Wabash National Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Wabash designs, manufactures, and services trailers, truck bodies, parts, and related products. Its reportable segments are Transportation Solutions (TS) and Parts & Services (P&S).
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Net sales | $621.0 million | $546.8 million |
| Gross profit / margin | $116.0 million / 18.7% | $58.1 million / 10.6% |
| Operating income / margin | $69.9 million / 11.3% | $20.1 million / 3.7% |
| Net income attributable to common stockholders | $51.2 million | $12.1 million |
| Diluted EPS | $1.04 | $0.24 |
| Operating cash flow | $69.5 million | ($34.6) million |
| Capital expenditures | $31.4 million | $9.9 million |
Gross margin increased 8.1 percentage points. Sales rose 13.6%; cost of sales increased 3.3%. Net income growth reflected higher revenue per trailer and truck body, improved pricing and product mix, and lower intangible amortization. Selling, general and administrative expenses increased $10.4 million, including higher employee costs and professional fees.
Segments and operating trends
- TS sales were $578.1 million, up 15.1%; segment operating income was $87.1 million versus $31.7 million. Higher pricing, mix, and truck-body shipments supported results.
- P&S sales were $47.1 million, up 0.9%; segment operating income was $9.2 million versus $6.8 million. Wabash Parts LLC contributed approximately $4.6 million in sales.
- New trailer shipments declined 0.7% to 11,780, primarily due to the planned ramp-down of conventional refrigerated van production. Truck-body shipments increased 9.5% to 3,815.
Cash, debt, and liquidity
- Cash and cash equivalents were $68.2 million at quarter-end. Liquidity, defined as cash plus available revolver capacity, was $410.4 million.
- Total debt was $400.0 million principal, represented by 4.50% senior notes due 2028; the revolving facility had no balance outstanding. The $350 million revolver matures in September 2027. The company reported compliance with debt covenants.
- Operating cash flow improved by $104.1 million year over year. Inventory consumed $71.8 million of cash, partly offset by an $81.7 million increase in accounts payable and accrued liabilities.
- Financing used $28.1 million, including $23.6 million of stock repurchases and withholding-related repurchases and $4.6 million of dividends. The quarterly dividend declared was $0.08 per share.
- Inventory increased to $315.6 million from $243.9 million at year-end, including higher finished goods and raw materials.
Outlook, risks, and notable items
- Management described demand and backlog as strong but noted uncertainty and some softening associated with economic conditions, supply-chain disruption, and staffing constraints. Backlog was $3.07 billion, down 10% from December 2022 but up 31% year over year; orders may change or be cancelled.
- Management cited ACT and FTR estimates of 306,000 and 313,000 U.S. trailer production units, respectively, for 2023. These are industry forecasts, not company revenue or earnings guidance. The filing notes weaker 2024 industry forecasts and continued uncertainty.
- Management expects 2023 capital expenditures of $100–$110 million for traditional property and equipment and $35–$40 million for revenue-generating Trailers as a Service assets. It plans to add 20% dry-van manufacturing capacity, with production scheduled to begin in Q2 2023, and is investing in scaling EcoNex technology.
- Risks include cyclical demand, inflation, raw-material and component costs, dependence on limited suppliers, labor shortages, and the ability to ramp production. A 10% change in commodity prices applied to raw-material purchase commitments was estimated to change cost of goods sold by approximately $7.3 million.
- The company accrued a $3.0 million liability for two California wage-and-hour class-action matters; after quarter-end it reached a settlement for an amount materially consistent with that estimate. Other described environmental matters were not expected to have a material adverse effect based on information available.
- Commodity swaps had approximately $73.3 million in notional value; the company expected to reclassify about $0.9 million of pretax deferred gains to cost of sales over the next 12 months.
Investor verification points
- Track whether backlog converts to shipments and revenue, particularly as orders and industry demand soften.
- Check execution and returns on the planned capacity expansion, EcoNex investment, and Trailers as a Service spending.
- Monitor inventory growth, cash conversion, and working-capital needs as production ramps.
- Verify the final resolution and financial impact of the California employment litigation.
- Assess whether pricing and hedging continue to offset raw-material, component, freight, and labor cost pressures.
- Review debt covenant headroom, revolver availability, and capital allocation, including repurchases and dividends.