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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Wabash National Corporation
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SEC 1913 (02-02)
[WABASH NATIONAL LOGO]
LETTER FROM THE PRESIDENT
As we begin 2005, our focus at Wabash National Corporation is changing:
"IT'S NOT A TURN-AROUND ANYMORE. IT'S ABOUT THE FUTURE."
Over the last few years, every associate at Wabash has worked diligently,
effectively and successfully to overcome the many critical challenges that
threatened our Company. Their efforts have transformed the Company. In 2005, we
will mark our twentieth anniversary - a new era has begun and we are focused on
the future. In addition to the continuous improvement mindset and lean
manufacturing initiatives that we have deployed over the last few years, we will
continue to nurture and refine the traits Wabash National was founded on:
product and technological leadership, innovation and a focus on the success of
our customers. Our vision for 2005 is to merge these attributes with initiatives
to create and enhance long term shareholder value.
2004:
Results in 2004 improved significantly over our 2003 results. We achieved sales
of $1.0 billion and net income of $58.4 million versus sales of $887.9 million
and a loss of $57.2 million in 2003. Despite unprecedented increases in raw
material costs in 2004, the Company's gross margin grew to 12.1% versus 5.9% in
2003. The 2003 period included a $28.5 million charge related to a loss on asset
impairment. As of December 31, 2004, we had $42 million in cash and no bank
debt, achieving the goal established in 2002 to be bank debt free.
SALES:
- Grew unit volume by over 10,000 trailers year-over-year.
- Increased van market share by over 1% despite a significant
year-over-year reduction in unit volume from core accounts; none of
which were lost.
- Added approximately 225 new, primarily mid-market accounts that
purchased approximately 6,000 new trailers, the majority of which
were our proprietary DuraPlate(R) product. Our success in the
mid-market far exceeded our original expectations.
- Recovered approximately 90% of our raw material cost increases
through increased selling prices.
P.O. Box 6129 - Lafayette, Indiana 47903 - Phone: (765) 771-5300
OPERATIONS:
- Continued our organizational focus on safety with a 41% improvement
in Total Recordable Incident Rate. We are now 50% better than the
industry norm.
- Improved First Pass Yield across all production lines from 20% in
2002 to 95% in 2004. This accomplishment allowed the Company to
significantly reduce warranty reserves and expenses in 2004.
- Awarded the prestigious 2003 U.S. Senate Productivity Award from the
State of Indiana for the significant cost savings and productivity
we achieved in the prior two years.
RETAIL/BRANCH OPERATIONS:
- Improved operating results $13 million year-over-year.
- Achieved record new trailer sales with 40% fewer branch locations.
2005 OUTLOOK:
Moving forward we see our industry cycle in the formative stage, as 2004 was the
first year in the last four when marginal replacement of the industry's aging
trailer fleet occurred. Our customers, the major truckload and
less-than-truckload fleets, have seen vast improvements in their respective
operations, and as such, vast improvements in their balance sheets. All this
seemingly signifies a sustainable recovery in the transportation industry upon
which we intend to capitalize.
MID-MARKET GROWTH:
This defined market segment of 1,250 carriers with trailer fleet
sizes between 500 and 7,500 units has in excess of 1 million
trailers in service and an approximate yearly replacement level of
100,000 units. Today, our share of this market is less than 10%.
Over the next three years, we intend to capture approximately 30% -
35% representing an estimated 20,000 additional units. If
successful, this new business would represent $450 to $500 million
in sales. With focus, determination, quality trailer products, and a
commitment to ensuring our customers' success, we believe the
probability of attaining this goal is high.
LOWER COST MANUFACTURING:
Over the last several years, we have made exceptional improvements
in our trailer assembly process as measured in terms of
productivity, quality, safety and reduced costs. We strive to
continuously improve processes and further reduce costs. In 2005, we
begin a three-year, $40 million program to replace four trailer
assembly lines. The schedule is to replace one line in 2005, two in
2006 and one in 2007. Each line is estimated to cost $10 million and
each will produce an estimated annual cost savings of $7 million.
This investment in our production capabilities will help to
revolutionize trailer manufacturing, incorporating the use of
technology proven in the automotive industry.
NEW ERP SYSTEM:
Our next step in improving build processes is implementation of an
Enterprise Resource Planning (ERP) system. This system, which will
be implemented in stages over the course of twenty-four months, will
integrate departments and functions across the Company, enhance our
ability to service our customers, and improve our control
environment. We recognize that the success of this type of system
implementation is widely dependent upon senior executive support
and, therefore, my direct reports and I will champion this project
through its completion.
BENCH STRENGTH:
Selecting and developing future managers is a crucial task. We have
begun to evaluate and measure critical leadership positions within
the Company to ensure that as the Company grows and its strategy
evolves, our initiatives are being actively managed and management
can deliver sustainable business results.
RAW MATERIAL/COMPONENT COST REDUCTION:
Raw materials and components represent approximately 75% of our
product cost and present a tremendous opportunity for significant
cost reductions. We believe that standardization of parts and
processes will enable us to obtain more competitive pricing and
achieve improved assembly efficiencies. We are also working closely
with suppliers to target and obtain greater cost and productivity
sharing. We are targeting over 300 basis point annual improvement
over the next three years.
This letter outlines just a few of the major undertakings in 2005, and
subsequent years, to improve profitability, enhance shareholder value, and
address the needs of our customers. Given continuing, favorable economic and
geopolitical conditions, we expect the positive market cycle to extend through
2008. We fully intend to take advantage of this prolonged period of prosperity
with record sales and profitability.
To the associates of Wabash National Corporation, I state,
"WE HAVE EARNED THIS RIGHT. IT IS NOW ABOUT THE FUTURE."
/s/ William P. Greubel
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William P. Greubel
President & CEO
[WABASH NATIONAL LOGO]
STOCKHOLDER INFORMATION
EXECUTIVE OFFICERS DIRECTORS
William P. Greubel David C. Burdakin
President, Chief Executive Officer and Director President
HON Company
Richard J. Giromini
Executive Vice President - Chief Operating Officer William P. Greubel
President and Chief Executive Officer
Rodney P. Ehrlich Wabash National Corporation
Senior Vice President - Chief Technology Officer
John T. Hackett
Brent A. Larson Chairman of the Board of Directors
Senior Vice President - Sales and Marketing Wabash National Corporation
Jerry R. Linzey Dr. Martin C. Jischke
Senior Vice President - Manufacturing President
Purdue University
Timothy J. Monahan
Senior Vice President - Human Resources Stephanie K. Kushner
Vice President and Chief Financial Officer
Robert J. Smith Federal Signal Corporation
Senior Vice President - Chief Financial Officer
Larry J. Magee
AUDITORS Chairman, CEO and President
Ernst & Young BFS Retail & Commercial Operations, LLC
111 Monument Circle
Suite 2600 Scott K. Sorensen
Indianapolis, Indiana 46204-5120 Vice President and Chief Financial Officer
Hillenbrand Industries, Inc.
TRANSFER AGENT
National City Bank Ronald L. Stewart
Corporate Trust Operations President and Chief Executive Officer
PO Box 92301 Material Sciences Corporation
Cleveland, Ohio 44193-0900
(800) 622-6757 STOCK LISTING
Symbol: WNC
REQUESTS New York Stock Exchange
For stockholder requests for information or assistance, As required by the NYSE rules, in 2004, the CEO
Please write or telephone: certified to the NYSE that he was not aware of any
Wabash National Corporation violation by the Corporation of NYSE corporate
c/o Investor Relations governance listing standards as of the date of that
PO Box 6129 certification,
Lafayette, Indiana 47903-6129
(765) 771-5310 FORM 10-K
In lieu of a separate annual report to stockholders,
INTERNET ADDRESS enclosed is Wabash National Corporation's Form
http://www.wabashnational.com 10-K, which included as an exhibit the certifications
required by Section 302 of the Sarbanes Oxley Act.
[WABASH NATIONAL CORPORATION LOGO]