Wabash National Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Wabash designs, manufactures, and services trailers, truck bodies, transportation equipment, parts, and related products. Its reportable segments are Transportation Solutions (TS) and Parts & Services (P&S).
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net sales | $686.6 million | $642.8 million | $1,307.6 million | $1,189.5 million |
| Gross profit / margin | $151.0 million / 22.0% | $78.0 million / 12.1% | $267.1 million / 20.4% | $136.1 million / 11.4% |
| Operating income / margin | $103.3 million / 15.0% | $35.9 million / 5.6% | $173.2 million / 13.2% | $56.0 million / 4.7% |
| Net income attributable to common stockholders | $74.3 million | $22.6 million | $125.5 million | $34.6 million |
| Diluted earnings per share | $1.54 | $0.46 | $2.58 | $0.70 |
- Q2 sales rose 6.8%; six-month sales rose 9.9%. Despite fewer trailer shipments, higher revenue per trailer and truck body supported growth and substantially higher gross margins. Management cited pricing, customer mix, and improved pricing processes.
- Q2 TS sales increased 5.8% and P&S sales increased 23.2%. P&S growth included Engineered Products, upfitting, and services. New trailer shipments fell 13.5% in Q2; truck body shipments rose 1.9%.
- Q2 general and administrative expense rose 20.6% to $37.3 million, partly reflecting professional services and higher employee-related costs. Six-month expense also included a $3.0 million estimate for California wage-and-hour litigation settlement.
Cash flow, debt, and liquidity
- Operating cash flow for the first six months was $146.3 million, versus $82.7 million in 2022. Investing activities used $59.1 million, including $55.8 million of property and equipment capital expenditures; financing activities used $46.7 million, primarily for repurchases and dividends.
- Cash and cash equivalents were $98.8 million at June 30, 2023, compared with $58.2 million at December 31, 2022. Inventory increased $98.6 million during the first half, largely from higher finished goods.
- Debt consisted of $400 million principal of 4.50% unsecured Senior Notes due 2028, reported at $396.1 million net of unamortized discount and fees. No revolving-credit borrowings were outstanding at quarter-end. The $350 million revolving facility matures in 2027.
- Reported liquidity—cash plus available revolving borrowing capacity—was $441.1 million, up from $401.2 million at year-end 2022. The company reported compliance with debt covenants.
- During the first half, Wabash paid $8.4 million in dividends and repurchased shares; $76.7 million remained under its repurchase authorization at June 30. The declared dividend was $0.08 per share per quarter.
Outlook, risks, and notable items
- Management described the 2023 trailer-market outlook as generally strong, while warning of demand softening, economic uncertainty, and supply-chain disruption. ACT and FTR forecast 2023 U.S. trailer production of approximately 310,000 and 322,000, respectively; management cautioned that estimates, particularly for 2024, could change.
- Backlog was $2.423 billion at June 30, down 29% from year-end 2022 as orders fulfilled exceeded new orders, but up 5% from June 2022. The 12-month backlog was $2.092 billion, down 25% year over year.
- Management expects 2023 capital expenditures of $100–$110 million for property and equipment and $20–$25 million for revenue-generating assets supporting its Trailers as a Service initiative. Dry-van capacity expansion began production in Q2; the company also cited a planned $20 million investment to scale EcoNex technology.
- Risks include cyclical demand, inflation and commodity costs, dependence on a limited number of suppliers, production constraints, labor costs, and the ability to pass cost increases to customers. A 10% change in commodity prices on disclosed purchase commitments was estimated to affect cost of goods sold by about $6 million.
- Wabash reached an agreement in Q2 to settle two California employment class actions for an amount materially consistent with its $3.0 million accrual. Other disclosed environmental matters were not expected by management to have a material adverse effect based on information then available. Management cautioned that litigation outcomes remain uncertain.
- Commodity hedges had a net liability fair value of $3.9 million at June 30; approximately $3.0 million of pretax deferred losses were expected to be reclassified to cost of sales over the next 12 months.
Key facts for investors to verify
- Whether higher unit pricing and improved margins can be sustained as trailer shipments and backlog evolve.
- How finished-goods inventory, supply availability, and working-capital needs affect cash conversion.
- Progress, spending, and expected returns from dry-van capacity expansion, EcoNex investment, and the Trailers as a Service initiative.
- Actual available borrowing capacity under the asset-based revolving facility and ongoing covenant compliance.
- Final settlement terms and payment timing for the California lawsuits, and any material developments in other legal or environmental matters.