WABASH NATIONAL CORPORATION ANNOUNCES THIRD QUARTER 2020 RESULTS
- Third quarter revenue of $352M on stable shipment volumes
- Completion of $20M run-rate savings from reorganization actions deliver 13% decremental margins
- Net Income turns positive with $0.07 GAAP EPS or $0.09 adjusted non-GAAP EPS
- Substantial improvement in trough financial performance speaks to more resilient business model
- Third quarter backlog increased to $1 billion showing improved end-market sentiment for 2021
LAFAYETTE, Ind., – (Trailer Technician) — Wabash National Corporation (NYSE:WNC), the innovation leader of engineered solutions for the transportation, logistics and distribution industries, today reported results for the quarter ended September 30, 2020.
Net sales for the third quarter 2020 were steady compared with prior quarters at $351.6 million as the Company continued to produce equipment to satisfy customer demand volumes. Consolidated gross margin of 12.3% was the strongest rate since Q4 of 2019 as the company continued to achieve greater efficiency operating within the constraints of COVID-19 protocols. Operating income of $8.4 million, or 2.4% of sales, on a GAAP basis, includes the positive impact of cost savings stemming from strategic organizational realignment actions completed during the quarter. The Company’s previously announced target of $20M in run rate savings from these realignment actions has been completed ahead of schedule and helped to limit decremental margins to 13% during the third quarter. Earnings per share was $0.07 on a GAAP basis or $0.09 on an adjusted non-GAAP basis for the third quarter.
Total Company backlog as of September 30, 2020 was approximately $1.0 billion as new order activity markedly accelerated during the September time frame. Backlog rose 37% compared June 2020 and was 29% above September 2019.
“We are pleased to deliver a profitable quarter that builds upon our purposeful financial management during the first half of 2020. We successfully executed strategic cost reductions that have not only preserved our organization’s strength, but have enhanced our company’s culture by eliminating silos and allowed us to provide a more seamless experience for customers who purchase across our unmatched portfolio of first to final mile solutions,” said Brent Yeagy, president and chief executive officer.
Operating cash flow was $107.1 million and free cash flow was $93.4 million year to date at the close of the third quarter 2020, which compares to significant cash burn during each of the two prior economic recessions. Liquidity as of the end of the third quarter was $383 million with $216 million of cash and a fully untapped revolving credit line of $167 million. Following the successful refinancing of the Company’s term loan, the Company’s nearest material debt maturity is now October 2025.
“Our increased backlog reflects strong underpinnings within the freight markets as rebounding freight activity has contributed to significant gains in spot and contract rates. While we’re looking forward to a demand environment that looks poised to improve into 2021, we also remain focused on executing in the final quarter of 2020 completing a year that we expect will demonstrate the benefits of our Company’s diversification efforts over the last decade as well as actions over the past two years to significantly strengthen the management system of the Company.” continued Yeagy. “Our broadened and synergistic portfolio has resulted in considerable improvement in trough performance across an array of key financial metrics like operating income, EBITDA, and free cash flow.”
Business Segment Highlights
The table below is a summary of select segment operating and financial results prior to the elimination of intersegment sales for the third quarter of 2020 and 2019. A complete disclosure of the results by individual segment is included in the tables following this release.
Commercial Trailer Products’ net sales for the third quarter were $226.5 million, a decrease of 40.4% as compared to the prior year quarter as a result of a reduction in market demand. Operating income was $19.7 million or 8.7% of sales during the quarter.
Diversified Products’ net sales for the third quarter were $72.0 million, a decrease of 22.7% as compared to the prior year as a result of lower market demand. Operating income was $4.2 million or 5.8% of sales during the quarter.
Final Mile Products’ net sales for the third quarter totaled $55.3 million, a decrease of 51.2%, as compared to the prior year, due to softer market demand. Operating loss was $4.4 million during the quarter as a result of weaker volume leverage over fixed costs.
Non-GAAP Measures
In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), the financial information included in this release contains non-GAAP financial measures, including operating EBITDA, adjusted operating income (loss), adjusted net income (loss), adjusted earnings per share, adjusted segment EBITDA, and adjusted segment EBITDA margin. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures and results calculated in accordance with GAAP, including net income (loss), and reconciliations to GAAP financial statements should be carefully evaluated.
Operating EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, debt issuance costs expensed within General & administrative expenses related to the closing of the New Term Loan Credit Agreement, impairment and other, net, and other non-operating income and expense (which includes loss on debt extinguishment charges). Management believes providing operating EBITDA is useful for investors to understand the Company’s performance and results of operations period to period with the exclusion of the items identified above. Management believes the presentation of operating EBITDA, when combined with the GAAP presentations of operating income (loss) and net income (loss), is beneficial to an investor’s understanding of the Company’s operating performance. A reconciliation of operating EBITDA to net income (loss) is included in the tables following this release.
Free cash flow is defined as net cash provided by operating activities minus capital expenditures. Management believes providing free cash flow is useful for investors to understand the Company’s performance and results of cash generation period to period with the exclusion of the item identified above. Management believes the presentation of free cash flow, when combined with the GAAP presentations of cash provided by operating activities, is beneficial to an investor’s understanding of the Company’s operating performance. A reconciliation of free cash flow to cash provided by operating activities is included in the tables following this release.
Adjusted operating income (loss), a non-GAAP financial measure, excludes certain costs, expenses, other charges, gains or income that are included in the determination of operating income (loss) under U.S. GAAP, but that management would not consider important in evaluating the quality of the Company’s operating results as they are not indicative of the Company’s core operating results or may obscure trends useful in evaluating the Company’s continuing activities. Accordingly, the Company presents adjusted operating income (loss) excluding these special items to help investors evaluate our operating performance and trends in our business consistent with how management evaluates such performance and trends. Further, the Company presents adjusted operating income (loss) to provide investors with a better understanding of the Company’s view of our results as compared to prior periods. A reconciliation of adjusted operating income (loss) to operating income (loss), the most comparable GAAP financial measure, is included in the tables following this release.
Adjusted net income and adjusted earnings per diluted share each reflect adjustments for non-cash impairment and debt transactions, and the related tax effects of these adjustments. Management believes providing adjusted measures and excluding certain items facilitates comparisons to the Company’s prior year periods and, when combined with the GAAP presentation of net income (loss) and diluted net income (loss) per share, is beneficial to an investor’s understanding of the Company’s performance. A reconciliation of adjusted net income and adjusted earnings per diluted share to net income (loss) and net income (loss) per diluted share is included in the tables following this release.
Adjusted segment EBITDA, a non-GAAP financial measure, is calculated by adding back segment depreciation and amortization expense to segment operating income (loss), and excludes certain costs, expenses, other charges, gains or income that are included in the determination of operating income (loss) under GAAP, but that management would not consider important in evaluating the quality of the Company’s segment operating results as they are not indicative of each segment’s core operating results or may obscure trends useful in evaluating the segment’s continuing activities. Adjusted segment EBITDA Margin is calculated by dividing Adjusted segment EBITDA by segment total net sales. A reconciliation of adjusted segment EBITDA to income (loss) from operations is included in the tables following this release.
Third Quarter 2020 Conference Call
Wabash National will discuss its results during its quarterly investor conference call on Thursday, November 5, 2020, beginning at 10:00 a.m. EDT. The call and an accompanying slide presentation will be accessible on the “Investors” section of the Company’s website www.wabashnational.com. The conference call will also be accessible by dialing (844) 778-4139, conference ID 5580198. A replay of the call will be available on the site shortly after the conclusion of the presentation.
About Wabash National Corporation
As the innovation leader of engineered solutions for the transportation, logistics and distribution industries, Wabash National Corporation (NYSE: WNC) is changing how the world reaches you. Headquartered in Lafayette, Indiana, the company’s mission is to enable customers to succeed with breakthrough ideas and solutions that help them move everything from first to final mile. Wabash National designs and manufactures a diverse range of products, including: dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, 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®, Supreme®, Transcraft®, Walker Engineered Products, and Walker Transport. Learn more at www.wabashnational.com.
Safe Harbor Statement
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements convey the Company’s current expectations or forecasts of future events. All statements contained in this press release other than statements of historical fact are forward-looking statements. These forward-looking statements include, among other things, all statements regarding the Company’s outlook for trailer and truck body shipments, backlog, expectations regarding demand levels for trailers, truck bodies, non-trailer equipment and our other diversified product offerings, pricing, profitability and earnings, cash flow and liquidity, opportunity to capture higher margin sales, new product innovations, our growth and diversification strategies, our expectations for improved financial performance during the course of the year and our expectations with regards to capital allocation. These and the Company’s other forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Without limitation, these risks and uncertainties include a continued or prolonged shutdown or reduction of our operations, substantially reduced customer orders or sales volumes and supply disruptions due to the coronavirus (COVID-19) outbreak, the continued integration of Supreme into the Company’s business, adverse reactions to the transaction by customers, suppliers or strategic partners, uncertain economic conditions including the possibility that customer demand may not meet our expectations, increased competition, reliance on certain customers and corporate partnerships, risks of customer pick-up delays, shortages and costs of raw materials including the impact of tariffs or other international trade developments, risks in implementing and sustaining improvements in the Company’s manufacturing operations and cost containment, dependence on industry trends and timing, supplier constraints, labor costs and availability, customer acceptance of and reactions to pricing changes and costs of indebtedness. Readers should review and consider the various disclosures made by the Company in this press release and in the Company’s reports to its stockholders and periodic reports on Forms 10-K and 10-Q.