, Brazil. This action seeks recovery of damages plus pain and suffering. Because of the bankruptcy of BK, this proceeding isnow pending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99). This case grows out of a joint venture agreement between BK and the Company, which was generally intended to permit BK and the Company to marketthe RoadRailer trailer in Brazil and other areas of South America. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the jointventure was dissolved. BK subsequently filed its lawsuit against the Company alleging among other things that it was forced to terminate business with othercompanies because of the exclusivity and non-compete clauses purportedly found in the joint venture agreement. In its complaint, BK asserts that it has beendamaged by these alleged wrongs by the Company in the approximate amount of $8.4 million. The Company answered the complaint in May 2001, denying any wrongdoing. The Company believes that the claims asserted against it by BK arewithout merit and intends to defend itself vigorously against those claims. The Company believes that the resolution of this lawsuit will not have a materialadverse effect on its financial position, liquidity or future results of operations; however, at this early stage of the proceeding, no assurance can be given as tothe ultimate outcome of the case.50 Environmental In September 2003, the Company was noticed as a potentially responsible party (PRP) by the United States Environmental Protection Agency pertaining tothe Motorola 52nd Street, Phoenix, Arizona Superfund Site pursuant to the Comprehensive Environmental Response, Compensation and Liability Act. PRPsinclude current and former owners and operators of facilities at which hazardous substances were disposed of. EPA’s allegation that the Company was a PRParises out of the operation of a former branch facility located approximately five miles from the original site. The Company does not expect that theseproceedings will have a material adverse effect on the Company’s financial condition or results of operations. In January 2006, the Company received a letter from the North Carolina Department of Environment and Natural Resources indicating that a site that itformerly owned near Charlotte, North Carolina has been included on the state’s October 2005 Inactive Hazardous Waste Sites Priority List. The letter statesthat the Company was being notified in fulfillment of the state’s “statutory duty” to notify those who own and those who at present are known to beresponsible for each Site on the Priority List. No action is being requested from the Company at this time. The Company does not expect that this designationwill have a material adverse effect on its financial condition or results of operations. b. Environmental The Company generates and handles certain material, wastes and emissions in the normal course of operations that are subject to various and evolvingfederal, state and local environmental laws and regulations. The Company assesses its environmental liabilities on an on-going basis by evaluating currently available facts, existing technology, presently enactedlaws and regulations as well as experience in past treatment and remediation efforts. Based on these evaluations, the Company estimates a lower and upperrange for the treatment and remediation efforts and recognizes a liability for such probable costs based on the information available at the time. As of December31, 2005, the Company had an estimated reserve of $0.4 million for remediation activities at a former branch property, which was sold in 2005. c. Used Trailer Restoration Program In December 2005, the Company reached an agreement with the IRS to pay an assessment of approximately $1.1 million, plus estimated accrued interest of$0.8 million to resolve issues related to federal excise tax on a used trailer restoration program. Accordingly, the Company reduced its liability andcorresponding receivable from $6.1 million at December 31, 2004 to $1.9 million in the accompanying Consolidated Balance Sheets at December 31, 2005.The Company believes it is fully indemnified by the customer for this liability and believes that the related receivable is fully collectible. d. Letters of Credit As of December 31, 2005, the Company had standby letters of credit totaling $7.7 million issued in connection with workers compensation claims andsurety bonds. e. Royalty Payments The Company is obligated to make quarterly royalty payments through 2007 in accordance with a licensing agreement related to the development of theCompany’s composite plate material used on its proprietary DuraPlate trailer. The amount of the payments varies with the production volume of usablematerial, but required minimum royalties of $0.5 million annually through 2005. Annual payments were $0.7 million, $0.7 million and $1.1 million in2005, 2004 and 2003, respectively. f. Used Trailer Residual Guarantees and Purchase Commitments In connection with certain historical new trailer sale transactions, the Company had entered into agreements to guarantee end-of-term residual value, whichcontain an option to purchase the used equipment at a pre-determined price. By policy, the Company no longer provides used trailer residual guarantees.51 Under these agreements, future guarantee payments that may be required as of December 31, 2005 are $8.4 million and $1.8 million in 2006 and 2007,respectively. The purchase option on the equipment as of December 31, 2005 is $23.5 million for 2006 and $5.5 million for 2007. In relation to the guarantees, as of December 31, 2005 and 2004, the Company recorded loss contingencies of $0.1 million. g. Purchase Commitments As part of the sale of certain assets of our aftermarket parts business, as discussed in Footnote 5, the Company entered into a parts purchase agreementwith the buyer. As amended, the Company is required to purchase $9.2 million in parts from the buyer between October 2005 and September 2006. TheCompany does not believe the purchase commitment will exceed business requirements. The buyer is subject to certain performance requirements.15. SEGMENTS AND RELATED INFORMATION a. Segment Reporting Under the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company has two reportablesegments: manufacturing and retail and distribution. The manufacturing segment produces and sells new trailers to the retail and distribution segment or tocustomers who purchase trailers direct or through independent dealers. The retail and distribution segment includes the sale, leasing and financing of new andused trailers, as well as the sale of aftermarket parts and service through its retail branch network. In addition, the retail and distribution segment in 2003includes the sale of aftermarket parts through Wabash National Parts. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that the Companyevaluates segment performance based on income from operations. The Company has not allocated certain corporate related charges such as administrativecosts, interest and income taxes from the manufacturing segment to the Company’s other reportable segment. The Company accounts for intersegment salesand transfers at cost plus a specified mark-up. Reportable segment information is as follows (in thousands):52 Retail and Combined Consolidated Manufacturing Distribution Segments Eliminations Total 2005 Net sales External customers $968,419 $245,292 $1,213,711 $— $1,213,711 Intersegment sales 102,938 — 102,938 (102,938) — Total net sales $1,071,357 $245,292 $1,316,649 $(102,938) $1,213,711 Depreciation and amortization 12,406 3,141 15,547 — 15,547 Income from operations 75,385 2,827 78,212 1,782 79,994 Reconciling items to net income: Interest income (760)Interest expense 6,431 Foreign exchange gains and losses, net (231)Other income, net 498 Income tax benefit (37,031)Net income $111,087 Capital expenditures $30,302 $578 $30,880 $— $30,880 Assets $536,566 $173,825 710,391 $(161,738) $548,653 2004 Net sales External customers $805,993 $235,103 $1,041,096 $— $1,041,096 Intersegment sales 107,685 1,975 109,660 (109,660) — Total net sales $913,678 $237,078 $1,150,756 $(109,660) $1,041,096 Depreciation and amortization 13,357 6,084 19,441 — 19,441 Income (loss) from operations 73,472 (2,879) 70,593 (1,810) 68,783 Reconciling items to net income: Interest income (129)Interest expense 10,809 Foreign exchange gains and losses, net (463)Loss on debt extinguishment 607 Other income, net (1,046)Income tax expense 600 Net income $58,405 Capital expenditures $14,240 $1,255 $15,495 $— $15,495 Assets $410,087 $185,479 $595,566 $(163,520) $432,046 2003 Net sales External customers $620,120 $267,820 $887,940 $— $887,940 Intersegment sales 52,172 878 53,050 (53,050) — Total net sales $672,292 $268,698 $940,990 $(53,050) $887,940 Depreciation and amortization 13,843 9,945 23,788 — 23,788 Loss from operations 27,603 (37,283) (9,680) 433 (9,247)Reconciling items to net loss: Interest income (406)Interest expense 31,184 Foreign exchange gains and losses, net (5,291)Loss on debt extinguishment 19,840 Other expense, net 2,653 Net loss (57,227)Capital expenditures $5,672 $846 $6,518 $— $6,518 Assets $370,325 $188,477 $558,802 $(161,766) $397,036 53 b. Geographic Information International sales, primarily to Canadian customers, accounted for less than 10% in each of the last three years. At December 31, 2005 and 2004, property, plant and equipment, net of accumulated depreciation related to the Company’s Canadian subsidiary wasapproximately $0.8 million and $2.0 million, respectively. c. Product Information The Company offers products primarily in three general categories; new trailers, used trailers, and parts and service. Other sales include leasing revenues,interest income from finance contracts and freight revenue. The following table sets forth the major product category sales and their percentage of consolidatednet sales (dollars in thousands): 2005 2004 2003New Trailers $1,084,454 89.4% $914,468 87.8% $690,465 77.8%Used Trailers 55,546 4.6 52,960 5.1 64,843 7.3 Parts and Service 57,000 4.7 58,246 5.6 98,789 11.1 Other 16,711 1.3 15,422 1.5 33,843 3.8 Total Sales $1,213,711 100.0% $1,041,096 100.0% $887,940 100.0% d. Major Customers In 2005 and 2004, no customer represented 10% or greater of consolidated net sales. The Company had one customer included in the manufacturingsegment that represented 14% of consolidated net sales in 2003. The Company’s consolidated net sales in the aggregate to its five largest customers were 22%,32% and 27% of its consolidated net sales in 2005, 2004 and 2003, respectively.16. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited quarterly results of operations for fiscal years 2005, 2004 and 2003 (dollars in thousands except per shareamounts). First Second Third Fourth Quarter Quarter Quarter Quarter 2005 Net sales $256,105 $322,983 $293,834 $340,789 Gross profit $34,398 $36,109 $30,085 $33,923 Net income(1) $18,479 $49,258 $23,655 $19,695 Basic net income per share(2) $0.60 $1.58 $0.76 $0.63 Diluted net income per share(2) $0.52 $1.33 $0.66 $0.55 2004 Net sales $221,597 $254,899 $277,243 $287,357 Gross profit $23,122 $36,635 $36,922 $29,107 Net income $6,859 $18,262 $20,294 $12,990 Basic and diluted net income per share(2) $0.25 $0.67 $0.74 $0.44 Diluted net income per share(2) $0.23 $0.56 $0.62 $0.39 2003 Net sales $222,508 $230,231 $215,450 $219,751 Gross profit $23,166 $(3,855) $17,012 $16,154 Net loss $1,430 $(27,268)(3) $(29,641)(4) $(1,748)(5)Basic and diluted net income (loss) per share(2) $0.05 $(1.07) $(1.16) $(0.08) (1) The second, third and fourth quarters of 2005 included $29.3 million, $6.6 million and $0.6 million, respectively, related to the reversal of taxvaluation allowances, as discussed in Footnote 13. (2) Net income (loss) per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly net income per share maydiffer from annual net income (loss) per share due to rounding. (3) The second quarter 2003 results included a $28.5 million loss on asset impairment, as discussed in Footnote 5. (4) The third quarter 2003 results included an $18.9 million loss on debt extinguishment, related to its debt refinancing. (5) The fourth quarter 2003 results include a $4.1 million loss on the sale of a large portion of the Company’s finance contract, as discussed in Footnote 5.54 ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NoneITEM 9A—CONTROLS AND PROCEDURES Disclosure Controls and Procedures Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officerhave concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, asamended (Exchange Act)) were effective as of December 31, 2005. Changes in Internal Controls There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during thefourth quarter of fiscal 2005 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Report of Management on Internal Control over Financial Reporting The management of Wabash National Corporation (the Company), is responsible for establishing and maintaining adequate internal control over financialreporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of the financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Companyare being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financialstatements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies and procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria for effectiveinternal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). Based on this assessment, we have concluded that internal control over financial reporting is effective as of December 31,2005. Ernst & Young LLP, an Independent Registered Public Accounting Firm, has audited the Company’s consolidated financial statements and has issued anattestation report on management’s assessment of the Company’s internal control over financial reporting which appears on the following page. William P. Greubel Chief Executive OfficerRobert J. Smith Senior Vice President and Chief Financial OfficerFebruary 21, 200655 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Wabash National Corporation We have audited management’s assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, thatWabash National Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Wabash NationalCorporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of thecompany’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing andevaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. In our opinion, management’s assessment that Wabash National Corporation maintained effective internal control over financial reporting as ofDecember 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Wabash National Corporation maintained, inall material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Wabash National Corporation as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, andcash flows for each of the three years in the period ended December 31, 2005 of Wabash National Corporation and our report dated February 21, 2006expressed an unqualified opinion thereon.ERNST & YOUNG LLPIndianapolis, IndianaFebruary 21, 200656 ITEM 9B—OTHER INFORMATION None.PART IIIITEM 10—EXECUTIVE OFFICERS OF THE REGISTRANT The Company hereby incorporates by reference the information contained under the heading “Election of Directors” from its definitive Proxy Statement tobe delivered to stockholders of the Company in connection with the 2005 Annual Meeting of Stockholders to be held May 18, 2006. The following are the executive officers of the Company: Name Age PositionWilliam P. Greubel 54 Chief Executive Officer and DirectorRichard J. Giromini 52 President, Chief Operating Officer and DirectorRodney P. Ehrlich 59 Senior Vice President — Chief Technology OfficerBruce N. Ewald 54 Senior Vice President – Sales and MarketingTimothy J. Monahan 53 Senior Vice President — Human ResourcesRobert J. Smith 59 Senior Vice President — Chief Financial Officer William P. Greubel. Mr. Greubel has been Chief Executive Officer and Director of the Company since May 2002. Mr. Greubel was President untilDecember 2005. He also serves on the Executive Committee of the Board. Mr. Greubel was a Director and Chief Executive Officer of Accuride Corporation, amanufacturer of wheels for trucks and trailers, from 1998 until May 2002 and served as President of Accuride Corporation from 1994 to 1998. Previously,Mr. Greubel was employed by AlliedSignal Corporation from 1974 to 1994 in a variety of positions of increasing responsibility, most recently as VicePresident and General Manager of the Environmental Catalysts and Engineering Plastics business units. Richard J. Giromini. Mr. Giromini was promoted to President and appointed a Director of the Company on December 8, 2005. He had been Executive VicePresident and Chief Operating Officer since February 28, 2005. He had been Senior Vice President — Chief Operating Officer since joining the Company onJuly 15, 2002. He has also served as President and a Director of Wabash National Trailer Centers, Inc. since January 2004. Prior to joining Wabash,Mr. Giromini spent his entire career in the automotive industry. Most recently, Mr. Giromini was with Accuride Corporation from April 1998 to July 2002,where he served in capacities as Senior Vice President — Technology and Continuous Improvement; Senior Vice President and General Manager — LightVehicle Operations; and President and CEO of AKW LP. Previously, Mr. Giromini was employed by ITT Automotive, Inc. from 1996 to 1998 serving as theDirector of Manufacturing. Mr. Giromini also serves on the board of directors of The Wabash Center, a non-profit company dedicated to serving individualswith disabilities and special needs. Rodney P. Ehrlich. Mr. Ehrlich has been Senior Vice President — Chief Technology Officer of the Company since January 2004. From 2001-2003,Mr. Ehrlich was Senior Vice President of Product Development. Mr. Ehrlich has been in charge of the Company’s engineering operations since the Company’sfounding. Timothy J. Monahan. Mr. Monahan has been Senior Vice President – Human Resources since joining the Company on October 15, 2003. Prior to that,Mr. Monahan was with Textron Fastening Systems from 1999 to October 2003 where he served as Vice President – Human Resources. Previously,Mr. Monahan served as Vice President – Human Resources at Beloit Corporation. Mr. Monahan serves on the board of directors of North American ToolCorporation. Bruce N. Ewald. Mr. Ewald’s original appointment was Vice President and General Manager of Wabash National Trailer Centers, Inc. when he joined theCompany in March 2005. In October 2005, his title has changed to Senior Vice President – Sales and Marketing. Mr. Ewald has nearly 25 years experience inthe transportation industry. For 14 years he served in a number of executive-level positions with PACCAR. Prior to PACCAR, Mr. Ewald spent 10 years withGenuine Parts Co. where he held several positions, including President and General Manager, Napa Auto Parts/Genuine Parts Co.57 Robert J. Smith. Mr. Smith was appointed Senior Vice President — Chief Financial Officer in October 2004, after serving as our Acting Chief FinancialOfficer since June 2004, and our Vice President and Controller since joining us in March 2003. Before joining us, Mr. Smith served from 2000 to 2001 asDirector of Finance for KPMG Consulting, Inc., now BearingPoint, Inc.; from 1993 to 2000 with Great Lakes Chemical Corp. (serving from 1998 to 2000 asvice president and controller) and from 1983 to 1993 with Olin Corporation, including as chief financial officer for several of its divisions. Code of Ethics As part of our system of corporate governance, our Board of Directors has adopted a code of ethics that is specifically applicable to our Chief ExecutiveOfficer and Senior Financial Officers. This code of ethics is available on our website at www.wabashnational.com/about.ITEM 11—EXECUTIVE COMPENSATION The Company hereby incorporates by reference the information contained under the heading “Compensation” from its definitive Proxy Statement to bedelivered to the stockholders of the Company in connection with the 2006 Annual Meeting of Stockholders to be held May 18, 2006.ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company hereby incorporates by reference the information contained under the headings “Beneficial Ownership of Common Stock” and “EquityCompensation Plan Information” from its definitive Proxy Statement to be delivered to the stockholders of the Company in connection with the 2006 AnnualMeeting of Stockholders to be held on May 18, 2006.ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company hereby incorporates by reference the information contained under the heading “Related Party Transactions” from its definitive ProxyStatement to be delivered to the stockholders of the Company in connection with the 2006 Annual Meeting of Stockholders to be held on May 18, 2006.ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES Information required by Item 14 of this form and the audit committee’s pre-approval policies and procedures regarding the engagement of the principalaccountant are incorporated herein by reference to the information contained under the heading “Audit Committee Report – Independent Auditor Fees” from theCompany’s definitive Proxy Statement to be delivered to the stockholders of the Company in connection with the 2006 Annual Meeting of Stockholders to beheld on May 18, 2006.PART IVITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) Financial Statements: The Company has included all required financial statements in Item 8 of this Form 10-K. The financial statement scheduleshave been omitted as they are not applicable or the required information is included in the Notes to the consolidated financial statements.(b) 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 listedbelow: 2.01 Asset Purchase Agreement dated July 22, 2003 (11) 2.02 Amendment No. 1 to the Asset Purchase Agreement dated September 19, 2003 (11) 3.01 Certificate of Incorporation of the Company (1) 3.02 Certificate of Designations of Series D Junior Participating Preferred Stock (18) 3.03 Amended and Restated By-laws of the Company (6) 4.01 Specimen Stock Certificate (4) 4.02 Rights Agreement between the Company and National City Bank as Rights Agent dated December 28, 2005 (18)58 4.03 Indenture for the 3.25% Convertible Senior Notes due August 1, 2008, between the registrant, as issuer, and Wachovia Bank, National Association,as Trustee, dated as of August 1, 2003 (10) 10.01# 1992 Stock Option Plan (1) 10.02 Indemnification Agreement between the Company and Roadway Express, Inc. (2) 10.03# 2000 Stock Option Plan (3) 10.04# 2001 Stock Appreciation Rights Plan (5) 10.05# Executive Employment Agreement dated April 2002 between the Company and William P. Greubel (6) 10.06# Executive Employment Agreement dated June 28, 2002 between the Company and Richard J. Giromini (7) 10.07# Non-qualified Stock Option Agreement dated July 15, 2002 between the Company and Richard J. Giromini (7) 10.08# Restricted Stock Agreement between the Company and Richard J. Giromini (7) 10.09# Non-qualified Stock Option Agreement between the Company and William P. Greubel (7) 10.10# First Amendment to Executive Employment Agreement dated December 4, 2002 between the Company and William P. Greubel (8) 10.11# Restricted Stock Agreement between the Company and William P. Greubel (8) 10.12# Second Amendment to Executive Employment Agreement dated June 2, 2003 between the Company and William P. Greubel (9) 10.13 Loan and Security Agreement dated September 23, 2003 (12) 10.14 Amendment No. 1 to Loan and Security Agreement dated October 23, 2003 (12) 10.15 Amendment No. 3 to Loan and Security Agreement dated December 11, 2003 (12) 10.16# 2004 Stock Incentive Plan (13) 10.17 Waiver and Amendment No. 4 to Loan and Security Agreement dated September 9, 2004 (14) 10.18# Form of Associate Stock Option Agreements under the 2004 Stock Incentive Plan (14) 10.19# Form of Associate Restricted Stock Agreements under the 2004 Stock Incentive Plan (14) 10.20# Form of Executive Stock Option Agreements under the 2004 Stock Incentive Plan (14) 10.21# Form of Executive Restricted Stock Agreements under the 2004 Stock Incentive Plan (14) 10.22 Amended and Restated Loan and Security Agreement dated December 30, 2004 (15) 10.23# Restricted Stock Unit Agreement between the Company and William P. Greubel dated March 7, 2005 (16) 10.24# Stock Option Agreement between the Company and William P. Greubel dated March 7, 2005 (16) 10.25# Corporate Plan for Retirement – Executive Plan (16) 10.26 Amendment No. 1 to the Amended and Restated Loan and Security Agreement dated September 23, 2005 (17) 10.27 Consent and Amendment No. 2 to Amended and Restated Loan and Security Agreement dated December 30, 2005 (19) 21.00 List of Significant Subsidiaries (20) 23.01 Consent of Ernst & Young LLP (20) 31.01 Certification of Principal Executive Officer (20) 31.02 Certification of Principal Financial Officer (20) 32.01 Written Statement of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.Section 1350) (20) #Management contract or compensatory plan. (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-Afiled December 6, 1995 (item 3.02 and 4.02) (2)Incorporated by reference to the Registrant’s Form 10-K for the year ended December 31, 1999 (3)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended March 31, 2001 (4)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2001 (5)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended September 30, 2001 (6)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended March 31, 2002 (7)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2002 (8)Incorporated by reference to the Registrant’s Form 10-K for the year ended December 31, 2002 (9)Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2003 (10)Incorporated by reference to the Registrant’s registration statement Form S-3 (Registration No. 333-109375) filed on October 1, 2003 (11)Incorporated by reference to the Registrant’s Form 8-K filed on September 29, 2003 (12)Incorporated by reference to the Registrant’s Form 10-K/A Amendment No. 3 for the year ended December 31, 2003 (13)Incorporated by reference to the Registrant’s Form 10-Q filed on August 9, 200459 (14)Incorporated by reference to the Registrant’s Form 10-Q filed on October 27, 2004 (15)Incorporated by reference to the Registrant’s Form 8-K filed on January 5, 2005 (16)Incorporated by reference to the Registrant’s Form 8-K filed on March 11, 2005 (17)Incorporated by reference to the Registrant’s Form 8-K filed on September 23, 2005 (18)Incorporated by reference to the Registrant’s Form 8-K filed on December 28, 2005 (19)Incorporated by reference to the Registrant’s Form 8-K filed on February 21, 2006 (20)Filed herewith60 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.WABASH NATIONAL CORPORATION February 24, 2006 By: /s/ Robert J. Smith Robert J. Smith Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting 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 the registrant inthe capacities and on the date indicated. Date Signature and Title February 24, 2006 By: /s/ William P. Greubel William P. Greubel Chief Executive Officer and Director (Principal Executive Officer) February 24, 2006 By: /s/ Richard J. Giromini Richard J. Giromini President, Chief Operating Officer and Director February 24, 2006 By: /s/ Robert J. Smith Robert J. Smith Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 24, 2006 By: /s/ John T. Hackett John T. Hackett Chairman of the Board of Directors February 24, 2006 By: /s/ David C. Burdakin David C. Burdakin Director February 24, 2006 By: /s/ Martin C. Jischke Dr. Martin C. Jischke Director February 24, 2006 By: /s/ Stephanie K. Kushner Stephanie K. Kushner Director February 24, 2006 By: /s/ Ronald L. Stewart Ronald L. Stewart Director February 24, 2006 By: /s/ Larry J. Magee Larry J. Magee Director February 24, 2006 By: /s/ Scott K. Sorensen Scott K. Sorensen Director61 EXHIBIT 21.00SUBSIDIARIES OF THE COMPANY ANDOWNERSHIP OF SUBSIDIARY STOCK STATE/COUNTRY OF % OF SHARES OWNEDNAME OF SUBSIDIARY INCORPORATION BY THE CORPORATION*Wabash National GmbH Germany 100%Wabash National Trailer Centers, Inc Delaware 100%WNC Cloud Merger Sub, Inc Arkansas 100%Cloud Oak Flooring Company, Inc Arkansas 100%Wabash National L.P. Delaware 100%Wabash National Lease Receivables, L.P. Delaware 100%Wabash National Services L.P. Delaware 100%Wabash Financing LLC Delaware 100%RoadRailer Mercosul, Ltda Brazil 50%RoadRailer Technology Development Company, Ltd. China 81%National Trailer Funding LLC Delaware 100%Continental Transit Corporation Indiana 100%FTSI Canada, Ltd. Canada 100%Wabash Receivables, LLC Delaware 100%WNC Receivables Management Corp. Delaware 100%FTSI Distribution Company, L.P. Delaware 100% * Includes both direct and indirect ownership by the parent, Wabash National Corporation Exhibit 23.01Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1) Registration Statement (Form S-3 No. 333-109375) of Wabash National Corporation (2) Registration Statement (Form S-8 No. 333-54714) pertaining to the 2000 Stock Option and Incentive Plan of Wabash National Corporation (3) Registration Statement (Form S-8 No. 333-29309) pertaining to the 1992 Stock Option Plan and Stock Bonus Plan of Wabash National Corporation (4) Registration Statement (Form S-8 No. 33-49256) pertaining to the 1992 Stock Option Plan of Wabash National Corporation (5) Registration Statement (Form S-8 No. 33-65698) pertaining to the 1993 Employee Stock Purchase Plan of Wabash National Corporation (6) Registration Statement (Form S-8 No. 33-90826) pertaining to the Directors and Executives Deferred Compensation Plan of Wabash National Corporation (7) Registration Statement (Form S-8 No. 333-115682) pertaining to the 2004 Stock Incentive Plan of Wabash National Corporation (8) Registration Statement (Forms S-8 No. 333-113157) pertaining to the Non-Qualified Stock Option Agreements for William P. Greubel, Richard J.Giromini and Timothy J. Monahan of Wabash National Corporationof our reports dated February 21, 2006, with respect to the consolidated financial statements of Wabash National Corporation and Wabash NationalCorporation management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financialreporting of Wabash National Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2005./s/ Ernst & Young LLPIndianapolis, IndianaFebruary 21, 2006 Exhibit 31.01CERTIFICATIONSI, William P. Greubel, certify that:1. I have reviewed this annual report on Form 10-K of Wabash National Corporation;2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrantand have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarterthat has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 24, 2006 /s/ William P. Greubel William P. Greubel Chief Executive Officer (Principal Executive Officer) Exhibit 31.02CERTIFICATIONSI, Robert J. Smith, certify that:1. I have reviewed this annual report on Form 10-K of Wabash National Corporation;2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrantand have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarterthat has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 24, 2006 /s/ Robert J. Smith Robert J. Smith Senior Vice President and Chief Financial Officer (Principal Financial Officer) Exhibit 32.01Written Statement of Chief Executive Officer and Chief Financial OfficerPursuant to Section 906of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)The undersigned, the Chief Executive Officer and the Senior Vice President, Chief Financial Officer of Wabash National Corporation (the “Company”), eachhereby certifies that, to his knowledge, on February 24, 2006:(a) the Form 10K Annual Report of the Company for the year ended December 31, 2005 filed on February 24, 2006, with the Securities and ExchangeCommission (the “Report”) fully complies with the requirements of Section 13(a) of 15(d) of the Securities Exchange Act of 1934; and(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ William P. Greubel William P. Greubel Chief Executive Officer February 24, 2006 /s/ Robert J. Smith Robert J. Smith Senior Vice President, Chief Financial Officer February 24, 2006
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