Wabash National(WNC) - 2019 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Wabash National Corporation as of September 30, 2019, and for the three and nine-month periods then ended, including balance sheets, statements of operations, comprehensive income, cash flows, and stockholders' equity, along with accompanying notes Condensed Consolidated Balance Sheets As of September 30, 2019, total assets increased to $1.38 billion from $1.30 billion at year-end 2018, primarily driven by a significant rise in inventories, while total liabilities grew to $863.5 million and total stockholders' equity increased to $515.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | Total current assets | $621,386 | $549,419 | | Inventories | $274,273 | $184,404 | | Total assets | $1,378,603 | $1,304,393 | | Total current liabilities | $325,662 | $271,676 | | Long-term debt | $475,122 | $503,018 | | Total liabilities | $863,545 | $830,544 | | Total stockholders' equity | $515,058 | $473,849 | Condensed Consolidated Statements of Operations For the third quarter of 2019, net sales increased to $580.9 million from $553.1 million year-over-year, leading to a significant rise in net income to $25.5 million, and for the nine-month period, net sales grew to $1.74 billion with net income increasing to $71.2 million Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $580,908 | $553,073 | $1,740,135 | $1,657,082 | | Gross profit | $77,735 | $65,162 | $234,075 | $214,595 | | Income from operations | $38,269 | $16,513 | $111,005 | $88,209 | | Net income | $25,460 | $4,664 | $71,200 | $57,837 | | Diluted EPS | $0.46 | $0.08 | $1.28 | $0.98 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2019, net cash from operating activities was $76.2 million, an increase from $56.7 million in the prior year period, while investing activities used $21.5 million and financing activities used $66.6 million Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $76,218 | $56,684 | | Net cash (used in) provided by investing activities | ($21,459) | $491 | | Net cash used in financing activities | ($66,576) | ($138,957) | | Net decrease in cash | ($11,817) | ($81,782) | | Cash at end of period | $120,873 | $109,739 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on accounting policies and financial items, including the adoption of the new lease standard, revenue recognition policies, debt structure, segment performance, and details on the share repurchase program - The company adopted the new lease standard (ASU 2016-2) on January 1, 2019, resulting in the recording of Right-of-Use (ROU) assets and lease liabilities of $9.9 million[23] - Revenue is primarily recognized upon transfer of control of products (trailers, equipment, parts) to the customer, with performance obligations identified as the sale of trailers/equipment, replacement parts, and service work[24][25] - The company's Board of Directors authorized an additional $100 million for its stock repurchase program in November 2018, with $80.0 million remaining available as of September 30, 2019[77] Segment Net Sales and Operating Income (Nine Months Ended Sep 30, 2019, in thousands) | Segment | Total Net Sales | Income from Operations | | :--- | :--- | :--- | | Commercial Trailer Products | $1,122,253 | $102,742 | | Diversified Products | $289,855 | $24,138 | | Final Mile Products | $349,170 | $15,718 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results, highlighting a 5.0% increase in net sales for both the third quarter and first nine months of 2019, primarily driven by the Final Mile Products segment, with improved gross profit margin due to pricing efforts and operational efficiencies, while maintaining a strong liquidity position and balanced capital allocation strategy Results of Operations For Q3 2019, net sales rose 5.0% to $580.9 million, and gross margin increased to 13.4% from 11.8% year-over-year, driven by strong performance in the Final Mile Products segment and pricing actions, with total net sales for the nine-month period also growing 5.0% to $1.74 billion Net Sales by Segment - Q3 Change (in thousands) | Segment | Q3 2019 Sales | Q3 2018 Sales | Change (%) | | :--- | :--- | :--- | :--- | | Commercial Trailer Products | $380,344 | $368,342 | 3.3% | | Diversified Products | $93,181 | $102,361 | (9.0)% | | Final Mile Products | $113,504 | $87,049 | 30.4% | | Total | $580,908 | $553,073 | 5.0% | Gross Profit by Segment - Q3 Change (in thousands) | Segment | Q3 2019 Gross Profit | Q3 2018 Gross Profit | Change (%) | | :--- | :--- | :--- | :--- | | Commercial Trailer Products | $43,960 | $39,137 | 12.3% | | Diversified Products | $18,042 | $17,018 | 6.0% | | Final Mile Products | $16,763 | $8,954 | 87.2% | | Total | $77,735 | $65,162 | 19.3% | - The increase in Final Mile Products segment sales was driven by a 16.8% increase in truck body unit shipments in Q3, attributable to improved chassis availability and strong market demand[95] - For the nine months ended Sep 30, 2019, total net sales increased 5.0% to $1.74 billion, with the Final Mile Products segment growing 23.1% to $349.2 million[111][115] Liquidity and Capital Resources As of September 30, 2019, the company had a strong liquidity position of $288.1 million, with a debt-to-equity ratio of approximately 0.9:1.0, and during the first nine months of 2019, it made $30.0 million in voluntary debt prepayments, paid $13.4 million in dividends, and repurchased $20.0 million of stock, with an order backlog of $0.8 billion - The company's liquidity position was $288.1 million as of September 30, 2019, with a debt-to-equity ratio of approximately 0.9:1.0[131][153] - Capital allocation in the first nine months of 2019 included $30.0 million in voluntary prepayments on the Term Loan, $13.4 million in dividends, and $20.0 million in share repurchases[131] - The order backlog was $0.8 billion at September 30, 2019, a decrease from $1.8 billion at year-end 2018 and $1.3 billion at September 30, 2018[162] - Industry analysts (ACT and FTR) forecast continued healthy trailer demand, with 2019 production estimates around 326,000-329,700 units, though a decrease is projected for 2020[163] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from commodity price fluctuations, interest rate changes, and foreign exchange rates, managing commodity risk through fixed-price contracts and derivatives, with a hypothetical 100 basis-point change in floating interest rates impacting annual interest expense by approximately $1.6 million, while foreign exchange risk is considered immaterial - The company manages commodity price risk (aluminum, steel, etc.) through fixed-price contracts and financial derivatives, and as of Sep 30, 2019, it had $60.6 million in raw material purchase commitments[168] - A hypothetical 100 basis-point change in the floating interest rate on its Term Loan Credit Agreement would change annual interest expense by approximately $1.6 million[170] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes in internal control over financial reporting during the third quarter of 2019 - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2019[172] - No changes occurred in the Company's internal control over financial reporting during Q3 2019 that have materially affected, or are reasonably likely to materially affect, these controls[173] PART II – OTHER INFORMATION Legal Proceedings The company refers to Note 11 of the financial statements for information on legal proceedings, notably the dismissal with prejudice of a putative class action lawsuit against its subsidiary, Supreme, and the subsequent appeal dismissal in September 2019 - The class action lawsuit filed against Supreme Corporation regarding projected backlog was dismissed with prejudice on March 29, 2019, and the plaintiffs' appeal was dismissed on September 24, 2019[71][72] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - The company directs investors to consider the risks described in its Annual Report on Form 10-K for the year ended December 31, 2018[175] Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2019, the company repurchased 590,256 shares of its common stock for approximately $8.8 million under its publicly announced repurchase program, with $80.0 million remaining available for future repurchases as of September 30, 2019 Share Repurchases in Q3 2019 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Max Amount Remaining for Purchase ($ in millions) | | :--- | :--- | :--- | :--- | :--- | | July 1 - 31, 2019 | 244,030 | $15.49 | 244,030 | $85.0 | | August 1 - 31, 2019 | 0 | $— | 0 | $85.0 | | September 1 - 30, 2019 | 347,711 | $14.44 | 346,226 | $80.0 | | Total | 591,741 | $14.87 | 590,256 | $80.0 | - In November 2018, the Board approved an additional $100 million for the share repurchase program, which is set to expire on February 28, 2022[176] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and financial data files formatted in iXBRL