Wabash National Corporation Announces Third Quarter 2019 Results

November 6, 2019 at 6:53 AM EST
  • Revenue grew 5 percent year-over-year to $581M, a record level for the third quarter
  • Operating margin of 6.6 percent showed substantial year-over-year improvement
  • Final Mile Products grew 30% versus Q3 of 2018 while achieving margin expansion of 580 basis points
  • Earnings Per Share of $0.46
  • Full year 2019 EPS outlook raised to midpoint of $1.67, range narrowed to $1.64 to $1.70 per share

LAFAYETTE, Ind., Nov. 06, 2019 (GLOBE NEWSWIRE) -- 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, 2019.

Net sales for the third quarter 2019 increased 5 percent to $581 million from $553 million in the prior year quarter, as growth was led by the Company’s Final Mile Products and Commercial Trailer Products Segments. Operating income was $38.3 million and the Company achieved a consolidated operating margin of 6.6 percent during the third quarter of 2019, which represents a significant improvement from the third quarter of 2018, highlighting the success of both short and long-term initiatives targeting margin expansion.

“Q3 is a significant milestone of the process improvements we've implemented over the last year that have allowed us to stabilize challenges in the manufacturing environment and excel operationally," explained Brent Yeagy, president and chief executive officer. "Our team has executed on initiatives like supply chain optimization, transforming information flows from chassis OEMs and enhanced sales and operational planning to unlock capacity necessary for growth in Final Mile.  In any environment, 140 basis points of overall operating margin improvement is a significant accomplishment.  Similarly, 580 basis points of margin expansion in Final Mile Products shows considerable underlying improvements.”

Net income for the third quarter 2019 was $25.5 million, or 46 cents per diluted share, which compares to 8 cents in the third quarter of 2018 or 29 cents on a non-GAAP Adjusted basis. Operating EBITDA, a non-GAAP measure that excludes the effects of certain items, for the third quarter 2019 was $50.7 million, or 8.7 percent of net sales.

Mr. Yeagy continued, “We are raising the midpoint of our full-year EPS outlook to $1.67 based on our strong year to date performance.  With one quarter left in the year, we are narrowing the range of our EPS outlook to $1.64 to $1.70.”

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 2019 and 2018. A complete disclosure of the results by individual segment is included in the tables following this release.

    Commercial Trailer Products   Diversified Products   Final Mile Products
Three Months Ended September 30,   2019   2018   2019   2018   2019   2018
    (dollars in thousands)
New trailers shipped   13,700     14,450     750     700          
Net sales   $ 380,344     $ 368,342     $ 93,181     $ 102,361     $ 113,504     $ 87,049  
Gross profit   $ 43,960     $ 39,137     $ 18,042     $ 17,018     $ 16,763     $ 8,954  
Gross profit margin   11.6 %   10.6 %   19.4 %   16.6 %   14.8 %   10.3 %
Income (loss) from operations   $ 36,503     $ 32,453     $ 7,183     $ (6,346 )   $ 4,628     $ (1,495 )
Income (loss) from operations margin   9.6 %   8.8 %   7.7 %   (6.2 )%   4.1 %   (1.7 )%
                                     

Commercial Trailer Products’ net sales for the third quarter were $380 million, an increase of $12.0 million, or 3.3 percent as compared to the prior year quarter. Gross profit margin for the third quarter increased 100 basis points as compared to the prior year period primarily due to successful efforts to recover cost pressures as well as product and customer mix.  Operating income increased $4.1 million, or 12.5 percent, from the third quarter last year to $36.5 million, or 9.6 percent of net sales.

Diversified Products’ net sales for the third quarter were $93 million, a decrease of $9.2 million, or 9.0 percent, as compared to the prior year, due to impact from the divestiture of a business, partially offset by increased demand for tank trailers. Gross profit and profit margin as compared to the prior year period increased $1.0 million and 280 basis points, respectively, as the segment benefited from cost recovery as well as operational cost improvements driven by the Wabash Management System. Operating income in the third quarter of 2019 was $7.2 million, or 7.7 percent of net sales, representing an increase of $13.5 million as compared to the third quarter of 2018 or $1.5 million with the impact of a non-GAAP adjustment in the prior year period.

Final Mile Products’ net sales for the third quarter totaled $114 million, an increase of $26.5 million, or 30.4 percent, as compared to the prior year, due to strong market and customer demand. Gross profit margin for the third quarter increased 450 basis points as compared to the prior year period primarily due to improved volume, cost recovery and improved operational efficiency. Operating income was $4.6 million, or 4.1 percent of net sales, compared to a loss of $1.5 million, or -1.7 percent of net sales in the prior year period.

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, adjusted net income and adjusted earnings per diluted share.  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, and reconciliations to GAAP financial statements should be carefully evaluated.

Operating EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition expenses and related charges, and other non-operating income and expense. 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 and net income, is beneficial to an investor’s understanding of the Company’s operating performance. A reconciliation of operating EBITDA to net income is included in the tables following this release.

Adjusted operating income, a non-GAAP financial measure, excludes certain costs, expenses, other charges, gains or income that are included in the determination of operating income 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 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 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 to operating income, the most comparable GAAP financial measure, is included in the tables following this press release.

Adjusted net income and adjusted earnings per diluted share, each reflect adjustments for income or losses recognized on the sale and/or closure of former Company locations, the losses attributable to the Company's extinguishment of debt, a non-cash impairment of assets, acquisition expenses and related charges, and tax reform and other discrete tax 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 and diluted net income per share, is beneficial to an investor’s understanding of the Company’s performance. A reconciliation of each of adjusted net income and adjusted earnings per diluted share to net income and net income per diluted share is included in the tables following this release.

Third Quarter 2019 Conference Call

Wabash National will discuss its results during its quarterly investor conference call on Wednesday, November 6, 2019, 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 5094114.  A replay of the call will be available on the site shortly after the conclusion of the presentation.

About Wabash National Corporation

Headquartered in Lafayette, Indiana, Wabash National Corporation (NYSE: WNC) is a diversified industrial manufacturer and a leading producer of semi-trailers, truck bodies and liquid transportation systems. Established in 1985, the Company manufactures a diverse range of products including: dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, 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 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.

WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - dollars in thousands)

  September 30,
2019
  December 31,
2018
Assets      
Current assets:      
Cash and cash equivalents $ 120,873     $ 132,690  
Accounts receivable, net 171,393     181,064  
Inventories 274,273     184,404  
Prepaid expenses and other 54,847     51,261  
Total current assets 621,386     549,419  
Property, plant, and equipment, net 210,963     206,991  
Goodwill 311,134     311,084  
Intangible assets 194,934     210,328  
Other assets 40,186     26,571  
Total assets $ 1,378,603     $ 1,304,393  
Liabilities and Stockholders' Equity      
Current liabilities:      
Current portion of long-term debt $     $ 1,880  
Current portion of finance lease obligations 322     299  
Accounts payable 188,911     153,113  
Other accrued liabilities 136,429     116,384  
Total current liabilities 325,662     271,676  
Long-term debt 475,122     503,018  
Finance lease obligations 461     714  
Deferred income taxes 32,454     34,905  
Other non-current liabilities 29,846     20,231  
Total liabilities 863,545     830,544  
Commitments and contingencies      
Stockholders' equity:      
Common stock 200,000,000 shares authorized, $0.01 par value, 54,122,624 and 55,135,788 shares outstanding, respectively 750     744  
Additional paid-in capital 636,756     629,039  
Retained earnings 207,934     150,244  
Accumulated other comprehensive loss (4,895 )   (3,343 )
Treasury stock at cost, 20,923,252 and 19,372,735 common shares, respectively (325,487 )   (302,835 )
Total stockholders' equity 515,058     473,849  
Total liabilities and stockholders' equity $ 1,378,603     $ 1,304,393  
               

WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands, except per share amounts)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Net sales $ 580,908     $ 553,073     $ 1,740,135     $ 1,657,082  
Cost of sales 503,173     487,911     1,506,060     1,442,487  
Gross profit 77,735     65,162     234,075     214,595  
General and administrative expenses 25,353     23,033     82,002     73,920  
Selling expenses 8,998     8,690     25,715     25,591  
Amortization of intangible assets 5,115     4,937     15,353     14,818  
Acquisition expenses             68  
Impairment     11,989         11,989  
Income from operations 38,269     16,513     111,005     88,209  
Other income (expense):              
Interest expense (6,713 )   (7,044 )   (20,823 )   (21,649 )
Other, net 1,333     533     2,245     12,486  
Other expense, net (5,380 )   (6,511 )   (18,578 )   (9,163 )
Income before income tax 32,889     10,002     92,427     79,046  
Income tax expense 7,429     5,338     21,227     21,209  
Net income $ 25,460     $ 4,664     $ 71,200     $ 57,837  
Net income per share:              
Basic $ 0.47     $ 0.08     $ 1.30     $ 1.01  
Diluted $ 0.46     $ 0.08     $ 1.28     $ 0.98  
Weighted average common shares outstanding (in thousands):              
Basic 54,413     56,798     54,975     57,486  
Diluted 55,019     57,742     55,502     59,218  
               
Dividends declared per share $ 0.080     $ 0.075     $ 0.240     $ 0.225  
                               

WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - dollars in thousands)

  Nine Months Ended September 30,
  2019   2018
Cash flows from operating activities:      
Net income $ 71,200     $ 57,837  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 16,258     15,701  
Amortization of intangibles 15,353     14,818  
Net loss (gain) on sale of property, plant and equipment (40 )   (10,164 )
Loss on debt extinguishment 104     174  
Deferred income taxes (2,451 )   (122 )
Stock-based compensation 7,362     8,479  
Impairment     11,989  
Non-cash interest expense 783     1,426  
Changes in operating assets and liabilities      
Accounts receivable 9,671     (48,531 )
Inventories (89,869 )   (66,089 )
Prepaid expenses and other (2,368 )   (3,265 )
Accounts payable and accrued liabilities 57,750     76,602  
Other, net (7,535 )   (2,171 )
Net cash provided by operating activities 76,218     56,684  
Cash flows from investing activities:      
Capital expenditures (22,244 )   (20,344 )
Proceeds from sale of property, plant and equipment 785     17,775  
Other, net     3,060  
Net cash (used in) provided by investing activities (21,459 )   491  
Cash flows from financing activities:      
Proceeds from exercise of stock options 361     961  
Dividends paid (13,443 )   (13,566 )
Borrowings under revolving credit facilities 446     582  
Payments under revolving credit facilities (446 )   (582 )
Principal payments under finance lease obligations (230 )   (216 )
Principal payments under term loan credit facility (30,470 )   (1,410 )
Principal payments under industrial revenue bond     (93 )
Debt issuance costs paid (142 )    
Convertible senior notes repurchase     (80,200 )
Stock repurchase (22,652 )   (44,433 )
Net cash used in financing activities (66,576 )   (138,957 )
Cash, cash equivalents, and restricted cash:      
Net increase (decrease) for the period (11,817 )   (81,782 )
At beginning of period 132,690     191,521  
At end of period $ 120,873     $ 109,739  
Supplemental disclosures of cash flow information:      
Cash paid for interest $ 15,639     $ 16,263  
Cash paid for income taxes $ 18,965     $ 23,588  
               

WABASH NATIONAL CORPORATION
SEGMENTS AND RELATED INFORMATION
(Unaudited - dollars in thousands)

Three Months Ended September 30,   Commercial
Trailer Products
  Diversified
Products
  Final Mile
Products
  Corporate and
Eliminations
  Consolidated
2019                    
New trailers shipped   13,700     750             14,450  
Used trailers shipped   25     10             35  
                     
New Trailers   $ 366,938     $ 51,697     $     $     $ 418,635  
Used Trailers   86     417             503  
Components, parts and service   10,039     23,790     4,302     (5,960 )   32,171  
Equipment and other   3,281     17,277     109,202     (161 )   129,599  
Total net external sales   $ 380,344     $ 93,181     $ 113,504     $ (6,121 )   $ 580,908  
Gross profit   $ 43,960     $ 18,042     $ 16,763     $ (1,030 )   $ 77,735  
Income (Loss) from operations   $ 36,503     $ 7,183     $ 4,628     $ (10,045 )   $ 38,269  
                     
2018                    
New trailers shipped     14,450       700                   15,150  
Used trailers shipped     150       50                   200  
                     
New Trailers   $ 354,003     $ 44,399     $     $     $ 398,402  
Used Trailers   1,888     775             2,663  
Components, parts and service   8,090     29,064     2,304     (4,676 )   34,782  
Equipment and other   4,361     28,123     84,745     (3 )   117,226  
Total net external sales   $ 368,342     $ 102,361     $ 87,049     $ (4,679 )   $ 553,073  
Gross profit   $ 39,137     $ 17,018     $ 8,954     $ 53     $ 65,162  
Income (Loss) from operations   $ 32,453     $ (6,346 )   $ (1,495 )   $ (8,099 )   $ 16,513  
                                         


Nine Months Ended September 30,   Commercial
Trailer Products
  Diversified
Products
  Final Mile
Products
  Corporate and
Eliminations
  Consolidated
2019                    
New trailers shipped   40,350     2,200             42,550  
Used trailers shipped   50     60             110  
                     
New Trailers   $ 1,078,599     $ 146,821     $     $     $ 1,225,420  
Used Trailers   236     1,743             1,979  
Components, parts and service   30,994     88,681     12,165     (20,455 )   111,385  
Equipment and other   12,424     52,610     337,005     (688 )   401,351  
Total net external sales   $ 1,122,253     $ 289,855     $ 349,170     $ (21,143 )   $ 1,740,135  
Gross profit   $ 126,806     $ 58,264     $ 51,576     $ (2,571 )   $ 234,075  
Income (Loss) from operations   $ 102,742     $ 24,138     $ 15,718     $ (31,593 )   $ 111,005  
                     
2018                    
New trailers shipped   42,750     1,900             44,650  
Used trailers shipped   850     100             950  
                     
New Trailers   $ 1,049,452     $ 115,840     $     $     $ 1,165,292  
Used Trailers   8,794     2,489             11,283  
Components, parts and service   25,780     94,958     7,340     (16,529 )   111,549  
Equipment and other   14,245     78,362     276,377     (26 )   368,958  
Total net external sales   $ 1,098,271     $ 291,649     $ 283,717     $ (16,555 )   $ 1,657,082  
Gross profit   $ 123,173     $ 51,008     $ 41,409     $ (995 )   $ 214,595  
Income (Loss) from operations   $ 102,718     $ 3,078     $ 9,372     $ (26,959 )   $ 88,209  
                                         

WABASH NATIONAL CORPORATION
SEGMENT AND COMPANY FINANCIAL INFORMATION
(Unaudited - dollars in thousands)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Commercial Trailer Products              
Income from operations $ 36,503     $ 32,453     $ 102,742     $ 102,718  
               
Diversified Products              
Income from operations 7,183     (6,346 )   24,138     3,078  
Adjustments:              
Impairment     11,989         11,989  
Adjusted operating income 7,183     5,643     24,138     15,067  
               
Final Mile Products              
Income from operations 4,628     (1,495 )   15,718     9,372  
Adjustments:              
Acquisition expenses and related charges             751  
Adjusted operating income 4,628     (1,495 )   15,718     10,123  
               
Corporate              
Income from operations (10,045 )   (8,099 )   (31,593 )   (26,959 )
Adjustments:              
Acquisition expenses and related charges             68  
Adjusted operating income (10,045 )   (8,099 )   (31,593 )   (26,891 )
               
Consolidated              
Income from operations 38,269     16,513     111,005     88,209  
Adjustments:              
Impairment     11,989         11,989  
Acquisition expenses and related charges             819  
Adjusted operating income $ 38,269     $ 28,502     $ 111,005     $ 101,017  
                               


WABASH NATIONAL CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO
NON-GAAP FINANCIAL MEASURES
(Unaudited - dollars in thousands, except per share amounts)

Operating EBITDA1: Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Net income $ 25,460     $ 4,664     $ 71,200     $ 57,837  
Income tax expense 7,429     5,338     21,227     21,209  
Interest expense 6,713     7,044     20,823     21,649  
Depreciation and amortization 10,416     10,308     31,611     30,519  
Stock-based compensation 1,985     3,089     7,362     8,479  
Acquisition expenses             68  
Impairment     11,989         11,989  
Other non-operating income (1,333 )   (533 )   (2,245 )   (12,486 )
Operating EBITDA $ 50,670     $ 41,899     $ 149,978     $ 139,264  


Adjusted Net Income2: Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Net income $ 25,460     $ 4,664     $ 71,200     $ 57,837  
Adjustments:              
Facility transactions3     (150 )       (10,779 )
Loss on debt extinguishment             174  
Impairment     11,989         11,989  
Acquisition expenses and related charges             819  
Tax effect of aforementioned items     (3,078 )       (573 )
Tax reform and other discrete tax adjustments     3,084         3,084  
Adjusted net income $ 25,460     $ 16,509     $ 71,200     $ 62,551  


Adjusted Diluted Earnings Per Share2: Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Diluted earnings per share $ 0.46     $ 0.08     $ 1.28     $ 0.98  
Adjustments:              
Facility transactions3             (0.17 )
Loss on debt extinguishment              
Impairment     0.21         0.20  
Acquisition expenses and related charges             0.01  
Tax effect of aforementioned items     (0.05 )       (0.01 )
Tax reform and other discrete tax adjustments     0.05         0.05  
Adjusted diluted earnings per share $ 0.46     $ 0.29     $ 1.28     $ 1.06  
               
Weighted average number of diluted shares outstanding (in thousands) 55,019     57,742     55,502     59,218  
                       

1Operating EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition expenses and related charges, and other non-operating income and expense.
2Adjusted net income and adjusted earnings per diluted share reflect adjustments for acquisition expenses, the losses attributable to the Company’s extinguishment of debt, income or losses recognized on the sale and/or closure of former Company locations, a non-cash impairment of assets, and tax reform and other discrete tax adjustments.
3Facility transactions in 2018 and 2019 relate to gains and/or losses incurred for the sale or closure of former Company locations.

Media Contact:
Dana Stelsel
Director, Corporate Communications
(765) 771-5766
dana.stelsel@wabashnational.com

Investor Relations:
Ryan Reed
Director, Investor Relations
(765) 771-5805
ryan.reed@wabashnational.com

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Source: Wabash National Corporation