Form
(Mark One)
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| (Mark One) | ||
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| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| Delaware |  | 52-1375208 | |
| (State of Incorporation) | (IRS Employer Identification Number) | ||
Commission File Number: 1-10883
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| Lafayette | Indiana | 47905 | |||
(Address of Principal Executive Offices) |  |
(Zip Code) | |||
| Title of each class | Trading Symbol(s) | Name of each exchangeon which registered | ||
| Common Stock, $.01 Par Value | WNC | New York Stock Exchange | ||
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best 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 this Form 10-K.¨
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | ||
53,082,095.
TABLE OF CONTENTS
YEAR ENDED DECEMBER 31, 2017
| ▪ | our business plan; |
| ▪ | our ability to effectively integrate Supreme and realize expected synergies and benefits from the Supreme acquisition; |
| ▪ | our expected revenues, income or loss; |
| ▪ | our ability to manage our indebtedness; |
| ▪ | our strategic plan and plans for future operations; |
| ▪ | financing needs, plans and liquidity, including for working capital and capital expenditures; |
| ▪ | our ability to achieve sustained profitability; |
| ▪ | reliance on certain customers and corporate relationships; |
| ▪ | availability and pricing of raw |
| ▪ | availability of capital and financing; |
| ▪ | dependence on industry trends; |
| ▪ | the outcome of any pending litigation or notice of environmental dispute; |
| ▪ | export sales and new markets; |
| ▪ | engineering and manufacturing capabilities and |
| ▪ | our ability to develop and commercialize new products; |
| ▪ | acceptance of new technologies and products; |
| ▪ | government regulations; and |
| ▪ | assumptions relating to the foregoing. |
actions. The Diversified Products segment (together with its subsidiaries,which we refer to herein as “Wabash,” “Wabash National,” “the Company,the “Company,” “us,” “we,” or “our”)“our,” is changing how the world reaches you. Wabash was founded in 1985incorporated as a start-up companycorporation in Delaware in 1991, with its principal executive offices in Lafayette, Indiana. WeIndiana, as a dry van trailer manufacturer. Today we are now a diversified industrial manufactureran innovation leader of engineered solutions for the transportation, logistics, and a leading producer of semi-trailers, truck bodies, specialized commercial vehicles,distribution industries. Our mission is to enable customers to succeed with breakthrough ideas and liquid transportation systems. Wesolutions that help them move everything from first to final mile.manufacture and marketmanufacture a diverse range of products, including dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade and pharmaceutical equipment. We have achieved this diversification through acquisitions, organic growth, and product innovation. We continue to search for acquisitions that will increase margins, enhance business stability, create new products, reduce cyclicality, and provide operational synergies.Our management teamMore importantly, we believe our leadership position is focused on growing the company in a profitable and sustainable manner, while continuing to optimize operations to match the current demand environment, implementing cost savings initiatives and lean manufacturing techniques, strengthening our capital structure, developing innovative products that enable our customers to succeed, improving earnings and continuing diversificationindicative of the business into higher margin opportunitiesvalues and leadership principles that leverageguide our intellectual and process capabilities.Wabash was incorporated in Delaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985. Our internet website is www.wabashnational.com. We make our electronic filings with the Securities Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available on our website free of charge as soon as practicable after we file them with or furnish them to the SEC. Information on the website is not part of this Annual Report. We are listed on the NYSE under the ticker symbol “WNC”.Previously, we managedtwothree reportable segments: Commercial Trailer Products and(“CTP”), Diversified Products. In the third quarter of 2017, we completed the acquisition of Supreme Industries, Inc.Products (“Supreme”DPG”). As a result, we created a new reporting segment in the fourth quarter referred to as the, and Final Mile Products segment, which includes(“FMP”). Each of these reportable segments offers a diverse portfolio of industrial solutions for the Supreme operationsend markets and certain other truck body operations which were previously included in our industries that they serve.Commercial Trailer Products Diversified Products Final Mile Products ■ Dry and Refrigerated Van Trailers ■ Tank Trailers and Truck-Mounted Tanks ■ Truck-Mounted Dry Bodies ■ Platform Trailers ■ Composite Panels and Products ■ Truck-Mounted Refrigerated Bodies ■ Aftermarket Parts and Service ■ Food, Dairy, and Beverage Equipment ■ Service and Stake Bodies ■ Containment and Aseptic Systems ■ Fiberglass Reinforced Plywood Panels ■ Aftermarket Parts and Service ■ Upfitting Parts and Service segment. Certain corporate-related administrative costs, interestdesigns and income taxes are not allocated to these segments, but are reported in our Corporatemanufactures dry and Eliminations segment. Financial results by operating segment, including information about revenue, measures of profit and loss, and financial information regarding geographic areas and export sales are discussed in Note 13, Segments, of the accompanying consolidated financial statements. By operating segment, net sales, prior to the elimination of intersegment sales, were as follows (dollars in thousands): Year Ended December 31, 2017 2016 2015 Sales by Segment Commercial Trailer Products $ 1,348,382 $ 1,506,110 $ 1,582,240 Diversified Products Group 361,358 352,404 456,927 Final Mile Products 70,461 - - Corporate and Eliminations (13,040 ) (13,070 ) (11,679 ) Total $ 1,767,161 $ 1,845,444 $ 2,027,488 4Commercial Trailer ProductsCommercial Trailer Products segment sales as a percentage of our consolidated net sales and gross margin measured prior to intersegment eliminations were: Year Ended December 31, 2017 2016 2015 Percentage of net sales 75.7 % 81.0 % 77.6 % Percentage of gross profit 70.1 % 77.0 % 64.9 % The Commercial Trailer Products segment manufactures standard and customized dry van, refrigerated van, andvans, platform trailers and other transportation related equipment. Commercial Trailer Products’ transportation equipment is marketed under the Wabashcustomers who purchase directly from us or through independent dealers. We have been one of largest producers of van trailers in North America since 1994, with onemany of the most widely recognized brandslargest companies in the industry. We seek to identify and produce proprietary custom products that offer exceptional value to customers with the potential to generate higher profit margin than standardized products. We believe that we have the engineering and manufacturing capability to produce these products efficiently. We introduced our proprietary composite product, DuraPlateâ, in 1996 and have experienced widespread truck trailertrucking industry, acceptance. Since 2002, sales of our DuraPlateâ trailers have represented approximately 95% of our total new dry van trailer sales. We are a significant producer of refrigerated trailer products as well as other specialty products, including converter dollies. Through our Transcraft subsidiary we arethrough a network of the one the leading producers of steel and aluminum flatbed and dropdeck trailers. Ourindependent dealers. Commercial Trailer Products segment also operates a wood flooring production facility that manufactures laminated hard wood oak products for our van trailer products.Commercial Trailer Products’ transportation equipment is marketed under the Wabashâ, DuraPlateâ, DuraPlateHDâ, DuraPlateâ XD-35®, ArcticLite®, RoadRailer®, Transcraft® and Benson® trademarks directly to customers and through independent dealers. Historically, we have focused on our longstanding core customers representing many of the largest companies in the trucking industry, but have expanded this focus over the past several years to include numerous additional key accounts. Our relationships with our core customers have been central to our growth since inception. We have also actively pursued the diversification of our customer base through our network of independent dealers. For our van business we utilize a total of 27 independent dealers with approximately 73 locations throughout North America to market and distribute our trailers. We distribute our flatbed and dropdeck trailers through a network of 75 independent dealers with approximately 124 locations throughout North America. In addition, we maintain a used fleet sales center to focus on selling both large and small fleet trade packages to the wholesale market.Diversified Products segment sales as a percentage of our consolidated net sales and gross margin measured prior to intersegment eliminations were: Year Ended December 31, 2017 2016 2015 Percentage of net sales 20.3 % 19.0 % 22.4 % Percentage of gross profit 26.8 % 23.0 % 35.1 % 5ishas historically been comprised of four strategic business units: Tank Trailer, Process Systems, Composites, and Aviation &and Truck Equipment. On January 22, 2019, the Company announced that it completed a transaction to divest the Aviation and Truck Equipment business unit to Garsite Progress, LLC, an entity formed by AFI Partners, a New York-based private equity firm. The Tank Trailer business sells products through several brands including Walker Transport, Brenner® Tank, Bulk Internationaldesigns and Beall® Trailers. These brands represent leading positions inmanufactures liquid transportation systems, and include a full line ofincluding stainless steel and aluminum tank trailers, for the North American chemical, dairy, food and beverage, and petroleum and energy servicesservice markets. Tank Trailers are marketed under the Walker Transport, Brenner® Tank, Bulk International and Beall® Trailer brands. Our Process Systems business includes brands such as Walker® Engineered Productsdesigns and Extract Technology® and represent what we estimate to be leading positions inmanufactures isolators, stationary silos and downflow booths around the world for the chemical, dairy, food and beverage, pharmaceutical and nuclear markets. The Aviation & Truck Equipment business is a leading manufacturer of truck-mounted tanks used in the aviation, refined fuel, heating oil, propane and liquid waste industries with products offeredProcess Systems markets its product offerings under the GarsiteWalker® Engineered Products and Progress TankExtract Technology® brands. Our Composites business includes offerings under our DuraPlate® composite panel technology, which contains unique properties of strength and durability that can be utilized in numerous applications in addition to truck trailers and truck bodies. The Diversified Products segment has leveragedLeveraging our DuraPlate® panel technology, to developour Composites business has designed andCX™CX™, Ventix DRSTM™ and AeroFin XLTM®. In addition, we utilize our DuraPlate® technology in the production of truck bodies, overhead doors, foldable portable storage containers, truck boxes, decking systems, and other industrial applications. These DuraPlate® composite products are sold to original equipment manufacturers and aftermarket customers.The Diversified Products segment focuses on our commitment to expand our customer base, diversify our product offerings, end markets and revenues, and extend our market leadership by leveraging our intellectual property and technology, including our proprietary DuraPlate® panel technology, drawing on our core manufacturing expertise and making available products that are complementary to the truck and tank trailers and transportation equipment we offer. This segment includes a wide array of products and customer-specific solutions. Leveraging our intellectual property and technology and core manufacturing expertise into new applications and market sectors enables us to deliver greater value to our customers and shareholders.Through these brands and product offerings, our Diversified Products segment now serves a variety of end markets. We expect to continue to focus on diversifying our Diversified Products segment to enhance our business model, strengthen our revenues and become a more diverse company that can deliver greater value to our shareholders.was established after completing the Supreme acquisition on September 27, 2017. Since this date, Final Mile Products segment sales as a percentage of our consolidated net salesdesigns and gross margin measured prior to intersegment eliminations were:Year Ended December 31,2017Percentage of net sales4.0%Percentage of gross profit3.1%Supreme is one of the nation’s leading manufacturers of specialized commercial vehicles, includingmanufactures cutaway, and dry-freight, van bodies, refrigerated, units, and stake bodies. This acquisition allows us to accelerateaccelerated our growth and expandexpanded our presence in the final mile space, with increased distribution paths and greater customer reach, and supports our objectivemission to transform our business into a more diversified industrial manufacturer.enable customers to succeed with breakthrough ideas and solutions that help them move everything from first to final mile. Final Mile Product truck bodies are offered in aluminum, FiberPanel PW, FiberPanel HC, or DuraPlateKing®King®, Iner-City®Iner-City®, Spartan, as well as other Wabash brands that leverage our fleet-proven DuraPlate® technology utilized in dry van trailers. Our Final Mile Products also include our molded structural composite panels.truck bodies and fiberglass reinforced plywood used on some of our truck bodies. In addition, we have recently introduced our molded structural composites technology to our truck bodies. With the acquisition of Supreme, our truck body line was expanded to include Classes 2 through 5, allowing us to serve a large variety of end customers in the final mile space. TheFinal Mile Products sells both direct to customers and through a large independent dealer network.distributor network for truck bodies consistsstrategic growth, all supported by a company culture of more than 1,000 commercial dealers and a limited numbercontinuous improvement.INNOVATE ■ Continue innovation leadership ■ Develop new capabilities and capacity to enable growth ■ Improve durability and reduce weight with material technologies OPTIMIZE ■ Margin enhancement through integration, alignment and shared service activities ■ Utilize the Wabash Management System and lean manufacturing to drive margin enhancement through continuous focus on efficiency GROW ■ Expand Final Mile platform ■ Commercialize Molded Structural Composites refrigerated van and truck bodies ■ Increase business development capabilities truck equipment distributors.StrategyIn additionthese three pillars, we will be well-positioned to advance our commitment to deliver long-term profitable growth within each of our reportingreportable segments, our strategic initiatives include a focus on diversification efforts, both organicsupport margin enhancement through lean manufacturing principles and strategic, to further transformthe Wabash into a diversified industrial manufacturer with a higher growth and margin profileManagement System, and successfully deliver greater value to our shareholders. Organically, our focus is on profitably growingBy continuing to be an innovation leader in the transportation, logistics, and diversifying our operations by leveragingdistribution industries we expect to leverage our existing assets capabilities, and technologycapabilities into higher margin products and markets and thereby providingby delivering value-added customer solutions. Strategically, we continue to focus onOptimizing our transition into a more diversified industrial manufacturer, profitably growing and further broadening the product portfolio, we offer,operations and processes to enhance manufacturing efficiency and agility is expected to well-position the customersCompany to drive margin expansion and end markets we servereinforce our customer relationships. Growing strategically may diversify our revenue stream and strengthening our geographic presence. In addition to our acquisition of Supreme, future acquisitions may further provide us the opportunity to move forward on this strategic initiative and our long-term plan to become a more diversified industrial manufacturer. Our most recent acquisitions have enabledallow us to recognize top-lineleverage our technology across more markets.▪ Customer-focused solutions; ▪ Access to new technology and innovation; ▪ Strong management team that is a cultural fit; ▪ Aligned with our core competencies in purchasing, operations, distribution and product development; and ▪ Growth markets, whether end-markets or geographical, within the transportation, logistics, and distribution industries. improved profitability,initiatives and margin expansion; provided us access to additional markets while expanding our manufacturing footprint;create shareholder value. The objectives and allowed us to offer onegoals of the broadest product portfolios in the transportation equipment industry.Company’s capital allocation strategy are summarized below:Maintain Liquidity: 6 Debt Management: Reinvest for Growth: Dividends: Share Repurchases:
Industry and Competition
Wabash, Great Dane, Utility and Hyundai Translead, are generally viewed as the top manufacturers in U.S. trailer shipments by volume. Our share of U.S. total trailer shipments in 2017 was approximately 19%. indicators.
The table below sets forth new trailers shipped for Wabash and, as provided by Trailer Body Builders Magazine, the principal producers within North America. The data represents all segments of the industry, except containers and chassis. For the years included below, we have participated primarily in the van, platform, and tank trailer segments. Van trailer demand, the largest segment within the trailer industry, has recovered from a low of approximately 52,000 trailers in 2009 to an estimated 223,000 van trailers in 2017.
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| Wabash | 54,000 | 60,000 | 63,000 | 56,000 | 46,000 | |||||||||||||||
| Hyundai Translead | 58,000 | 49,000 | 43,000 | 34,000 | 27,000 | |||||||||||||||
| Great Dane | 46,000 | 48,000 | 52,000 | 48,000 | 44,000 | |||||||||||||||
| Utility | 43,000 | 46,000 | 49,000 | 41,000 | 39,000 | |||||||||||||||
| Stoughton | 15,000 | 16,000 | 15,000 | 13,000 | 12,000 | |||||||||||||||
| Other principal producers | 32,000 | 33,000 | 40,000 | 37,000 | 31,000 | |||||||||||||||
| Total Industry | 282,000 | 283,000 | 302,000 | 265,000 | 232,000 | (1) | ||||||||||||||
Our Final Mile Products segment competes in the specialized vehicle industry, which is highly competitive with only a few national competitors and many smaller, regional companies. As a result of this broad competition, we are often faced with competitive pricing pressures. Other competitive factors include quality of product, lead times, geographic proximity to customers, and the ability to manufacture a product customized to customer specifications. With our national presence, and diverse product offerings, and broad customer relationships, we believe that we are well positioned to meet the competitive challenges presented.
| ▪ | Long-Term Core Customer Relationships – We are the leading provider of trailers to a significant number of top tier trucking companies, generating a revenue base that has helped to sustain us as one of the market leaders. Our van products are preferred |
| ▪ | Technology and Innovation –We continue to be recognized by the trucking industry as a leader in developing technology to provide value-added solutions for our customers that reduce trailer operating costs, improve revenue opportunities, and solve unique transportation problems. Throughout our history, we have been and we expect we will continue to be a leading innovator in the design and production of trailers and related products. |
- Extended Service Life – operate three to five years longer;
- Lower Operating and Maintenance Costs – greater durability and performance;
- Less Downtime – higher utilization for fleets;
- Extended Warranty – warranty period for DuraPlateâ panels is ten years; and
- Improved Resale Value – higher trade-in and resale values.
| ▪ | Extended Service Life – operate three to five years longer; |
| ▪ | Lower Operating and Maintenance Costs – greater durability and performance; |
| ▪ | Less Downtime – higher utilization for fleets; |
| ▪ | Extended Warranty – warranty period for DuraPlate® panels is ten years; and |
| ▪ | Improved Resale Value – higher trade-in and resale values. |
We have also focused on a customer-centered approach in developing product enhancements for other industries we serve. Some of the more recent innovations include: the development of mobile clean rooms, or self-contained laboratories, which are configured to provide isolation and containment solutions into a rapidly deployable and flexible manufacturing facility for pharmaceutical and other technology applications; the development of a Refined Fuel truck with integrated Auxiliary Power Unit designed to improve fuel efficiency and prolong the useful operating life of fuel delivery vehicles; introduction of a prototype Side Impact Guard (SIG) designed to prevent passenger car under ride in side collisions, introduction of advanced materials to remove over 300 pounds fromDuraPlate® Cell Core technology, the standard Dry Van; introduction of RIG-16 offset rear under ride guard, and the introduction of the Truck Body line leveraging our fleet-proven DuraPlate® technology for dry truck bodies as well as the introduction of a revolutionary proprietary composite designed to improve weight and thermal efficiency in refrigerated truck body applications. We will also be introducing a new modified core DuraPlate to remove 300 pounds from a dry van trailer in 2018. ThisThese technology innovations will allow us to continue providing unrivaled value to our customers and differentiate Wabash from our competitors.
| ▪ | Significant |
| ▪ | Enterprise Lean and the Wabash Management System (WMS) – Safety, quality, |
| ▪ | Corporate Culture – We believe strong human capital acts as a competitive differentiator and our focus is not only on ensuring we have the right leaders in place to drive our strategic initiatives today, but also to nurture our talent pipeline to develop strong leaders for our company’s future. To that end, we benefit from an experienced, value-driven management team and dedicated |
| ▪ | Extensive Distribution Network– We utilize a network of 27 independent dealers with approximately |
Products
Commercial Trailer Products segment sales represented approximately 76%, 81% and 78% of our consolidated net sales in 2017, 2016 and 2015, respectively.
| ▪ | Dry Van Trailers. The dry van market represents our largest product line and includes trailers sold under the DuraPlate |
| ▪ | Platform Trailers. Platform trailers are sold under the Transcraft® and Benson® trademarks. Platform trailers consist of a trailer chassis with a flat or “drop” loading deck without permanent sides or a roof. These trailers are primarily utilized to haul steel coils, construction materials and large equipment. In addition to our all steel and combination steel and aluminum platform trailers, we also offer a premium all-aluminum platform trailer. |
| ▪ | Refrigerated Trailers. |
| ▪ | Specialty Trailers. These products include a wide array of specialty equipment and services generally focused on products that require a higher degree of customer specifications and requirements. These specialty products include converter dollies, Big Tire Hauler, and Steel Coil Hauler |
| ▪ | Aftermarket Parts and Service. Aftermarket component products are manufactured to provide continued support to our customers throughout the |
| ▪ | Used Trailers. These products includes the sale of used trailers through our used fleet sales center to facilitate new trailer sales with a focus on selling both large and small fleet trade packages to the wholesale market as well as through our branch network to enable us to |
| ▪ | Wood Products. We manufacture laminated hardwood oak flooring used primarily in our dry van trailer segment at our manufacturing operations located in Harrison, Arkansas. |
Diversified Products segment sales represented approximately 20%, 19% and 22% of our consolidated net sales in 2017, 2016 and 2015, respectively.
| ▪ | Tank Trailers.Tank Trailers currently has several principal brands dedicated to transportation products including Walker Transport, Brenner® Tank, Bulk Tank International, and Beall® Trailers. Equipment sold under these brands include stainless steel and aluminum liquid and dry bulk tank trailers and other transport solutions for the dairy, food and beverage, chemical, environmental, petroleum and refined fuel industries. We also provide parts and maintenance and repair services for tank trailers and other related equipment through our |
| ▪ | Walker Transport – Founded as the original Walker business in 1943, the Walker Transport brand includes stainless steel tank trailers for the dairy, food and beverage end markets. |
| ▪ | Brenner® Tank – Founded in 1900, Brenner®Tank manufactures stainless steel and aluminum tank trailers, dry bulk trailers, and fiberglass reinforced poly tank trailers, as well as vacuum tank trailers for the oil and gas, chemical, energy and environmental services end markets. |
| ▪ | Bulk Tank International – Manufactures stainless steel tank trailers for the oil and gas and chemical end markets. |
| ▪ | Beall® Trailers – With tank trailer production dating to 1928, the Beall® brand includes aluminum tank trailers and related tank trailer equipment for the dry bulk and petroleum end markets. |
| ▪ | Process Systems.Process Systems currently sells products under the Walker Engineered Products and Extract Technology® brands and specializes in the design and production of a broad range of products including: a portfolio of products for storage, mixing and blending, including process vessels, as well as round horizontal and vertical storage silo tanks; containment and isolation systems for the pharmaceutical, chemical, and nuclear industries, including custom designed turnkey systems and spare components for full service and maintenance contracts; containment systems for the pharmaceutical, chemical and biotech |
| ▪ | Walker Engineered Products – Since the 1960s, Walker has marketed stainless steel storage tanks and silos, mixers, and processors for the dairy, food and beverage, pharmaceutical, chemical, craft brewing, and biotech end markets under the Walker Engineered Products brand. |
| ▪ | Extract Technology® – Since 1981, the Extract Technology® brand has included stainless steel isolators and downflow booths, as well as custom-fabricated equipment, including workstations and drum booths for the pharmaceutical, fine chemical, biotech and nuclear end markets. |
| ▪ |
Composites. Our |
The Final Mile Products segment, established after the acquisition of Supreme hadin 2017, sales representing approximately 4% of our consolidated net sales in 2017. The Final Mile Products segment primarily includes the following products:
| ▪ | Signature Van Bodies.Signature van bodies range from |
| ▪ | Iner-City® Cutaway Van Bodies.An ideal route truck for a variety of commercial applications, the Iner-City bodies are manufactured on cutaway chassis which allow access from the cab to the cargo area. Borrowing many design elements from Supreme’s larger van body, the Iner-City is shorter in length |
| ▪ | Spartan Service Bodies.Built on a cutaway chassis and constructed of FiberPanel PW or DuraPlate®, the Spartan cargo van provides the smooth maneuverability of a commercial van with the full-height and spacious cargo area of a truck body. In lengths of |
| ▪ | Kold |
| ▪ | Stake Bodies.Stake bodies are flatbeds with various configurations of removable sides. The stake body is utilized for a broad range of agricultural and construction |
| ▪ | Final Mile Series and Cold Chain Series.Introduced in 2015, we have combined fleet-proven equipment designs and advanced materials to create a line of high performance refrigerated and dry freight truck bodies for Class 6, 7, and 8 chassis. The truck body product leverages our |
We have
| ▪ | Truckload Carriers: Averitt Express, |
| ▪ | Less-Than-Truckload Carriers: FedEx Corporation; Old Dominion Freight Lines, Inc.; R&L Carriers Inc.; Saia, Inc. |
| ▪ | Refrigerated Carriers: CR England, Inc.; K&B Transportation, Inc.; Prime, Inc.; and Southern Refrigerated Transport, Inc. |
| ▪ | Leasing Companies: Matlack Leasing; Penske Truck Leasing Company; Wells Fargo Equipment Finance, Inc.; and Xtra Lease, Inc. |
| ▪ | Private Fleets: C&S Wholesale Grocers, Inc.; Dollar General Corporation; and Safeway, Inc. |
| ▪ | Liquid Carriers: Dana Liquid Transport Corporation; Evergreen Tank Solutions LLC; Kenan Advantage Group, Inc.; Oakley Transport, Inc.; Quality Carriers, Inc.; Superior Tank, Inc.; and Trimac Transportation. |
.
Rent-A-Center.
| ▪ | Factory direct accounts; and |
| ▪ | Independent dealerships. |
months.
Canada.
We also hold or have applied for 4948 trademarks in the U.S. as well as 6463 trademarks in foreign countries. These trademarks include the Wabash®, Wabash National®, Transcraft®, Benson®, Extract Technology®, Beall®, Brenner®, and Supreme® brand names as well as trademarks associated with our proprietary products such as DuraPlate®, RoadRailer®, Transcraft Eagle®, Arctic Lite®, Kold King®, and Iner-City®. Additionally, we utilize several tradenames that are each well-recognized in their industries, including Walker Transport, Walker Stainless Equipment, Walker Engineered Products Garsite,and Bulk Tank International and Progress Tank.International. Our trademarks associated with additional proprietary products include MSC Technology™, MaxClearance® Overhead Door System, Trust Lock Plus®, EZ-7®, DuraPlate Aeroskirt®, Aeroskirt CX®, DuraPlate XD-35®, DuraPlate HD®, SolarGuard®, VentixDRS®, AeroFin®, AeroFin XL® and EZ-Adjust®. We believe these trademarks are important for the identification of our products and the associated customer goodwill; however, our business is not materially dependent on such trademarks.
Research and Development
Research and development expenses are charged to earnings as incurred and were $3.9 million, $6.4 million and $4.8 million in 2017, 2016 and 2015, respectively.
We believe strong human capital acts as a competitive differentiator and our focus is not only on ensuring we have the right leaders in place to drive our strategic initiatives today, but also to nurture our talent pipeline to develop strong leaders for Wabash’s future.
| Name | Age | Position | ||
| Brent L. Yeagy | President and Chief | |||
| M. Kristin Glazner | 42 | Senior Vice President and Chief Human Resources Officer | ||
| Melanie D. Margolin | 48 | Senior Vice President and General Counsel, Corporate Secretary | ||
| Kevin J. Page | Senior Vice President | |||
| Michael N. Pettit | Senior Vice President | |||
| Dustin T. Smith | Senior Vice President | |||
Richard J. Giromini.Brent L. Yeagy. Mr. Giromini has served as ourYeagy was appointed to President and Chief Executive Officer since January 2007, and served as our President from that date until October 2016. On December 14, 2017, Mr. Giromini notified the Company that he will step down from his position as Chief Executive Officer oneffective June 1,2, 2018. Mr. Giromini is expected to then continue his employment with the Company through June 1, 2019 to assist in the leadership transition. On June 1, 2019 Mr. Giromini will retire from the Company, and he will not stand for reelection to the Board of Directors at the 2019 Annual Meeting. Mr. Giromini joined the Company in July 2002, as Senior Vice President - Chief Operating Officer and served as our Executive Vice President and Chief Operating Officer from February 2005 until December 2005 when he was appointed President and a Director of the Company. Earlier experience includes 26 years in the transportation industry, having begun his career with General Motors Corporation (1976 – 1985), then serving in a variety of positions of increasing responsibility within the Tier 1 automotive and transportation sectors, most recently with Accuride Corporation (Senior Vice President and General Manager), AKW LP (President and CEO), and ITT Automotive (Director of Manufacturing). Mr. Giromini holds a Master of Science degree in Industrial Management and a Bachelor of Science degree in Mechanical and Industrial Engineering, both from Clarkson University. He is also a graduate of the Advanced Management Program at the Duke University Fuqua School of Management.
Brent L. Yeagy. Mr. Yeagy has served as ourhad been President and Chief Operating Officer, and a Director of the Company since October 2016. On December 15, 2017 the Board of Directors announced the appointment of Mr. Yeagy to servePreviously, he served as the Company’s President and Chief Executive Officer effective June 2, 2018. Mr. Yeagy had been Senior Vice President –- Group President of Commercial Trailer Products Group from June 2013 to October 2016. Previously, he served as2016 and Vice President and General Manager for the Commercial Trailer Products Group from 2010 to 2013. Mr. Yeagy has held numerous operations related roles since joining Wabash National in February 2003. Prior to joining the Company, Mr. Yeagy held various roles within Human Resources, Environmental Engineering and Safety Management for Delco Remy International from July 1999 through February 2003. Mr. Yeagy served in various Plant Engineering roles at Rexnord Corporation from December 1995 through June 1999. Mr. Yeagy is a veteran of the United States Navy, serving from 1991 to 1994. He received his Masters of Business Administration from Anderson University and his Master and Bachelor degrees in Science from Purdue University. He is also a graduate of the University of Michigan, Ross School of Business Program in Executive Management and the Stanford Executive Program.
William D. Pitchford. Mr. Pitchford was promoted to Senior Vice President – Human Resources and Assistant Secretary in June 2013. He joined the Company in December 2011 as Vice President – Human Resources with an extensive Human Resource background including executive leadership, talent management, training and development, labor relations, employee engagement, compensation design and organizational development. Prior to joining the Company, Mr. Pitchford served as Vice President - Human Resources for Rio Tinto Alcan Corporation in Chicago, Illinois, from January 2009 to December 2010 and was with Ford Motor Company for more than 30 years where he held a variety of key leadership positions including Human Resources Director, Labor Relations Director and Senior Human Resources Manager. Mr. Pitchford holds a Master of Arts degree in Human Resources from Central Michigan University and a Bachelor of Science degree from Indiana State University.
Dustin T. Smith
. Mr. SmithJeffery L. Taylor. Mr. Taylor was appointed Senior Vice President and Chief Financial Officer in January 2014. Mr. Taylor joined the company in July 2012 as Vice President of Finance and Investor Relations and was promoted to Vice President – Acting Chief Financial Officer and Treasurer in June 2013. Prior to joining the Company, Mr. Taylor was with King Pharmaceuticals, Inc. from May 2006 to July 2011 as Vice President, Finance – Technical Operations, and with Eastman Chemical Company from June 1997 to May 2006 where he served in various positions of increasing responsibility within finance, accounting, investor relations and business management, including its Global Business Controller – Coatings, Adhesives, Specialty Polymers & Inks. Mr. Taylor earned his Masters of Business Administration from the University of Texas at Austin and his Bachelor of Science in Chemical Engineering from Arizona State University.
could have a material adverse effect on our business, financial condition and results of operations.
results of operations.
Global economic weakness could negatively impacthave a material adverse effect on our operationsbusiness, financial condition and financial performance.
results of operations.
operations.
goals, and this may have a material adverse effect on our business, financial condition and results of operations.
We have a limited number of suppliers of raw materials and components; increases in the price of raw materials or the inability to obtain raw materials could adversely affect our results of operations.
We currently rely on a limited number of suppliers for certain key components and raw materials in the manufacturing of our products, such as tires, landing gear, axles, suspensions, specialty steel coil, stainless steel, plastic, aluminum and lumber. From time to time, there have been and may in the future be shortages of supplies of raw materials or components, or our suppliers may place us on allocation, which would have an adverse impact on our ability to meet demand for our products. Shortages and allocations may result in inefficient operations and a build-up of inventory, which can negatively affect our working capital position. In addition, price volatility in commodities we purchase that impacts the pricing of raw materials could have negative impacts on our operating margins. The loss of any of our suppliers or their inability to meet our price, quality, quantity and delivery requirements could have a significant adverse impact on our results of operations.
Volatility in the supply of vehicle chassis and other vehicle components could adversely affecthave a material adverse effect on our Final Mile Products business.
business, financial condition and results of operations.
operations.
Our Final Mile Products segment competes in the highly competitive specialized vehicle industry which may impact its financial results.
operations.
business, financial condition and results of operations.
of operations.
| ▪ | challenges caused by distance, language and cultural differences and by doing business with foreign agencies and governments; |
| ▪ | longer payment cycles in some countries; |
| ▪ | uncertainty regarding liability for services and content; |
| ▪ | credit risk and higher levels of payment fraud; |
| ▪ | currency exchange rate fluctuations and our ability to manage these fluctuations; |
| ▪ | foreign exchange controls that might prevent us from repatriating cash earned outside the U.S.; |
| ▪ | import and export requirements that may prevent us from shipping products or providing services to a particular market and may increase our operating costs; |
| ▪ | potentially adverse tax consequences; |
| ▪ | higher costs associated with doing business internationally; |
| ▪ | different expectations regarding working hours, work culture and work-related benefits; and |
| ▪ | different employee/employer relationships and the existence of workers’ councils and labor unions. |
Compliance with complex foreign and U.S. laws and regulations that apply to international operations may increase our cost of doing business and could expose us or our employees to fines, penalties and other liabilities. These numerous and sometimes conflicting laws and regulations include import and export requirements, content requirements, trade restrictions, tax laws, environmental laws and regulations, sanctions, internal and disclosure control rules, data privacy requirements, labor relations laws, and U.S. laws such as the Foreign Corrupt Practices Act and substantially equivalent local laws prohibiting corrupt payments to governmental officials and/or other foreign persons. Although we have policies and procedures designed to ensurecause compliance with these laws and regulations, there can be no assurance that our officers, employees, contractors or agents will not violate our policies. Any violation of the laws and regulations that apply to our operations and properties could result in, among other consequences, fines, environmental and other liabilities, criminal sanctions against us, our officers or our employees, and prohibitions on our ability to offer our products and services to one or more countries and could also materially damage our reputation, our brand, our efforts to diversify our business, our ability to attract and retain employees, our business and our operating results.
Disruption of our manufacturing operations wouldcould have an adverse effect on our financial condition and results of operations.
We manufacture our van trailer products at two facilities in Lafayette, Indiana, a flatbed trailer facility in Cadiz, Kentucky, a hardwood floor facility in Harrison, Arkansas, six liquid-transportation systems facilities in New Lisbon, Wisconsin; Fond du Lac, Wisconsin; Kansas City, Kansas; Portland, Oregon; and Queretaro, Mexico, three engineered products facilities in New Lisbon, Wisconsin; Elroy, Wisconsin; Huddersfield, United Kingdom, seven truck body facilities in Goshen, IN; Ligonier, IN; Cleburne, TX; Griffin, GA; Jonestown, PA; Moreno Valley, CA; and Lafayette, IN, and produce Composite products at facilities in Lafayette, Indiana and Frankfort, Indiana. An unexpected disruption in our production at any of these facilities for any length of time would have anmaterial adverse effect on our business, financial condition and results of operations.
operations.
financial condition and results of operations.
Regulations related to conflict-free minerals may force us to incur additional expenses
As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission adopted rules regarding disclosure of the use of certain minerals, known as conflict minerals, originating from the Democratic Republic of Congo or adjoining countries. These requirements require ongoing due diligence efforts and disclosure requirements. We may incur significant costs to determine the source of any such minerals used in our products. We may also incur costs with respect to potential changes to products, processes or sources of supply as a consequence of our diligence activities. Further, the implementation of these rules and their effect on customer and/or supplier behavior could adversely affect the sourcing, supply and pricing of materials used in our products, as the number of suppliers offering conflict-free minerals could be limited. We may incur additional costs or face regulatory scrutiny if we determine that some of our products contain materials not determined to be conflict-free or if we are unable to sufficiently verify the origins of all conflict minerals used in our products. Accordingly, compliance with these rulesother legal claims could have a material adverse effect on our business, results of operations and/or financial condition.
Product liability and other legal claims could have an adverse effect on our financial condition and results of operations.
An impairment in the carrying value of goodwill and other long-lived intangible assets could negatively affect our operating results.
| ▪ | the state of our business, competition, and changes in our industry; |
| ▪ | changes in the factors, assumptions, and other considerations made by our Board of Directors in reviewing and revising our dividend policy; |
| ▪ | our future results of operations, financial condition, liquidity needs, and capital resources; and |
| ▪ | our various expected cash needs, including cash interest and principal payments on our indebtedness, capital expenditures, the purchase price of acquisitions, and taxes. |
Changes to U.S. or foreign tax laws could affect our effective tax rate and our future profitability.
Act.
| ▪ | negatively affect our ability to pay principal and interest on our debt; |
| ▪ | increase our vulnerability to general adverse economic and industry conditions; |
| ▪ | limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments of interest and principal or to comply with any restrictive terms of our debt; |
| ▪ | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
| ▪ | impair our ability to obtain additional financing or to refinance our indebtedness in the future; |
| ▪ | place us at a competitive disadvantage compared to our competitors that may have proportionately less debt; and |
| ▪ | impact our ability to continue to fund a regular quarterly dividend. |
Risks Related to an Investment in Our Common Stock
| ▪ | 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 by our competitors; |
| ▪ | changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; |
| ▪ | operating results that vary from the expectations of securities analysts and investors; |
| ▪ | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, financings or capital commitments; |
| ▪ | changes in laws and regulations; |
| ▪ | general economic and competitive conditions; and |
| ▪ | changes in key management personnel. |
It
If weSupreme.
In addition, uncertainty about the effect of the acquisition on Supreme’s customers, employees or suppliers may have an adverse effect on Supreme. These uncertainties may impair our ability to attract, retain and motivate key personnel through the transition and into the future, and could cause disruptions in its relationships with customers, suppliers and other parties with which it deals.
We also expect that integration-related issuesour ongoing integration of Supreme will place a significant burden on our and Supreme’s management, employees, and internal resources, which could otherwise have been devoted to other business opportunities and improvements.
We These continued integration matters may have made certain assumptions relating to the Supreme acquisition that may prove to be materially inaccurate.
We have made certain assumptions relating to the Supreme acquisition which may prove to be inaccurate, including as a result of the failure to realize the expected benefits of the acquisition, higher than expected transaction and integration costs and unknown liabilities, as well as general economic and business conditions that adversely affect the combined company following the acquisition. These assumptions relate to numerous matters, including:
If one or more of these assumptions are incorrect, it could have a materialan adverse effect on us, our business, financial position and operating results and the perceived benefits from the acquisition may not be realized.
of operations.
| Location | Owned or Leased | Description of Activities at Location | Segment | |||
| Cadiz, Kentucky | Owned/Leased | Manufacturing | Commercial Trailer Products | |||
| Cleburne, Texas | Manufacturing | Final Mile Products | ||||
| Fond du Lac, Wisconsin | Owned | |||||
| Manufacturing | Diversified Products | |||||
| Goshen, Indiana | Owned | Manufacturing | Final Mile Products | |||
| Griffin, Georgia | Owned | Manufacturing | Final Mile Products | |||
| Jonestown, Pennsylvania | Manufacturing | Final Mile Products | ||||
| Lafayette, Indiana | Corporate Headquarters, Manufacturing, and | Commercial Trailer Products, Diversifed Products and Final Mile | ||||
| Moreno Valley, California | Owned/Leased | Manufacturing | Final Mile Products | |||
| New Lisbon, Wisconsin | ||||||
| Owned | Manufacturing | Diversified Products | ||||
| Owned | Manufacturing | Diversified Products | ||||
We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities, and are periodically subject to governmental examinations (including by regulatory and tax authorities), and information gathering requests (collectively, "governmental examinations").
We have recorded liabilities for certain On the basis of our outstanding legalinformation currently available to us, management does not believe that existing proceedings and governmental examinations. A liability is accrued when it is both (a) probable that a loss with respect to the legal proceeding has occurred and (b) the amount of loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the liability that has been previously accrued. These legal proceedings, as well as governmental examinations, involve various lines of business and a variety of claims (including, but not limited to, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against us specify the damages claimed by the plaintiff, many seek a not-yet-quantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against Wabash is stated, the claimed amount may be exaggerated and/or unsupported. As a result, it is not currently possible to estimate a range of possible loss beyond previously accrued liabilities relating to some matters including those described below. Such previously accrued liabilities may not represent our maximum loss exposure. The legal proceedings and governmental examinations underlying the estimated rangeinvestigations will change from time to time and actual results may vary significantly from the currently accrued liabilities.
Based on our current knowledge, and taking into consideration litigation-related liabilities, we believe we are not a party to, nor are any of our properties the subject of, any pending legal proceeding or governmental examination other than the matters below, which are addressed individually, that could have a material adverse effectimpact on our consolidated financial condition or liquidity if determined in a manner adverse to us.the Company. However, in light of the uncertainties involved in such matters the ultimate outcome of a particular matterare unpredictable, and we could be material toincur judgments or enter into settlements for current or future claims that could materially and adversely affect our operating results for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.financial statements. Costs associated with the litigation and settlements of legal matters are reported withinGeneral and Administrative Expenses in the Condensed Consolidated Statements 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 Curitiba in the State of Paraná, Brazil. Because of the bankruptcy of BK, this proceeding is now pending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99).
The case grows out of a joint venture agreement between BK and Wabash related to marketing of RoadRailer trailers in Brazil and other areas of South America. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the joint venture was dissolved. BK subsequently filed its lawsuit against Wabash alleging that it was forced to terminate business with other companies because of the exclusivity and non-compete clauses purportedly found in the joint venture agreement. BK asserted damages, exclusive of any potentially court-imposed interest or inflation adjustments, of approximately R$20.8 million (Brazilian Reais). BK did not change the amount of damages it asserted following its filing of the case in 2001.
A bench (non-jury) trial was held on March 30, 2010 in Curitiba, Paraná, Brazil. On November 22, 2011, the Fourth Civil Court of Curitiba partially granted BK’s claims, and ordered Wabash to pay BK lost profits, compensatory, economic and moral damages in excess of the amount of compensatory damages asserted by BK. The total ordered damages amount was approximately R$26.7 million (Brazilian Reais), which was approximately $8.1 million U.S. dollars using current exchange rates and exclusive of any potentially court-imposed interest, fees or inflation adjustments. On October 5, 2016, the Court of Appeals re-heard all facts and legal questions presented in the case, and ruled in favor of Wabash on all claims at issue. In doing so, the Court of Appeals dismissed all claims against Wabash and vacated the judgment and damages amounts previously ordered by the Fourth Civil Court of Curitiba. On September 30, 2017, BK filed its notice for a special appeal of the Court of Appeals ruling to the Superior Court of Justice and the Supreme Federal Court. However, unless these higher courts find in favor of BK on any of its claims, the judgment of the Court of Appeals is final. As a result of the Court of Appeals ruling, Wabash does not expect that this proceeding will have a material adverse effect on its financial condition or results of operations; however, it will continue to monitor these legal proceedings.
Intellectual Property
In October 2006, we filed a patent infringement suit against Vanguard National Corporation (“Vanguard”) regarding our U.S. Patent Nos. 6,986,546 and 6,220,651 in the U.S. District Court for the Northern District of Indiana (Civil Action No. 4:06-cv-135). We amended the Complaint in April 2007. In May 2007, Vanguard filed its Answer to the Amended Complaint, along with Counterclaims seeking findings of non-infringement, invalidity, and unenforceability of the subject patents. We filed a reply to Vanguard’s counterclaims in May 2007, denying any wrongdoing or merit to the allegations as set forth in the counterclaims. The case was stayed by agreement of the parties while the U.S. Patent and Trademark Office (“Patent Office”) undertook a reexamination of U.S. Patent No. 6,986,546. In June 2010, the Patent Office notified Wabash that the reexamination was completed and the Patent Office reissued U.S. Patent No. 6,986,546 without cancelling any claims of the patent. The parties have not yet petitioned the Court to lift the stay, and it is unknown at this time when the parties may do so.
We believe that our claims against Vanguard have merit and that the claims asserted by Vanguard are without merit. We intend to vigorously defend our position and intellectual property. We believe that the resolution of this lawsuit will not have a material adverse effect on our financial position, liquidity or future results of operations. However, at this stage of the proceeding, no assurance can be given as to the ultimate outcome of the case.
Walker Acquisition
In connection with our acquisition of Walker in May 2012, there is an outstanding claim of approximately $2.9 million for unpaid benefits owed by Walker that is currently in dispute and that, if required to be paid by us, is not expected to have a material adverse effect on our financial condition or results of operations.
Environmental Disputes
In January 2006, we
Supreme Litigation
Prior to our acquisition of Supreme, a complaint was filed against Supreme Corporation, a subsidiary of Supreme, in a suit (SVI, Inc. v. Supreme Corporation, Hometown Trolley (a/k/a Double K, Inc.) and Dustin Pence) in the United States District Court, District of Nevada on May 16, 2016. The plaintiff is Supreme’s former trolley distributor. The plaintiff filed an amended complaint on January 3, 2017, which alleges that Supreme’s sale of its trolley assets to another trolley manufacturer was improper. Supreme filed a motion to dismiss, which was granted in part on May 30, 2017. The remaining claims alleged against Supreme include: (i) misappropriation of trade secrets; (ii) civil conspiracy/collusion; (iii) tortious interference with contractual relationships; (iv) breach of contract; and (v) breach of the covenant of good faith and fair dealing. The plaintiff alleges damages amounting to approximately $40 million. However, due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; and, further, management believes that the allegations are without merit and is vigorously defending the matter. As a result, management does not believe this matter will have a material adverse effect on our financial condition or results of operations.
Prior to our acquisition of Supreme on November 4, 2016, a putative class action lawsuit was filed against our subsidiary, Supreme, Mark D. Weber (Supreme’s former Chief Executive Officer) and Matthew W. Long (Supreme’s former Chief Financial Officer) in the United States District Court for the Central District of California alleging the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by making material, misleading statements in July 2016 regarding projected backlog. The plaintiff seeks to recover unspecified damages. On February 14, 2017, the court transferred the venue of the case to the Northern District of Indiana upon the joint stipulation of the plaintiff and the defendants. An amended complaint was filed on April 24, 2017 challenging statements made during a putative class period of October 22, 2015 through October 21, 2016. Due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; however, at this time, management believes that the allegations are without merit and is vigorously defending the matter. As a result, management does not believe this matter will have a material adverse effect on our financial condition or results of operations.
596.
High and low stock prices as reported on the New York Stock Exchange for the last two years were:
| High | Low | |||||||
| 2017 | ||||||||
| First Quarter | $ | 22.21 | $ | 15.79 | ||||
| Second Quarter | $ | 24.16 | $ | 19.01 | ||||
| Third Quarter | $ | 23.81 | $ | 18.25 | ||||
| Fourth Quarter | $ | 23.12 | $ | 18.38 | ||||
| 2016 | ||||||||
| First Quarter | $ | 13.57 | $ | 9.68 | ||||
| Second Quarter | $ | 14.97 | $ | 11.81 | ||||
| Third Quarter | $ | 14.72 | $ | 12.23 | ||||
| Fourth Quarter | $ | 16.30 | $ | 10.74 | ||||
Comparative of Cumulative Total Return
2019
Base Period December 31, | Indexed Returns Years ended December 31, | |||||||||||
| Company/Index | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||
| Wabash National Corporation | $100.00 | $95.71 | $127.99 | $177.51 | $108.80 | $125.59 | ||||||
| S&P 500 Index | $100.00 | $99.27 | $108.74 | $129.86 | $121.76 | $156.92 | ||||||
| Dow Jones Transportation Index | $100.00 | $82.15 | $98.95 | $116.11 | $100.33 | $119.27 | ||||||
The Company’s share repurchase program (“Repurchase Program”) was approved by our Board of Directors and
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Amount That May Yet Be Purchased Under the Plans or Programs ($ in millions) | ||||||||||||
| October 2017 | 1,999 | $ | 11.81 | 0 | $ | 80.7 | ||||||||||
| November 2017 | 920,697 | $ | 19.36 | 920,697 | $ | 62.8 | ||||||||||
| December 2017 | 498,474 | $ | 20.09 | 493,651 | $ | 52.9 | ||||||||||
| Total | 1,421,170 | $ | 19.60 | 1,414,348 | $ | 52.9 | ||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Amount That May Yet Be Purchased Under the Plans or Programs ($ in millions) | ||||||||||
| October 2019 | 75,090 | $ | 13.40 | 68,547 | $ | 79.1 | ||||||||
| November 2019 | 126,476 | $ | 15.72 | 126,476 | $ | 77.1 | ||||||||
| December 2019 | 515,291 | $ | 15.64 | 512,438 | $ | 69.1 | ||||||||
| Total | 716,857 | $ | 15.42 | 707,461 | $ | 69.1 | ||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Statement of Comprehensive Income Data: | ||||||||||||||||||||
| Net sales | $ | 1,767,161 | $ | 1,845,444 | $ | 2,027,489 | $ | 1,863,315 | $ | 1,635,686 | ||||||||||
| Cost of sales | 1,506,286 | 1,519,910 | 1,724,046 | 1,630,681 | 1,420,563 | |||||||||||||||
| Gross profit | $ | 260,875 | $ | 325,534 | $ | 303,443 | $ | 232,634 | $ | 215,123 | ||||||||||
| Selling, general and administrative expenses | 103,413 | 101,399 | 100,728 | 88,370 | 89,263 | |||||||||||||||
| Amortization of intangibles | 17,041 | 19,940 | 21,259 | 21,878 | 21,786 | |||||||||||||||
| Acquisition expenses | 9,605 | - | - | - | 883 | |||||||||||||||
| Impairment of goodwill and other intangibles | - | 1,663 | 1,087 | - | - | |||||||||||||||
| Income from operations | $ | 130,816 | $ | 202,532 | $ | 180,369 | $ | 122,386 | $ | 103,191 | ||||||||||
| Interest expense | (16,400 | ) | (15,663 | ) | (19,548 | ) | (22,165 | ) | (26,308 | ) | ||||||||||
| Other, net | 8,122 | (1,452 | ) | 2,490 | (1,759 | ) | 740 | |||||||||||||
| Income before income taxes | $ | 122,538 | $ | 185,417 | $ | 163,311 | $ | 98,462 | $ | 77,623 | ||||||||||
| Income tax expense (benefit) | 11,116 | 65,984 | 59,022 | 37,532 | 31,094 | |||||||||||||||
| Net income | $ | 111,422 | $ | 119,433 | $ | 104,289 | $ | 60,930 | $ | 46,529 | ||||||||||
| Dividends declared per share | $ | 0.255 | $ | 0.060 | $ | - | $ | - | $ | - | ||||||||||
| Basic net income per common share | $ | 1.88 | $ | 1.87 | $ | 1.55 | $ | 0.88 | $ | 0.67 | ||||||||||
| Diluted net income per common share | $ | 1.78 | $ | 1.82 | $ | 1.50 | $ | 0.85 | $ | 0.67 | ||||||||||
| Balance Sheet Data: | ||||||||||||||||||||
| Working capital | $ | 292,723 | $ | 314,791 | $ | 318,430 | $ | 298,802 | $ | 232,638 | ||||||||||
| Total assets | $ | 1,351,513 | $ | 898,733 | $ | 950,126 | $ | 928,651 | $ | 912,245 | ||||||||||
| Total debt and capital leases | $ | 551,413 | $ | 237,836 | $ | 315,633 | $ | 332,527 | $ | 370,595 | ||||||||||
| Stockholders' equity | $ | 506,063 | $ | 472,391 | $ | 439,811 | $ | 390,832 | $ | 322,379 | ||||||||||
| Years Ended December 31, | |||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| (dollars in thousands, except per share data) | |||||||||||||||||||
| Statement of Operations Data: | |||||||||||||||||||
| Net sales | $ | 2,319,136 | $ | 2,267,278 | $ | 1,767,161 | $ | 1,845,444 | $ | 2,027,489 | |||||||||
| Cost of sales | 2,012,754 | 1,983,627 | 1,506,286 | 1,519,910 | 1,724,046 | ||||||||||||||
| Gross profit | 306,382 | 283,651 | 260,875 | 325,534 | 303,443 | ||||||||||||||
| Selling, general and administrative expenses | 143,125 | 128,160 | 103,413 | 101,399 | 100,728 | ||||||||||||||
| Amortization of intangibles | 20,471 | 19,468 | 17,041 | 19,940 | 21,259 | ||||||||||||||
| Acquisition expenses | — | 68 | 9,605 | — | — | ||||||||||||||
| Impairment | — | 24,968 | — | 1,663 | 1,087 | ||||||||||||||
| Income from operations | 142,786 | 110,987 | 130,816 | 202,532 | 180,369 | ||||||||||||||
| Interest expense | (27,340 | ) | (28,759 | ) | (16,400 | ) | (15,663 | ) | (19,548 | ) | |||||||||
| Other, net | 2,285 | 13,776 | 8,122 | (1,452 | ) | 2,490 | |||||||||||||
| Income before income taxes | 117,731 | 96,004 | 122,538 | 185,417 | 163,311 | ||||||||||||||
| Income tax expense | 28,156 | 26,583 | 11,116 | 65,984 | 59,022 | ||||||||||||||
| Net income | $ | 89,575 | $ | 69,421 | $ | 111,422 | $ | 119,433 | $ | 104,289 | |||||||||
| Dividends declared per share | $ | 0.320 | $ | 0.305 | $ | 0.255 | $ | 0.060 | $ | — | |||||||||
| Basic net income per common share | $ | 1.64 | $ | 1.22 | $ | 1.88 | $ | 1.87 | $ | 1.55 | |||||||||
| Diluted net income per common share | $ | 1.62 | $ | 1.19 | $ | 1.78 | $ | 1.82 | $ | 1.50 | |||||||||
| Balance Sheet Data: | |||||||||||||||||||
| Working capital | $ | 282,011 | $ | 277,743 | $ | 292,723 | $ | 314,791 | $ | 318,430 | |||||||||
| Total assets | $ | 1,304,591 | $ | 1,304,393 | $ | 1,351,513 | $ | 898,733 | $ | 950,126 | |||||||||
| Total debt and finance leases | $ | 456,091 | $ | 505,911 | $ | 551,413 | $ | 237,836 | $ | 315,633 | |||||||||
| Stockholders’ equity | $ | 520,988 | $ | 473,849 | $ | 506,063 | $ | 472,391 | $ | 439,811 | |||||||||
As a result of the acquisition of Supreme in the third quarter of 2017, we now manage our business in three segments: Commercial Trailer Products, Diversified Products, and Final Mile Products. The Commercial Trailer Products segment manufactures standard and customized van and platform trailers and other transportation related equipment for customers who purchase directly from us or through independent dealers. The Diversified Products segment, comprised of fourthree strategic business units including, Tank Trailer, Aviation & Truck Equipment, Process Systems, and Composites, focuses on our commitment to expand our customer base and diversify our product
2017 provided
The outlook for the overall trailer market for 2018 continues2020 indicates a softer demand environment compared to indicate a strong demand environment. In fact,the last several years. However, the most recent estimates from industry forecasters, ACT and FTR, indicate demand levels expected to be in excess of the estimated replacement demand in every year through 2022.2024. More specifically, ACT is currently estimating 20182020 demand will be approximately 299,000239,000 trailers, an increasea decrease of 4.3%28.3% as compared to the previous year period,2019, with 20192021 through 20222024 industry demand levels ranging between 256,000241,900 and 285,000283,600 trailers. In addition, FTR anticipates trailer production for 2018 to remain strong2020 at approximately 290,000270,000 trailers, an increasea decrease of 1.8%17.9% as compared to 20172019 levels. This continued strongIn addition, industry forecasters indicate that further reductions in demand environment for new trailer equipment as well asare unlikely and that production has shifted to a more sustainable rate from the positive economic andhigh levels the last couple years.
In spite of a strong forecasted demand environment, there remainare downside risks relating to issues with both the domestic and global economies, including the housing, energy and construction-related markets in the U.S. Other potential risks as we proceed into 2018 will2020 primarily relate to our ability to effectively manage our manufacturing operations as well as the cost and supply of raw materials, commodities and components. Significant increases in the cost of certain commodities, raw materials or components have had, and may continue to have, an adverse effect on our results of operations. As has been our practice, we will endeavor to pass raw material and component price increases to our customers in addition to continuing our cost management and hedging activities in an effort to minimize the risk that changes in material costs could have on our operating results. In addition, we rely on a limited number of
We remain committed to enhancing and diversifying our business model through the organic and strategic initiatives discussed above in the Annual Report. We believe we remain well-positioned for long-term success in the transportation industry because: (1) our core customers are among the dominant participants in the trucking industry; (2) our DuraPlate® and other industry leading brands continue to have a strong market acceptance; (3) our focus is on developing solutions that reduce our customers’ trailer maintenance and operating costs providing the best overall value; and (4) our presence throughout North America utilizing our extensive dealer network to market and sell our products. Continuing to identify attractive opportunities to leverage our core competencies, proprietary technology and core manufacturing expertise into new applications and end markets enables us to deliver greater value to our customers and shareholders.
| Internal performance. Our primary internal quality measurement is Process Yield. Process Yield is a performance metric that measures the impact of all aspects of the business on our ability to ship our products at the end of the production process. As with previous years, the expectations of the highest quality product continue to increase while maintaining Process Yield performance and reducing rework. In addition, we currently maintain an ISO 9001 registration of our Quality Management System at our Lafayette operations. |
| ▪ | External performance. We actively track our warranty claims and costs to identify and drive improvement opportunities in quality and reliability. Early life cycle warranty claims for our van trailers are trended for performance monitoring. Using a |
| During the past several years, |
| ▪ | Through deployment of the Wabash Management System, all of our business reporting segments have focused on increasing velocity at all our manufacturing locations. We have engaged in extensive lean training and deployed purposeful capital to accelerate our productivity initiatives. |
Truck transportation
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||
| New Trailer Shipments | 204,000 | 232,000 | 234,000 | 269,000 | 308,000 | 286,000 | 290,000 | 323,000 | 328,000 | |||||||||||||||||
| Year-Over-Year Change (%) | 64 | % | 14 | % | 1 | % | 15 | % | 14 | % | (7 | %) | 1 | % | 11 | % | 2 | % | ||||||||
| ▪ | The |
| ▪ | In December 2017, the California Air Resource Board (“CARB”) |
| While we believe the need for trailer equipment will be positively impacted by the legislative and regulatory changes addressed above, these demand drivers could be offset by factors that contribute to the increased concentration and density of |
| ▪ | Trucking company profitability, which can be influenced by factors such as fuel prices, freight tonnage volumes, and government regulations, is highly correlated with the overall economy of the U.S. |
| ▪ | Fleet equipment utilization has been rising due to increasing freight volumes, new government regulations and shortages of qualified truck drivers. As a result, trucking companies are under increased pressure to look for alternative ways to move freight, leading to more intermodal freight movement. We believe that railroads are at or near capacity, which will limit their ability to respond to freight demand pressures. Therefore, we expect that the majority of freight in our industry will continue to be moved by truck and, according to ATA, while trucking’s share of total freight tonnage will decrease slightly in 2030 from the current year, freight tonnage carried by trucks is expected to increase |
Results of Operations
| Years Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Cost of sales | 85.2 | 82.0 | 85.0 | |||||||||
| Gross profit | 14.8 | 18.0 | 15.0 | |||||||||
| General and administrative expenses | 4.4 | 4.0 | 3.6 | |||||||||
| Selling expenses | 1.5 | 1.5 | 1.3 | |||||||||
| Amortization of intangibles | 1.0 | 1.1 | 1.1 | |||||||||
| Other Operating Expenses | 0.5 | 0.1 | 0.1 | |||||||||
| Income from operations | 7.4 | 11.3 | 8.9 | |||||||||
| Interest expense | (1.0 | ) | (0.8 | ) | (0.9 | ) | ||||||
| Other, net | 0.5 | (0.1 | ) | 0.1 | ||||||||
| Income before income taxes | 6.9 | 10.4 | 8.1 | |||||||||
| Income tax expense (benefit) | 0.6 | 3.6 | 3.1 | |||||||||
| Net income | 6.3 | % | 6.8 | % | 5.0 | % | ||||||
2017
| Years Ended December 31, | ||||||||
| 2019 | 2018 | 2017 | ||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||
| Cost of sales | 86.8 | % | 87.5 | % | 85.2 | % | ||
| Gross profit | 13.2 | % | 12.5 | % | 14.8 | % | ||
| General and administrative expenses | 4.7 | % | 4.2 | % | 4.4 | % | ||
| Selling expenses | 1.5 | % | 1.5 | % | 1.5 | % | ||
| Amortization of intangibles | 0.9 | % | 0.8 | % | 1.0 | % | ||
| Other operating expenses | — | % | 1.1 | % | 0.5 | % | ||
| Income from operations | 6.2 | % | 4.9 | % | 7.4 | % | ||
| Interest expense | (1.2 | )% | (1.3 | )% | (1.0 | )% | ||
| Other, net | 0.1 | % | 0.6 | % | 0.5 | % | ||
| Income before income taxes | 5.1 | % | 4.2 | % | 6.9 | % | ||
| Income tax expense | 1.2 | % | 1.1 | % | 0.6 | % | ||
| Net income | 3.9 | % | 3.1 | % | 6.3 | % | ||
2018
| Year Ended December 31, | ||||||||||||||||
| (prior to elimination of intersegment sales) | Change | |||||||||||||||
| 2017 | 2016 | $ | % | |||||||||||||
| Sales by Segment | ||||||||||||||||
| Commercial Trailer Products | $ | 1,348,382 | $ | 1,506,110 | $ | (157,728 | ) | (10.5 | ) | |||||||
| Diversified Products | 361,358 | 352,404 | 8,954 | 2.5 | ||||||||||||
| Final Mile Products | 70,461 | - | 70,461 | |||||||||||||
| Eliminations | (13,040 | ) | (13,070 | ) | ||||||||||||
| Total | $ | 1,767,161 | $ | 1,845,444 | $ | (78,283 | ) | (4.2 | ) | |||||||
| New Trailers | (units) | |||||||||||||||
| Commercial Trailer Products | 52,800 | 58,850 | (6,050 | ) | (10.3 | ) | ||||||||||
| Diversified Products | 2,250 | 2,100 | 150 | 7.1 | ||||||||||||
| Final Mile Products | - | - | ||||||||||||||
| Eliminations | - | - | ||||||||||||||
| Total | 55,050 | 60,950 | (5,900 | ) | (9.7 | ) | ||||||||||
| Used Trailers | (units) | |||||||||||||||
| Commercial Trailer Products | 1,050 | 950 | 100 | 10.5 | ||||||||||||
| Diversified Products | 100 | 100 | - | - | ||||||||||||
| Final Mile Products | - | - | ||||||||||||||
| Eliminations | - | - | ||||||||||||||
| Total | 1,150 | 1,050 | 100 | 9.5 | ||||||||||||
| Year Ended December 31, | Change | |||||||||||||
| 2019 | 2018 | Amount | % | |||||||||||
| (prior to elimination of intersegment sales) | ||||||||||||||
| Sales by Segment | ||||||||||||||
| Commercial Trailer Products | $ | 1,521,541 | $ | 1,536,939 | $ | (15,398 | ) | (1.0 | %) | |||||
| Diversified Products | 384,516 | 393,971 | (9,455 | ) | (2.4 | %) | ||||||||
| Final Mile Products | 441,910 | 358,249 | 83,661 | 23.4 | % | |||||||||
| Eliminations | (28,831 | ) | (21,881 | ) | ||||||||||
| Total | $ | 2,319,136 | $ | 2,267,278 | $ | 51,858 | 2.3 | % | ||||||
| New Trailers | (units) | |||||||||||||
| Commercial Trailer Products | 54,650 | 59,500 | (4,850 | ) | (8.2 | %) | ||||||||
| Diversified Products | 2,850 | 2,650 | 200 | 7.5 | % | |||||||||
| Total | 57,500 | 62,150 | (4,650 | ) | (7.5 | %) | ||||||||
| Used Trailers | (units) | |||||||||||||
| Commercial Trailer Products | 75 | 950 | (875 | ) | (92.1 | %) | ||||||||
| Diversified Products | 75 | 150 | (75 | ) | (50.0 | %) | ||||||||
| Total | 150 | 1,100 | (950 | ) | (86.4 | %) | ||||||||
a stronger focus on servicing this market.
trailer parts and accessories.
market, which included opening a new facility in 2019.
Diversified Products segment cost of sales, prior to the elimination of intersegment sales, was $291.2$309.9 million in 2017,2019, a decrease of $15.6 million, or 4.8%, compared to 2018. This decrease was the result of the divestiture of the AVTE business which resulted in a $32.8 million decrease in cost of sales which was partially offset by a $17.2 million increase in material costs and other manufacturing costs in 2019 compared to 2018, which is in line with the increase in new trailer shipments.
Final Mile Product segment cost of sales was $62.3 million in 2017 for this newly created segment.
| Year Ended December 31, | ||||||||||||||||
| Change | ||||||||||||||||
| 2017 | 2016 | $ | % | |||||||||||||
| Gross Profit by Segment: | ||||||||||||||||
| Commercial Trailer Products | $ | 183,912 | $ | 253,274 | $ | (69,362 | ) | (27.4 | ) | |||||||
| Diversified Products | 70,159 | 75,630 | (5,471 | ) | (7.2 | ) | ||||||||||
| Final Mile Products | 8,150 | - | 8,150 | |||||||||||||
| Corporate and Eliminations | (1,346 | ) | (3,371 | ) | 2,025 | |||||||||||
| Total | $ | 260,875 | $ | 325,533 | $ | (64,658 | ) | (19.9 | ) | |||||||
| Year Ended December 31, | Change | |||||||||||||
| 2019 | 2018 | $ | % | |||||||||||
| Gross Profit by Segment | ||||||||||||||
| Commercial Trailer Products | $ | 177,190 | $ | 168,343 | $ | 8,847 | 5.3 | % | ||||||
| Diversified Products | 74,588 | 68,428 | 6,160 | 9.0 | % | |||||||||
| Final Mile Products | 57,815 | 48,771 | 9,044 | 18.5 | % | |||||||||
| Corporate and Eliminations | (3,211 | ) | (1,891 | ) | (1,320 | ) | ||||||||
| Total | $ | 306,382 | $ | 283,651 | $ | 22,731 | 8.0 | % | ||||||
operating costs.
sales volumes.
2019, compared to 13.6% in 2018. The increase in gross profit compared to
2018 was primarily driven by higher sales volumes and our pricing efforts. The 50 basis point decrease in gross margin is primarily due to increased material costs as a result of a higher take rate on lower margin options.2018.
Amortization of Intangibles
Acquisition Expenses
Acquisition expenses totaling $9.62013, and Supreme in September 2017.
business.
in 2018.
locations throughout
2018.2016 Compared to 2015
Net Sales
Net sales in 2016 decreased $182.0 million, or 9.0%, compared to the 2015 period. By business segment, net sales prior to intersegment eliminations and related units sold were as follows (dollars in thousands):
| Year Ended December 31, | ||||||||||||||||
| (prior to elimination of intersegment sales) | Change | |||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| Sales by Segment | ||||||||||||||||
| Commercial Trailer Products | $ | 1,506,110 | $ | 1,582,241 | $ | (76,131 | ) | (4.8 | ) | |||||||
| Diversified Products | 352,404 | 456,927 | (104,523 | ) | (22.9 | ) | ||||||||||
| Eliminations | (13,070 | ) | (11,679 | ) | ||||||||||||
| Total | $ | 1,845,444 | $ | 2,027,489 | $ | (182,045 | ) | (9.0 | ) | |||||||
| New Trailers | (units) | |||||||||||||||
| Commercial Trailer Products | 58,850 | 61,300 | (2,450 | ) | (4.0 | ) | ||||||||||
| Diversified Products | 2,100 | 3,400 | (1,300 | ) | (38.2 | ) | ||||||||||
| Eliminations | - | - | ||||||||||||||
| Total | 60,950 | 64,700 | (3,750 | ) | (5.8 | ) | ||||||||||
| Used Trailers | (units) | |||||||||||||||
| Commercial Trailer Products | 950 | 1,900 | (950 | ) | (50.0 | ) | ||||||||||
| Diversified Products | 100 | 150 | (50 | ) | (33.3 | ) | ||||||||||
| Eliminations | - | - | ||||||||||||||
| Total | 1,050 | 2,050 | (1,000 | ) | (48.8 | ) | ||||||||||
Commercial Trailer Products segment sales, prior to the elimination of intersegment sales, were $1.5 billion in 2016, a decrease of $76.1 million, or 4.8%, compared to 2015. The decrease in sales was primarily due to a 4.0% decrease in new trailer shipments as 58,850 trailers were shipped in 2016 compared to 61,300 trailer shipments in 2015. Used trailer sales decreased $19.0 million, or 61.3%, compared to 2015 due to decreased availability and selective management of product through fleet trade packages as approximately 950 fewer used trailers shipped in 2016 as compared to the prior year. Parts and service sales in 2016 decreased $4.3 million, or 7.1%, compared to 2015 primarily due to fewer retail branch locations throughout 2016 as compared to the prior year.
Diversified Products segment sales, prior to the elimination of intersegment sales, were $352.4 million in 2016, down $104.5 million, or 22.9%, compared to 2015. New trailer sales decreased $88.4 million, or 40.1%, due to a 38.2% decrease in new trailer shipments, as approximately 2,100 trailers were shipped in 2016 compared to 3,400 trailers shipped in 2015. Sales of our components, parts and service product offerings in 2016 were comparable to 2015. Equipment and other sales decreased $13.5 million, or 11.1%, due to lower demand for our non-trailer truck mounted equipment and other engineered products.
Cost of Sales
Cost of sales was $1.5 billion, a decrease of $204.1 million, or 11.8%, as compared to 2015. Cost of sales is comprised of material costs, a variable expense, and other manufacturing costs, comprised of both fixed and variable expenses, including direct and indirect labor, outbound freight, and overhead expenses.
Commercial Trailer Products segment cost of sales, prior to the elimination of intersegment sales, was $1.3 billion in 2016, a decrease of $131.6 million, or 9.5%, compared to 2015. The decrease was primarily driven by a $131.2 million reduction in materials costs attributable to lower new trailer production volumes, as well as lower commodity costs and continued optimization through product design and sourcing.
Diversified Products segment cost of sales, prior to the elimination of intersegment sales, was $276.8 million in 2016, an decrease of $73.1 million, or 20.9%, compared to 2015. The decrease was primarily driven by a $58.7 million reduction in materials costs and a $14.4 million decrease in other manufacturing due primarily to decreased sales volumes resulting from weaker tank trailer demand, lower material costs and continued operational efficiencies as compared to 2015.
Gross Profit
Gross profit was $325.5 million in 2016, an improvement of $22.1 million, or 7.3% from 2015. Gross profit as a percentage of sales was 18.0% in 2016 as compared to 15.0% in 2015. Gross profit by segment was as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||
| Change | ||||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| Gross Profit by Segment: | ||||||||||||||||
| Commercial Trailer Products | $ | 253,274 | $ | 197,777 | $ | 55,497 | 28.1 | |||||||||
| Diversified Products | 75,630 | 107,023 | (31,393 | ) | (29.3 | ) | ||||||||||
| Corporate and Eliminations | (3,370 | ) | (1,357 | ) | (2,013 | ) | ||||||||||
| Total | $ | 325,534 | $ | 303,443 | $ | 22,091 | 7.3 | |||||||||
Commercial Trailer Products segment gross profit was $253.3 million in 2016 compared to $197.8 million in 2015, an increase of $55 million. Gross profit, as a percentage of net sales prior to the elimination of intersegment sales, was 16.8% in 2016 as compared to 12.5% in 2015, an increase of 430 basis points. The increases in gross profit and profit margin as compared to 2015 was primarily driven by improved pricing, favorable material costs, including cost optimization through product design and sourcing, and continued operational efficiencies.
Diversified Products segment gross profit was $75.6 million in 2016 compared to $107.0 million in 2015. Gross profit, as a percentage of net sales prior to the elimination of intersegment sales, was 21.5% in 2016 compared to 23.4% in 2015. The decrease in gross profit as a percentage of net sales, as compared to 2015, was due primarily to lower sales volume and the reduced leverage of fixed costs from lower production levels which more than offset the favorable material costs and continued operational efficiencies.
General and Administrative Expenses
General and administrative expenses in 2016 increased $0.6 million, or 0.9%, from 2015 as a result of a $2.7 million increase in outside service and professional fee expenditures, as well as a $0.9 million increase in various other operating expenses, primarily information technology related costs. These increases were offset by a $3.0 million decrease in employee related costs, including costs associated with employee incentive programs. General and administrative expenses, as a percentage of net sales, were 4.0% in 2016 compared to 3.6% in 2015.
Selling Expenses
Selling expenses were $27.3 million in 2016, an increase of $0.1 million, or 0.1%, compared to 2015 as a $0.3 million increase in advertising and promotional efforts were partially offset by lower employee related costs, including costs associated with employee incentive programs. As a percentage of net sales, selling expenses were 1.5% in 2016 compared to 1.3% in 2015.
Amortization of Intangibles
Amortization of intangibles was $19.9 million in 2016 compared to $21.3 million in 2015. Amortization of intangibles for both periods primarily includes amortization expense recognized for intangible assets recorded from the acquisition of Walker in May 2012 and certain assets acquired from Beall in February 2013.
Other Operating Expenses
Other operating expenses of $1.7 million in 2016 is the impairment of goodwill recognized during the second quarter of 2016. Based on an analysis we performed to determine the allocations of goodwill with the realignment of our reporting segments, we determined a portion of goodwill allocated to our retail branch operations was impaired as the fair value of reporting did not exceed its carrying value resulting in an impairment charge for the Commercial Trailer Products reporting segment.
Other Income (Expense)
Interest expense in 2016 totaled $15.7 million compared to $19.5 million in 2015. Interest expense for both periods primarily related to interest and non-cash accretion charges on our Convertible Notes and Term Loan Credit Agreement. The decrease from the prior year is primarily due to Convertible Notes repurchases completed in late 2015 and during the first and fourth quarters of 2016.
Other, netfor 2016 represented expense of $1.5 million as compared to income of $2.5 million for 2015. The current year expense includes $1.9 million loss on debt extinguishment for voluntary purchases of our outstanding Convertible Notes partially offset by a $0.3 million gain on the transition of our retail branches to independent dealer facilities. The 2015 period primarily consists of an $8.3 million gain on the sale of our former retail branch real estate in Fontana, California and Portland, Oregon partially offset by $5.3 million of accelerated amortization and related fees in connection with the refinancing of our Term Loan Credit Agreement in March 2015 and $0.3 million of charges incurred in connection with the amendment to our Credit Agreement in June 2015.
Income Taxes
We recognized income tax expense of $66.0 million in 2016 compared to $59.0 million in 2015. The effective tax rate for 2016 was 35.6%, which differs from the U.S. Federal statutory rate of 35%21% primarily due to the impact of state and local taxes offset by the benefit of the U.S. Internal Revenue Code domestic manufacturing deduction. In addition, the rate for 2016 includes aand tax benefitcredits related to employee share-based payment awards, which are now recorded as anresearch and development expenses. Cash paid for income tax expense (or benefit)taxes in earnings effective with the adoption of a new accounting standard. Cash taxes paid in 2016
$20.4 million and $24.2 million, respectively.
Agreement and returning capital to our shareholders.
As of December 31, 2017, and at any time until the close of business on the second business day immediately preceding the maturity date, the Convertible Notes are convertible by their holders into cash, shares of our common stock or any combination thereof at our election, at an initial conversion rate of 85.4372 shares of our common stock per $1,000 in principal amount of Notes, which is equal to an initial conversion price of approximately $11.70 per share.
If the Convertible Notes outstanding at December 31, 2017 had been converted as of December 31, 2017, the if-converted value would exceed the principal amount by approximately $38 million. It is our intent to settle conversions in cash for both the principal portion and the excess of the conversion value over the principal portion. The Convertible Notes mature on May 1, 2018 and are classified as current within the Condensed Consolidated Balance Sheet.
We accountaccounted separately for the liability and equity components of the Convertible Notes in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance requires the carrying amount of the liability component
During 2017, we acquired $4.4 million in principal of such Convertible Notes for $8.0 million, excluding accrued interest. Additionally, in 2016 we acquired $82.0 million in principal for $98.9 million, excluding accrued interest.capital during 2018. For the years ended
The Senior Notes are guaranteed on a senior unsecured basis by all of our direct and indirect existing and future domestic restricted subsidiaries, subject to certain restrictions.exceptions. The Senior Notes and related guarantees are our and the guarantors’ general unsecured senior obligations and are subordinate to all of our and the guarantors’ existing and future secured debt to the extent of the assets securing that secured obligation.debt. In addition, the Senior Notes are structurally subordinate to any existing and future debt and other obligations of any of our subsidiaries that are not guarantors, to the extent of the assets of those subsidiaries.
As of December 31, 2019, we were in compliance with all covenants.
In May 2012,
The Revolving Credit Facility (i) bears interest, at the Borrowers’ election, at (x) LIBOR (subject to a floor of 0%) plus a margin ranging from 150 basis points to 200 basis points, or (y) a base rate plus a margin ranging from 50 basis points to 100 basis points, in each case, based upon the monthly average excess availability under the Revolving Credit Facility, (ii) requires us to pay a monthly unused line fee equal to 25 basis points times the average unused availability under the Revolving Credit Facility, (iii) provides that if availability under the Revolving Credit Facility is less than 12.5% of the total commitment under the Revolving Credit Facility or if there exists an event of default, amounts in any of the Borrowers’ and the subsidiary guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the Revolving Credit Facility, and (iv) requires us to maintain a minimum fixed charge coverage ratio of not less than 1.1 to 1.0agreement, dated as of the end of any period of 12 fiscal months when excess availability under theMay 8, 2012.
In connection with, and in order to permit under the Credit Agreement, the Senior Notes offering and the acquisition of Supreme, on August 16, 2017, we entered into the Third Amendment to the Credit Agreement (the “Third Amendment”). The Third Amendment also permitted us to incur certain other indebtedness in connection with the acquisition of Supreme and to acquire certain liens and obligations of Supreme upon the consummation of the acquisition.
The Credit Agreement is guaranteed by certain of our subsidiaries (the “Revolver Guarantors”) and is secured by (i) first priority security interests (subject only to customary permitted liens and certain other permitted liens) in substantially all personal property of the Borrowers and the Revolver Guarantors, consisting of accounts receivable, inventory, cash, deposit and securities accounts and any cash or other assets in such accounts and, to the extent evidencing or otherwise related to such property,
The Revolving Credit Agreement has a scheduled maturity date of December 21, 2023, subject to certain springing maturity events.
Agreement, we recognized a loss on debt extinguishment of $0.1 million during 2018, which is included in
Other, net on the Company’s Consolidated Statements of Operations.The Term Loan Credit Agreement is guaranteed by certain of our subsidiaries, and is secured by (i) first-priority liens on and security interests in the Term Priority Collateral, and (ii) second-priority security interests in the Revolver Priority Collateral.
As of December 31, 2019, we were in compliance with all covenants.
Sheets.
2017
2018
| Source (Use) of cash: | 2017 | 2016 | Change | |||||||||
| Accounts receivable | $ | 31,943 | $ | (809 | ) | $ | 32,752 | |||||
| Inventories | $ | (13,158 | ) | $ | 24,969 | $ | (38,127 | ) | ||||
| Accounts payable and accrued liabilities | $ | (963 | ) | $ | (13,002 | ) | $ | 12,039 | ||||
| Net (use) source of cash | $ | 17,822 | $ | 11,158 | $ | 6,664 | ||||||
| 2019 | 2018 | Change | |||||||||
| Source (use) of cash: | |||||||||||
| Accounts receivable | $ | 8,327 | $ | (39,539 | ) | $ | 47,866 | ||||
| Inventories | (2,510 | ) | (18,713 | ) | 16,203 | ||||||
| Accounts payable and accrued liabilities | (817 | ) | 32,653 | (33,470 | ) | ||||||
| Net source (use) of cash | $ | 5,000 | $ | (25,599 | ) | $ | 30,599 | ||||
Investing activities used $332.2 million during 2017 compared to $17.3 million used in 2016. Investing activities for 2017 was primarily related to the acquisition of Supreme completed in the third quarter for $323.5 million, netuse of cash acquired. It also includes capital expenditures to support growth and improvement initiatives at our facilities totaling $26.1 million. These uses of cash were partially offset by proceeds from sale of assets totaling $17.3 million, primarily related to the sale of our former branch locations. Cash used in investing activities in 2016 included capital expenditures to support growth and improvement initiatives at our facilities totaling $20.3 million, partially offset by proceeds from the sale of certain branch location assets totaling $3.0 million.
Financing activities provided $215.9 million during 2017, as the issuance of our new $325 million Senior Notes was partially offset by repurchases of common stock through our share repurchase program totaling $70.1 million, cash dividends paid to our shareholders and holders of our Convertible Notes of $15.3$2.5 million and the payment of principal under various debt and lease obligations totaling $18.3 million. Financing activities used $176.8 $18.7
As of December 31, 2017, our liquidity position, defined as cash on hand and available borrowing capacity, amounted to $361.1 million, representing an increase of $28.1 million from December 31, 2016. Total debt and capital lease obligations amounted to $551.4 million as of December 31, 2017. As we continue to see a strong demand environment within the trailer industry and excellence in operational performance across all business segments, we believe our liquidity is adequate to fund our currently planned operations, working capital needs and capital expenditures for 2018.
2016 compared to 2015
Cash provided by operating activities for 2016 totaled $178.8 million, compared to $131.8 million in 2015. The cash provided by operations during the 2016 period was the result of net income adjusted for various non-cash activities, including depreciation, amortization, gain (loss) on the sale of assets, deferred taxes, loss on debt extinguishment, stock-based compensation, accretion of debt discount and impairment of goodwill and intangibles, of $179.4 million, and a $0.7 million increase in our working capital. Changes in key working capital accounts for 2016 and 2015 are summarized below (in thousands):
| Source (Use) of cash: | 2016 | 2015 | Change | |||||||||
| Accounts receivable | $ | (809 | ) | $ | (17,618 | ) | $ | 16,809 | ||||
| Inventories | $ | 24,969 | $ | 10,162 | $ | 14,807 | ||||||
| Accounts payable and accrued liabilities | $ | (13,002 | ) | $ | (12,243 | ) | $ | (759 | ) | |||
| Net (use) source of cash | $ | 11,158 | $ | (19,699 | ) | $ | 30,857 | |||||
Accounts receivable increased by $0.8 million in 2016 as compared to an increase of $17.6 million in the prior year period. Days sales outstanding, a measure of working capital efficiency that measures the amount of time a receivable is outstanding, increased to approximately 30 days as of December 31, 2016, compared to 25 days in 2015. The increase in accounts receivable for 2016 was primarily the result of the timing of shipments. Inventory decreased by $25.0 million during 2016 as compared to a decrease of $10.2 million in 2015. The decrease in inventory for the 2016 period was primarily due to lower finished goods inventories as customer shipments exceeded production, and lower raw materials inventories due to improved inventory management and expected lower demand volume for January 2017 as compared to January 2016.respectively. Our inventory turns, a commonly used measure of working capital efficiency that measures how quickly inventory turns per year was approximately 8 times in 20162019 compared to 10 times in 2018. The increase in inventory for 2019 resulted from higher finished goods and 2015.work in progress inventories partially offset by a decrease in raw materials inventory due to softer demand as of December 31, 2019 compared to December 31, 2018. Accounts payable and accrued liabilities decreased by $13.0$0.8 million in 20162019 compared to a decreasean increase of $12.2$32.7 million for 2015. The decrease in 2016 was primarily due to timing of production and a decrease in accruals pertaining to employee salaries and related incentive compensation.2018. Days payable outstanding, a measure of working capital efficiency that measures the amount of time a payable is outstanding, was 1624 days in 20162019 and 2015.
31 days in 2018. The decrease in 2019 was primarily due to lower raw materials inventory and the overall timing of payments compared to 2018, partially offset by an increase in accrued liabilities attributed to employee-related costs, including benefits and incentive programs.
$17.8 million. Financing activities used $176.8$158.1 million during 2016,2018, primarily duerelated to the repurchase of Convertible Notes totaling $80.2 million, repurchases of common stock through our share repurchase program totaling $77.0$58.4 million, and repurchase of Notes totaling $98.9 million, excluding accrued interest. Financing activities used $91.4 million during 2015 primarily due to the repurchases of common stock through our share repurchase program totaling $60.1 million, repurchase of Notes totaling $22.9 million, excluding accrued interest, principal payments under existing debt and capital lease obligations of $6.1 million, and debt issuance costs of $2.6 million in relation to amendmentscash dividends paid to our Term Loan Credit Agreementshareholders and Credit Agreement.
Capital Expenditures
Capital spending amounted to $26.1 million for 2017 and is anticipated to be in the rangeholders of $40 million to $50 million for 2018. Capital spending for 2017 was primarily utilized to support maintenance, growth, and productivity improvement initiatives within our facilities. For 2018, the increase in expected capital spending is attributable to the acquisitionConvertible Notes of Supreme, which we expect to spend in the range of $10 to $12 million and our continued investment in growth and productivity improvement initiatives across all our facilities.
Off-Balance Sheet Transactions
$17.8 million.
2020.
| 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||||||||
| DEBT: | ||||||||||||||||||||||||||||
| Revolving Facility (due 2020) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| Convertible Senior Notes (due 2018) | 44,561 | - | - | - | - | - | 44,561 | |||||||||||||||||||||
| Term Loan Credit Facility (due 2022) | 1,880 | 1,880 | 1,880 | 1,880 | 180,057 | - | 187,577 | |||||||||||||||||||||
| Senior Notes (due 2025) | - | - | - | - | - | 325,000 | 325,000 | |||||||||||||||||||||
| Other Debt | 92 | - | - | - | - | - | 92 | |||||||||||||||||||||
| Capital Leases (including principal and interest) | 361 | 361 | 361 | 361 | 30 | - | 1,474 | |||||||||||||||||||||
| TOTAL DEBT | $ | 46,894 | $ | 2,241 | $ | 2,241 | $ | 2,241 | $ | 180,087 | $ | 325,000 | $ | 558,704 | ||||||||||||||
| OTHER: | ||||||||||||||||||||||||||||
| Operating Leases | $ | 2,466 | $ | 1,364 | $ | 688 | $ | 439 | $ | 254 | $ | - | $ | 5,211 | ||||||||||||||
| TOTAL OTHER | $ | 2,466 | $ | 1,364 | $ | 688 | $ | 439 | $ | 254 | $ | - | $ | 5,211 | ||||||||||||||
| OTHER COMMERCIAL COMMITMENTS: | ||||||||||||||||||||||||||||
| Letters of Credit | $ | 5,303 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 5,303 | ||||||||||||||
| Raw Material Purchase Commitments | 58,658 | - | - | - | - | - | 58,658 | |||||||||||||||||||||
| Chassis Converter Pool Agreements | 21,523 | - | - | - | - | - | 21,523 | |||||||||||||||||||||
| TOTAL OTHER COMMERCIAL | ||||||||||||||||||||||||||||
| COMMITMENTS | $ | 85,484 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 85,484 | ||||||||||||||
| TOTAL OBLIGATIONS | $ | 134,844 | $ | 3,605 | $ | 2,929 | $ | 2,680 | $ | 180,341 | $ | 325,000 | $ | 649,399 | ||||||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |||||||||||||||||||||
| Debt: | |||||||||||||||||||||||||||
| Revolving Facility (due 2023) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
| Term Loan Credit Facility (due 2022) | — | — | 135,228 | — | — | — | 135,228 | ||||||||||||||||||||
| Senior Notes (due 2025) | — | — | — | — | — | 325,000 | 325,000 | ||||||||||||||||||||
| Finance Leases (including principal and interest) | 361 | 361 | 30 | — | — | — | 752 | ||||||||||||||||||||
| Total debt | 361 | 361 | 135,258 | — | — | 325,000 | 460,980 | ||||||||||||||||||||
| Other: | |||||||||||||||||||||||||||
| Operating Leases | 4,986 | 4,477 | 2,551 | 1,855 | 851 | 1,242 | 15,962 | ||||||||||||||||||||
| Total other | 4,986 | 4,477 | 2,551 | 1,855 | 851 | 1,242 | 15,962 | ||||||||||||||||||||
| Other commercial commitments: | |||||||||||||||||||||||||||
| Letters of Credit | 7,432 | — | — | — | — | — | 7,432 | ||||||||||||||||||||
| Raw Material Purchase Commitments | 83,922 | — | — | — | — | — | 83,922 | ||||||||||||||||||||
| Chassis Agreements and Programs | 13,473 | — | — | — | — | — | 13,473 | ||||||||||||||||||||
| Total other commercial commitments | 104,827 | — | — | — | — | — | 104,827 | ||||||||||||||||||||
| Total obligations | $ | 110,174 | $ | 4,838 | $ | 137,809 | $ | 1,855 | $ | 851 | $ | 326,242 | $ | 581,769 | |||||||||||||
Scheduled payments for our Convertible Notes exclude interest payments. The Notes bear interest at the rate of 3.375% per annum from the date of issuance, payable semi-annually on May 1 and November 1.
Capital
chassis by the Company.
The table below presentsWarranties. We estimate warranty claims based on our historical information aboutand the nature, frequency and rationaleaverage cost of claims of our various product lines, combined with our current understanding of existing claims, recall campaigns and discussions with our customers. Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing estimates, changes in our assumptions could materially affect our results of operations.
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In addition, there are other items within our financial statements that require estimation,reporting units include, but are not as critical aslimited to, the amounts and timing of expected future cash flows which is largely dependent on expected EBITDA margins, the discount rate applied to those discussed above. Changes in estimatescash flows, and terminal growth rates. The assumptions used in thesedetermining our expected future cash flows consider various factors such as historical operating trends and other items could have a significant effectlong-term operating strategies and initiatives. The discount rate used by each reporting unit is based on our consolidated financial statements.assumption of a prudent investor’s required rate of return of assuming the risk of investing in a particular company. The determinationterminal growth rate reflects the sustainable operating income a reporting unit could generate in a perpetual state as a function of revenue growth, inflation and future margin expectations. Future events and changing market conditions may, however, lead us to re-evaluate the assumptions we have used to test for goodwill impairment, including key assumptions used in our expected EBITDA margins and cash flows, as well as other key assumptions with respect to matters out of our control, such as discount rates and market multiple comparables.
an indicator of impairment. We believe this decline in our market capitalization is primarily due to softer trailer production estimates from ACT and FTR for 2020 and 2021 compared to 2019. The Company will continue to assess the impact of its market capitalization and any other indicators of potential impairment. It is possible that if the Company’s market capitalization decline is more than temporary, or if other indicators of impairment are identified, an interim impairment analysis may be necessary, which could result in an impairment of goodwill.
As of December 31, 2017,2019, a hypothetical 100 basis-point change in commodity prices based on our raw material purchase commitments through December 2020 would result in a corresponding change in cost of goods sold over a one-year period of approximately $8.4 million. This sensitivity analysis does not account for the change in the competitive environment indirectly related to the change in commodity prices and the potential managerial action taken in response to these changes.
Cash Equivalents. Accounts Receivable.Accounts receivable are shown net of allowance for doubtful accounts and primarily include trade receivables. The Company records and maintains a provision for doubtful accounts for customers based upon a variety of factors including the Company’s historical collection experience, the length of time the account has been outstanding and the financial condition of the customer. If the circumstances related to specific customers were to change, the Company’s estimates with respect to the collectability of the related accounts could be further adjusted. The Company’s policy is to write-off receivables when they are determined to be uncollectible. Provisions to the allowance for doubtful accounts are charged toSellingand General and Property, Plant and Equipment.Property, plant and equipment are recorded at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, while expenditures that extend the useful life of an asset are capitalized. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives are up to 33 years for buildings and building improvements and range from three to ten years for machinery and equipment. Goodwill. Goodwill represents the excess purchase price over fair value of the net assets acquired. The Company determines its reporting units at the individual operating segment level, or one level below, when there is discrete financial information available that is regularly reviewed by segment management for evaluating operating results. The Company reviews goodwill for impairment, at the reporting unit level, annually on October 1 and whenever events or changes in circumstances indicate its carrying value may not be recoverable. In accordance with ASC 350,Intangibles has historically chosen. Long-Lived Assets.Long-lived assets, consisting primarily of intangible assets and property, plant and equipment, are reviewed for impairment whenever facts and circumstances indicate that the carrying amount may not be recoverable. Specifically, this process involves comparing an asset’s carrying value to the estimated undiscounted future cash flows the asset is expected to generate over its remaining life. If this process were to result in the conclusion that the carrying value of a long-lived asset would not be recoverable, a write-down of the asset to fair value would be recorded through a charge to operations. Fair value is determined based upon discounted cash flows or appraisals as appropriate. Warranties.The Company offers a limited warranty for its products with a coverage period that ranges between one and five years, except that the coverage period for DuraPlate® trailer panels is ten years. The Company passes through component manufacturers’ warranties to our customers. The Company’s policy is to accrue the estimated cost of warranty coverage at the time of the sale. receivables. the standard. The Company did not reassess whether any contracts entered into prior to adoption are leases. The Company has approximately $16.7 million of noncancelable future rental obligations as of December 31, 2019, as shown in Note 11. The Company The Senior Notes will mature on October 1, 2025. At any time prior to October 1, 2020, the Company may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes being redeemed plus an applicable make-whole premium set forth in the indenture for the Senior Notes and accrued and unpaid interest to, but not including, the redemption date. Prior to October 1, 2020, the Company may redeem up to 40% of the Senior Notes at a redemption price of 105.50% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, with the proceeds of certain equity offerings so long as if, after any such redemption occurs, at least 60% of the aggregate principal amount of the Senior Notes remains outstanding. On and after October 1, 2020, the Company may redeem some or all of the Senior Notes at redemption prices (expressed as percentages of principal amount) equal to 102.750% for the twelve-month period beginning on October 1, 2020, 101.375% for the twelve-month period beginning October 1, 2021 and 100.000% beginning on October 1, 2022, plus accrued and unpaid interest to, but not including, the redemption date. Upon the occurrence of a Change of Control (as defined in the indenture for the Senior Notes), unless the Company has exercised its optional redemption right in respect of the Senior Notes, the holders of the Senior Notes have the right to require the Company to repurchase all or a portion of the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the date of repurchase. As of December 31, 2019, the Company was in compliance with all covenants. The Revolving Credit Agreement has a scheduled maturity date of December 21, 2023, subject to certain springing maturity events. 2019 and $299.5 million as of December 31, 2018. On February 24, 2017, the Company entered into Amendment No. 3 to the Term Loan Credit Agreement (“Amendment No. 3”). As of February 24, 2017, $189.5 million of the Tranche B-2 Loans were outstanding. Under Amendment No. 3, the lenders agreed to provide to the Company term loans in the same aggregate principal amount of the outstanding Tranche B-2 Loans (the “Tranche B-3 Loans”), which were used to refinance the outstanding Tranche B-2 Loans. As of December 31, 2019, the Company was in compliance with all covenants. Sheets. Additionally, upon the Company’s acquisition of Supreme, the Company acquired a pool of investments made by a wholly owned captive insurance subsidiary. These investments are comprised of mutual funds, The Company generates and handles certain material, wastes and emissions in the normal course of operations that are subject to various and evolving federal, state and local environmental laws and regulations. Sheets. The Final Mile Products segment manufactures truck bodies for customers in the final mile space. Report of Management on Internal Control over Financial Reporting 2019. AND CORPORATE GOVERNANCE 12, 2020. 12, 2020. 12, 2020. 12, 2020. PagesPage 55Theand Stockholders of Wabash National Corporation“Company“)Company) as of December 31, 20172019 and 2016,2018, the related consolidated statements of operations, comprehensive income, stockholders‘stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017,2019, and the related notes (collectively referred to as the “consolidated financial statements“statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2019, in conformity with US generally accepted accounting principles.2017,2019, based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 201825, 2020 expressed an unqualified opinion thereon.Company‘sCompany’s management. Our responsibility is to express an opinion on the Company‘sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the USU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Valuation of Goodwill Description of the Matter At December 31, 2019, the Company’s goodwill was $311.0 million. As discussed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at the reporting unit level at least annually or whenever events or changes in circumstances indicate its carrying value may not be recoverable. Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimation required to determine the fair values of the reporting units. In particular, the fair value estimates were sensitive to significant assumptions, such as changes in the discount rate, EBITDA margin, and terminal growth rates, which are affected by expectations about future market or economic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment testing process, including controls over management’s review of the significant data and assumptions described above. To test the estimated fair values of the Company’s reporting units, we performed audit procedures that included, among others, assessing methodologies, testing the significant assumptions discussed above used to develop the prospective financial information and testing the underlying data used by the Company in its analysis. We compared the prospective financial information developed by management to the historical performance of each reporting unit as well as current industry and economic trends, and evaluated the expected impacts of the Company’s operating strategies and initiatives on the significant assumptions. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. We involved our internal valuation specialists to assist in our evaluation of the methodologies used by the Company, the discount rate assumptions and the calculations of each reporting unit’s fair value. /s/ ERNST & YOUNG LLP We have served as the Company‘sCompany’s auditor since 2002. Indianapolis, Indiana February 28, 20185625, 2020 December 31, 2017 2016 ASSETS CURRENT ASSETS Cash and cash equivalents $ 191,521 $ 163,467 Accounts receivable 146,836 153,634 Inventories 180,735 139,953 Prepaid expenses and other 57,299 24,351 Total current assets $ 576,391 $ 481,405 PROPERTY, PLANT AND EQUIPMENT 195,363 134,138 DEFERRED INCOME TAXES - 20,343 GOODWILL 317,464 148,367 INTANGIBLE ASSETS 237,030 94,405 OTHER ASSETS 25,265 20,075 $ 1,351,513 $ 898,733 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 46,020 $ 2,468 Current portion of capital lease obligations 290 494 Accounts payable 108,448 71,338 Other accrued liabilities 128,910 92,314 Total current liabilities $ 283,668 $ 166,614 LONG-TERM DEBT 504,091 233,465 CAPITAL LEASE OBLIGATIONS 1,012 1,409 DEFERRED INCOME TAXES 36,955 499 OTHER NONCURRENT LIABILITIES 19,724 24,355 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock 200,000,000 shares authorized, $0.01 par value, 57,564,493 and 60,129,631 shares outstanding, respectively 737 725 Additional paid-in capital 653,435 640,883 Retained earnings 98,728 3,591 Accumulated other comprehensive loss (2,385 ) (2,847 ) Treasury stock at cost, 16,207,740 and 12,474,109 common shares, respectively (244,452 ) (169,961 ) Total stockholders' equity $ 506,063 $ 472,391 $ 1,351,513 $ 898,733 December 31, 2019 2018 Assets Current assets: Cash and cash equivalents $ 140,516 $ 132,690 Accounts receivable, net 172,737 181,064 Inventories 186,914 184,404 Prepaid expenses and other 41,222 51,261 Total current assets 541,389 549,419 Property, plant, and equipment, net 221,346 206,991 Goodwill 311,026 311,084 Intangible assets 189,898 210,328 Other assets 40,932 26,571 Total assets $ 1,304,591 $ 1,304,393 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ — $ 1,880 Current portion of finance lease obligations 327 299 Accounts payable 134,821 153,113 Other accrued liabilities 124,230 116,384 Total current liabilities 259,378 271,676 Long-term debt 455,386 503,018 Finance lease obligations 378 714 Deferred income taxes 37,576 34,905 Other non-current liabilities 30,885 20,231 Total liabilities 783,603 830,544 Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value: 200,000,000 shares authorized; 53,473,620 and 55,135,788 shares outstanding, respectively 750 744 Additional paid-in capital 638,917 629,039 Retained earnings 221,841 150,244 Accumulated other comprehensive loss (3,978 ) (3,343 ) Treasury stock, at cost: 21,640,109 and 19,372,735 common shares, respectively (336,542 ) (302,835 ) Total stockholders' equity 520,988 473,849 Total liabilities and stockholders' equity $ 1,304,591 $ 1,304,393 57 Year Ended December 31, 2017 2016 2015 NET SALES $ 1,767,161 $ 1,845,444 $ 2,027,489 COST OF SALES 1,506,286 1,519,910 1,724,046 Gross profit $ 260,875 $ 325,534 $ 303,443 GENERAL AND ADMINISTRATIVE EXPENSES 77,825 74,129 73,495 SELLING EXPENSES 25,588 27,270 27,233 AMORTIZATION OF INTANGIBLES 17,041 19,940 21,259 ACQUISITON EXPENSES 9,605 - - OTHER OPERATING EXPENSES - 1,663 1,087 Income from operations $ 130,816 $ 202,532 $ 180,369 OTHER INCOME (EXPENSE): Interest expense (16,400 ) (15,663 ) (19,548 ) Other, net 8,122 (1,452 ) 2,490 Income before income taxes $ 122,538 $ 185,417 $ 163,311 INCOME TAX EXPENSE 11,116 65,984 59,022 Net income $ 111,422 $ 119,433 $ 104,289 DIVIDENDS DECLARED PER SHARE $ 0.255 $ 0.060 $ - BASIC NET INCOME PER SHARE $ 1.88 $ 1.87 $ 1.55 DILUTED NET INCOME PER SHARE $ 1.78 $ 1.82 $ 1.50 Year Ended December 31, 2019 2018 2017 Net sales $ 2,319,136 $ 2,267,278 $ 1,767,161 Cost of sales 2,012,754 1,983,627 1,506,286 Gross profit 306,382 283,651 260,875 General and administrative expenses 108,274 95,114 77,825 Selling expenses 34,851 33,046 25,588 Amortization of intangible assets 20,471 19,468 17,041 Acquisition expenses — 68 9,605 Impairment — 24,968 — Income from operations 142,786 110,987 130,816 Other income (expense): Interest expense (27,340 ) (28,759 ) (16,400 ) Other, net 2,285 13,776 8,122 Other expense, net (25,055 ) (14,983 ) (8,278 ) Income before income tax 117,731 96,004 122,538 Income tax expense 28,156 26,583 11,116 Net income $ 89,575 $ 69,421 $ 111,422 Net income per share: Basic $ 1.64 $ 1.22 $ 1.88 Diluted $ 1.62 $ 1.19 $ 1.78 Weighted average common shares outstanding (in thousands): Basic 54,695 56,996 59,358 Diluted 55,290 58,430 62,599 Dividends declared per share $ 0.320 $ 0.305 $ 0.255 58 Year Ended December 31, 2017 2016 2015 NET INCOME $ 111,422 $ 119,433 $ 104,289 Other comprehensive (loss) income: Foreign currency translation adjustment 487 (1,347 ) (863 ) Unrealized holding loss on investments (25 ) - - Total other comprehensive (loss) income 462 (1,347 ) (863 ) COMPREHENSIVE INCOME $ 111,884 $ 118,086 $ 103,426 Year Ended December 31, 2019 2018 2017 Net income $ 89,575 $ 69,421 $ 111,422 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment and other 712 (193 ) 462 Unrealized loss on derivative instruments (1,347 ) (765 ) — Total other comprehensive (loss) income (635 ) (958 ) 462 Comprehensive income $ 88,940 $ 68,463 $ 111,884 59STOCKHOLDERS'STOCKHOLDERS’ EQUITY Accumulated Additional Retained Other Common Stock Paid-In Earnings Comprehensive Treasury Shares Amount Capital (Deficit) Losses Stock Total BALANCES, December 31, 2014 68,998,069 $ 709 $ 635,606 $ (216,198 ) $ (637 ) $ (28,648 ) $ 390,832 Net income for the year 104,289 104,289 Foreign currency translation (863 ) (863 ) Stock-based compensation 396,389 4 10,006 10,010 Stock repurchase (4,651,570 ) (61,757 ) (61,757 ) Equity component of convertible senior notes repurchase (4,714 ) (4,714 ) Common stock issued in connection with: Stock option exercises 186,622 2 2,010 2,012 BALANCES, December 31, 2015 64,929,510 $ 715 $ 642,908 $ (111,909 ) $ (1,500 ) $ (90,405 ) $ 439,809 Net income for the year 119,433 119,433 Foreign currency translation (1,347 ) (1,347 ) Stock-based compensation 615,066 6 12,031 12,037 Stock repurchase (5,832,387 ) (79,556 ) (79,556 ) Equity component of convertible senior notes repurchase (18,883 ) (18,883 ) Common stock dividends (3,933 ) (3,933 ) Common stock issued in connection with: Stock option exercises 417,442 4 4,827 4,831 BALANCES, December 31, 2016 60,129,631 $ 725 $ 640,883 $ 3,591 $ (2,847 ) $ (169,961 ) $ 472,391 Net income for the year 111,422 111,422 Foreign currency translation 487 487 Stock-based compensation 650,218 7 10,422 10,429 Stock repurchase (3,726,809 ) (74,491 ) (74,491 ) Equity component of convertible senior notes repurchase (3,655 ) (3,655 ) Common stock dividends (16,285 ) (16,285 ) Unrealized holding loss on investments, net of tax (25 ) (25 ) Common stock issued in connection with: Stock option exercises 511,453 5 �� 5,785 5,790 BALANCES, December 31, 2017 57,564,493 $ 737 $ 653,435 $ 98,728 $ (2,385 ) $ (244,452 ) $ 506,063 Common Stock Total Shares Amount Balances at December 31, 2016 60,129,631 $ 725 $ 640,883 $ 3,591 $ (2,847 ) $ (169,961 ) $ 472,391 Net income for the year 111,422 111,422 Foreign currency translation and other 462 462 Stock-based compensation 650,218 7 10,422 10,429 Stock repurchase (3,726,809 ) (74,491 ) (74,491 ) Equity component of convertible senior notes repurchase (3,655 ) (3,655 ) Common stock dividends (16,285 ) (16,285 ) Common stock issued in connection with: Stock option exercises 511,453 5 5,785 5,790 Balances at December 31, 2017 57,564,493 $ 737 $ 653,435 $ 98,728 $ (2,385 ) $ (244,452 ) $ 506,063 Net income for the year 69,421 69,421 Foreign currency translation and other (193 ) (193 ) Stock-based compensation 404,628 6 10,163 10,169 Stock repurchase (2,935,978 ) (58,383 ) (58,383 ) Equity component of convertible senior notes repurchase (35,519 ) (35,519 ) Common stock dividends (17,905 ) (17,905 ) Unrealized loss on derivative instruments, net of tax (765 ) (765 ) Common stock issued in connection with: Stock option exercises 102,645 1 960 961 Balances at December 31, 2018 55,135,788 $ 744 $ 629,039 $ 150,244 $ (3,343 ) $ (302,835 ) $ 473,849 Net income for the year 89,575 89,575 Foreign currency translation and other 712 712 Stock-based compensation 319,430 5 9,031 9,036 Stock repurchase (2,072,798 ) (33,707 ) (33,707 ) Common stock dividends (17,978 ) (17,978 ) Unrealized loss on derivative instruments, net of tax (1,347 ) (1,347 ) Common stock issued in connection with: Stock option exercises 91,200 1 847 848 Balances at December 31, 2019 53,473,620 $ 750 $ 638,917 $ 221,841 $ (3,978 ) $ (336,542 ) $ 520,988 60 Years Ended December 31, 2017 2016 2015 Cash flows from operating activities Net income $ 111,422 $ 119,433 $ 104,289 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 18,012 16,830 16,739 Amortization of intangibles 17,041 19,940 21,259 Net (gain) loss on sale of property, plant and equipment (8,046 ) 101 (8,299 ) Loss on debt extinguishment 799 1,895 5,808 Deferred income taxes (14,682 ) 4,044 (7,749 ) Stock-based compensation 10,429 12,038 10,010 Non-cash interest expense 2,258 3,475 5,222 Impairment of goodwill and other intangibles - 1,663 1,087 Changes in operating assets and liabilities Accounts receivable 31,943 (809 ) (17,618 ) Inventories (13,158 ) 24,969 10,162 Prepaid expenses and other (2,014 ) (10,147 ) 1,786 Accounts payable and accrued liabilities (963 ) (13,002 ) (12,243 ) Other, net (8,662 ) (1,680 ) 1,342 Net cash provided by operating activities $ 144,379 $ 178,750 $ 131,795 Cash flows from investing activities Capital expenditures (26,056 ) (20,342 ) (20,847 ) Proceeds from sale of property, plant and equipment 10,860 19 13,203 Acquisitions, net of cash acquired (323,487 ) - - Other, net 6,443 3,014 - Net cash used in investing activities $ (332,240 ) $ (17,309 ) $ (7,644 ) Cash flows from financing activities Proceeds from exercise of stock options 5,790 4,831 2,012 Borrowings under senior notes 325,000 - - Dividends paid (15,315 ) - - Borrowings under revolving credit facilities 713 618 1,134 Payments under revolving credit facilities (713 ) (618 ) (1,134 ) Principal payments under capital lease obligations (600 ) (779 ) (4,201 ) Proceeds from issuance of term loan credit facility 377,519 - 192,845 Principal payments under term loan credit facility (386,577 ) (1,928 ) (194,291 ) Principal payments under industrial revenue bond (583 ) (473 ) (496 ) Debt issuance costs paid (6,783 ) - (2,587 ) Convertible senior notes repurchase (8,045 ) (98,922 ) (22,936 ) Stock repurchase (74,491 ) (79,556 ) (61,757 ) Net cash provided by (used in) financing activities $ 215,915 $ (176,827 ) $ (91,411 ) Net increase (decrease) in cash and cash equivalents $ 28,054 $ (15,386 ) $ 32,740 Cash and cash equivalents at beginning of year 163,467 178,853 146,113 Cash and cash equivalents at end of year $ 191,521 $ 163,467 $ 178,853 Supplemental disclosures of cash flow information Cash paid during the period for Interest $ 8,394 $ 12,656 $ 14,578 Income taxes $ 41,391 $ 68,870 $ 66,283 Year Ended December 31, 2019 2018 2017 Cash flows from operating activities Net income $ 89,575 $ 69,421 $ 111,422 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 21,886 21,215 18,012 Amortization of intangibles 20,471 19,468 17,041 Net gain on sale of property, plant and equipment (109 ) (10,148 ) (8,046 ) Loss on debt extinguishment 165 280 799 Deferred income taxes 3,420 (2,976 ) (14,682 ) Stock-based compensation 9,036 10,169 10,429 Non-cash interest expense 1,045 1,745 2,258 Impairment of goodwill and other assets — 24,968 — Accounts receivable 8,327 (39,539 ) 31,943 Inventories (2,510 ) (18,713 ) (13,158 ) Prepaid expenses and other (3,809 ) 4,548 (2,014 ) Accounts payable and accrued liabilities (817 ) 32,653 (963 ) Other, net (396 ) (620 ) (8,662 ) Net cash provided by operating activities 146,284 112,471 144,379 Cash flows from investing activities Capital expenditures (37,645 ) (34,009 ) (26,056 ) Proceeds from sale of property, plant and equipment 785 17,776 10,860 Acquisitions, net of cash acquired — — (323,487 ) Other, net — 3,060 6,443 Net cash used in investing activities (36,860 ) (13,173 ) (332,240 ) Cash flows from financing activities Proceeds from exercise of stock options 848 961 5,790 Borrowings under senior notes — — 325,000 Dividends paid (17,797 ) (17,768 ) (15,315 ) Borrowings under revolving credit facilities 619 937 713 Payments under revolving credit facilities (619 ) (937 ) (713 ) Principal payments under finance lease obligations (308 ) (290 ) (600 ) Proceeds from issuance of term loan credit facility — — 377,519 Principal payments under term loan credit facility (50,470 ) (1,880 ) (386,577 ) Principal payments under industrial revenue bond — (93 ) (583 ) Debt issuance costs paid (164 ) (476 ) (6,783 ) Convertible senior notes repurchase — (80,200 ) (8,045 ) Stock repurchase (33,707 ) (58,383 ) (74,491 ) Net cash (used in) provided by financing activities (101,598 ) (158,129 ) 215,915 Cash and cash equivalents: Net increase (decrease) in cash, cash equivalents, and restricted cash 7,826 (58,831 ) 28,054 Cash, cash equivalents, and restricted cash at beginning of year 132,690 191,521 163,467 Cash, cash equivalents, and restricted cash at end of year $ 140,516 $ 132,690 $ 191,521 Supplemental disclosures of cash flow information: Cash paid for interest $ 26,234 $ 27,386 $ 9,479 Cash paid for income taxes $ 20,379 $ 24,243 $ 41,391 611.DESCRIPTION OF THE BUSINESSaircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade and pharmaceutical equipment. Its innovative products are sold under the following brand names: Wabash National®, Beall®, Benson®, Brenner® Tank, Bulk Tank International, DuraPlate®, Extract Technology®, Garsite, Progress Tank, Supreme Transcraft®, Transcraft®, Walker Engineered Products, and Walker Transport.2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.Basis of Consolidationb.Use of Estimatesc.Revenue RecognitionThe Company recognizes revenue from the sale of its products when the customer has made a fixed commitment to purchase a product for a fixed or determinable price, collection is reasonably assured under the Company’s normal billingcredit terms and ownership and all risk of loss has been transferred to the buyer, which is normally upon shipment to or pick up by the customer. Revenues on certain contracts are recorded on a percentage of completion method, measured by actual total cost incurred to the total estimated costs for each project. The Company excludes from revenue vehicle chassis obtained through its converter pool agreements as the original equipment manufacturer (“OEM”) retains full rights and ownership of the chassis for ultimate sale to an authorized OEM dealer. Revenues exclude all taxes collected from the customer. Shipping and handling fees are included inNet Sales and the associated costs included inCost of Salesin the Consolidated Statements of Operations.d.Used Trailer Trade Commitments and Residual Value GuaranteesIn the normal course of business, the Company commits to accept used trailers on trade for new trailer purchases. These commitments arise related to future new trailer orders at the time a new trailer order is placed by the customer. The Company acquired used trailers on trade of $9.5 million, $4.6 million, and $12.8 million in 2017, 2016, and 2015, respectively. As of December 31, 2017, the Company had $3.2 million in outstanding trade commitments which also represented the estimated net realizable value of the underlying used trailer. The Company had no outstanding trade commitments as of December 31, 2016. On occasion, the amount of the trade allowance provided for in the used trailer commitments, or cost, may exceed the net realizable value of the underlying used trailer. In these instances, the Company’s policy is to recognize the loss related to these commitments at the time the new trailer revenue is recognized. Net realizable value of used trailers is measured considering market sales data for comparable types of trailers.e.Cash and Cash Equivalents62f.Accounts ReceivableAdministrative Expensesadministrative expenses in the Consolidated Statements of Operations. The following table presents the changes in the allowance for doubtful accounts (in thousands): Years Ended December 31, 2017 2016 2015 Balance at beginning of year $ 951 $ 956 $ 1,047 Provision 119 117 145 Write-offs, net of recoveries (201 ) (122 ) (236 ) Balance at end of year $ 869 $ 951 $ 956 g.Inventories Years ended December 31, 2019 2018 2017 Balance at beginning of year $ 665 $ 869 $ 951 Provision 282 63 119 Write-offs, net of recoveries (277 ) (267 ) (201 ) Balance at end of year $ 670 $ 665 $ 869 market.net realizable value. The cost of manufactured inventory includes raw material, labor and overhead. Inventories, net of reserves, consist of the following (in thousands): December 31, 2017 2016 Raw materials and components $ 83,834 $ 53,388 Finished goods 54,000 57,297 Work in progress 29,123 18,422 Used trailers 7,330 2,490 Aftermarket parts 6,448 8,356 $ 180,735 $ 139,953 h.Prepaid Expenses and Other20172019 and 20162018 consists of the following (in thousands): December 31, 2017 2016 Chassis converter pool agreements $ 18,326 $ - Income tax receivables 10,821 6,926 Assets held for sale 10,777 5,788 Insurance premiums & maintenance agreements 6,860 3,555 All other 10,515 8,082 $ 57,299 $ 24,351 December 31, 2019 2018 Chassis converter pool agreements $ 10,164 $ 22,273 Income tax receivables 8,701 9,872 Insurance premiums & maintenance agreements 3,217 3,313 Assets held for sale 3,020 3,039 All other 16,120 12,764 $ 41,222 $ 51,261 former sale.sale and unused land parcels. Insurance premiums and maintenance agreements are charged to expense over the contractual life, which is generally one year or less. Other prepaid items consist primarily of costs in excess of billings oncontract assets related to contracts for which the Company recognizes revenue on a percentage of completionan over time basis and investments held by the Company’s captive insurance subsidiary.
As of December 31, 2019 and 2018, there was no restricted cash included in prepaid expenses and other current assets.63i.Property, Plant and Equipment Depreciation expense, which is recorded inCost of Sales andGeneral and Administrative Expenses in the Consolidated Statements of Operations, as appropriate, on property, plant and equipment was $16.7 million, $15.9 million, and $16.0 million in 2017, 2016, and 2015, respectively, and includes amortization of assets recorded in connection with the Company’s capital lease agreements. As of December 31, 2017 and 2016, the assets related to the Company’s capital lease agreements are recorded withinProperty, Plant and Equipmentin the Consolidated Balance Sheet for the amount of $3.2 million and $4.3 million, respectively, net of accumulated depreciation of $1.4 million and $1.9 million, respectively.Property, plant and equipment consist of the following (in thousands): December 31, 2017 2016 Land $ 34,493 $ 20,958 Buildings and building improvements 139,636 110,789 Machinery and equipment 254,544 231,094 Construction in progress 17,672 12,116 $ 446,345 $ 374,957 Less: accumulated depreciation (250,982 ) (240,819 ) $ 195,363 $ 134,138 j.Intangible AssetsAs of December 31, 2017, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average
Amortization Period Gross Intangible
Assets Accumulated
Amortization Net Intangible
Assets Tradenames and trademarks 20 years $ 57,894 $ (14,034 ) $ 43,860 Customer relationships 10 years 290,415 (105,567 ) 184,848 Technology 12 years 16,517 (8,694 ) 7,823 Backlog less than 1 year 2,200 (1,701 ) 499 Total $ 367,026 $ (129,996 ) $ 237,030 As of December 31, 2016, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average
Amortization Period Gross Intangible
Assets Accumulated
Amortization Net Intangible
Assets Tradenames and trademarks 20 years $ 37,894 $ (11,864 ) $ 26,030 Customer relationships 10 years 151,090 (92,686 ) 58,404 Technology 12 years 16,517 (6,546 ) 9,971 Total $ 205,501 $ (111,096 ) $ 94,405 64Intangible asset amortization expense was $17.0 million, $19.9 million, and $21.3 million for 2017, 2016, and 2015, respectively. Annual intangible asset amortization expense for the next 5 fiscal years is estimated to be $20.4 million in 2018; $21.6 million in 2019; $23.1 million in 2020; $24.4 million in 2021; and $19.5 million in 2022.k.Goodwill–- Goodwill and Other, goodwill is reviewed for impairment utilizing either a qualitative assessment or a two-step quantitative process.In assessingAn entity has an unconditional option to bypass the qualitative factorsassessment in any period and proceed directly to determine whether itperforming the quantitative impairment test, which is more likely than not that the fair value of a reporting unit is less than its carrying amount,option the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit's fair value or carrying amount involve significant judgments and assumptions. The judgments and assumptions include the identification of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and Company specific events and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.two-step quantitative analysis, the first stepCompany compares the carrying value, including goodwill, of each reporting unit with its estimated fair value. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is greater than the fair value, this suggests that an impairment may exist and a second step is required in which the implied fair value of goodwill is calculated as the excess of the fair value of the reporting unit over the fair values assigned to its assets and liabilities. If this implied fair value is less than the carrying value, the difference is recognized as an impairment loss charged to the reporting unit. In assessingAfter an impairment loss is recognized, the adjusted carrying amount of goodwill using thisshall be its new accounting basis.approach, the Company establishes fair value for the purpose of impairment testing by averagingassessment to estimate the fair value using an income and market approach. Theof each reporting unit at the annual testing date of October 1, 2019 utilizing a combination of the income approach employs a discounted cash flow model incorporating similar pricing concepts used to calculate fair value in an acquisition due diligence process and a discount rate that takes into account the Company’s estimated average cost of capital. The market approach, employs market multiples basedweighted equally. Based on comparable publicly traded companies in similar industries as the reporting unit. Estimates of fair value are established using current and forward multiples adjusted for size and performance of the reporting unit relative to peer companies.During the fourth quarters of 2017 and 2016, the Company completed its goodwill impairment test using the quantitative assessment. During the second quarter of 2016, in connection with the realignmentassessment performed, all of the Company’s reporting segments,units exceeded their carrying values; as such, there was no goodwill impairment as a result of the 2019 annual goodwill impairment test.analysis to determine the allocationsinterim quantitative assessment as of goodwill and test for impairment. Furthermore, for 2015, the Company completed its goodwill impairment testing during the fourth quarter using the qualitative approach. Based on these assessments and in connection with the realignmentDecember 31, 2019, utilizing a combination of the Company’s reporting segments in the second quarter of 2016, it determined that the portion of goodwill allocated to the retail branch operationsincome and market approaches, which were weighted evenly. No impairment was impairedindicated as the fair value of the reporting unit did not exceedexceeded its carrying value resulting in an impairment charge for the Commercial Trailer Products reporting segment of $1.7 million. Based on all other assessments performed in eachvalue. The results of the last three years, the Company believed it was more likely than not thatquantitative analysis performed indicated the fair value of itsthe FMP reporting unitsunit exceeded the carrying value by approximately 3%. Key assumptions used in the analysis were greater than theira discount rate of 16.0%, EBITDA margin, and a terminal growth rate of 3.00%. The primary driver in the reduction of the fair value of the FMP reporting unit was a reduction of expected future cash flows. Future events and changing market conditions may, however, lead the Company to re-evaluate the assumptions used to test for goodwill impairment, including key assumptions used in our expected EBITDA margins and cash flows, as well as other key assumptions with respect to matters out of our control, such as discount rates and market multiple comparables.amountvalue of the reporting unit exceeded the fair value of the reporting unit and, no additionalaccordingly, a goodwill impairment of goodwill$4.9 million was recognized.As of December 31, 2017, the carrying amount of goodwill totaled $317.5 million which was allocated to its reporting segment in the following amounts: Final Mile Products - $169.2 million; Diversified Products - $145.6 million; and, Commercial Trailer Products - $2.7 million. For the years ended December 31, 2017 and 2016, the changes in the carrying amounts of goodwill were as follows (in thousands):
recorded.65 2017 2016 Balance as of January 1 $ 148,367 $ 149,718 Acquisition of Supreme 169,235 - Effects of foreign currency (138 ) 312 Impairment of goodwill - (1,663 ) Balance as of December 31 $ 317,464 $ 148,367 l.Other AssetsThe Company capitalizes the cost of computer software developed or obtained for internal use. Capitalized software is amortized using the straight-line method over three to seven years. As of December 31, 2017 and 2016, the Company had software costs, net of amortization, of $7.3 million and $5.4 million, respectively. Amortization expense for 2017, 2016, and 2015 was $1.3 million, $1.0 million, and $0.7 million, respectively.m.Long-Lived Assetsn.Other Accrued Liabilitiesfollowing table presentsCompany capitalizes the major componentscost ofOther Accrued Liabilities (in thousands): December 31, 2017 2016 Payroll and related taxes $ 27,840 $ 26,793 Customer deposits 26,059 19,302 Warranty 20,132 20,520 Chassis converter pool agreements 18,326 - Self-insurance 9,996 8,387 Accrued taxes 9,224 6,400 All other 17,333 10,912 $ 128,910 $ 92,314 The following table presents computer software developed or obtained for internal use. Capitalized software is amortized using the changes instraight-line method over three to seven years. As of December 31, 2019 and 2018, the product warranty accrual included inOther Accrued Liabilities (in thousands): 2017 2016 Balance as of January 1 $ 20,520 $ 19,709 Provision for warranties issued in current year 5,873 6,601 Supreme acquisition 1,421 - (Recovery of) Provision for pre-existing warranties (970 ) 560 Payments (6,712 ) (6,350 ) Balance as of December 31 $ 20,132 $ 20,520
Company had software costs, net of amortization, of $7.2 million and $7.9 million, respectively. Amortization expense for 2019, 2018, and 2017 was $1.7 million, $1.5 million, and $1.3 million, respectively.66self-insuranceproduct warranty accrual included inOther Accrued Liabilitiesaccrued liabilities (in thousands): 2017 2016 Balance as of January 1 $ 8,387 $ 7,677 Expense 38,817 41,470 Supreme Acquisition 2,555 - Payments (39,763 ) (40,760 ) Balance as of December 31 $ 9,996 $ 8,387 2019 2018 Balance as of January 1 $ 22,247 $ 20,132 Provision for warranties issued in current year 8,027 8,026 Liability adjustment due to divestiture of business — (420 ) Net adjustment to warranty accrual (2,320 ) — Payments (5,379 ) (5,491 ) Balance as of December 31 $ 22,575 $ 22,247 o.Income Taxes 2019 2018 Balance as of January 1 $ 9,890 $ 9,996 Expense 57,733 66,493 Payments (54,689 ) (66,599 ) Balance as of December 31 $ 12,934 $ 9,890 p.Concentration of Credit Riskreceivables.q.Research and DevelopmentearningsCost of sales and General and administrative expenses in the Consolidated Statements of Operations as incurred and were $19.5 million, $8.8 million, and $3.9 million $6.4 millionin 2019, 2018 and $4.8 million in 2017, 2016 and 2015, respectively.r.New Accounting PronouncementsMay 2014,February 2016, the Financial Accounting Standards Board (the “FASB”(“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers2016-02, “Leases (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605,Revenue. Furthermore, the FASB issued additional amendments and technical corrections related to ASU 2014-09 during 2016 and 2017, which are considered in our evaluation of this standard. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company has identified the revenue streams and the related performance obligations and pricing arrangements within each of its product lines. The Company has evaluated contractual terms, such as customer acceptance clauses, payment terms, transferring of control to the customer, shipping instructions, and timing of shipments, and the timing of revenue recognition against the new standards with no findings that impact the Company’s financial statements. The Company is using the modified retrospective method to transition to the new standard, which is effective January 1, 2018.67In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842)”. This update requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company has identified its existing lease contracts and calculated the right-of-use (“ROU”) assets, which are reflected in will bewas effective for the Company as of January 1, 2019. A modified retrospectiveAdoption of the new standard resulted in the recording of ROU assets and lease liabilities of $9.9 million as of January 1, 2019. The FASB has issued further ASUs related to the standard providing an optional transition method is required.allowing entities to not recast comparative periods. The Company is currently evaluatingelected the impactpractical expedients upon transition that retained the lease classification and initial direct costs for any leases that existed prior to adoption of this guidance will have on its consolidated financial statements.NovemberJune 2016, the FASB issued ASU No. 2016-18,Statement2016-13, “Financial Instruments - Credit Losses,” which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of Cash Flows (Topic 230), Restricted Cash,financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities, and net investments in leases as well as reinsurance and trade receivables. In November 2018, the FASB issued ASU 2018-19, which requires entities to showclarifies that operating lease receivables are outside the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one item on the balance sheet, a reconciliationscope of the totals in the statement of cash flows to the related captions in the balance sheet is required.new standard. This guidancestandard will be effective for the Company as ofus beginning January 1, 2018. Entities will be required to apply the guidance retrospectively.2020. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-4”). ASU 2017-4 eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company believesexpects that the adoption of the provisions of ASU 2017-04new credit losses model will not have a material impact on its consolidated financial position, resultsstatements.operationsTopic 606 did not have a material impact on the consolidated financial statements. The Company recognizes revenue from the sale of its products when obligations under the terms of a contract with our customers are satisfied; this occurs with the transfer of control of our products and replacement parts or cash flows.3.ACQUISITION OF SUPREME INDUSTRIES, INC.On September 27,throughout the completion of service work. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring promised goods or services to a customer and excludes all taxes collected from the customer. Shipping and handling fees are included in acquisitionquantitative assessment. During the third quarter of Supreme Industries, Inc. (“Supreme”) following a cash tender offer by2018, the Company for all outstanding sharesperformed an interim impairment analysis after identifying indicators of Supreme’s Class A and Class B common stock for $21 per share and an aggregate consideration paid of $360.4 million. The Company financedimpairment based on the Supreme acquisition and related fees and expenses using the proceedsresults of the Company’s $325 million offering in aggregate principal amount of 5.50% senior unsecured notes due 2025 (as described in further detail in Note 6) and available cash and cash equivalents.Supreme is oneAVTE reporting unit. Based on this assessment, it was determined that all of the nation’s leading manufacturers of specialized commercial vehicles, including cutaway and dry-freight van bodies, refrigerated units, and stake bodies. Supreme has manufacturing facilities in Goshen and Ligonier, Indiana; Jonestown, Pennsylvania; Cleburne, Texas; Griffin, Georgia; and Moreno Valley, California. Supreme will be part of a new Final Mile Products segment created by the Company in the fourth quarter of 2017. This acquisition allows the Company to accelerate our growth and greatly expand our presence in the final mile space, with increased distribution paths and greater customer reach, and supports the Company’s objective to transform it into a more diversified industrial manufacturer.The Company incurred various costs related to the Supreme acquisition including fees paid to an investment banker for acquisition services and the related bridge financing commitment as well as professional fees for diligence, legal and accounting totaling $9.6 million. These costs have been recorded asAcquisition Expenses in the Condensed Consolidated Statements of Operations.The aggregate purchase price of $360.4 million wasgoodwill allocated to the opening balance sheetAVTE reporting unit was impaired resulting in an impairment charge for the Diversified Products reporting segment of Supreme at September 27, 2017,$4.9 million. Based on all other assessments performed in each of the datelast three years, the Company believed it was more likely than not that the fair value of acquisition, which is still preliminaryits reporting units were greater than their carrying amount and subject to adjustmentno additional impairment of goodwill was recognized.68 Commercial Trailer Products Diversified Products Final Mile Products Total Balance at December 31, 2017 Goodwill $ 4,288 $ 145,604 $ 169,235 $ 319,127 Accumulated impairment losses (1,663 ) — — (1,663 ) Net balance at December 31, 2017 2,625 145,604 169,235 317,464 Acquisition of Supreme — — (1,520 ) (1,520 ) Effects of foreign currency — 84 — 84 Goodwill impairments during 2018 — (4,944 ) — (4,944 ) Balance at December 31, 2018 Goodwill 4,288 145,688 167,715 317,691 Accumulated impairment losses (1,663 ) (4,944 ) — (6,607 ) Net balance as of December 31, 2018 2,625 140,744 167,715 311,084 Effects of foreign currency — (58 ) — (58 ) Impact of divestiture on goodwill — (4,944 ) — (4,944 ) Impact of divestiture on accumulated impairment losses — 4,944 — 4,944 Balance as of December 31, 2019 Goodwill 4,288 140,686 167,715 312,689 Accumulated impairment losses (1,663 ) — — (1,663 ) Net balance as of December 31, 2019 $ 2,625 $ 140,686 $ 167,715 $ 311,026 Cash $ 36,878 Accounts receivable 25,146 Inventories 34,084 Prepaid expense and other 21,730 Property, plant, and equipment 59,891 Intangibles 161,200 Goodwill 169,235 Other assets 127 Total assets acquired $ 508,291 Current portion of long term debt $ 7,167 Accounts payable 10,546 Other accrued liabilites 55,350 Deferred income taxes 71,946 Long term liabilities 2,917 Total liabilities assumed $ 147,926 Net assets acquired $ 360,365 Acquisition, net of cash acquired $ 323,487 Tradenames and trademarks 20 years $ 53,103 $ (17,962 ) $ 35,141 Customer relationships 13 years 282,863 (132,903 ) 149,960 Technology 12 years 14,045 (9,248 ) 4,797 Total $ 350,011 $ (160,113 ) $ 189,898 $161.2December 31, 2018, the balances of intangible assets, other than goodwill, were as follows (in thousands): Tradenames and trademarks 20 years $ 53,103 $ (15,307 ) $ 37,796 Customer relationships 13 years 282,736 (116,222 ) 166,514 Technology 12 years 14,045 (8,027 ) 6,018 Total $ 349,884 $ (139,556 ) $ 210,328 were preliminarily recorded as a result$19.5 million, and $17.0 million for 2019, 2018, and 2017, respectively. Annual intangible asset amortization expense for the next 5 fiscal years is estimated to be $21.4 million in 2020; $23.5 million in 2021; $18.1 million in 2022; $15.4 million in 2023; and $15.2 million in 2024.the acquisition andreserves, consist of the following (in thousands): Amount Useful Life Tradename $ 20,000 20 years Customer relationships 139,000 15 years Backlog 2,200 Less than 1 year $ 161,200 Goodwill December 31, 2019 2018 Raw materials and components $ 105,332 $ 115,083 Finished goods 58,224 48,698 Work in progress 14,269 13,119 Used trailers 2,499 1,083 Aftermarket parts 6,590 6,421 $ 186,914 $ 184,404 $169.2 million was preliminarily recorded as a result of the acquisition. The Company does not expect the amount recorded as goodwill for the Supreme acquisition to be deductible for tax purposes. The process of completing the valuations of the identified intangible assets, including tax assetssales and liabilities, is being completed. Goodwill, calculated as the excess of the consideration transferred over the net assets recognizedGeneral and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized, is comprised of operational synergies that are expected to be realized in both the short and long-term and the opportunity to enter new market sectors with higher margin potential, which will enable us to deliver greater value to our customers and shareholders. During the fourth quarter of 2017, the Company made certain adjustments to its purchase price allocation to adjust intangibles; property, plant, and equipment; and deferred tax liabilities, which resulted in a $3.8 million increase in goodwill. Additional adjustments to intangibles, taxes and liabilities as well as resulting adjustments to goodwill may be necessary as the Company completes the valuation of acquired assets and liabilities. The Company expects the process of completing the valuations to be completed during the first quarter of 2018. Unaudited Pro forma ResultsThe results of Supreme are includedadministrative expenses Condensed Consolidated Statements of Operations, from the date of acquisition, including $67.1as appropriate, on property, plant and equipment was $20.2 million, $19.7 million, and $16.7 million in revenue2019, 2018, and net loss2017, respectively, and includes amortization of $1.6 million for the year ended December 31, 2017. The following unaudited pro forma information is shown below as if the acquisition of Supreme had been completed as of the beginning of the earliest period presented (in thousands):69 Twelve Months Ended
December 31, 2017 2016 Sales $ 1,998,043 $ 2,139,404 Net income $ 117,786 $ 124,323 The information presented above is for informational purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of the respective periods, nor is it necessarily indicative of future operating results of the combined companies under the ownership and management of the Company.4.PER SHARE OF COMMON STOCKPer share results have been calculated based on the average number of common shares outstanding. The calculation of basic and diluted net income per share is determined using net income applicable to common stockholders as the numerator and the number of shares includedassets recorded in the denominator as follows (in thousands, except per share amounts): Years Ended December 31, 2017 2016 2015 Basic net income per share: Net income applicable to common stockholders $ 111,422 $ 119,433 $ 104,289 Weighted average common shares outstanding 59,358 63,729 67,201 Basic net income per share $ 1.88 $ 1.87 $ 1.55 Diluted net income per share: Net income applicable to common stockholders $ 111,422 $ 119,433 $ 104,289 Weighted average common shares outstanding 59,358 63,729 67,201 Dilutive shares from assumed conversion of convertible senior notes 1,726 794 1,128 Dilutive stock options and restricted stock 1,515 1,239 1,039 Diluted weighted average common shares outstanding 62,599 65,762 69,368 Diluted net income per share $ 1.78 $ 1.82 $ 1.50 For the period ending December 31, 2017, there were no options excluded from average diluted shares outstanding as the average market price of the common shares was greater than the exercise price. The periods ended December 31, 2016 and 2015 exclude options to purchase common shares totaling 503 and 666, respectively, because the exercise prices were greater than the average market price of the common shares. In addition, the calculation of diluted net income per share for each period includes the impact ofconnection with the Company’s Notes as the average stock price of the Company’s common stock during these periods was above the initial conversion price of approximately $11.70 per share.5.LEASE ARRANGEMENTSThe Company leases office space, manufacturing, warehouse and service facilities and equipment for varying periods under both operating and capitalfinance lease agreements. Future minimum lease payments required under these lease commitments asAs of December 31, 20172019 and 2018, the assets related to the Company’s finance lease agreements are as followsrecorded within 70 December 31, 2019 2018 Land $ 36,794 $ 35,485 Buildings and building improvements 146,210 141,098 Machinery and equipment 287,332 266,803 Construction in progress 36,179 31,772 506,515 475,158 Less: accumulated depreciation (285,169 ) (268,167 ) $ 221,346 $ 206,991 Capital
Leases Operating
Leases 2018 361 2,466 2019 361 1,364 2020 361 688 2021 361 439 2022 30 254 Thereafter - - Total minimum lease payments $ 1,474 $ 5,211 Interest (172 ) Present value of net minimum lease payments $ 1,302 Total rental expense was $6.5 million, $6.2 million, and $6.2 million for 2017, 2016, and 2015, respectively.6.DEBT December 31, 2019 2018 Customer deposits $ 19,324 $ 23,483 Chassis converter pool agreements 10,164 22,273 Warranty 22,575 22,247 Payroll and related taxes 25,263 16,096 Self-insurance 12,934 9,890 Accrued interest 4,696 4,779 Operating lease obligations 4,369 — Accrued taxes 10,344 7,653 All other 14,561 9,963 $ 124,230 $ 116,384 December 31, December 31, 2017 2016 Convertible senior notes due 2018 $ 44,561 $ 48,951 Senior notes due 2025 325,000 - Term loan credit agreement 187,579 189,470 Other debt 93 676 $ 557,233 $ 239,097 Less: unamortized discount and fees (7,122 ) (3,164 ) Less: current portion (46,020 ) (2,468 ) $ 504,091 $ 233,465 December 31, 2019 December 31, 2018 Senior notes due 2025 $ 325,000 $ 325,000 Term loan credit agreement 135,228 185,699 460,228 510,699 Less: unamortized discount and fees (4,842 ) (5,801 ) Less: current portion — (1,880 ) $ 455,386 $ 503,018 maturematured on May 1, 2018. The Convertible Notes arewere senior unsecured obligations of the Company ranking equally with its existing and future senior unsecured debt. The Company used the net proceeds of $145.1 million from the sale of the Convertible Notes to fund a portion of the purchase price of the acquisition of Walker Group Holdings (“Walker”) in May 2012.As of December 31, 2017, and at any time until the close of business on the second business day immediately preceding the maturity date, the Convertible Notes are convertible by their holders into cash, shares of the Company’s common stock or any combination thereof at the Company’s election, at an initial conversion rate of 85.4372 shares of the Company’s common stock per $1,000 in principal amount of Convertible Notes, which is equal to an initial conversion price of approximately $11.70 per share.If the Convertible Notes outstanding at December 31, 2017 had been converted as of December 31, 2017, the if-converted value would exceed the principal amount by approximately $38 million. It is the Company’s intent to settle conversions in cash for both the principal portion and the excess of the conversion value over the principal portion. The Convertible Notes mature on May 1, 2018 and are classified as current within the Condensed Consolidated Balance Sheet.71accountsaccounted separately for the liability and equity components of the Convertible Notes in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance requires the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature. The Company determined that senior, unsecured corporate bonds traded on the market represent a similar liability to the Convertible Notes without the conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity,estimated the impliedused $80.2 million in cash, excluding interest, rateto settle $44.6 million in principal of the Convertible Notes to be 7.0%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs (as defined below).none were converted to common shares. The estimated implied interest rate was applied to the Convertible Notes, which resulted in a fair valueexcess of the liability component of $123.8 million upon issuance, calculated ascash settlement amount over the presentprincipal value of implied future payments based on the $150.0 million aggregate principal amount. The $21.7 million difference between the cash proceeds before offering expenses of $145.5 million and the estimated fair value of the liability component was recorded in additional paid-in capital. The discount on the liability portion of the Convertible Notes is being amortized over the lifewas accounted for as a reacquisition of the Convertible Notes using the effective interest rate method.During 2017, the Company acquired $4.4equity, resulting in a $35.5 million in principal of such Convertible Notes for $8.0 million, excluding accrued interest. Additionally, in 2016 the Company acquired $82.0 million in principal for $98.9 million, excluding accrued interest.reduction to additional paid-in capital during 2018. For the years ended and 2016, the Company, we recognized a loss on debt extinguishment of $0.2 million and $0.1 million, respectively, related to settlements and $1.9 million, respectively, for repurchase activity,the retirement of the Convertible Notes, which is included inOther, net on the Company’s Condensed Consolidated Statements of Operations.The Company applies the treasury stock method in calculating the dilutive impact of the Convertible Notes. For the years ended December 31, 2017 and 2016, the Convertible Notes had a dilutive impact.The following table summarizes information about the equity and liability components of the Convertible Notes (dollars in thousands): December 31, December 31, 2017 2016 Principal amount of the Notes outstanding $ 44,561 $ 48,951 Unamortized discount and fees of liability component (514 ) (2,183 ) Net carrying amount of liability component 44,047 46,768 Less: current portion (44,047 ) - Long-term debt $ - $ 46,768 Carrying value of equity component, net of issuance costs $ (7,626 ) $ (3,971 ) Remaining amortization period of discount on the liability component 0.4 years 1.3 years 2017, 20162019, 2018, and 20152017 included inInterest Expenseexpense on the Company’s Condensed Consolidated Statements of Operations were as follows (in thousands): Years Ended December 31, 2017 2016 2015 Contractual coupon interest expense $ 1,570 $ 3,198 $ 5,063 Accretion of discount and fees on the liability component $ 1,537 $ 2,902 $ 4,324 Year Ended December 31, 2019 2018 2017 Contractual coupon interest expense $ — $ 470 $ 1,570 Accretion of discount and fees on the liability component $ — $ 461 $ 1,537 will pay interest semi-annually in cash on April 1 and October 1 of each year, beginning on April 1, 2018.year. The Company used the net proceeds of $318.9 million from the sale of the Senior Notes to finance a portion of the acquisition of Supreme and to pay related fees and expenses.72yearyears ended December 31, 2019, 2018 and 2017, was $18.5 million, $18.5 million and $4.8 million, respectively and is included inInterest Expenseexpense on the Company’s Condensed Consolidated Statements of Operations.In May 2012,(as subsequently amended, the “Credit(the “Revolving Credit Agreement”), dated as of May 8, 2012, among the Company, certain of its subsidiaries of the Company from time to time party theretoas borrowers (together with the Company, the “Borrowers”), the several lenders from time to time party thereto, and Wells Fargo Capital Finance, LLC, as the administrative agent, joint lead arranger and administrativejoint bookrunner (the “Revolver Agent”), and Citizens Business Capital, a division of Citizens Asset Finance, Inc., as syndication agent, (the “Agent”). The Credit Agreement provides for, among other things, (x) a $175 million senior securedjoint lead arranger and joint bookrunner, which amended and restated the Company’s existing amended and restated revolving credit facility that matures on June 4, 2020, subject to certain springing maturity events and (y) an uncommitted accordion feature allowing for an increase to the availability under the revolving credit facility of up to $50 million, subject to certain conditions (the “Revolving Credit Facility”).73The Revolving Credit Facility (i) bears interest, at the Borrowers’ election, at (x) LIBOR (subject to a floor of 0%) plus a margin ranging from 150 basis points to 200 basis points, or (y) a base rate plus a margin ranging from 50 basis points to 100 basis points, in each case, based upon the monthly average excess availability under the Revolving Credit Facility, (ii) requires the Company to pay a monthly unused line fee equal to 25 basis points times the average unused availability under the Revolving Credit Facility, (iii) provides that if availability under the Revolving Credit Facility is less than 12.5% of the total commitment under the Revolving Credit Facility or if there exists an event of default, amounts in any of the Borrowers’ and the subsidiary guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the Revolving Credit Facility, and (iv) requires the Company to maintain a minimum fixed charge coverage ratio of not less than 1.1 to 1.0agreement, dated as of the end of any period of 12 fiscal months when excess availability under theMay 8, 2012. Credit Facility is less than 10% of the total commitment under the Revolving Credit Facility.In connection with, and in order to permit under the Credit Agreement, the Senior Notes offering and the acquisition of Supreme, on August 16, 2017, the Company entered into the Third Amendment to the Credit Agreement (the “Third Amendment”). The Third Amendment also permitted the Company to incur certain other indebtedness in connection with the acquisition of Supreme and to acquire certain liens and obligations of Supreme upon the consummation of the acquisition.The Credit Agreement is guaranteed by certain subsidiaries of the Company’s subsidiariesCompany (the “Revolver Guarantors”) and is secured by (i) first priority security interests (subject only to customary permitted liens and certain other permitted liens) in substantially all personal property of the Borrowers and the Revolver Guarantors, consisting of accounts receivable, inventory, cash, deposit and securities accounts and any cash or other assets in such accounts and, to the extent evidencing or otherwise related to such property, all general intangibles, licenses, intercompany debt, letter of credit rights, commercial tort claims, chattel paper, instruments, supporting obligations, documents and payment intangibles (collectively, the “Revolver Priority Collateral”), and (ii)BorrowerBorrowers and each Revolver Guarantor (subject to customary limitations in the case of the equity of foreign subsidiaries), and (B) substantially all other tangible and intangible assets of the Borrowers and the Revolver Guarantors including equipment, general intangibles, intercompany notes, insurance policies, investment property intellectual property and material owned realintellectual property (in each case, except to the extent constituting Revolver Priority Collateral), but excluding real property (collectively, including certain material owned real property that does not constitute collateral under the Revolving Credit Agreement, the “Term Priority Collateral”). The respective priorities of the security interests securing the Revolving Credit Agreement and the Term Loan Credit Agreement are governed by an Intercreditor Agreement, dated as of May 8, 2012, between the Revolver Agent and the Term Agent (as defined below), as amended (the “Intercreditor Agreement”).Company’s ability of the Company and certain of its affiliates to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock, enter into transactions with affiliates, merge, dissolve, pay offrepay subordinated indebtedness, make investments and dispose of assets. In addition, the Company will be required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 as of the end of any period of 12 fiscal months (commencing with the month ending December 31, 2018) when excess availability under the Revolving Credit Agreement is less than 10% of the total revolving commitment.2017,2019 and 2018, the Company had no outstanding borrowings under the Credit Agreement and was in compliance with all covenants. The Company’s liquidity position, defined as cash on hand and available borrowing capacity on the Revolving Credit Facility, amounted to $361.2$308.1 million as of December 31, 2017.Lo anLoan Credit Agreement (as amended, the “Term Loan Credit Agreement”), dated as of May 8, 2012, among the Company, the several lenders from time to time party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent (the “Term Agent”), joint lead arranger and joint bookrunner, and Wells Fargo Securities, LLC, as joint lead arranger and joint bookrunner, which provides for, among other things, (x) a senior secured term loan of $188.0 million that matures on March 19, 2022, subject to certain springing maturity events (the “Term Loans”), and (y) an uncommitted accordion feature to provide for additional senior secured term loans of up to $75 million plus an unlimited amount provided that the senior secured leverage ratio would not exceed 3.00 to 1.00, subject to certain conditions (the “Term Loan Facility”).74 shall amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the initial principal amount of the Tranche B-4 Loans, with the balance payable at maturity, and bear interest at a rate, at the Company’s election, equal to (i) LIBOR (subject to a floor of 0%) plus a margin of 225 basis points or (ii) a base rate (subject to a floor of 0%) plus a margin of 125 basis points. The Company is not subject to any financial covenants under the Term Loan Facility.2017, 20162019, 2018 and 2015,2017, under the Term Loan Credit Agreement the Company paid interest of $7.4$7.8 million, $8.3$8.0 million and $8.5$7.4 million, respectively, and paid principal of $1.9$50.5 million, $1.9 million, and $1.4$1.9 million, respectively. During 2019, the Company recognized losses on debt extinguishment totaling approximately $0.2 million in connection with the prepayment of principal. In connection with Amendment No. 3 and Amendment No. 5, the Company recognized a loss on debt extinguishment of approximately $0.7 million during 2017 which is2017. The losses on debt extinguishment are included inOther, net on the Company’s Condensed Consolidated Statements of Operations. As of December 31, 2017,2019 and December 31, 2018, the Company had $187.6$135.2 million and $185.7 million, respectively, outstanding under the Term Loan Credit Agreement, of which NaN and $1.9 million, respectively, was classified as current on the Company’s Condensed Consolidated Balance Sheet.2017, 20162019, 2018, and 2015,2017, the Company incurred charges of $0.2 million $0.2 million and $0.3 million, respectively,in each period for amortization of fees and original issuance discount which is included inInterest Expenseexpense in the Consolidated Statements of Operations. Asset / (Liability) Derivatives Balance Sheet Caption December 31, 2019 December 31, 2018 Derivatives designated as hedging instruments Commodity swap contracts Prepaid expenses and other $ 1,290 $ 17 Commodity swap contracts Other accrued liabilities (3,216 ) (1,146 ) Total derivatives designated as hedging instruments $ (1,926 ) $ (1,129 ) Amount of Gain (Loss) Recognized in
AOCI on Derivatives
(Effective Portion, net of tax) Location of Gain (Loss) Reclassified from AOCI into Earnings
(Effective Portion) Amount of Gain (Loss) Reclassified from AOCI into Earnings Year Ended December 31, December 31, 2019 December 31, 2018 2019 2018 2017 Derivatives instruments Commodity swap contracts $ (2,112 ) $ (765 ) Cost of sales $ (2,297 ) $ 142 $ — Classification December 31, 2019 Right-of-Use Assets Operating Other assets $ 14,246 Finance Property, plant and equipment, net 2,945 Total leased ROU assets $ 17,191 Liabilities Current Operating Other accrued liabilities $ 4,369 Finance Current portion of finance lease obligations 327 Noncurrent Operating Non-current liabilities 10,041 Finance Finance lease obligations 378 Total lease liabilities $ 15,115 Classification Twelve Months Ended December 31, 2019 Operating lease cost Cost of sales, selling expenses and general and administrative expense $ 5,172 Finance lease cost Amortization of ROU leased assets Depreciation and amortization 144 Interest on lease liabilities Interest expense 65 Net lease cost $ 5,381 Operating Leases Finance Leases Total 2020 $ 4,986 $ 361 $ 5,347 2021 4,477 361 4,838 2022 2,551 30 2,581 2023 1,855 — 1,855 2024 851 — 851 Thereafter 1,242 — 1,242 Total lease payments $ 15,962 $ 752 $ 16,714 Less: interest 1,552 47 Present value of lease payments $ 14,410 $ 705 7.FAIR VALUE MEASUREMENTSDecember 31, 2019 Weighted average remaining lease term (years) Operating leases 4.0 Finance leases 2.1 Weighted average discount rate Operating leases 5.17 % Finance leases 6.16 % Twelve Months Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 5,016 Operating cash flows from finance leases $ 53 Financing cash flows from finance leases $ 308 75·▪ Level 1 — Valuation is based on quoted prices for identical assets or liabilities in active markets; ·▪ Level 2 — Valuation is based on quoted prices for similar assets or liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for the full term of the financial instrument; and ·▪ Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement. $1.4 million of which are classified as Level 1, and life-insurance contracts valued based on the performance of underlying mutual funds, $13.8 million of which are classified as Level 2.$2.9 million of which are classified as Level 1. Frequency Asset / (Liability) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)December 31, 2019 Commodity swap contracts Recurring $ (1,926 ) $ — $ (1,926 ) $ — Mutual funds Recurring $ 7,367 $ 7,367 $ — $ — Life-insurance contracts Recurring $ 15,072 $ — $ 15,072 $ — December 31, 2018 Commodity swap contracts Recurring $ (1,129 ) $ — $ (1,129 ) $ — Mutual funds Recurring $ 4,140 $ 4,140 $ — $ — Life-insurance contracts Recurring $ 15,333 $ — $ 15,333 $ — 20172019 consists primarily of the Convertible Senior Notes due 2018, Senior Notes due 2025 and borrowings under the Term Loan Credit Agreement (see Note 6)10). The fair value of the Convertible Senior Notes due 2018, Senior Notes due 2025, Term Loan Credit Agreement, and the Revolving Credit Facility are based upon third party pricing sources, which generally do not represent daily market activity or represent data obtained from an exchange, and are classified as Level 2. The interest rates on the Company’s borrowings under the Revolving Credit Facility are adjusted regularly to reflect current market rates and thus carrying value approximates fair value for these borrowings. All other debt and capital lease obligations approximateapproximates their fair value as determined by discounted cash flows and are classified as Level 3.20172019 and December 31, 20162018 were as follows (in thousands): December 31, 2017 December 31, 2016 Carrying Fair Value Carrying Fair Value Value Level 1 Level 2 Level 3 Value Level 1 Level 2 Level 3 Instrument Convertible senior notes due 2018 $ 44,046 $ - $ 83,605 $ - $ 46,768 $ - $ 69,721 $ - Senior notes due 2025 319,377 - 328,250 - - - - - Term loan credit agreement 186,620 - 188,048 - 188,540 - 189,470 - Other debt 67 - - 67 625 - - 625 Capital lease obligations 1,302 - - 1,302 1,903 - - 1,903 $ 551,412 $ - $ 599,903 $ 1,369 $ 237,836 $ - $ 259,191 $ 2,528 8.STOCKHOLDERS’ EQUITYOn February 24, 2017, the Board December 31, 2019 December 31, 2018 Fair Value Fair Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Instrument Senior notes due 2025 $ 320,572 $ — $ 320,572 $ — $ 319,941 $ — $ 278,688 $ — Term loan credit agreement 134,814 — 134,814 — 184,957 — 181,985 — $ 455,386 $ — $ 455,386 $ — $ 504,898 $ — $ 460,673 $ — Directors approved the extension of the company’s existing stock repurchase programdebt is based on current public market prices for an additional two-year period and authorizing up to an additional $100 million in repurchases. Stock repurchases under this program may be madedisclosure purposes only. Unrealized gains or losses are not recognized in the open marketfinancial statements as long-term debt is presented at the carrying value, net of unamortized premium or discount and unamortized deferred financing costs in private transactions at times and in amounts determined by the Company. financial statements.2017, $52.9 million remained available under the program.76The Board of Directors has the authority to issue common and unclassed preferred stock of up to 200 million shares and 25 million shares, respectively, with par value of $0.01 per share, as well as to fix dividends, voting and conversion rights, redemption provisions, liquidation preferences and other rights and restrictions.9.STOCK-BASED COMPENSATIONOn May 18, 2017, the shareholders of the Company approved the 2017 Omnibus Incentive Plan (the “2017 Incentive Plan”) which authorizes 3,150,000 shares for issuance under the plan. Awards granted under the 2017 Incentive Plan may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, other share-based awards and cash awards to directors, officers and other eligible employees of the Company.The Company recognizes all share-based awards to eligible employees based upon their fair value. The Company’s policy is to recognize expense for awards that have service conditions only subject to graded vesting using the straight-line attribution method. Total stock-based compensation expense was $10.4 million, $12.0 million and $10.0 million in 2017, 2016 and 2015, respectively. The amount of compensation costs related to nonvested stock options and restricted stock not yet recognized was $11.6 million at December 31, 2017, for which the weighted average remaining life was 1.8 years.Restricted StockRestricted stock awards vest over a period of one to three years and may be based on the achievement of specific financial performance metrics. These shares are valued at the market price on the date of grant and are forfeitable in the event of terminated employment prior to vesting.A summary of all restricted stock activity during 2017 is as follows: Weighted Average Number of Grant Date Shares Fair Value Restricted Stock Outstanding at December 31, 2016 1,963,725 $ 14.20 Granted 794,700 $ 21.65 Vested (657,040 ) $ 14.33 Forfeited (255,758 ) $ 16.58 Restricted Stock Outstanding at December 31, 2017 1,845,627 $ 17.11 During 2017, 2016 and 2015, the Company granted 794,700, 1,105,010 and 667,126 shares of restricted stock, respectively, with aggregate fair values on the date of grant of $17.2 million, $14.7 million and $9.9 million, respectively. The total fair value of restricted stock that vested during 2017, 2016 and 2015 was $13.5 million, $7.4 million and $5.6 million, respectively.Stock OptionsStock options are awarded with an exercise price equal to the market price of the underlying stock on the date of grant, become fully exercisable three years after the date of grant and expire ten years after the date of grant. No stock options have been granted by the Company since February 2015.77A summary of all stock option activity during 2017 is as follows: Number of
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life Aggregate
Intrinsic
Value ($ in
millions) Options Outstanding at December 31, 2016 1,273,754 $ 11.13 5.1 $ 6.0 Exercised (511,453 ) $ 11.32 $ 4.4 Forfeited (8,753 ) $ 14.16 Expired (510 ) $ 13.32 Options Outstanding at December 31, 2017 753,038 $ 10.96 4.4 $ 8.1 Options Exercisable at December 31, 2017 704,858 $ 10.74 4.2 $ 7.7 The total intrinsic value of stock options exercised during 2017, 2016 and 2015 was $4.4 million, $1.3 million and $0.6 million, respectively.10.EMPLOYEE SAVINGS PLANSSubstantially all of the Company’s employees are eligible to participate in a defined contribution plan under Section 401(k) of the Internal Revenue Code. The Company also provides a non-qualified defined contribution plan for senior management and certain key employees. Both plans provide 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 these plans was approximately $7.3 million, $7.0 million, and $7.3 million for 2017, 2016, and 2015, respectively.11.INCOME TAXESa.Income Before Income TaxesThe consolidated income (loss) before income taxes for 2017, 2016 and 2015 consists of the following (in thousands): 2017 2016 2015 Domestic $ 121,897 $ 185,042 $ 163,325 Foreign 641 375 (14 ) Total income before income taxes $ 122,538 $ 185,417 $ 163,311 b.Income Tax ExpenseThe Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act contains numerous new and changed provisions related to the US federal taxation of domestic and foreign corporate operations. Although most of these provisions go into effect starting January 1, 2018 for calendar year corporate taxpayers, companies are still required to record the income tax accounting effects within the financial statements in the period of enactment. As such, the Company has included the estimated effects of remeasuring deferred taxes for the new US federal income tax rate of 21% going into effect in 2018, as well as assessed its ability to realize deferred income tax assets in the future under the new rules. At December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances.The Company remeasured certain deferred tax assets and liabilities based on the rates that are expected to be in effect at the time the tax deduction or taxable item will be reported in the Company’s tax return (i.e. when they are expected to reverse in the future), which is generally 21%. However, the Company is still analyzing certain aspects of the Act and refining calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement resulted in a decrease to our deferred tax balance of $19.7 million, which reduced the Company’s income tax expense for year ended December 31, 2017.78The Company assessed the impacts of the new provisions associated with the deductibility of executive compensation under Internal Revenue Code Section 162(m), and the associated “grandfathering” rules within the Act to provide taxpayers transition relief when applying the change in law. Starting with the 2018 tax year, the Act will no longer permit the exclusion of performance-based compensation, as well as CFO compensation, from the deduction limits set forth in Section 162(m). Within the Act are transition relief provisions for which the Company believes it would qualify when assessing the future deductibility of executive compensation. As such, we are currently recognizing a deferred income tax asset associated with the future tax deductions of equity-based compensation for the executives whose compensation falls under the new limitation rules in the amount of $3.1 million. The Company will monitor future guidance set forth by the Department of Treasury with regard to Section 162(m) provisions under the Act, and true up this estimate as appropriate within the one year measurement period required under Staff Accounting Bulletin No. 118 (SAB 118) issued by the SEC.The consolidated income tax expense for 2017, 2016 and 2015 consists of the following components (in thousands): 2017 2016 2015 Current Federal $ 21,316 $ 51,489 $ 58,090 State 4,327 10,307 8,627 Foreign 155 144 54 $ 25,798 $ 61,940 $ 66,771 Deferred Federal $ (16,065 ) $ 3,448 $ (7,930 ) State 1,459 686 288 Foreign (76 ) (90 ) (107 ) $ (14,682 ) $ 4,044 $ (7,749 ) Total consolidated expense $ 11,116 $ 65,984 $ 59,022 The following table provides a reconciliation of differences from the U.S. Federal statutory rate of 35% as follows (in thousands): 2017 2016 2015 Pretax book income $ 122,538 $ 185,417 $ 163,311 Federal tax expense at 35% statutory rate 42,888 64,896 57,159 State and local income taxes (net of federal benefit) 5,047 7,145 6,190 Benefit of domestic production deduction (3,450 ) (5,065 ) (5,255 ) Change in income tax reserves (11,925 ) 862 641 Remeasurement of deferred taxes (19,796 ) - - Other (1,648 ) (1,854 ) 287 Total income tax expense $ 11,116 $ 65,984 $ 59,022 79c.Deferred TaxesThe Company’s deferred income taxes are primarily due to temporary differences between financial and income tax reporting for incentive compensation, depreciation of property, plant and equipment, amortization of intangibles, other accrued liabilities and net operating loss carryforwards (“NOLs”).Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Companies are required to assess whether valuation allowances should be established against their deferred tax assets based on the consideration of all available evidence, both positive and negative, using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified.The Company assesses, on a quarterly basis, the realizability of its deferred tax assets by evaluating all available evidence, both positive and negative, including: (1) the cumulative results of operations in recent years, (2) the nature of recent losses, if applicable, (3) estimates of future taxable income, (4) the length of NOLs and (5) the uncertainty associated with a possible change in ownership, which imposes an annual limitation on the use of these carryforwards.As of December 31, 2017 and 2016, the Company retained a valuation allowance of $1.2 million against deferred tax assets related to various state and local NOLs that are subject to restrictive rules for future utilization.As of December 31, 2017, the Company had no U.S. federal tax NOLs. The Company had various multistate income tax NOLs aggregating approximately $53 million which will expire beginning in 2018, if unused.The components of deferred tax assets and deferred tax liabilities as of December 31, 2017 and 2016 were as follows (in thousands): 2017 2016 Deferred tax assets Tax credits and loss carryforwards $ 1,710 $ 260 Accrued liabilities 6,629 9,852 Incentive compensation 13,867 21,206 Other 2,852 4,084 $ 25,058 $ 35,402 Deferred tax liabilities Property, plant and equipment $ (12,813 ) $ (5,823 ) Intangibles (45,960 ) (5,299 ) Other (2,003 ) (3,264 ) $ (60,776 ) $ (14,386 ) Net deferred tax asset before valuation allowances and reserves $ (35,718 ) $ 21,016 Valuation allowances (1,237 ) (1,172 ) Net deferred tax asset or liability $ (36,955 ) $ 19,844 80d.Tax ReservesThe Company’s policy with respect to interest and penalties associated with reserves or allowances for uncertain tax positions is to classify such interest and penalties inIncome Tax Expense on the Consolidated Statement of Operations. As of December 31, 2017 and 2016, the total amount of unrecognized income tax benefits was approximately $0.8 million and $12.7 million, respectively, all of which, if recognized, would impact the effective income tax rate of the Company. As of December 31, 2017 and 2016, the Company had recorded a total of $0.3 and $2.1 million, respectively of accrued interest and penalties related to uncertain tax positions. The year over year reduction in the accrual balances relates to the release of income tax reserves upon closing of the federal income tax audit for the 2014 tax year. The Company foresees no significant changes to the facts and circumstances underlying its reserves and allowances for uncertain income tax positions as reasonably possible during the next 12 months. As of December 31, 2017, the Company is subject to unexpired statutes of limitation for U.S. federal income taxes for the years 2015 and 2016. The Company is also subject to unexpired statutes of limitation for Indiana state income taxes for the years 2014 through 2016.A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows (in thousands) and all balances as of December 31, 2017 were included inDeferred Income Taxesin the Company’s Consolidated Balance Sheet:Balance at January 1, 2016 $ 10,625 Decrease in prior year tax positions - Balance at December 31, 2016 $ 10,625 Decrease in prior year tax positions (10,130 ) Balance at December 31, 2017 $ 495 12.COMMITMENTS AND CONTINGENCIESa.LitigationThe Company is involved in a number of legal proceedings concerning matters arising in connection with the conduct of its business activities, and is periodically subject to governmental examinations (including by regulatory and tax authorities), and information gathering requests (collectively, "governmental examinations"). As of December 31, 2017,2019, the Company was named as a defendant or was otherwise involved in numerous legal proceedings and governmental examinations, in connection with the conduct of its business activities, in various jurisdictions, both in the United States and internationally.The Company has recorded liabilities for certain On the basis of its outstanding legalinformation currently available to it, management does not believe that existing proceedings and governmental examinations. A liability is accrued when it is both (a) probable that a loss with respect to the legal proceeding has occurred and (b) the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the liability that has been previously accrued. These legal proceedings, as well as governmental examinations, involve various lines of business of the Company and a variety of claims (including, but not limited to, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against the Company specify the damages claimed by the plaintiff, many seek a not-yet-quantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated and/or unsupported. As a result, it is not currently possible to estimate a range of possible loss beyond previously accrued liabilities relating to some matters including those described below. Such previously accrued liabilities may not represent the Company's maximum loss exposure. The legal proceedings and governmental examinations underlying the estimated rangeinvestigations will change from time to time and actual results may vary significantly from the currently accrued liabilities.81Based on its current knowledge, and taking into consideration its litigation-related liabilities, the Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding or governmental examination other than the matters below, which are addressed individually, that would have a material adverse effectimpact on the Company'sour consolidated financial condition or liquidity if determined in a manner adverse to the Company. However, in light of the uncertainties involved in such matters the ultimate outcome of a particular matterare unpredictable, and we could be material to the Company's operating resultsincur judgments or enter into settlements for a particular period depending on, among other factors, the size of the losscurrent or liability imposedfuture claims that could materially and the level of the Company's income for that period.adversely affect our financial statements. Costs associated with the litigation and settlements of legal matters are reported withinAdministrative Expensesadministrative expenses in the Condensed Consolidated Statements of Operations.Brazil Joint VentureIn March 2001, Bernard Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against the Company in the Fourth Civil Court of Curitiba in the State of Paraná, Brazil. Because of the bankruptcy of BK, this proceeding is now pending before the Second Civil Court of Bankruptcies and Creditors Reorganization of Curitiba, State of Paraná (No. 232/99).The case grows out of a joint venture agreement between BK and the Company related to marketing of RoadRailer trailers in Brazil and other areas of South America. When BK was placed into the Brazilian equivalent of bankruptcy late in 2000, the joint venture was dissolved. BK subsequently filed its lawsuit against the Company alleging that it was forced to terminate business with other companies because of the exclusivity and non-compete clauses purportedly found in the joint venture agreement. BK asserted damages, exclusive of any potentially court-imposed interest or inflation adjustments, of approximately R$20.8 million (Brazilian Reais). BK did not change the amount of damages asserted following its filing of the case in 2001.A bench (non-jury) trial was held on March 30, 2010 in Curitiba, Paraná, Brazil. On November 22, 2011, the Fourth Civil Court of Curitiba partially granted BK’s claims, and ordered Wabash to pay BK lost profits, compensatory, economic and moral damages in excess of the amount of compensatory damages asserted by BK. The total ordered damages amount was approximately R$26.7 million (Brazilian Reais), which was approximately $8.1 million U.S. dollars using the exchange rate as of December 31, 2017 and exclusive of any potentially court-imposed interest, fees or inflation adjustments. On October 5, 2016, the Court of Appeals re-heard all facts and legal questions presented in the case, and ruled in favor of the Company on all claims at issue. In doing so, the Court of Appeals dismissed all claims against the Company and vacated the judgment and damages previously ordered by the Fourth Civil Court of Curitiba. On September 30, 2017, BK filed its notice for a special appeal of the Court of Appeals ruling to the Superior Court of Justice and the Supreme Federal Court. However, unless these higher courts find in favor of BK on any of its claims, the judgment of the Court of Appeals is final. As a result of the Court of Appeals ruling, the Company does not expect that this proceeding will have a material adverse effect on its financial condition or results of operations; however, it will continue to monitor these legal proceedings.Intellectual PropertyIn October 2006, the Company filed a patent infringement suit against Vanguard National Corporation (“Vanguard”) regarding the Company’s U.S. Patent Nos. 6,986,546 and 6,220,651 in the U.S. District Court for the Northern District of Indiana (Civil Action No. 4:06-cv-135). The Company amended the Complaint in April 2007. In May 2007, Vanguard filed its Answer to the Amended Complaint, along with Counterclaims seeking findings of non-infringement, invalidity, and unenforceability of the subject patents. The Company filed a reply to Vanguard’s counterclaims in May 2007, denying any wrongdoing or merit to the allegations as set forth in the counterclaims. The case was stayed by agreement of the parties while the U.S. Patent and Trademark Office (“Patent Office”) undertook a reexamination of U.S. Patent No. 6,986,546. In June 2010, the Patent Office notified the Company that the reexamination was completed and the Patent Office reissued U.S. Patent No. 6,986,546 without cancelling any claims of the patent. The parties have not yet petitioned the Court to lift the stay, and it is unknown at this time when the parties may do so.The Company believes that its claims against Vanguard have merit and that the claims asserted by Vanguard are without merit. The Company intends to vigorously defend its position and intellectual property. The Company believes that the resolution of this lawsuit will not have a material adverse effect on its financial position, liquidity or future results of operations. However, at this stage of the proceeding, no assurance can be given as to the ultimate outcome of the case.82Walker AcquisitionIn connection with the Company’s acquisition of Walker in May 2012, there is an outstanding claim of approximately $2.9 million for unpaid benefits that is currently in dispute and that, if required to be paid by the Company, is not expected to have a material adverse effect on the Company’s financial condition or results of operations.was noticedreceived notice as a potentially responsible party (“PRP”) by the South Carolina Department of Health and Environmental Control (“DHEC”(the “DHEC”) pertaining to the Philip Services Site located in Rock Hill, South Carolina pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and corresponding South Carolina statutes. PRPs include parties identified through manifest records as having contributed to deliveries of hazardous substances to the Philip Services Site between 1979 and 1999. The DHEC’s allegation that the Company was a PRP arises out of four manifest entries in 1989 under the name of a company unaffiliated with Wabash National (or any of its former or current subsidiaries) that purport to be delivering a de minimis amount of hazardous waste to the Philip Services Site “c/o Wabash National Corporation.” As such, the Philip Services Site PRP Group (“PRP(the “PRP Group”) notified Wabash in August 2014 that it was offering the Company the opportunity to resolve any liabilities associated with the Philip Services Site by entering into a Cash Out and Reopener Settlement Agreement (the “Settlement Agreement”) with the PRP Group, as well as a Consent Decree with the DHEC. The Company has accepted the offer from the PRP Group to enter into the Settlement Agreement and Consent Decree, while reserving its rights to contest its liability for any deliveries of hazardous materials to the Philips Services Site. The requested settlement payment is immaterial to the Company’s financial conditions or operations, and as a result, if the Settlement Agreement and Consent Decree are finalized, the payment to be made by the Company thereunder is not expected to have a material adverse effect on the Company’s financial condition or results of operations.In January 2006,letter fromnotice as a PRP by the North CarolinaIndiana Department of Environment and Natural Resources indicating thatEnvironmental Management related to substances found at a siteproperty located at 817 South Earl Avenue, Lafayette, Indiana (“the Site”). The Site is not owned by the Company but is in close proximity to certain of our owned properties. The notice alleges that the Company formerlyis a PRP in addition to several other PRPs for hazardous substances contaminating the site under both Indiana state law and the CERCLA. Review of publicly available records reveal that the Site is owned near Charlotte, North Carolina has been includedby Raisor Development Group, LLC and currently operates as “Premier Auto Detailing & Wash”. As of December 31, 2019, based on the state's October 2005 Inactive Hazardous Waste Sites Priority List. The letter states thatinformation available 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 be responsible for each Site on the Priority List. Following receipt of this notice, no action has ever been requested from the Company, and since 2006 the Company has not received any further communications regarding this matter from the state of North Carolina. The Company does not expect that this designation willmatter to have a material adverse effect on its financial condition or results of operations.SupremePrior to the Company’s acquisition of Supreme, a complaint was filed against Supreme Corporation, a subsidiary of Supreme, in a suit (SVI, Inc. v. Supreme Corporation, Hometown Trolley (a/k/a Double K, Inc.) Commitments and Dustin Pence) in the United States District Court, District of Nevada on May 16, 2016. The plaintiff is Supreme Corporation’s (“SC”) former trolley distributor. The plaintiff filed an amended complaint on January 3, 2017, which alleges that SC’s sale of its trolley assets to another trolley manufacturer was improper. SC filed a motion to dismiss, which was granted in part on May 30, 2017. The remaining claims alleged against SC include: (i) misappropriation of trade secrets; (ii) civil conspiracy/collusion; (iii) tortious interference with contractual relationships; (iv) breach of contract; and (v) breach of the covenant of good faith and fair dealing. The plaintiff alleges damages amounting to approximately $40 million. However, due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; and, further, management believes that the allegations are without merit and is vigorously defending the matter. As a result, management does not believe this matter will have a material adverse effect on the Company’s financial condition or results of operations.Prior to the Company’s acquisition of Supreme, on November 4, 2016, a putative class action lawsuit was filed against the Company’s subsidiary, Supreme Industries, Inc., Mark D. Weber (Supreme’s Chief Executive Officer) and Matthew W. Long (Supreme’s former Chief Financial Officer) in the United States District Court for the Central District of California alleging the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by making material, misleading statements in July 2016 regarding projected backlog. The plaintiff seeks to recover unspecified damages. On February 14, 2017, the court transferred the venue of the case to the Northern District of Indiana upon the joint stipulation of the plaintiff and the defendants. An amended complaint was filed on April 24, 2017 challenging statements made during a putative class period of October 22, 2015 through October 21, 2016. Due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; however, at this time, management believes that the allegations are without merit and is vigorously defending the matter. As a result, management does not believe this matter will have a material adverse effect on the Company’s financial condition or results of operations.
Contingencies83b.Environmental Litigation Commitments and Contingencies2017,2019, the Company had reserved estimated remediation costs of $0.3$0.1 million for activities at existing and former properties which are recorded withinOther Accrued Liabilities inaccrued liabilities on the Consolidated Balance Sheet.c.Letters of Credit2017,2019, the Company had standby letters of credit totaling $5.3$7.4 million issued in connection with workers compensation claims and surety bonds.d.Purchase Commitments$58.7$83.9 million in purchase commitments throughat December 20172019 for various raw material commodities, including aluminum, steel, nickel, and nickelpolyethylene, as well as other raw material components which are within normal production requirements.e.Chassis Converter Pool Agreements its subsidiary Supreme, obtains most vehicle chassis for its specialized vehicle products directly from the chassis manufacturers under converter pool agreements. Chassis are obtained from the manufacturers based on orders from customers, and in some cases, for unallocated orders. The agreements generally state that the manufacturer will provide a supply of chassis to be maintained at the Company’s facilities with the condition that we will store such chassis and will not move, sell, or otherwise dispose of such chassis except under the terms of the agreement. In addition, the manufacturer typically retains the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales of the chassis to the manufacturer’s dealers. The manufacturer also does not transfer the certificate of origin to the Company nor permit the Company to sell or transfer the chassis to anyone other than the manufacturer (for ultimate resale to a dealer). Although the Company is party to related finance agreements with manufacturers, the Company has not historically settled, nor expects to in the future settle, any related obligations in cash. Instead, the obligation is settled by the manufacturer upon reassignment of the chassis to an accepted dealer, and the dealer is invoiced for the chassis by the manufacturer. Accordingly, as of December 31, 20172019 the Company’s outstanding chassis converter pool with the manufacturer totaled $18.3$10.2 million and has included this financing agreement on the Company’s Consolidated Balance Sheets withinPrepaid$3.2$3.3 million. Under these agreements, if the chassis is not delivered to a customer within a specified time frame the Company is required to pay a finance or storage charge on the chassis. Additionally, the Company receives finance support funds from manufacturers when the chassis are assigned into the Company’s chassis pool. Typically, chassis are converted and delivered to customers within 90 days of the receipt of the chassis by the Company.8413.SEGMENTSa.Segment ReportingPreviously, Year Ended December 31, 2019 2018 2017 Basic net income per share: Net income applicable to common stockholders $ 89,575 $ 69,421 $ 111,422 Weighted average common shares outstanding 54,695 56,996 59,358 Basic net income per share $ 1.64 $ 1.22 $ 1.88 Diluted net income per share: Net income applicable to common stockholders $ 89,575 $ 69,421 $ 111,422 Weighted average common shares outstanding 54,695 56,996 59,358 Dilutive shares from assumed conversion of convertible senior notes — 455 1,726 Dilutive stock options and restricted stock 595 979 1,515 Diluted weighted average common shares outstanding 55,290 58,430 62,599 Diluted net income per share $ 1.62 $ 1.19 $ 1.78 managedapproved the 2017 Omnibus Incentive Plan (the “2017 Incentive Plan”) which authorizes 3,150,000 shares for issuance under the plan. Awards granted under the 2017 Incentive Plan may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, other share-based awards, and cash awards to directors, officers, and other eligible employees of the Company. Restricted Stock Outstanding at December 31, 2018 1,495,564 $ 20.77 Granted 853,994 15.22 Vested (514,006 ) 12.53 Forfeited (143,853 ) 23.30 Restricted Stock Outstanding at December 31, 2019 1,691,699 $ 20.24 Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Options Outstanding at December 31, 2018 633,593 $ 11.26 3.8 $ 1.3 Exercised (91,200 ) $ 9.30 $ 0.5 Forfeited — $ — Expired (10,451 ) $ 13.98 Options Outstanding at December 31, 2019 531,942 $ 11.54 3.1 $ 1.7 Options Exercisable at December 31, 2019 531,942 $ 11.59 3.2 $ 1.6 Derivative Instruments Total Balances at December 31, 2016 $ (2,847 ) $ — $ (2,847 ) Net unrealized gains (losses) arising during the period 462 — 462 Less: Net realized gains (losses) reclassified to net income — — — Net change during the period 462 — 462 Balances at December 31, 2017 (2,385 ) — (2,385 ) (193 ) (660 ) (853 ) — 105 105 Net change during the period (193 ) (765 ) (958 ) Balances at December 31, 2018 (2,578 ) (765 ) (3,343 ) 712 (3,059 ) (2,347 ) — (1,712 ) (1,712 ) Net change during the period 712 (1,347 ) (635 ) Balances at December 31, 2019 $ (1,866 ) $ (2,112 ) $ (3,978 ) Years Ended December 31, 2019 2018 2017 Domestic $ 116,886 $ 94,978 $ 121,897 Foreign 845 1,026 641 Total income before income taxes $ 117,731 $ 96,004 $ 122,538 Years Ended December 31, 2019 2018 2017 Current Federal $ 18,167 $ 22,120 $ 21,316 State 6,233 7,271 4,327 Foreign 336 168 155 24,736 29,559 25,798 Deferred Federal 2,760 (1,613 ) (16,065 ) State 620 (1,312 ) 1,459 Foreign 40 (51 ) (76 ) 3,420 (2,976 ) (14,682 ) Total consolidated expense $ 28,156 $ 26,583 $ 11,116 Years Ended December 31, 2019 2018 2017 Pretax book income $ 117,731 $ 96,004 $ 122,538 Federal tax expense at applicable statutory rate 24,723 20,161 42,888 State and local income taxes (net of federal benefit) 5,513 4,737 5,047 Benefit of domestic production deduction — — (3,450 ) Change in income tax reserves — — (11,925 ) Tax credits (3,301 ) — — Remeasurement of deferred taxes — (421 ) (19,796 ) Nondeductible officer compensation — 1,152 — Compensation expense 1,317 (1,009 ) (1,943 ) Other (96 ) 1,963 295 Total income tax expense $ 28,156 $ 26,583 $ 11,116 December 31, 2019 2018 Deferred tax assets Tax credits and loss carryforwards $ 672 $ 657 Accrued liabilities 7,489 7,285 Incentive compensation 14,420 12,132 Other 5,423 6,747 28,004 26,821 Deferred tax liabilities Property, plant and equipment (17,899 ) (14,695 ) Intangibles (44,477 ) (42,343 ) Other (2,379 ) (3,841 ) (64,755 ) (60,879 ) Net deferred tax liability before valuation allowances and reserves (36,751 ) (34,058 ) Valuation allowances (825 ) (847 ) Net deferred tax liability $ (37,576 ) $ (34,905 ) Unrecognized Tax Benefits Balance at January 1, 2018 $ 495 Increase in prior year tax positions 682 Balance at December 31, 2018 1,177 Increase in prior year tax positions 245 Balance at December 31, 2019 $ 1,422 two3 segments: Commercial Trailer Products, and Diversified Products. In the third quarter of 2017, the Company completed the acquisition of Supreme. As a result, the Company implemented a new reporting segment during the fourth quarter referred to as theProducts, and Final Mile Products segment, which includes the operations of Supreme and other truck body activities previously reported in the Company’s Commercial Trailer Products segment.Products. The Commercial Trailer Products segment manufactures standard and customized van and platform trailers and other transportation related equipment tofor customers who purchase directly from the Company or through independent dealers. The Diversified Products segment, comprised of four3 strategic business units including, Tank Trailer, Aviation & Truck Equipment, Process Systems and Composites, focuses on the Company’s commitment to expand its customer base, diversify its product offerings and revenues and extend its market leadership by leveraging its proprietary DuraPlate® panel technology, drawing on its core manufacturing expertise and making available products that are complementary to truck and tank trailers and transportation equipment.85 Consolidated 2019 Net sales External customers $ 1,519,592 $ 357,634 $ 441,910 $ — $ 2,319,136 Intersegment sales 1,949 26,882 — (28,831 ) — Total net sales $ 1,521,541 $ 384,516 $ 441,910 $ (28,831 ) $ 2,319,136 Depreciation and amortization $ 10,667 $ 18,621 $ 11,361 $ 1,708 $ 42,357 Income (Loss) from operations $ 145,877 $ 29,748 $ 9,804 $ (42,643 ) $ 142,786 Assets $ 362,328 $ 317,246 $ 511,862 $ 113,155 $ 1,304,591 2018 Net sales External customers $ 1,536,687 $ 372,342 $ 358,249 $ — $ 2,267,278 Intersegment sales 252 21,629 — (21,881 ) — Total net sales $ 1,536,939 $ 393,971 $ 358,249 $ (21,881 ) $ 2,267,278 Depreciation and amortization $ 9,631 $ 21,177 $ 8,314 $ 1,561 $ 40,683 Income (Loss) from operations $ 141,795 $ (3,033 ) $ 7,907 $ (35,682 ) $ 110,987 Assets $ 355,183 $ 349,423 $ 484,634 $ 115,153 $ 1,304,393 2017 Net sales External customers $ 1,348,251 $ 348,449 $ 70,461 $ — $ 1,767,161 Intersegment sales 131 12,909 — (13,040 ) — Total net sales $ 1,348,382 $ 361,358 $ 70,461 $ (13,040 ) $ 1,767,161 Depreciation and amortization $ 9,975 $ 22,236 $ 1,152 $ 1,690 $ 35,053 Income (Loss) from operations $ 151,999 $ 20,376 $ (2,098 ) $ (39,461 ) $ 130,816 Assets $ 311,705 $ 340,651 $ 404,246 $ 294,911 $ 1,351,513 Commercial Diversified Final Mile Corporate and Trailer Products Products Products Eliminations Consolidated 2017 Net sales External customers $ 1,348,251 $ 348,449 $ 70,461 $ - $ 1,767,161 Intersegment sales 131 12,909 - (13,040 ) - Total net sales $ 1,348,382 $ 361,358 $ 70,461 $ (13,040 ) $ 1,767,161 Depreciation and amortization 9,975 22,236 1,152 1,690 35,053 Income (Loss) from operations 151,999 20,376 (2,098 ) (39,461 ) 130,816 Reconciling items to net income Interest expense 16,400 Other, net (8,122 ) Income tax expense 11,116 Net income $ 111,422 Assets $ 311,705 $ 340,651 $ 404,246 $ 294,911 $ 1,351,513 2016 Net sales External customers $ 1,506,070 $ 339,374 $ - $ - $ 1,845,444 Intersegment sales 40 13,030 - (13,070 ) - Total net sales $ 1,506,110 $ 352,404 $ - $ (13,070 ) $ 1,845,444 Depreciation and amortization 12,345 22,970 - 1,454 36,769 Income (Loss) from operations 212,351 24,595 - (34,414 ) 202,532 Reconciling items to net income Interest expense 15,663 Other, net 1,452 Income tax expense 65,984 Net income $ 119,433 Assets $ 312,848 $ 370,338 $ - $ 215,547 $ 898,733 2015 Net sales External customers $ 1,582,019 $ 445,470 $ - $ - $ 2,027,489 Intersegment sales 222 11,457 - (11,679 ) - Total net sales $ 1,582,241 $ 456,927 $ - $ (11,679 ) $ 2,027,489 Depreciation and amortization 12,674 23,888 - 1,436 37,998 Income (Loss) from operations 159,385 51,078 - (30,094 ) 180,369 Reconciling items to net income Interest expense 19,548 Other, net (2,490 ) Income tax expense 59,022 Net income $ 104,289 Assets $ 336,235 $ 397,892 $ - $ 215,543 $ 949,670 b.Customer Concentration24%27%, 24%25% and 25%24% of the Company’s aggregate net sales in 2017, 20162019, 2018 and 2015,2017, respectively. In addition, for each of the last three years there were no customers whose revenue individually represented 10% or more of our aggregate net sales. International sales accounted for less than 10% in each of the last three years.86c.Product Information Commercial Diversified Final Mile Trailer Products Products Products Eliminations Consolidated Year ended December 31,
2017 $ $ $ $ $ % New trailers 1,273,584 140,105 - - 1,413,689 80.0 Used trailers 10,720 3,278 - - 13,998 0.8 Components, parts and service 48,008 117,681 1,877 (13,040 ) 154,526 8.7 Equipment and other 16,070 100,294 68,584 - 184,948 10.5 Total net external sales 1,348,382 361,358 70,461 (13,040 ) 1,767,161 100.0 Commercial Diversified Final Mile Trailer Products Products Products Eliminations Consolidated 2016 $ $ $ $ $ % New trailers 1,421,586 129,639 - (89 ) 1,551,136 84.1 Used trailers 11,998 3,176 - - 15,174 0.8 Components, parts and service 56,191 111,519 - (12,955 ) 154,755 8.4 Equipment and other 16,335 108,070 - (26 ) 124,379 6.7 Total net external sales 1,506,110 352,404 - (13,070 ) 1,845,444 100.0 Commercial Diversified Final Mile Trailer Products Products Products Eliminations Consolidated 2015 $ $ $ $ $ % New trailers 1,474,201 218,028 - - 1,692,229 83.5 Used trailers 31,022 4,558 - - 35,580 1.8 Components, parts and service 60,482 119,696 - (11,628 ) 168,550 8.3 Equipment and other 16,536 114,645 - (51 ) 131,130 6.4 Total net external sales 1,582,241 456,927 - (11,679 ) 2,027,489 100.0 14.CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)Year ended December 31, 2019 Commercial Trailer Products Diversified Products Final Mile Products Eliminations Consolidated New trailers $ 1,464,636 $ 198,043 $ — $ 1,662,679 71.7 % Used trailers 435 2,044 — — 2,479 0.1 % Components, parts and service 40,344 113,024 15,023 (27,902 ) 140,489 6.1 % Equipment and other 16,126 71,405 426,887 (929 ) 513,489 22.1 % Total net external sales $ 1,521,541 $ 384,516 $ 441,910 $ (28,831 ) $ 2,319,136 100.0 % Year ended December 31, 2018 Commercial Trailer Products Diversified Products Final Mile Products Eliminations Consolidated New trailers $ 1,473,583 $ 164,790 $ — $ — $ 1,638,373 72.2 % Used trailers 9,618 3,514 — — 13,132 0.6 % Components, parts and service 34,994 122,099 9,968 (21,811 ) 145,250 6.4 % Equipment and other 18,744 103,568 348,281 (70 ) 470,523 20.8 % Total net external sales $ 1,536,939 $ 393,971 $ 358,249 $ (21,881 ) $ 2,267,278 100.0 % Year ended December 31, 2017 Commercial Trailer Products Diversified Products Final Mile Products Eliminations Consolidated New trailers $ 1,273,584 $ 140,105 $ — $ — $ 1,413,689 80.0 % Used trailers 10,720 3,278 — — 13,998 0.8 % Components, parts and service 48,008 117,681 1,877 (13,040 ) 154,526 8.7 % Equipment and other 16,070 100,294 68,584 — 184,948 10.5 % Total net external sales $ 1,348,382 $ 361,358 $ 70,461 $ (13,040 ) $ 1,767,161 100.0 % 2017, 20162019, 2018 and 20152017 (dollars in thousands, except per share amounts):87 First Second Third Fourth Quarter Quarter Quarter Quarter 2017 Net sales $ 362,716 $ 435,903 $ 425,098 $ 543,444 Gross profit 59,357 67,679 60,963 72,876 Net income 20,173 22,945 18,947 49,357 Basic net income per share(1) 0.34 0.38 0.32 0.84 Diluted net income per share(1) 0.32 0.36 0.30 0.80 2016 Net sales $ 447,676 $ 471,439 $ 464,272 $ 462,057 Gross profit 79,526 91,064 83,459 71,485 Net income 27,523 35,532 33,378 23,000 Basic net income per share(1) 0.42 0.55 0.52 0.37 Diluted net income per share(1) 0.42 0.53 0.51 0.36 2015 Net sales $ 437,597 $ 514,831 $ 531,350 $ 543,711 Gross profit 57,197 72,405 86,022 87,819 Net income 10,474 28,649 31,880 33,286 Basic net income per share(1) 0.15 0.42 0.48 0.50 Diluted net income per share(1) 0.15 0.41 0.47 0.50 2019 Net sales $ 533,174 $ 626,053 $ 580,908 $ 579,001 Gross profit $ 68,690 $ 87,650 $ 77,735 $ 72,307 Net income $ 14,780 $ 30,960 $ 25,460 $ 18,375 $ 0.27 $ 0.56 $ 0.47 $ 0.34 $ 0.27 $ 0.56 $ 0.46 $ 0.34 2018 Net sales $ 491,319 $ 612,690 $ 553,073 $ 610,196 Gross profit $ 64,119 $ 85,315 $ 65,162 $ 69,056 Net income $ 21,272 $ 31,902 $ 4,664 $ 11,584 $ 0.37 $ 0.55 $ 0.08 $ 0.21 $ 0.35 $ 0.54 $ 0.08 $ 0.21 2017 Net sales $ 362,716 $ 435,903 $ 425,098 $ 543,444 Gross profit $ 59,357 $ 67,679 $ 60,963 $ 72,876 Net income $ 20,173 $ 22,945 $ 18,947 $ 49,357 $ 0.34 $ 0.38 $ 0.32 $ 0.84 $ 0.32 $ 0.36 $ 0.30 $ 0.80 Basic and diluted net income per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly net income per share may differ from annual net income per share due to rounding. None2017,2019, including those procedures described below, we, including our Chief Executive Officer and our Chief Financial Officer, determined that those controls and procedures were effective.2017year 2019 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.88Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Supreme Industries, Inc., which is included in the Company’s 2017 consolidated financial statements and constituted $404.2 million of the Company’s total assets as of December 31, 2017 and $67.1 million of the Company’s sales for the year then ended.2017,2019, based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(2013 (2013 framework) (COSO). Based on this assessment, management has concluded that internal control over financial reporting is effective as of December 31, 2017.2017,2019, and its report on internal controls over financial reporting as of December 31, 20172019 appears on the following page.Richard J. GirominiBrent L. Yeagy President and Chief Executive Officer Jeffery L. TaylorMichael N. PettitSenior Vice President and Chief Financial Officer February 28, 201825, 2020 89 Theand Stockholders of Wabash National Corporation2017,2019, based on criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wabash National Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on the COSO criteria.As indicated in the accompanying Report of Management on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Supreme Industries, Inc., which is included in the 2017 consolidated financial statements of Wabash National Corporation and constituted $404.2 million and $358.7 million of total and net assets, respectively, as of December 31, 2017, and $67.1 million and $1.6 million of sales and pretax loss, respectively, for the year then ended. Our audit of internal control over financial reporting of Wabash National Corporation also did not include an evaluation of the internal control over financial reporting of Supreme Industries, Inc.Wabash National Corporationthe Company as of December 31, 20172019 and 2016, and2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 20172019, and the related notes and our report dated February 28, 201825, 2020 expressed an unqualified opinion thereon.U.S.US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB./s/ Ernst & Young LLPIndianapolis, IndianaFebruary 28, 2018/s/ ERNST & YOUNG LLP 90Indianapolis, Indiana February 25, 2020 OF THE REGISTRANT“Executive Officers of Wabash National Corporation”“Information About Our Executive Officers” from Item 1 Part I of this Annual Report.“Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance” or “ElectionReports,” “Proposal 1 - Election of Directors” and “Corporate Governance” from its definitive Proxy Statement to be delivered to stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20182020 Annual Meeting of Stockholders to be held May 17, 2018.Compensation"Compensation Tables” and “Director“Corporate Governance—Director Compensation” from its definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20182020 Annual Meeting of Stockholders to be held May 17, 2018."Beneficial“Beneficial Ownership Information—Beneficial Ownership of Common Stock” and “Equity Compensation Plan Information” from its definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20182020 Annual Meeting of Stockholders to be held on May 17, 2018.“Election of Directors”“Corporate Governance—Board Structure and “Relatedits Role in Oversight—Director Independence” and “Corporate Governance—Related Persons Transactions Policy” from its definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20182020 Annual Meeting of Stockholders to be held on May 17, 2018.ACCOUNTINGACCOUNTANT FEES AND SERVICES“Ratification“Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm” from the Company’s definitive Proxy Statement to be delivered to the stockholders of the Company and filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report in connection with the 20182020 Annual Meeting of Stockholders to be held on May 17, 2018.
12, 2020.91(a) (b) No. Description 2.02Agreement and Plan of Merger, dated as of August 8, 2017, by and among Wabash National Corporation, Supreme Industries, Inc. and Redhawk Acquisition Corporation (21) 10.04#Form of Non-Qualified Stock Option Agreement under the 2007 Omnibus Incentive Plan (6) 92 101 The following materials from Wabash National Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019 are filed herewith, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2019 and 2018, (ii) the Consolidated Statements of Operations for the twelve months ended December 31, 2019, 2018, and 2017, (iii) the Consolidated Statements of Comprehensive Income for the twelve months ended December 31, 2019, 2018, and 2017, (iv) the Consolidated Statements of Stockholders’ Equity for the twelve months ended December 31, 2019, 2018, and 2017, (v) the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2019, 2018, and 2017, and (vi) Notes to the Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. (28) 104 Cover Page Interactive Data File Pursuant to Rule 405 of Regulation S-T(formatted as Inline XBRL and contained in Exhibit 101) (28) # Management contract or compensatory plan +(1) Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC. (1)Incorporated by reference to the Registrant’s registration statement on Form S-3 (Registration No. 333-27317) filed on May 16, 1997 (2)(2) Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended JuneSeptember 30, 20022018 (File No. 1-10883)001-10883) (3)(3) Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended March 31, 2005 (File No. 1-10883)001-10883) (4)(4) Incorporated by reference to the Registrant’s Form 8-K filed on December 16, 2015 (File No. 1-10883)001-10883) (5)(5) Incorporated by reference to the Registrant’s Form 8-K filed on January 8, 2007 (File No. 1-10883)Reserved (6)(6) Incorporated by reference to the Registrant’s Form 8-K filed on May 24, 2007 (File No. 1-10883)001-10883)(7 93) (7)Incorporated by reference to the Registrant’s Form 10-K for the year ended December 31, 2007 (File No. 1-10883)001-10883) (8)(8) Incorporated by reference to the Registrant’s Form 8-K filed on June 10, 2015 (File No. 1-10883)001-10883) (9)(9) Incorporated by reference to the Registrant’s Form 8-K filed on August 4, 2009 (File No. 1-10883)001-10883) (10)(10) Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended September 30, 2011 (File No. 1-10883)001-10883) (11)(11) Incorporated by reference to the Registrant’s Form 8-K filed on May 25, 2011 (File No. 1-10883)001-10883) (12)(12) Incorporated by reference to the Registrant’s Form 8-K filed on September 14, 2011 (File No. 1-10883)001-10883) (13)(13) Incorporated by reference to the Registrant’s Form 8-K filed on MarchDecember 27, 20122018 (File No.001-10883) (14)(14) Incorporated by reference to the Registrant’s Form 8-K filed on April 23, 2012 (File No.001-10883) (15)(15) Incorporated by reference to the Registrant’s Form 8-K filed on May 14, 2012 (File No 001-10883) (16)(16) Incorporated by reference to the Registrant’s Form 8-K filed on April 29, 2013 (File No 001-10883) (17)(17) Incorporated by reference to the Registrant’s Form 8-K filed on March 23, 2015 (File No 001-10883) (18)(18) Incorporated by reference to the Registrant’s Form 8-K filed on February 27, 2017 (File No 001-10883) (19)(19) Incorporated by reference to the Registrant’s Form 8-K filed on May 5, 2017 (File No. 1-10883)Reserved (20)(20) Incorporated by reference to the Registrant’s Form S-8 filed on May 18, 2017 (File No. 333-218085) (21)(21) Incorporated by reference to the Registrant’s Form 8-K filed on August 9, 2017 (File No. 1-10883)001-10883) (22)(22) Incorporated by reference to the Registrant’s Form 8-K filed on August 22, 2017 (File No. 1-10883)001-10883) (23)(23) Incorporated by reference to the Registrant’s Form 8-K filed on September 15, 2017 (File No. 1-10883)001-10883) (24)(24) Incorporated by reference to the Registrant’s Form 8-K filed on September 26, 2017 (File No. 1-10883)001-10883) (25)(25) Incorporated by reference to the Registrant’s Form 8-K filed on November 22, 2017 (File No. 1-10883)001-10883) (26)(26) Incorporated by reference to the Registrant’s Form 8-K filed on December 15, 2017 (File No. 1-10883)001-10883)(27)(27) Incorporated by reference to the Registrant’s Form 8-K filed on December 15, 2017 (File No. 1-10883)001-10883) (28)(28) Filed herewith 94February 28, 201825, 2020By: /s/ Jeffery L. TaylorMichael N. Pettit Jeffery L. TaylorMichael N. Pettit (PrincipalDateSignature and Name Signature and TitleDate February 28, 2018/s/ Brent L. Yeagy By:/s/ Richard J. GirominiRichard J. GirominiPresident and Chief Executive Officer, Director February 25, 2020 Brent L. Yeagy (Principal Executive Officer) (Principal Executive Officer) February 28, 2018 By:/s/ Jeffery L. TaylorJeffery L. TaylorMichael N. Pettit Senior Vice President and Chief Financial Officer (PrincipalFebruary 25, 2020 Michael N. Pettit (Principal Financial Officer and Principal Accounting Officer) February 28, 2018By:/s/ Brent L. YeagyRichard J. GirominiPresident and Chief Operating Officer, Director February 28, 2018By:/s/ Martin C. Jischke Dr. Martin C. Jischke Chairman of the Board of Directors February 25, 2020 Dr. Martin C. Jischke February 28, 2018By:/s/ John G. Boss John G. Boss/s/ Therese M. Bassett Director February 25, 2020 Therese M. Bassett Director February 28, 2018/s/ John G. Boss By:Director/s/ John E. KunzFebruary 25, 2020 John G. Boss John E. KunzDirector February 28, 2018/s/ John E. Kunz By:Director/s/ Larry J. MageeFebruary 25, 2020 John E. Kunz Larry J. MageeDirector February 28, 2018/s/ Larry J. Magee By:Director/s/ Ann D. MurtlowFebruary 25, 2020 Larry J. Magee Ann D. MurtlowDirector February 28, 2018/s/ Ann D. Murtlow By:Director/s/ Scott K. SorensenFebruary 25, 2020 Ann D. Murtlow /s/ Scott K. Sorensen Director February 25, 2020 Scott K. Sorensen Director/s/ Stuart A. Taylor II 95DirectorFebruary 25, 2020 Stuart A. Taylor II