Wabash National(WNC) - 2022 Q4 - Annual Report

PART I Item 1 Business Wabash, rebranded in 2022, leads in connected solutions for transportation, logistics, and distribution, manufacturing diverse products and focusing on strategic growth - Wabash National Corporation rebranded as 'Wabash' in January 2022, marking a significant shift in its go-to-market brand strategy to unify its legacy brands and reflect its transformation into a visionary leader of connected solutions for the transportation, logistics, and distribution industries[15][20][25] - The company's strategy is centered on scaling core competencies by growing in and around core markets with known customers, focusing on cold chain, e-commerce & logistics disruption, and recurrent revenue through parts & services[34][35] - Wabash operates two main segments: Transportation Solutions (TS), which includes design and manufacturing of transportation equipment, and Parts & Services (P&S), which covers aftermarket parts, upfitting, and engineered products[30][32][33] - Wabash is investing $20 million to scale its EcoNex™ Technology within refrigerated vans, truck bodies, and other transportation products, aiming for lighter weight and improved thermal performance (up to 28% better than conventional refrigerated trailers)[57] - The company's backlog as of December 31, 2022, increased significantly, with a 10% rise in 12-month backlog and a 34% increase in total backlog, driven by high demand, expected production, and long-term customer agreements[77] Backlog Information (in millions) | | December 31, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | 12-month backlog | $2,787 | $2,526 | 10% | | Total backlog | $3,396 | $2,526 | 34% | Overview Rebranding Wabash Management System Impact of Coronavirus ("COVID-19") Operating Segments Operating and Reportable Segments | Transportation Solutions | Parts & Services | | :----------------------- | :--------------- | | Dry & Refrigerated Van Trailers | Aftermarket Parts & Services | | Platform Trailers | Truck Body Upfitting Solutions | | Tank Trailers & Truck-Mounted Tanks | Food, Dairy, and Beverage Equipment | | Truck-Mounted Dry & Refrigerated Truck Bodies | DuraPlate® Components & Parts | | EcoNex™ Technology Products | Wabash Parts LLC | | | Trailers as a Service (TAAS)SM | Strategy - Key strategic initiatives include expanding market share in the temperature-controlled cold chain, capitalizing on e-commerce and logistics disruption (e.g., home delivery, power-only networks), and growing recurrent revenue through parts and services[35] Acquisition Strategy - Acquisition targets are evaluated based on customer-focused solutions, access to new technology, strong management, alignment with core competencies, and growth markets within the transportation, logistics, and distribution industries[38] Capital Allocation Strategy - The company's capital allocation strategy aims to maintain liquidity, manage debt, reinvest for growth (capex, R&D), maintain regular dividends, and opportunistically repurchase shares[38] Industry and Competition - The U.S. trucking industry was estimated at $875.5 billion in 2021, representing 81% of total U.S. transportation revenue, with 72.2% of domestic freight tonnage carried by trucks[39] - Trailer production recovered to approximately 304,000 units in 2022, an increase of 14% from 2021, with 2023 estimates ranging from 303,000 to 318,000 units, generally consistent with historical levels and above normal replacement demand[41] Human Capital Resources and Management - As of December 31, 2022, Wabash had approximately 6,900 full-time employees, with about 5% temporary production workforce and essentially all active employees being non-union[44] - The company's human capital strategy focuses on safety (TRIR of 5.6 in 2022), employee engagement, talent development (Wabash U, tuition reimbursement), health and wellness, diversity, equity and inclusion (70% of hourly hires in 2022 were women and/or minorities), competitive compensation and benefits, and community involvement[45][48][49][52][53] Competitive Strengths - Wabash's competitive strengths include long-term core customer relationships, technology and innovation (e.g., DuraPlate Cell Core, EcoNex™ Technology), significant brand recognition, the Wabash Management System (WMS) and enterprise lean principles, and an extensive distribution network[57][59][61] Regulation - The company's products are subject to various state and federal regulations concerning length, height, width, weight capacity, safety features, and environmental sustainability, including specific federal regulations for tank trailers[60] Products - Transportation Solutions products include dry van, refrigerated, platform, and tank trailers, as well as various truck bodies (dry freight, cargo, insulated refrigerated, platform, and light-duty refrigerated with EcoNex™ Technology)[62][63][64][65] - Parts & Services products encompass aftermarket parts and services, truck body upfitting, Wabash Parts LLC (a new distribution entity), Process Systems (stainless steel tanks, mixers), and Trailers as a Service (TAAS) initiative[66][67] Customers - Wabash serves a diverse customer base including large truckload carriers, leasing companies, private fleets, and package carriers, with its five largest customers accounting for approximately 33% of aggregate net sales in 2022[69][110] Marketing and Distribution - Products are marketed through factory direct accounts for large fleets and an extensive network of independent dealers across North America for van, platform, tank trailers, and truck bodies[72][73][75] Raw Materials - The company relies on a limited number of suppliers for key raw materials and components such as steel, aluminum, plastic, lumber, tires, landing gear, axles, and suspensions, and manages price changes through fixed-price contracts and financial derivatives[76] Backlog Backlog Information (in millions) | | December 31, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | 12-month backlog | $2,787 | $2,526 | 10% | | Total backlog | $3,396 | $2,526 | 34% | Patents and Intellectual Property - Wabash holds 147 U.S. patents and 154 foreign patents/registered designs related to transportation equipment and engineered products, including proprietary EcoNex™ Technology and DuraPlate® products, providing a significant competitive advantage[78][79] Environmental Matters - The company's facilities are subject to various environmental laws and regulations, and it believes it is in substantial compliance, not anticipating material adverse effects from future compliance costs[81][82] Website Access to Company Reports Information About Our Executive Officers Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Brent L. Yeagy | 52 | President and Chief Executive Officer, Director | | M. Kristin Glazner | 45 | Senior Vice President, General Counsel and Chief Human Resources Officer, Corporate Secretary | | Kevin J. Page | 61 | Senior Vice President, Chief Commercial Officer | | Michael N. Pettit | 48 | Senior Vice President, Chief Financial Officer | | Dustin T. Smith | 45 | Senior Vice President, Chief Strategy Officer | Item 1A Risk Factors The company faces multiple risks including economic sensitivity, business cyclicality, supply chain disruptions, competition, and financial obligations - Demand for products is highly sensitive to economic conditions, including unemployment, consumer confidence, inflation, and interest rates, which can lead to reduced demand, lower pricing, and customer payment issues[91] - The business is highly cyclical, and economic downturns can reduce demand for trailers and other products, leading to lower sales volumes and prices, despite diversification efforts[92][93] - Ongoing inflation has led to higher costs for labor, materials, and transportation, which the company may not be able to fully offset through price increases in competitive markets[97] - Reliance on a limited number of raw material and component suppliers (e.g., tires, steel, aluminum) creates risks of shortages, price increases, and supply chain disruptions, which can impact production, costs, and order fulfillment[101][102] - Failure to attract and retain key personnel or a sufficient workforce, especially in tight labor markets, could negatively impact operations and strategy implementation[106] - The company's long-term strategic plan and growth initiatives, including diversification and new product development, are subject to risks such as increased competition, inability to scale manufacturing, and challenges in executing acquisitions[107] - Significant competition in the industries, including offerings of new/better products or lower prices by competitors, could lead to loss of customers and declining revenues[111] - The company's indebtedness of approximately $400.0 million as of December 31, 2022, could adversely affect financial condition by limiting funding for capital expenditures, acquisitions, and dividends, and increasing vulnerability to adverse economic conditions[138][139] Risks Related to Our Business, Strategy and Operations Risks Related to an Investment in Our Common Stock Item 1B Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[147] Item 2 Properties Wabash National Corporation operates manufacturing and retail facilities across the United States and in Mexico, which are deemed adequate for current and foreseeable operations - Wabash operates manufacturing and retail facilities throughout the United States and Mexico, which are considered adequate for current and foreseeable business operations[149] Major Facilities Locations and Activities | Location | Owned or Leased | Description of Primary Activities at Location | Primary Segment and Products | | :--- | :--- | :--- | :--- | | Cadiz, Kentucky | Owned | Manufacturing | Transportation Solutions (Platform Trailers) | | Cleburne, Texas | Owned/Leased | Manufacturing | Transportation Solutions and Parts & Services (Truck Bodies) | | Fond du Lac, Wisconsin | Owned | Manufacturing | Transportation Solutions and Parts & Services (Tank Trailers) | | Goshen, Indiana | Owned | Manufacturing | Transportation Solutions and Parts & Services (Truck Bodies) | | Griffin, Georgia | Owned | Manufacturing | Transportation Solutions and Parts & Services (Truck Bodies) | | Jonestown, Pennsylvania | Owned/Leased | Manufacturing | Transportation Solutions and Parts & Services (Truck Bodies) | | Lafayette, Indiana | Owned/Leased | Corporate Headquarters, Manufacturing | Transportation Solutions and Parts & Services (Van Trailer Products) | | Moreno Valley, California | Owned/Leased | Manufacturing | Transportation Solutions (Truck Bodies) | | New Lisbon, Wisconsin | Owned | Manufacturing | Transportation Solutions and Parts & Services (Tank Trailers & Engineered Products) | | San José Iturbide, Mexico | Owned | Manufacturing | Transportation Solutions (Tank Trailers) | Item 3 Legal Proceedings Wabash is involved in various legal proceedings and environmental disputes, with no material adverse impact anticipated on financial condition or liquidity - Wabash is involved in numerous legal proceedings and governmental examinations, including class action lawsuits, but management does not believe these will have a material adverse impact on its financial condition or liquidity[151] - The company is a Potentially Responsible Party (PRP) in an environmental dispute at the Philip Services Site in Rock Hill, South Carolina, but the requested settlement payment is immaterial[152] - Wabash is also a PRP in an environmental dispute in Lafayette, Indiana, but its investigations indicate its properties are not the source of contamination, and no material adverse effect is expected[153] Environmental Disputes Item 4 Mine Safety Disclosures This item is not applicable to Wabash National Corporation - Item 4, Mine Safety Disclosures, is not applicable to the company[154] PART II Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Wabash's common stock trades on the NYSE under 'WNC', with reinstated quarterly cash dividends and an ongoing share repurchase program - Wabash's common stock (WNC) is traded on the New York Stock Exchange, with 534 record holders as of February 15, 2023[155] - The company reinstated a regular quarterly cash dividend program in December 2016, with payments dependent on future earnings, capital availability, and financial condition[156] - In August 2021, the Board approved an additional $150 million share repurchase program, set to expire in August 2024. As of December 31, 2022, $105.2 million remained available under the program, and 461,662 shares were repurchased in Q4 2022[161][162] Comparative Cumulative Total Return (December 31, 2017 = $100) | Company/Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Wabash National Corporation | $100.00 | $61.29 | $70.77 | $84.12 | $96.84 | $113.67 | | S&P 500 Index | $100.00 | $93.76 | $120.84 | $140.49 | $178.27 | $143.61 | | Dow Jones Transportation Index | $100.00 | $86.41 | $102.72 | $117.85 | $155.28 | $126.19 | Information Regarding our Common Stock Performance Graph Purchases of Our Equity Securities Item 6 [Reserved] This item is reserved and contains no information Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations Wabash's MD&A highlights strong 2022 operating performance, driven by increased sales and demand, with strategic focus on capacity expansion, technology, and parts growth, maintaining strong liquidity - Total U.S. trailer production levels for 2022 were approximately 304,000-305,000 units, a 14% increase from 2021, with 2023 estimates remaining strong[167][168] - Wabash plans to add 20% more dry van manufacturing capacity, with production starting in H1 2023, and is investing $20 million to scale EcoNex™ technology for refrigerated vans and truck bodies[170][212] - Operating income in 2022 totaled $166.6 million (6.7% operating margin), a significant increase from 2021, driven by higher sales and stronger demand[170] - The company repurchased $30.9 million of common stock and paid $16.0 million in dividends in 2022, demonstrating a balanced capital allocation strategy[173][211] - Liquidity position (cash + available borrowing capacity) increased 56% to $401.2 million as of December 31, 2022, from $258.0 million in 2021[212][230][242] Operating Data as a Percentage of Net Sales | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of sales | 87.1 % | 89.1 % | 89.2 % | | Gross profit | 12.9 % | 10.9 % | 10.8 % | | General and administrative expenses | 4.5 % | 4.9 % | 6.3 % | | Selling expenses | 1.1 % | 1.3 % | 1.7 % | | Amortization of intangibles | 0.6 % | 1.3 % | 1.5 % | | Impairment and other, net | — % | 1.5 % | 7.1 % | | Income (loss) from operations | 6.7 % | 1.9 % | (5.8)% | | Interest expense | (0.8)% | (1.3)% | (1.6)% | | Other, net | — % | (0.5)% | — % | | Income (loss) before income taxes | 5.9 % | 0.1 % | (7.4)% | | Income tax expense (benefit) | 1.3 % | — % | (0.8)% | | Net income (loss) | 4.5 % | 0.1 % | (6.6)% | COVID-19 Update Executive Summary Operating Performance - Wabash measures operating performance in Safety/Morale (2022 TRIR of 5.6), Quality (early life cycle warranty claims averaged 1.5 units per 100 van trailers in 2022), Delivery/Productivity (focus on throughput, labor hours, scrap rates), Cost Reduction (WMS and lean initiatives), and Environment (ISO 14001 registration, recycling programs saving 297,000 cubic yards of landfill space in 2021)[176][177][178][179][180][181][182][183][184] Industry Trends New Trailer Shipments (Units) | Year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | New Trailer Shipments | 269,000 | 308,000 | 286,000 | 290,000 | 323,000 | 328,000 | 210,000 | 265,000 | 302,000 | | Year-Over-Year Change (%) | 15 % | 14 % | (7)% | 1 % | 11 % | 2 % | (36)% | 26 % | 14 % | - Net trailer orders in 2022 increased by 45% to 362,000 units, with dry van orders up 68% to 226,000 units, reflecting strong demand despite supply chain and labor issues[191] - Regulatory changes, such as NHTSA's upgraded rear impact guard rule (effective July 2024) and the inapplicability of EPA GHG2 rules to trailers, along with CARB's suspended enforcement of GHG2 trailer requirements, are influencing trailer demand and design[192] Results of Operations Key Financial Performance (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,502,129 | $1,803,268 | $698,861 | 38.8% | | Cost of Sales | $2,179,438 | $1,606,801 | $572,637 | 35.6% | | Gross Profit | $322,691 | $196,467 | $126,224 | 64.2% | | Gross Margin | 12.9% | 10.9% | 2.0 pp | - | | General and Administrative Expenses | $113,083 | $88,807 | $24,276 | 27.3% | | Selling Expenses | $27,070 | $23,691 | $3,379 | 14.3% | | Amortization of Intangibles | $15,211 | $22,858 | $(7,647) | (33.5)% | | Impairment and Other, Net | $685 | $27,569 | $(26,884) | (97.5)% | | Income from Operations | $166,642 | $33,542 | $133,100 | 396.8% | | Interest Expense | $(20,525) | $(23,128) | $2,603 | (11.2)% | | Net Income Attributable to Common Stockholders | $112,258 | $1,164 | $111,094 | 9544.1% | | Basic EPS | $2.31 | $0.02 | $2.29 | 11450.0% | | Diluted EPS | $2.25 | $0.02 | $2.23 | 11150.0% | Liquidity and Capital Resources - As of December 31, 2022, total indebtedness was approximately $400.0 million, with a debt to equity ratio of 1.0:1.0[138][210] - The Revolving Credit Agreement was amended in September 2022, increasing the facility to $350 million and extending maturity to September 2027. No amounts were outstanding as of December 31, 2022[173][211][224][231] Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $124,084 | $(7,470) | $124,134 | | Net cash used in investing activities | $(55,305) | $(27,076) | $(3,016) | | Net cash used in financing activities | $(82,312) | $(111,353) | $(43,957) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(13,533) | $(145,899) | $77,161 | | Cash, cash equivalents, and restricted cash at end of period | $58,245 | $71,778 | $217,677 | Contractual Obligations and Commercial Commitments (in thousands) | Obligation Type | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Debt | $18,000 | $18,000 | $18,000 | $18,000 | $18,000 | $418,000 | $508,000 | | Operating Leases | $7,096 | $5,984 | $4,920 | $4,381 | $2,346 | $793 | $25,520 | | Letters of Credit | $5,702 | $— | $— | $— | $— | $— | $5,702 | | Raw Material Purchase Commitments | $59,200 | $— | $— | $— | $— | $— | $59,200 | | Chassis Agreements and Programs | $20,745 | $— | $— | $— | $— | $— | $20,745 | | Total Obligations | $110,743 | $23,984 | $22,920 | $22,381 | $20,346 | $418,793 | $619,167 | Significant Accounting Policies and Critical Accounting Estimates - Critical accounting estimates include legal and other contingencies, impairment of long-lived assets and definite-lived intangible assets, and goodwill impairment. Goodwill allocated to TS and P&S segments was $120.5 million and $67.9 million, respectively, as of December 31, 2022[251][252][253][255] - In 2021, non-cash impairment charges of approximately $28.3 million were recorded for trade name and trademark intangible assets due to rebranding[206][253] - The company performed a qualitative assessment for goodwill impairment in 2022 and 2021, concluding that the fair value of each reporting unit was greater than its carrying value, thus no impairment charges were recorded[256] Item 7A Quantitative and Qualitative Disclosures about Market Risk Wabash is exposed to market risks from commodity price fluctuations, interest rates, and foreign exchange rates, managed through fixed-price contracts and financial derivatives - Wabash is exposed to commodity price risks (aluminum, steel, lumber, etc.) and manages them through fixed-price contracts and financial derivatives. Raw material purchase commitments totaled $59.2 million through December 2023[269] - As of December 31, 2022, the company had no floating rate debt outstanding, with its Senior Notes due 2028 carrying a fixed interest rate of 4.50%, thus limiting interest rate risk[270] - Fluctuations in Mexican peso exchange rates have an immaterial impact on operations, and the company does not use derivative financial instruments for speculative purposes[271] Commodity Price Risks Interest Rates Foreign Exchange Rates Item 8 Financial Statements and Supplementary Data This section presents Wabash's audited consolidated financial statements for 2020-2022, with an unqualified opinion from Ernst & Young LLP on financial statements and internal controls - Ernst & Young LLP issued an unqualified opinion on Wabash National Corporation's consolidated financial statements and internal control over financial reporting as of December 31, 2022[276][277][447][448] Consolidated Balance Sheets (in thousands) | Assets | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $58,245 | $71,778 | | Accounts receivable, net | $255,577 | $176,511 | | Inventories | $243,870 | $237,621 | | Prepaid expenses and other | $34,927 | $43,795 | | Total current assets | $592,619 | $529,705 | | Property, plant, and equipment, net | $271,116 | $232,425 | | Goodwill | $188,434 | $188,443 | | Intangible assets, net | $99,231 | $114,441 | | Other assets | $52,123 | $42,057 | | Total assets | $1,203,523 | $1,107,071 | | Liabilities and Stockholders' Equity | | | | Current portion of long-term debt | $— | $— | | Current portion of finance lease obligations | $— | $59 | | Accounts payable | $189,141 | $173,950 | | Other accrued liabilities | $158,327 | $115,316 | | Total current liabilities | $347,468 | $289,325 | | Long-term debt | $395,818 | $428,315 | | Deferred income taxes | $27,758 | $36,019 | | Other non-current liabilities | $34,354 | $27,873 | | Total liabilities | $805,398 | $781,532 | | Noncontrolling interest | $512 | $— | | Total Wabash National Corporation stockholders' equity | $397,613 | $325,539 | | Total liabilities, noncontrolling interest, and equity | $1,203,523 | $1,107,071 | Consolidated Statements of Operations (in thousands, except per share amounts) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $2,502,129 | $1,803,268 | $1,481,889 | | Cost of sales | $2,179,438 | $1,606,801 | $1,322,135 | | Gross profit | $322,691 | $196,467 | $159,754 | | General and administrative expenses | $113,083 | $88,807 | $92,740 | | Selling expenses | $27,070 | $23,691 | $25,080 | | Amortization of intangible assets | $15,211 | $22,858 | $21,981 | | Impairment and other, net | $685 | $27,569 | $105,561 | | Income (loss) from operations | $166,642 | $33,542 | $(85,608) | | Interest expense | $(20,525) | $(23,128) | $(24,194) | | Other, net | $318 | $(9,124) | $588 | | Income (loss) before income tax | $146,435 | $1,290 | $(109,214) | | Income tax expense (benefit) | $33,665 | $126 | $(11,802) | | Net income (loss) | $112,770 | $1,164 | $(97,412) | | Net income attributable to noncontrolling interest | $512 | $— | $— | | Net income (loss) attributable to common stockholders | $112,258 | $1,164 | $(97,412) | | Basic EPS | $2.31 | $0.02 | $(1.84) | | Diluted EPS | $2.25 | $0.02 | $(1.84) | | Dividends declared per share | $0.32 | $0.32 | $0.32 | Consolidated Statements of Cash Flows (in thousands) | Cash flows from operating activities | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net income (loss) | $112,770 | $1,164 | $(97,412) | | Net cash provided by (used in) operating activities | $124,084 | $(7,470) | $124,134 | | Net cash used in investing activities | $(55,305) | $(27,076) | $(3,016) | | Net cash used in financing activities | $(82,312) | $(111,353) | $(43,957) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(13,533) | $(145,899) | $77,161 | | Cash, cash equivalents, and restricted cash at end of period | $58,245 | $71,778 | $217,677 | | Cash paid for interest | $20,131 | $22,040 | $23,411 | | Net cash paid (refunds received) for income taxes | $18,333 | $(467) | $(4,670) | Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 1. Description of the Business 2. Summary of Significant Accounting Policies Changes in Expected Losses for Accounts Receivable (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Balance at beginning of year | $429 | $536 | $670 | | Expected losses | $179 | $10 | $362 | | Write-offs, net of recoveries | $(180) | $(117) | $(496) | | Balance at end of year | $428 | $429 | $536 | Prepaid Expenses and Other (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Chassis converter pool agreements | $20,345 | $18,185 | | Income tax receivables | $2,358 | $10,386 | | Insurance premiums & maintenance/subscription agreements | $3,949 | $3,290 | | Assets held for sale | $— | $350 | | Commodity swap contracts | $2,674 | $7,963 | | All other | $5,601 | $3,621 | | Total | $34,927 | $43,795 | Changes in Product Warranty Accrual (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | Balance as of January 1 | $22,045 | $20,570 | | Provision and revisions to estimates | $2,806 | $4,891 | | Payments | $(2,790) | $(3,416) | | Balance as of December 31 | $22,061 | $22,045 | Changes in Self-Insurance Accrual (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | Balance as of January 1 | $11,152 | $12,086 | | Expense | $34,457 | $33,941 | | Payments | $(34,891) | $(34,875) | | Balance as of December 31 | $10,718 | $11,152 | 3. New Accounting Pronouncements - The company adopted ASU No. 2020-04, 'Reference Rate Reform (Topic 848),' in 2022, which provides practical expedients for contracts and hedging relationships affected by LIBOR discontinuation, with no material impact on financial statements[324] 4. Revenue Recognition - Revenue is recognized when control of products or services is transferred to the customer, primarily upon shipment or pickup for sales of trailers, equipment, and replacement parts. Service work revenue is recognized over time[325] 5. Goodwill and Other Intangible Assets - Goodwill allocated to the Transportation Solutions (TS) and Parts & Services (P&S) segments was approximately $120.5 million and $67.9 million, respectively, as of December 31, 2022[327] - The company performed qualitative goodwill impairment tests in 2022 and 2021, concluding no impairment as the fair value of each reporting unit exceeded its carrying value[328] - In 2021, non-cash impairment charges of approximately $28.3 million were recorded for trade name and trademark intangible assets due to the rebranding initiative[316][336] Goodwill Rollforward (in thousands) | | Transportation Solutions | Parts & Services | Total | | :--- | :--- | :--- | :--- | | Net balance at December 31, 2020 | $120,518 | $79,042 | $199,560 | | Impact of divestiture on goodwill | $— | $(11,101) | $(11,101) | | Effects of foreign currency | $(11) | $(5) | $(16) | | Net balance as of December 31, 2021 | $120,507 | $67,936 | $188,443 | | Effects of foreign currency | $(5) | $(4) | $(9) | | Net balance as of December 31, 2022 | $120,502 | $67,932 | $188,434 | Intangible Assets, Net (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Customer relationships | $97,930 | $112,164 | | Technology | $1,301 | $2,277 | | Total | $99,231 | $114,441 | 6. Noncontrolling Interest and Variable Interest Entities ("VIEs") - In Q2 2022, Wabash created Wabash Parts LLC (WP) with a partner, holding 50% ownership. WP is consolidated as a Variable Interest Entity (VIE) because Wabash is the primary beneficiary, having power to direct activities and the obligation to absorb significant losses/benefits[345][347] Wabash Parts LLC VIE Consolidated Assets and Liabilities (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total assets | $3,183 | $— | | Total liabilities | $2,159 | $— | Rollforward of Noncontrolling Interest (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Balance at January 1 | $— | $— | $— | | Net income attributable to noncontrolling interest | $512 | $— | $— | | Other comprehensive income (loss) | $— | $— | $— | | Distributions declared to noncontrolling interest | $— | $— | $— | | Balance at December 31 | $512 | $— | $— | 7. Inventories Inventories, Net of Reserves (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Raw materials and components | $176,080 | $174,915 | | Finished goods | $50,005 | $42,933 | | Work in progress | $9,983 | $14,133 | | Used trailers | $737 | $737 | | Aftermarket parts | $7,065 | $4,903 | | Total | $243,870 | $237,621 | 8. Property, Plant, and Equipment - Depreciation expense was $31.8 million in 2022, $24.3 million in 2021, and $24.0 million in 2020[351] Property, Plant, and Equipment, Net (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Land | $42,342 | $41,098 | | Buildings and building improvements | $149,052 | $150,000 | | Machinery and equipment | $311,736 | $313,744 | | Construction in progress | $94,018 | $45,505 | | Less: accumulated depreciation | $(326,032) | $(317,922) | | Total | $271,116 | $232,425 | 9. Other Accrued Liabilities Major Components of Other Accrued Liabilities (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Customer deposits | $32,129 | $17,646 | | Chassis converter pool agreements | $20,345 | $18,185 | | Warranty | $22,061 | $22,045 | | Payroll and related taxes | $29,219 | $15,679 | | Self-insurance | $10,718 | $11,152 | | Accrued interest | $3,854 | $4,288 | | Operating lease obligations | $6,120 | $3,507 | | Accrued taxes | $24,793 | $8,425 | | All other | $9,088 | $14,389 | | Total | $158,327 | $115,316 | 10. Long-Term Debt Long-Term Debt (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Senior Notes due 2028 | $400,000 | $400,000 | | Revolving Credit Agreement | $— | $33,035 | | Less: unamortized discount and fees | $(4,182) | $(4,720) | | Total | $395,818 | $428,315 | - The company issued $400 million of 4.50% unsecured Senior Notes due 2028 in October 2021, using proceeds to redeem Senior Notes due 2025 and repay the New Term Loan Credit Agreement[355][361] - The Revolving Credit Agreement was amended in September 2022, increasing the facility to $350 million and extending maturity to September 2027. No amounts were outstanding as of December 31, 2022[365][366][372] 11. Financial Derivative Instruments - Wabash uses commodity swap contracts to hedge against commodity price fluctuations, with notional amounts of approximately $59.2 million as of December 31, 2022[378] Fair Value Carrying Amount of Derivative Instruments (in thousands) | Balance Sheet Caption | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Prepaid expenses and other (Asset) | $2,674 | $7,963 | | Accounts payable and Other accrued liabilities (Liability) | $(1,653) | $(5,121) | | Total derivatives designated as hedging instruments | $1,021 | $2,842 | Gain (Loss) Recognized in AOCI and Reclassified to Earnings (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Amount of Gain (Loss) Recognized in AOCI (Effective Portion, net of tax) | $909 | $2,848 | $11,927 | | Amount of Gain (Loss) Reclassified from AOCI into Earnings (Effective Portion) | $4,887 | $54,937 | $(7,778) | 12. Leases Leased Assets and Liabilities (in thousands) | Classification | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Operating ROU Assets (Other assets) | $23,003 | $11,379 | | Finance ROU Assets (Property, plant and equipment, net) | $— | $2,658 | | Operating Lease Liabilities (Other accrued liabilities) | $6,120 | $3,507 | | Finance Lease Liabilities (Current portion of finance lease obligations) | $— | $59 | | Operating Lease Liabilities (Non-current liabilities) | $16,883 | $7,872 | | Finance Lease Liabilities (Finance lease obligations) | $— | $— | | Total lease liabilities | $23,003 | $11,438 | Maturity of Lease Liabilities (in thousands) | Year | Operating Leases | Finance Leases | Total | | :--- | :--- | :--- | :--- | | 2023 | $7,096 | $— | $7,096 | | 2024 | $5,984 | $— | $5,984 | | 2025 | $4,920 | $— | $4,920 | | 2026 | $4,381 | $— | $4,381 | | 2027 | $2,346 | $— | $2,346 | | Thereafter | $793 | $— | $793 | | Total lease payments | $25,520 | $— | $25,520 | | Less: interest | $2,517 | $— | | | Present value of lease payments | $23,003 | $— | | 13. Fair Value Measurements Fair Value Measurements (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Commodity swap contracts (Level 2) | $1,021 | $2,842 | | Mutual funds (Level 1) | $6,579 | $6,183 | | Life-insurance contracts (Level 2) | $15,509 | $18,670 | Carrying and Estimated Fair Value of Debt (in thousands) | Instrument | Carrying Value (2022) | Fair Value (Level 2, 2022) | Carrying Value (2021) | Fair Value (Level 2, 2021) | | :--- | :--- | :--- | :--- | :--- | | Senior Notes due 2028 | $395,818 | $337,237 | $395,280 | $399,727 | | Revolving Credit Agreement | $— | $— | $33,035 | $33,035 | | Total | $395,818 | $337,237 | $428,315 | $432,762 | 14. Commitments and Contingencies - The company has standby letters of credit totaling $5.7 million for workers' compensation and surety bonds[401] - Raw material purchase commitments amount to $59.2 million through December 2023[402] - Chassis converter pool agreements totaled $20.3 million as of December 31, 2022, representing chassis obtained from manufacturers for specialized vehicle products[403] 15. Net Income (Loss) Per Share of Common Stock Net Income (Loss) Per Share of Common Stock (in thousands, except per share amounts) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Basic net income (loss) attributable to common stockholders per share | $2.31 | $0.02 | $(1.84) | | Diluted net income (loss) attributable to common stockholders per share | $2.25 | $0.02 | $(1.84) | | Weighted average common shares outstanding (Basic) | 48,626 | 50,684 | 52,945 | | Weighted average common shares outstanding (Diluted) | 49,881 | 51,608 | 52,945 | 16. Stock-Based Compensation - Total stock-based compensation expense was $9.7 million in 2022, $7.1 million in 2021, and $4.5 million in 2020[407] Restricted Stock Activity (2022) | | Number of Shares | Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | | Outstanding at December 31, 2021 | 1,781,076 | $15.03 | | Granted | 653,492 | $18.22 | | Vested | (533,401) | $15.62 | | Forfeited | (147,099) | $14.96 | | Outstanding at December 31, 2022 | 1,754,068 | $16.05 | Stock Option Activity (2022) | | Number of Options | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding at December 31, 2021 | 199,711 | $12.20 | | Exercised | (184,195) | $12.07 | | Outstanding at December 31, 2022 | 15,516 | $13.67 | | Exercisable at December 31, 2022 | 12,610 | $13.55 | 17. Stockholders' Equity - As of December 31, 2022, $105.2 million remained available under the $150 million share repurchase program approved in August 2021[411] Changes in Accumulated Other Comprehensive Income (Loss) (in thousands) | | Foreign Currency Translation | Derivative Instruments | Total | | :--- | :--- | :--- | :--- | | Balances at December 31, 2019 | $(1,866) | $(2,112) | $(3,978) | | Net change during 2020 | $(316) | $11,927 | $11,611 | | Balances at December 31, 2020 | $(2,182) | $9,815 | $7,633 | | Net change during 2021 | $193 | $(6,967) | $(6,774) | | Balances at December 31, 2021 | $(1,989) | $2,848 | $859 | | Net change during 2022 | $198 | $(1,939) | $(1,741) | | Balances at December 31, 2022 | $(1,791) | $909 | $(882) | 18. Employee Savings Plans - Company matching contributions and related expense for 401(k) and non-qualified deferred compensation plans were approximately $9.1 million in 2022, $8.0 million in 2021, and $7.9 million in 2020[414] 19. Income Taxes Income (Loss) Before Income Taxes (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Domestic | $144,443 | $5,426 | $(110,049) | | Foreign | $1,992 | $(4,136) | $835 | | Total | $146,435 | $1,290 | $(109,214) | Consolidated Income Tax Expense (Benefit) (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Current | $41,279 | $8,273 | $(16,818) | | Deferred | $(7,614) | $(8,147) | $5,016 | | Total | $33,665 | $126 | $(11,802) | Deferred Tax Assets and Liabilities (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Deferred tax assets | $36,031 | $23,549 | | Deferred tax liabilities | $(63,014) | $(58,331) | | Net deferred tax liability before valuation allowances and reserves | $(26,983) | $(34,782) | | Valuation allowances | $(775) | $(1,237) | | Net deferred tax liability | $(27,758) | $(36,019) | 20. Segments - In September 2021, Wabash realigned its operating and reportable segments into Transportation Solutions (TS) and Parts & Services (P&S), eliminating historical CTP, DPG, and FMP segments[425] Reportable Segment Information (in thousands) | | Transportation Solutions (2022) | Parts & Services (2022) | Corporate and Eliminations (2022) | Consolidated (2022) | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $2,320,914 | $193,476 | $(12,261) | $2,502,129 | | Income (Loss) from operations | $209,942 | $30,558 | $(73,858) | $166,642 | | | Transportation Solutions (2021) | Parts & Services (2021) | Corporate and Eliminations (2021) | Consolidated (2021) | | Total net sales | $1,633,319 | $177,166 | $(7,217) | $1,803,268 | | Income (Loss) from operations | $61,869 | $20,201 | $(48,528) | $33,542 | | | Transportation Solutions (2020) | Parts & Services (2020) | Corporate and Eliminations (2020) | Consolidated (2020) | | Total net sales | $1,315,429 | $179,474 | $(13,014) | $1,481,889 | | Loss from operations | $(29,702) | $(12,658) | $(43,248) | $(85,608) | - The five largest customers accounted for approximately 33% of aggregate net sales in 2022, 30% in 2021, and 21% in 2020. No single customer represented 10% or more of aggregate net sales in any of these years[431] Product Information - Percentage of Consolidated Net Sales | Product Category | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | New trailers | 80.4% | 75.2% | 73.3% | | Used trailers | 0.1% | 0.1% | 0.6% | | Components, parts and services | 5.6% | 7.3% | 8.3% | | Equipment and other | 13.9% | 17.4% | 17.7% | | Total net external sales | 100.0% | 100.0% | 100.0% | 21. Impairment, Divestitures, and Sales of Property, Plant, and Equipment - In 2022, the company impaired $1.0 million of construction-in-progress projects and recognized a $0.7 million gain from the sale of a building and land[434] - In 2021, Wabash sold its Extract Technology business for $20.8 million net proceeds, recognizing a $1.9 million gain, and impaired $0.8 million of unused property, plant, and equipment[435] - In 2020, the company sold its Beall® brand of tank trailers for $11.2 million net proceeds, resulting in a $2.1 million loss, and sold other property, plant, and equipment for gains[436][437] 22. Consolidated Quarterly Financial Data (Unaudited) Unaudited Quarterly Results of Operations (in thousands, except per share amounts) | | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $546,761 | $642,769 | $655,150 | $657,449 | | Gross profit | $58,055 | $78,034 | $92,005 | $94,597 | | Net income attributable to common stockholders | $12,074 | $22,552 | $36,170 | $41,462 | | Basic EPS | $0.25 | $0.46 | $0.75 | $0.86 | | Diluted EPS | $0.24 | $0.46 | $0.73 | $0.84 | | | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $392,003 | $449,422 | $482,566 | $479,277 | | Gross profit | $47,166 | $55,608 | $51,045 | $42,648 | | Net income (loss) attributable to common stockholders | $3,217 | $12,252 | $11,008 | $(25,313) | | Basic EPS | $0.06 | $0.24 | $0.22 | $(0.51) | | Diluted EPS | $0.06 | $0.24 | $0.22 | $(0.51) | | | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $387,074 | $339,153 | $351,584 | $404,078 | | Gross profit | $36,743 | $34,321 | $43,194 | $45,496 | | Net income (loss) attributable to common stockholders | $(106,647) | $(146) | $3,887 | $5,494 | | Basic EPS | $(2.01) | $— | $0.07 | $0.10 | | Diluted EPS | $(2.01) | $— | $0.07 | $0.10 | Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[439] Item 9A Controls and Procedures Wabash's management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, a conclusion affirmed by Ernst & Young LLP - Management, including the CEO and CFO, determined that disclosure controls and procedures were effective as of December 31, 2022[440] - No material changes in internal control over financial reporting occurred during Q4 2022[441] - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[444] - Ernst & Young LLP issued an unqualified opinion on the effectiveness of Wabash's internal control over financial reporting as of December 31, 2022[447] Disclosure Controls and Procedures Changes in Internal Controls Report of Management on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Item 9B Other Information The company reported no other information required to be disclosed in this item - There is no other information to report under Item 9B[453] Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to Wabash National Corporation - Item 9C, Disclosure Regarding Foreign Jurisdictions That Prevent Inspections, is not applicable to the company[454] PART III Item 10 Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from Item 1 and the 2023 Proxy Statement - Information on executive officers is incorporated by reference from Item 1 of this Annual Report[455] - Information on directors and corporate governance is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[456] - The company has adopted a Code of Business Conduct and Ethics applicable to its CEO and Senior Financial Officers, available on its investor relations website[457] Item 11 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Executive compensation information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[458] Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership of certain beneficial owners and management, as well as equity compensation plan information, is incorporated by reference from the 2023 Proxy Statement - Security ownership information for beneficial owners and management, and equity compensation plan details, are incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[459] Item 13 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on related party transactions and director independence is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[460] Item 14 Principal Accounting Fees and Services Information regarding principal accounting fees and services, along with the Audit Committee's pre-approval policies, is incorporated by reference from the 2023 Proxy Statement - Information on principal accounting fees and services and Audit Committee pre-approval policies is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[461] PART IV Item 15 Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the Annual Report on Form 10-K, with many incorporated by reference from previous SEC filings - All required financial statements are included in Item 8, and financial statement schedules are omitted if not applicable or included in the notes[463] - The exhibit index includes corporate documents (e.g., Certificate of Incorporation, Bylaws), incentive plans, credit agreements, and certifications (e.g., CEO/CFO certifications, auditor consent)[465] Item 16 Form 10-K Summary The company did not provide a Form 10-K summary in this report - No Form 10-K Summary is provided[464] SIGNATURES The Annual Report on Form 10-K is signed by the principal executive officer, principal financial officer, and members of the Board of Directors, certifying its submission to the Securities Exchange Commission - The report is signed by Brent L. Yeagy (President and CEO), Michael N. Pettit (SVP and CFO), and the Board of Directors, dated February 23, 2023[470][471]