Wabash Reduces 2Q Loss, Gets $35 Mln. in New Capital
This story appears in the Aug. 10 print edition of Transport Topics.
Trailer maker Wabash National Corp. lost $17.9 million during the second quarter — an improvement of more than $10 million from the year’s first three months, when it lost $28.3 million — and announced the completion of a deal with a private equity firm that will give it $35 million in new capital.
In the 2008 second quarter, Wabash, Lafayette, Ind., lost $3.2 million. Total sales in those two quarters declined 57.2% to $86.2 million in 2009 from $201.5 million in 2008.
On Aug. 3 — two days before the earnings report — Wabash said it completed a deal with a unit of equity firm Lincolnshire Management. For its cash investment in Wabash, Lincolnshire will get three series of preferred stock paying an average of 16% a year over five years, 44.2% of voting rights in Wabash’s common stock, and five seats on what is now the manufacturer’s 12-member board of directors.
“This investment, combined with the amended credit facility and the continuing impact of our cost restructuring initiatives, provides the capital structure that we believe will meet the needs of the company during this economic downturn, and we look forward to profitable growth as business conditions improve,” Wabash CEO Richard Giromini said in a company statement.
Wabash and Great Dane Trailers are the nation’s two largest trailer makers, with the two manufacturers waging a see-saw battle for first place in market share. Registration data show Great Dane won the race in 2006, there was a near-tie in 2007 and Wabash won last year.
Wabash and Lincolnshire have done business before. In 2006, the equity firm sold Transcraft Corp. to the original equipment manufacturer, giving Wabash its entry to the flatbed market. Wabash told the Securities and Exchange Commission that it paid $71 million for Transcraft, which Lincolnshire had bought for $65 million in 1999.
Robert Smith, Wabash’s chief financial officer, said in an interview that the 2006 Transcraft purchase did not lead directly to Lincolnshire’s current investment but that it could prove to be helpful. “They’ve been in the transportation business recently, and they know how to stick with a cyclical business. They’re not novices.”
Smith said Wabash and Trans-craft are the only two transportation services or equipment companies that Lincolnshire has had in its portfolio.
U.S. trailer sales have dropped sharply in the past few years, according to R.L. Polk & Co. In the boom year of 2006, carriers registered more than 260,000 new trailers, but sales this year are expected to total only about 70,000 units, making for the worst performance since 1975.
Wabash said it sold 3,200 new trailers in the second quarter, a 60% drop from the same period in 2008.
Wabash said that earlier this year it had retained investment bank BB&T Capital Markets to help investigate strategic options for restructuring, and the Lincolnshire deal is the culmination of that effort.
Smith said the $35 million will be used to pay down debt and fund normal daily operations. He said that money should keep the company afloat for the next 18 months and that it would not seek any similar deals. He also said Wabash probably will not be active in mergers and acquisitions during that time.
During the year’s first quarter, Wabash lost $28.3 million on revenue of $77.9 million. The company maintained positive shareholders’ equity, or corporate net worth, at $109.9 million, as of June 30, although it started the year with equity of $153.4 million.
Former Purdue University President Martin Jischke will remain as chairman of the Wabash board, said Wabash Vice President James Hasty, adding that Giromini also will stay in place as chief executive officer.
Of the five new members of Wabash’s board, four are Lincolnshire executives: Thomas Maloney, Michael Lyons, Vineet Pruthi and James Binch. The fifth is Andrew Boynton, dean of Boston College’s business school.
