The accompanying notes are an integral
part of these Condensed Consolidated Statements.
The accompanying notes are an integral
part of these Condensed Consolidated Statements.
The accompanying notes are an integral
part of these Condensed Consolidated Statements.
The accompanying notes are an integral
part of these Condensed Consolidated Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
|
1.
|
DESCRIPTION OF THE BUSINESS
|
The condensed consolidated
financial statements of Wabash National Corporation (the “Company”) have been prepared without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed consolidated
financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly
the consolidated financial position of the Company, its results of operations and cash flows. Certain prior year amounts were
reclassified for consistency with the current period presentation. These reclassifications did not materially impact the consolidated
financial statements. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company’s 2015 Annual Report on Form 10-K.
Inventories are stated at the lower of
cost, primarily determined on the first-in, first-out (FIFO) method, or market. The cost of manufactured inventory includes raw
material, labor and overhead. Inventories consist of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Raw materials and components
|
|
$
|
70,631
|
|
|
$
|
65,790
|
|
Work in progress
|
|
|
22,271
|
|
|
|
18,201
|
|
Finished goods
|
|
|
98,608
|
|
|
|
67,260
|
|
Aftermarket parts
|
|
|
8,902
|
|
|
|
8,714
|
|
Used trailers
|
|
|
7,797
|
|
|
|
7,017
|
|
|
|
$
|
208,209
|
|
|
$
|
166,982
|
|
Long-term debt consists
of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Convertible senior notes
|
|
$
|
95,835
|
|
|
$
|
131,000
|
|
Term loan credit agreement
|
|
|
190,917
|
|
|
|
191,399
|
|
Industrial revenue bond
|
|
|
1,021
|
|
|
|
1,149
|
|
|
|
$
|
287,773
|
|
|
$
|
323,548
|
|
Less: unamortized discount and fees
|
|
|
(7,632
|
)
|
|
|
(11,052
|
)
|
Less: current portion
|
|
|
(2,451
|
)
|
|
|
(37,611
|
)
|
|
|
$
|
277,690
|
|
|
$
|
274,885
|
|
Convertible Senior
Notes
In April 2012, the
Company issued Convertible Senior Notes due 2018 (the “Notes”) with an aggregate principal amount of $150 million
in a public offering. 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. The Notes are senior unsecured obligations of the Company ranking equally with its existing and future
senior unsecured debt.
The 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 Notes, which
is equal to an initial conversion price of approximately $11.70 per share, only under the following circumstances: (A) before
November 1, 2017 (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2012 (and only during
such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive)
during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is
greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period
after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in
the indenture for the Notes) per $1,000 principal amount of Notes for each trading day of the measurement period was less than
98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading
day; and (3) upon the occurrence of specified corporate events as described in the indenture for the Notes; and (B) at any time
on or after November 1, 2017 until the close of business on the second business day immediately preceding the maturity date. As
of March 31, 2016, the Notes were not convertible based on the above criteria. If the Notes outstanding at March 31, 2016 were
converted as of March 31, 2016, the if-converted value would exceed the principal amount by approximately $12 million.
It is the Company’s
intent to settle conversions through a net share settlement, which involves repayment of cash for the principal portion and delivery
of shares of common stock for the excess of the conversion value over the principal portion. The Company used the net proceeds
of $145.1 million from the sale of the Notes to fund a portion of the purchase price of the acquisition of Walker Group Holdings
(“Walker”) in May 2012.
The Company accounts
separately for the liability and equity components of the Notes in accordance with authoritative guidance for convertible debt
instruments that may be settled in cash upon conversion. The guidance required 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 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, the Company estimated the implied interest rate of the 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. The
estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $123.8
million upon issuance, calculated as the present 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 Notes
is being amortized over the life of the Notes using the effective interest rate method.
In December 2015,
the Company executed agreements with existing holders of the Notes to repurchase $54.2 million in principal amount of such Notes,
of which $19.0 million was acquired in that month for $22.9 million, excluding accrued interest. The remaining $35.2 million in
principal amount of the Notes was acquired in February 2016 for $42.1 million, excluding accrued interest. The Company recognized
a loss on debt extinguishment of $0.5 million from the February repurchase, which is included in
Other, net
on the Company’s
Condensed Consolidated Statement of Operations.
The Company applies
the treasury stock method in calculating the dilutive impact of the Notes. For the quarter ended March 31, 2016, the Notes did
not have a dilutive impact as the average stock price of the Company’s common stock was below the initial conversion price
of approximately $11.70 per share.
The following table
summarizes information about the equity and liability components of the Notes (dollars in thousands). The fair value of the notes
outstanding were measured based on quoted market prices.
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Principal amount of the Notes outstanding
|
|
$
|
95,835
|
|
|
$
|
131,000
|
|
Unamortized fees and discount of liability component
|
|
|
(6,513
|
)
|
|
|
(9,888
|
)
|
Net carrying amount of liability component
|
|
|
89,322
|
|
|
|
121,112
|
|
Less: current portion
|
|
|
-
|
|
|
|
(35,165
|
)
|
Long-term debt
|
|
$
|
89,322
|
|
|
$
|
85,947
|
|
Carrying value of equity component, net of issuance costs
|
|
$
|
6,835
|
|
|
$
|
15,810
|
|
Remaining amortization period of discount on the liability component
|
|
|
2.1 years
|
|
|
|
2.3 years
|
|
Contractual coupon
interest expense and accretion of fees and discount on the liability component for the Notes for the three month period ended
March 31, 2016 and 2015 were as follow (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Contractual coupon interest expense
|
|
$
|
908
|
|
|
$
|
1,266
|
|
Accretion of fees and discount on the liability component
|
|
$
|
808
|
|
|
$
|
1,053
|
|
Revolving Credit
Agreement
In June 2015, the
Company entered into a Joinder and First Amendment to Amended and Restated Credit Agreement, First Amendment to Amended and Restated
Security Agreement and First Amendment to Amended and Restated Guaranty Agreement (the “Amendment”) by and among the
Company, certain of its subsidiaries designated as Loan Parties (as defined in the Amendment), Wells Fargo Capital Finance, LLC,
as arranger and administrative agent (the “Agent”), and the other Lenders party thereto. The Amendment amends, among
other things, the Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), dated as of May 8, 2012,
among the Company, certain subsidiaries of the Company from time to time party thereto (together with the Company, the “Borrowers”),
the several lenders from time to time party thereto, and the Agent and provides for, among other things, a five year, $175 million
senior secured revolving credit facility (the “Credit Facility”).
The Amendment, among
other things (i) increases the total commitments under the Credit Facility from $150 million to $175 million, and (ii) extends
the maturity date of the Credit Facility from May 2017 to June 2020, but provides for an accelerated maturity in the event the
Company’s outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that is
121 days prior to the maturity date thereof and the Company is not then maintaining, and continues to maintain until the Notes
are converted, redeemed, repurchased or refinanced in full, (x) Liquidity of at least $125 million and (y) availability under
the Credit Facility of at least $25 million. Liquidity, as defined in the Credit Agreement, reflects the difference between (i)
the sum of (A) unrestricted cash and cash equivalents and (B) availability under the Credit Facility and (ii) the amount necessary
to fully redeem the Notes.
In addition, the Amendment
(i) provides that borrowings under the Credit Facility will bear interest, at the Borrowers’ election, at (x) LIBOR plus
a margin ranging from 150 basis points to 200 basis points (in lieu of the previous range from 175 basis points to 225 basis points),
or (y) a base rate plus a margin ranging from 50 basis points to 100 basis points (in lieu of the previous range from 75 basis
points to 125 basis points), in each case, based upon the monthly average excess availability under the Credit Facility, (ii)
provides that the monthly unused line fee shall be equal to 25 basis points (which amount was previously 37.5 basis points) times
the average unused availability under the Credit Facility, (iii) provides that if availability under the Credit Facility is less
than 12.5% (which threshold was previously 15%) of the total commitment under the 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 Credit Facility, (iv) provides that the Company will be required to maintain a minimum fixed charge coverage ratio of not
less than 1.1 to 1.0 as of the end of any period of 12 fiscal months when excess availability under the Credit Facility is less
than 10% (which threshold was previously 12.5%) of the total commitment under the Credit Facility and (v) amends certain negative
covenants in the Credit Agreement.
The Credit Agreement
is guaranteed by certain of the Company’s 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,
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) second-priority liens on and security interests in (subject only to the liens securing the Term Loan Credit Agreement, customary
permitted liens and certain other permitted liens) (A) equity interests of each direct subsidiary held by the Borrower and each
Revolving 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 Revolving Guarantors including equipment, general intangibles,
intercompany notes, insurance policies, investment property, intellectual property and material owned real property (in each case,
except to the extent constituting Revolver Priority Collateral) (collectively, the “Term Priority Collateral”). The
respective priorities of the security interests securing the Credit Agreement and the Term Loan Credit Agreement are governed
by an Intercreditor Agreement between the Revolver Agent and the Term Agent (as defined below) (the “Intercreditor Agreement”).
Subject to the terms
of the Intercreditor Agreement, if the covenants under the Credit Agreement are breached, the lenders may, subject to various
customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral. Other customary events
of default in the Credit Agreement include, without limitation, failure to pay obligations when due, initiation of insolvency
proceedings, defaults on certain other indebtedness, and the incurrence of certain judgments that are not stayed, satisfied, bonded
or discharged within 30 days.
As of March 31, 2016
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 $337.8
million as of March 31, 2016.
Term Loan Credit
Agreement
In May 2012 the Company
entered into a credit agreement among the Company, the several lenders from time to time party thereto, Morgan Stanley Senior
Funding, Inc., as administrative agent, joint lead arranger and joint bookrunner (the “Term Agent”), and Wells Fargo
Securities, LLC, as joint lead arranger and joint bookrunner (the “Term Loan Credit Agreement”), which initially provided,
among other things, for a senior secured term loan facility of $300 million. Also in May 2012, certain of the Company’s
subsidiaries (the “Term Guarantors”) entered into a general continuing guarantee of the Company’s obligations
under the Term Loan Credit Agreement in favor of the Term Agent (the “Term Guarantee”).
In April 2013, the
Company entered into Amendment No.1 to Credit Agreement (the “Amendment”), which became effective on May 9, 2013.
As of the Amendment date, there was $297.0 million of term loans outstanding under the Term Loan Credit Agreement (the “Initial
Loans”), of which the Company paid $20.0 million in connection with the Amendment. Under the Amendment, the lenders agreed
to provide to the Company term loans in an aggregate principal amount of $277.0 million, which were exchanged for and used to
refinance the Initial Loans (the “Tranche B-1 Loans”).
In March 2015, the
Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”). As of the Amendment No. 2 date, there
was $192.8 million of the Tranche B-1 Loans outstanding. Under Amendment No. 2, the lenders agreed to provide to the Company term
loans in an aggregate principal amount of $192.8 million (the “Tranche B-2 Loans”), which were used to refinance the
outstanding Tranche B-1 Loans. The Tranche B-2 Loans mature in March 2022, but provide for an accelerated maturity in the event
the Company’s outstanding Notes are not converted, redeemed, repurchased or refinanced in full on or before the date that
is 91 days prior to the maturity date thereof and the Company is not then maintaining, and continues to maintain until the Notes
are converted, redeemed, repurchased or refinanced in full, liquidity of at least $125 million. Liquidity, as defined in the Term
Loan Credit Agreement, reflects the difference between (i) the sum of (A) unrestricted cash and cash equivalents and (B) the amount
available and permitted to be drawn under the Company’s existing Credit Agreement and (ii) the amount necessary to fully
redeem the Notes. The Tranche B-2 Loans shall amortize in equal quarterly installments in aggregate amounts equal to 0.25% of
the original principal amount of the Tranche B-2 Loans, with the balance payable at maturity, and will bear interest at a rate,
at the Company’s election, equal to (i) LIBOR (subject to a floor of 1.00%) plus a margin of 3.25% or (ii) a base rate plus
a margin of 2.25%.
Amendment No. 2 amends
the Term Loan Credit Agreement by (i) removing the maximum senior secured leverage ratio test, (ii) modifying the accordion feature,
as described in the Term Loan Credit Agreement, to provide for a senior secured incremental term loan facility in an aggregate
amount not to exceed the greater of (A) $75 million (less the aggregate amount of (1) any increases in the maximum revolver amount
under the Company’s existing Credit Agreement and (2) certain permitted indebtedness incurred for the purpose of prepaying
or repurchasing the Convertible Notes) and (B) an amount such that the senior secured leverage ratio would not be greater than
3.0 to 1.0, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently
party to the Term Loan Credit Agreement, to provide such increased amounts. The senior secured leverage ratio is defined in the
Term Loan Credit Agreement and reflects a ratio of consolidated net total secured indebtedness to consolidated EBITDA and (iii)
amending certain negative covenants.
The Term Loan Credit
Agreement, as amended, is guaranteed by the Term Guarantors 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. In addition,
the Term Loan Credit Agreement, as amended, contains customary covenants limiting the Company’s ability to, among other
things, pay cash dividends, incur debt or liens, redeem or repurchase stock, enter into transactions with affiliates, merge, dissolve,
pay off subordinated indebtedness, make investments and dispose of assets.
Subject to the terms
of the Intercreditor Agreement, if the covenants under the Term Loan Credit Agreement, as amended, are breached, the lenders may,
subject to various customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral.
Other customary events of default in the Term Loan Credit Agreement, as amended, include, without limitation, failure to pay obligations
when due, initiation of insolvency proceedings, defaults on certain other indebtedness, and the incurrence of certain judgments
that are not stayed, satisfied, bonded or discharged within 60 days.
For the three months
ended March 31, 2016 and 2015, under the Term Loan Credit Agreement the Company paid interest of $2.1 million and $2.2 million,
respectively, and principal of $0.5 million during the 2016 period. As of March 31, 2016, the Company had $190.6 million outstanding
under the Term Loan Credit Agreement, of which $1.9 million was classified as current on the Company’s Condensed Consolidated
Balance Sheet.
For the three months
ended March 31, 2016 and 2015, the Company incurred charges of less than $0.1 million and $0.2 million, respectively, for amortization
of fees and original issuance discount which is included in
Interest Expense
in the Condensed Consolidated Statements of
Operations.
Other Debt Facilities
In November 2012,
the Company entered into a loan agreement with GE Government Finance, Inc., as lender and the County of Trigg, Kentucky as issuer
for a $2.5 million Industrial Revenue Bond. The funds received were used to purchase the equipment needed for the expansion of
the Company’s Cadiz, Kentucky facility. The loan bears interest at a rate of 4.25% and matures in March 2018. As of March
31, 2016, the Company had $1.0 million outstanding of which $0.5 million was classified as current on the Condensed Consolidated
Balance Sheet.
|
4.
|
FAIR VALUE MEASUREMENTS
|
The Company’s
fair value measurements are based upon a three-level valuation hierarchy. These valuation techniques are based upon the transparency
of inputs (observable and unobservable) to the valuation of an asset or liability as of the measurement date. Observable inputs
reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.
These two types of inputs create the following fair value hierarchy:
|
·
|
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.
|
Recurring Fair
Value Measurements
The Company maintains
a non-qualified deferred compensation plan which is offered to senior management and other key employees. The amount owed to participants
is an unfunded and unsecured general obligation of the Company. Participants are offered various investment options with which
to invest the amount owed to them, and the plan administrator maintains a record of the liability owed to participants by investment.
To minimize the impact of the change in market value of this liability, the Company has elected to purchase a separate portfolio
of investments through the plan administrator similar to those chosen by the participant.
The investments purchased
by the Company (asset) include mutual funds, $2.6 million of which are classified as Level 1, and life-insurance contracts valued
based on the performance of underlying mutual funds, $7.7 million of which are classified as Level 2.
Nonrecurring Fair
Value Measurements
Certain nonfinancial
assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain
circumstances, such as when there is evidence of impairment.
The Company reviews
for goodwill impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable.
The fair value of the reporting units is determined using the income approach. The income approach focuses on the income-producing
capability of an asset, measuring the current value of the asset by calculating the present value of its future economic benefits
such as cash earnings, cost savings, corporate tax structure and product offerings. Value indications are developed by discounting
expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the
expected rate of inflation and risks associated with the reporting unit. These assets would generally be classified within Level
3, in the event that the Company were required to measure and record such assets at fair value within its unaudited condensed
consolidated financial statements.
The Company periodically
evaluates the carrying value of long-lived assets to be held and used, including definite-lived intangible assets and property
plant and equipment, when events or circumstances warrant such a review. Fair value is determined primarily using anticipated
cash flows assumed by a market participant discounted at a rate commensurate with the risk involved and these assets would generally
be classified within Level 3, in the event that the Company were required to measure and record such assets at fair value within
its unaudited condensed consolidated financial statements.
Assets and liabilities
acquired in business combinations are recorded at their fair value as of the date of acquisition.
The carrying amounts
of accounts receivable and accounts payable reported in the Condensed Consolidated Balance Sheets approximate fair value.
Estimated Fair
Value of Debt
The estimated fair
value of long-term debt at March 31, 2016 consists primarily of the Notes and borrowings under its Term Loan Credit Agreement
(see Note 3). The fair value of the Notes, the Term Loan Credit Agreement and the revolving credit facility are based upon third
party pricing sources, which generally do not represent daily market activity, nor does it 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 approximate their fair value as determined by discounted cash flows and are classified as Level
3.
The Company’s
carrying and estimated fair value of debt at March 31, 2016 and December 31, 2015 were as follows:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Carrying
|
|
|
Fair Value
|
|
|
Carrying
|
|
|
Fair Value
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Instrument
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible senior notes
|
|
$
|
89,322
|
|
|
$
|
-
|
|
|
$
|
122,103
|
|
|
$
|
-
|
|
|
$
|
121,112
|
|
|
$
|
-
|
|
|
$
|
155,694
|
|
|
$
|
-
|
|
Term loan credit agreement
|
|
|
189,867
|
|
|
|
-
|
|
|
|
189,723
|
|
|
|
-
|
|
|
|
190,311
|
|
|
|
-
|
|
|
|
190,442
|
|
|
|
-
|
|
Industrial revenue bond
|
|
|
984
|
|
|
|
-
|
|
|
|
-
|
|
|
|
984
|
|
|
|
1,106
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,106
|
|
Capital lease obligations
|
|
|
2,424
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,424
|
|
|
|
2,648
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,648
|
|
|
|
$
|
282,597
|
|
|
$
|
-
|
|
|
$
|
311,826
|
|
|
$
|
3,408
|
|
|
$
|
315,177
|
|
|
$
|
-
|
|
|
$
|
346,136
|
|
|
$
|
3,754
|
|
|
5.
|
STOCK-BASED COMPENSATION
|
The Company recognizes
all share-based payments based upon their fair value. The Company values stock option awards using a binomial option-pricing model,
which incorporates various assumptions including expected volatility, expected term, dividend yield and risk-free interest rates.
The expected volatility is based upon the Company’s historical experience. The expected term represents the period of time
that options granted are expected to be outstanding. The risk-free interest rate utilized for periods throughout the contractual
life of the options are based upon U.S. Treasury security yields at the time of grant. The Company grants restricted stock units
subject to service, performance and/or market conditions. 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. The fair value of service and performance
based units is based on the market price of a share of underlying common stock at the date of grant. The fair value of the market
based units is based on a lattice valuation model.
The amount of compensation costs related to
stock options, restricted stock units and performance units not yet recognized was $19.4 million at March 31, 2016 for which the
expense will be recognized through 2019.
The 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 March 31, 2016, the Company was named as a defendant or was otherwise
involved in numerous legal proceedings and governmental examinations in various jurisdictions, both in the United States and internationally.
The Company has recorded
liabilities for certain of its outstanding legal 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 range will change from time to time and actual results may vary significantly from the currently accrued
liabilities.
Based 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 effect on the Company's 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 matter could be material to the Company's operating results for a particular period depending on, among
other factors, the size of the loss or liability imposed and the level of the Company's income for that period. Costs associated
with the litigation and settlements of legal matters are reported within
General and Administrative Expenses
in the Consolidated
Statements of Operations.
Brazil Joint Venture
In March 2001, Bernard
Krone Indústria e Comércio de Máquinas Agrícolas Ltda. (“BK”) filed suit against the Company
in the Fourth Civil Court 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 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 is approximately $7.4 million U.S. dollars using current exchange rates and exclusive
of any potentially court-imposed interest, fees or inflation adjustments. The Company currently estimates these adjustments
to be approximately $52 million, at current exchange rates, but this amount will change with the passage of time and may be
increased or decreased at the discretion of the court at the time of final judgment in this matter. Due, in part, to the
amount and type of damages awarded by the Fourth Civil Court of Curitiba, Wabash immediately filed for clarification of the
judgment. The Fourth Civil Court has issued its clarification of judgment, leaving the underlying decision unchanged and
referring the parties to the State of Paraná Court of Appeals for any further appeal of the decision. As such, the
Company filed its notice of appeal with the Court of Appeals, as well as its initial appeal papers, on April 22, 2013. The
Court of Appeals has the authority to re-hear all facts presented to the lower court, as well as to reconsider the legal
questions presented in the case, and to render a new judgment in the case without regard to the lower court’s findings.
Pending outcome of this appeal process, the judgment is not enforceable by the plaintiff. Any ruling from the Court of
Appeals is not expected before the third quarter of 2016, at the earliest, and, accordingly, the judgment rendered by the
lower court cannot be enforced prior to that time, and may be overturned or reduced as a result of this process. Furthermore,
the ruling of the Court of Appeals may be further appealed to a higher court by either party. The Company believes that the
claims asserted by BK are without merit and it intends to continue to vigorously defend its position. The Company has not
recorded a charge with respect to this loss contingency as of March 31, 2016. Furthermore, at this time, the Company
remains unable to reasonably estimate the amount of any possible loss or range of loss that it may be required to pay at the
conclusion of the case. The Company will continue to reassess the need for the recognition of a loss contingency as the case
proceeds through the Court of Appeals, upon a decision to settle this case with the plaintiffs or an internal decision as to
an amount that the Company would be willing to settle or upon the outcome of the appeals process.
Intellectual Property
In 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 has
currently been stayed by agreement of the parties while the U.S. Patent and Trademark Office (“Patent Office”) undertakes
a reexamination of U.S. Patent Nos. 6,986,546. In June 2010, the Patent Office notified the Company that the reexamination is
complete and the Patent Office has 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’ petition to lift the
stay may be filed or granted.
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 does not believe that the resolution of this lawsuit will
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.
Walker Acquisition
In 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 is not expected to have a material adverse effect on the Company’s financial
condition or results of operations
Environmental Disputes
In August 2014, the
Company was noticed as a potentially responsible party (“PRP”) by the South Carolina Department of Health and Environmental
Control (“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 Group”) notified Wabash in August 2014 that is 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.
Bulk Tank International,
S. de R.L. de C.V. (“Bulk”) entered into agreements in 2011 with the Mexican federal environmental agency, PROFEPA,
and the applicable state environmental agency, PROPAEG, pursuant to PROFEPA’s and PROPAEG’s respective environmental
audit programs to resolve noncompliance with federal and state environmental laws at Bulk’s Guanajuato facility. Bulk completed
all required corrective actions and received a Certification of Clean Industry from PROPAEG, and is seeking the same certification
from PROFEPA, which the Company expects it will receive in 2016, following the conclusion of a final audit process that commenced
in December 2014. As a result, the Company does not expect that this matter will have a material adverse effect on its financial
condition or results of operations.
In January 2012, the
Company was noticed as a PRP by the U.S. Environmental Protection Agency (“EPA”) and the Louisiana Department of Environmental
Quality (“LDEQ”) pertaining to the Marine Shale Processors Site located in Amelia, Louisiana (“MSP Site”)
pursuant to CERCLA and corresponding Louisiana statutes. PRPs include current and former owners and operators of facilities at
which hazardous substances were allegedly disposed. The EPA’s allegation that the Company is a PRP arises out of one alleged
shipment of waste to the MSP Site in 1992 from the Company’s branch facility in Dallas, Texas. As such, the MSP Site PRP
Group notified the Company in January 2012 that, as a result of a March 18, 2009 Cooperative Agreement for Site Investigation
and Remediation entered into between the MSP Site PRP Group and the LDEQ, the Company was being offered a “De Minimis Cash-Out
Settlement” to contribute to the remediation costs, which would remain open until February 29, 2012. The Company chose not
to enter into the settlement and has denied any liability. In addition, the Company has requested that the MSP Site PRP Group
remove the Company from the list of PRPs for the MSP Site, based upon the following facts: the Company acquired this branch facility
in 1997 – five years after the alleged shipment - as part of the assets the Company acquired out of the Fruehauf Trailer
Corporation (“Fruehauf”) bankruptcy (Case No. 96-1563, United States Bankruptcy Court, District of Delaware (“Bankruptcy
Court”)); as part of the Asset Purchase Agreement regarding the Company’s purchase of assets from Fruehauf, the Company
did not assume liability for “Off-Site Environmental Liabilities,” which are defined to include any environmental
claims arising out of the treatment, storage, disposal or other disposition of any Hazardous Substance at any location other than
any of the acquired locations/assets; the Bankruptcy Court, in an Order dated May 26, 1999, also provided that, except for those
certain specified liabilities assumed by the Company under the terms of the Asset Purchase Agreement, the Company and its subsidiaries
shall not be subject to claims asserting successor liability; and the “no successor liability” language of the Asset
Purchase Agreement and the Bankruptcy Court Order form the basis for the Company’s request that it be removed from the list
of PRPs for the MSP Site. The MSP Site PRP Group is currently considering the Company’s request, but has provided no timeline
to the Company for a response. However, the MSP Site PRP Group has agreed to indefinitely extend the time period by which the
Company must respond to the De Minimis Cash-Out Settlement offer. The Company does not expect that this proceeding will have a
material adverse effect on its financial condition or results of operations.
In September 2003,
the Company was noticed as a PRP by the EPA pertaining to the Motorola 52nd Street, Phoenix, Arizona Superfund Site (the “Superfund
Site”) pursuant to CERCLA. The EPA’s allegation that the Company was a PRP arises out of the Company’s acquisition
of a former branch facility located approximately five miles from the original Superfund Site. The Company acquired this facility
in 1997, operated the facility until 2000, and sold the facility to a third party in 2002. In June 2010, the Company was contacted
by the Roosevelt Irrigation District (“RID”) informing it that the Arizona Department of Environmental Quality (“ADEQ”)
had approved a remediation plan in excess of $100 million for the RID portion of the Superfund Site, and demanded that the Company
contribute to the cost of the plan or be named as a defendant in a CERCLA action to be filed in July 2010. The Company initiated
settlement discussions with the RID and the ADEQ in July 2010 to provide a full release from the RID, and a covenant not-to-sue
and contribution protection regarding the former branch property from the ADEQ, in exchange for payment from the Company. If the
settlement is approved by all parties, it will prevent any third party from successfully bringing claims against the Company for
environmental contamination relating to this former branch property. The Company has been awaiting approval from the ADEQ since
the settlement was first proposed in July 2010. In March 2016, the Company received tentative approval of our settlement offer
from the ADEQ and the RID. Pursuant to statute, the settlement agreements will not be finalized until the passage of a 30-day
public comment period, which commenced on April 22, 2016. We do not anticipate opposition to the settlement agreements and believe
they will be finalized during the second quarter of 2016, however, no assurances as to the finality of this matter can be given
at this time. The proposed settlement terms have been accrued and did not have a material adverse effect on the Company’s
financial condition or results of operations, and the Company believes that any ongoing proceedings will not have a material adverse
effect on the Company’s financial condition or results of operations.
In January 2006, the
Company received a letter from the North Carolina Department of Environment and Natural Resources indicating that a site that
the Company formerly owned near Charlotte, North Carolina has been included on the state's October 2005 Inactive Hazardous Waste
Sites Priority List. The letter states that 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 will have a material
adverse effect on its financial condition or results of operations.
Per 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 included
in the denominator as follows (in thousands, except per share amounts):
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Basic net income per share:
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$
|
27,524
|
|
|
$
|
10,474
|
|
Weighted average common shares outstanding
|
|
|
65,037
|
|
|
|
68,731
|
|
Basic net income per share
|
|
$
|
0.42
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$
|
27,524
|
|
|
$
|
10,474
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
65,037
|
|
|
|
68,731
|
|
Dilutive shares from assumed conversion of convertible senior notes
|
|
|
-
|
|
|
|
1,729
|
|
Dilutive stock options and restricted stock
|
|
|
1,187
|
|
|
|
1,095
|
|
Diluted weighted average common shares outstanding
|
|
|
66,224
|
|
|
|
71,555
|
|
Diluted net income per share
|
|
$
|
0.42
|
|
|
$
|
0.15
|
|
Average diluted shares
outstanding for the three month periods ended March 31, 2016 and 2015 exclude options to purchase common shares totaling 748 and
557, 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 the three month period ended March 31, 2015 includes the
impact of 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.
The Company recognized
income tax expense of $16.2 million in the first three months of 2016 compared to $6.2 million for the same period in the prior
year. The effective tax rate for the first three months of 2016 and 2015 were 37.0% and 37.3%, respectively. These differ from
the U.S. Federal statutory rate of 35% primarily due to the impact of state and local taxes and the benefit of the U.S. Internal
Revenue Code domestic manufacturing deduction.
|
9.
|
OTHER ACCRUED LIABILITIES
|
The following table
presents major components of
Other Accrued Liabilities
(in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Payroll and related taxes
|
|
$
|
22,435
|
|
|
$
|
34,427
|
|
Warranty
|
|
|
21,590
|
|
|
|
19,709
|
|
Customer deposits
|
|
|
17,800
|
|
|
|
14,877
|
|
Accrued taxes
|
|
|
15,710
|
|
|
|
8,075
|
|
Self-insurance
|
|
|
8,748
|
|
|
|
7,677
|
|
All other
|
|
|
8,973
|
|
|
|
8,277
|
|
|
|
$
|
95,256
|
|
|
$
|
93,042
|
|
The following table
presents the changes in the product warranty accrual included in
Other Accrued Liabilities
(in thousands):
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Balance as of January 1
|
|
$
|
19,709
|
|
|
$
|
15,462
|
|
Provision for warranties issued in current year
|
|
|
1,640
|
|
|
|
1,681
|
|
Recovery of pre-existing warranties
|
|
|
1,682
|
|
|
|
(260
|
)
|
Payments
|
|
|
(1,441
|
)
|
|
|
(1,346
|
)
|
Balance as of March 31
|
|
$
|
21,590
|
|
|
$
|
15,537
|
|
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.
a. Segment Reporting
The Company manages
its business in three segments: Commercial Trailer Products, Diversified Products and Retail. The Commercial Trailer Products
segment produces and sells new trailers to the Retail segment and to customers who purchase trailers directly from the Company
or through independent dealers. The Diversified Products segment 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. The Retail segment includes the sale of new and used trailers, as well as the sale
of after-market parts and service, through its retail branch network.
The Company has not
allocated certain corporate related administrative costs, interest and income taxes included in the corporate and eliminations
segment to the Company’s other reportable segments. The Company accounts for intersegment sales and transfers at cost plus
a specified mark-up. Reportable segment information is as follows (in thousands):
|
|
Commercial
|
|
|
Diversified
|
|
|
|
|
|
Corporate and
|
|
|
|
|
Three Months Ended March 31,
|
|
Trailer Products
|
|
|
Products
|
|
|
Retail
|
|
|
Eliminations
|
|
|
Consolidated
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External Customers
|
|
$
|
337,195
|
|
|
$
|
76,638
|
|
|
$
|
33,843
|
|
|
$
|
-
|
|
|
$
|
447,676
|
|
Intersegment Sales
|
|
|
17,653
|
|
|
|
2,786
|
|
|
|
194
|
|
|
|
(20,633
|
)
|
|
|
-
|
|
Total Net Sales
|
|
$
|
354,848
|
|
|
$
|
79,424
|
|
|
$
|
34,037
|
|
|
$
|
(20,633
|
)
|
|
$
|
447,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
$
|
52,060
|
|
|
$
|
6,622
|
|
|
$
|
(149
|
)
|
|
$
|
(10,348
|
)
|
|
$
|
48,185
|
|
Assets
|
|
$
|
332,516
|
|
|
$
|
378,160
|
|
|
$
|
67,032
|
|
|
$
|
197,963
|
|
|
$
|
975,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External Customers
|
|
$
|
293,742
|
|
|
$
|
101,041
|
|
|
$
|
42,814
|
|
|
$
|
-
|
|
|
$
|
437,597
|
|
Intersegment Sales
|
|
|
20,762
|
|
|
|
2,951
|
|
|
|
326
|
|
|
|
(24,039
|
)
|
|
|
-
|
|
Total Net Sales
|
|
$
|
314,504
|
|
|
$
|
103,992
|
|
|
$
|
43,140
|
|
|
$
|
(24,039
|
)
|
|
$
|
437,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
$
|
22,770
|
|
|
$
|
10,611
|
|
|
$
|
1,126
|
|
|
$
|
(7,244
|
)
|
|
$
|
27,263
|
|
Assets
|
|
$
|
354,975
|
|
|
$
|
404,888
|
|
|
$
|
68,285
|
|
|
$
|
156,825
|
|
|
$
|
984,972
|
|
b. Product Information
The Company offers
products primarily in four general categories: (1) new trailers, (2) used trailers, (3) components, parts and service and (4)
equipment and other. The following table sets forth the major product categories and their percentage of consolidated net sales
(dollars in thousands):
|
|
Commercial
|
|
|
Diversified
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
|
|
|
Trailer Products
|
|
|
Products
|
|
|
Retail
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Three Months Ended March 31,
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Trailers
|
|
|
347,582
|
|
|
|
29,776
|
|
|
|
11,839
|
|
|
|
(17,388
|
)
|
|
|
371,809
|
|
|
|
83.1
|
|
Used Trailers
|
|
|
1,715
|
|
|
|
901
|
|
|
|
2,393
|
|
|
|
(256
|
)
|
|
|
4,753
|
|
|
|
1.1
|
|
Components, parts and service
|
|
|
1,630
|
|
|
|
20,522
|
|
|
|
19,768
|
|
|
|
(2,985
|
)
|
|
|
38,935
|
|
|
|
8.7
|
|
Equipment and other
|
|
|
3,921
|
|
|
|
28,225
|
|
|
|
37
|
|
|
|
(4
|
)
|
|
|
32,179
|
|
|
|
7.1
|
|
Total net sales
|
|
|
354,848
|
|
|
|
79,424
|
|
|
|
34,037
|
|
|
|
(20,633
|
)
|
|
|
447,676
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Trailers
|
|
|
307,680
|
|
|
|
54,018
|
|
|
|
19,857
|
|
|
|
(20,283
|
)
|
|
|
361,272
|
|
|
|
82.6
|
|
Used Trailers
|
|
|
2,170
|
|
|
|
1,169
|
|
|
|
2,571
|
|
|
|
(327
|
)
|
|
|
5,583
|
|
|
|
1.3
|
|
Components, parts and service
|
|
|
1,391
|
|
|
|
23,463
|
|
|
|
19,941
|
|
|
|
(3,282
|
)
|
|
|
41,513
|
|
|
|
9.5
|
|
Equipment and other
|
|
|
3,263
|
|
|
|
25,342
|
|
|
|
771
|
|
|
|
(147
|
)
|
|
|
29,229
|
|
|
|
6.6
|
|
Total net sales
|
|
|
314,504
|
|
|
|
103,992
|
|
|
|
43,140
|
|
|
|
(24,039
|
)
|
|
|
437,597
|
|
|
|
100.0
|
|
|
11.
|
NEW ACCOUNTING PRONOUNCEMENTS
|
In May 2014, the Financial
Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue
from Contracts with Customers
(Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification
(“ASC”) 605,
Revenue Recognition
. 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 effective date will be the first quarter of fiscal year 2018
using one of two retrospective application methods. The Company is currently assessing the potential impact of the adoption of
ASU 2014-09 on its financial statements and related disclosures and has not yet decided on a transition method.
In August 2014, the
FASB issued ASU No. 2014-15,
Presentation of Financial Statements – Going Concern
, which requires management to evaluate
whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote
disclosures. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016. Early
adoption is permitted for financial statements that have not been previously issued. The standard allows for either a full retrospective
or modified retrospective transition method. The Company does not expect this standard to have a material impact on the Company’s
financial statements upon adoption.
In April 2015, the
FASB issued ASU No. 2015-03,
Imputation of Interest
. Also, in August 2015, the FASB issued ASU No. 2015-15,
Imputation
of Interest, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Agreements
These
ASUs simplify the presentation of debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying
amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance
costs are not affected by these ASUs. The guidance provided in ASU No. 2015-03 did not address presentation or subsequent measurement
of debt issuance costs related to line-of-credit arrangements, therefore, ASU No. 2015-15 provided authoritative guidance permitting
an entity to defer and present debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably
over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit
arrangement. These ASUs were effective for annual and interim reporting periods beginning after December 15, 2015 and required
a retrospective approach. The Company adopted the guidance effective with the first quarter of 2016 and, as a result, it did not
have a material impact on the Company’s financial statements.
In July 2015, the
FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
. This ASU, which applies to inventory that
is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, requires that entities measure
inventory at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2016 and should be applied on a prospective basis. The Company is currently assessing
the potential impact of adopting this guidance, but does not, at this time, anticipate a material impact to its consolidated results
of operations, financial position, or cash flows.
In November 2015,
the FASB issued ASU 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.
This amendment changes
how deferred taxes are recognized by eliminating the requirement of presenting deferred tax liabilities and assets as current
and noncurrent on the balance sheet. Instead, the requirement will be to classify all deferred tax liabilities and assets as noncurrent.
ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that
reporting period, with earlier adoption permitted. ASU 2015-17 can be adopted either prospectively or retrospectively to all periods
presented. The Company has adopted ASU 2015-17 prospectively beginning with the current quarter and, therefore, all deferred income
taxes are now presented as non-current items. Prior year balances have not been restated to reflect the impact of ASU 2015-17.
In 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.
This guidance will be effective for the Company as of January 1, 2019. A modified retrospective transition method is required.
The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
In March 2016, the
FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606).
This update is intended to improve the operability
and understandability of the implementation guidance on principal versus agent considerations. The effective date will be the
first quarter of fiscal year 2018 using one of two retrospective application methods. The Company is currently assessing the potential
impact of the adoption of ASU 2016-08 on its financial statements and related disclosures and has not yet decided on a transition
method.
In March 2016, the
FASB issued ASU 2016-09,
Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting.
This update simplifies the accounting for employee share-based payment transactions, including the income tax
consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
This guidance will be effective for the Company as of January 1, 2017. The Company is currently evaluating the impact the adoption
of this guidance will have on its consolidated financial statements.