Wabash National Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise noted. Amounts are in U.S. dollars.
Business context and results
Wabash manufactures commercial trailers, specialized transportation equipment and final-mile truck bodies. It reports three segments: Commercial Trailer Products, Diversified Products and Final Mile Products.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net sales | $392.0 million | $387.1 million |
| Gross profit / margin | $47.2 million / 12.0% | $36.7 million / 9.5% |
| Operating income (loss) | $11.2 million | ($110.1 million) |
| Net income (loss) | $3.2 million; $0.06 per diluted share | ($106.6 million); ($2.01) per diluted share |
| Cash used in operating activities | $22.4 million | $10.1 million |
Sales increased 1.3%. Final Mile Products sales rose 27.9% on stronger truck-body demand; Commercial Trailer Products sales declined 1.3%, and Diversified Products sales declined 10.8%, partly reflecting the Beall divestiture and production ramp-up and supply issues. Gross margin improved with higher volumes and cost-containment measures. Q1 2020 results included $106.8 million of goodwill impairment; Q1 2021 included $0.8 million of asset impairment and a gain on asset sales.
Cash, debt and liquidity
- Cash was $168.9 million at March 31, down from $217.7 million at December 31, 2020. Operating cash use reflected a $41.7 million increase in working capital, including higher receivables and inventories, partly offset by increased payables and accrued liabilities.
- Capital expenditures were $4.2 million. Financing cash use was $22.4 million, including $19.3 million of share repurchases and $4.3 million of dividends.
- Long-term debt was $448.2 million; total debt and finance lease obligations were approximately $454.1 million. Debt included $315 million principal of 5.50% Senior Notes due 2025 and $138.8 million under the term loan due 2027. No revolver borrowings were outstanding. The company reported covenant compliance.
- Liquidity, defined as cash plus available revolving capacity, was $337.3 million, down 12% from year-end. In April 2021, after quarter-end, the company voluntarily repaid $15 million of the term loan and expected to record a $0.2 million extinguishment charge.
Outlook, commentary and risks
Management said demand and industry activity were recovering from depressed 2020 levels and described the order backlog as strong: approximately $1.547 billion at March 31, up 57% year over year. The company expected to complete most of that backlog within 12 months. It did not provide specific company revenue or earnings guidance. Management cited ACT and FTR estimates of 2021 U.S. trailer production of approximately 290,000 and 284,000 units, respectively, and forecast 2021 capital expenditures of $35–$40 million.
Management expects to pursue pricing, productivity and cost initiatives while investing in working capital and operations and returning capital to shareholders. Risks include continued COVID-19 disruption, the cyclical industry, the ability to ramp production and hire labor, raw-material inflation and shortages, and dependence on certain suppliers. Commodity swaps had approximately $129 million notional value; the company expected to reclassify about $32.5 million of pretax deferred gains into cost of sales over the next 12 months as inventory purchases settle. Legal and environmental matters were not expected by management to materially affect financial condition or results, but outcomes remain uncertain.
Important facts for investors to verify
- Whether backlog converts to shipments and revenue as expected, and whether production ramp-up and component availability constrain fulfillment.
- Whether pricing and hedging offset commodity-cost increases, and how much margin improvement is sustainable.
- Working-capital trends, particularly inventory, receivables and operating cash flow, alongside the decline in cash and liquidity.
- Debt terms, covenant headroom and the effect of the subsequent $15 million term-loan repayment; confirm the company’s reported covenant compliance.
- The potential effects of COVID-19, supplier concentration and pending environmental or other legal matters, which may develop differently from management’s current expectations.