Wabash National Corporation — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011; the filing also reports fourth-quarter results. Wabash designs, manufactures and sells truck trailers and related transportation equipment, with commercial trailer, diversified products and retail operations. The company began reporting these three segments in the fourth quarter of 2011, so segment comparisons reflect a revised presentation.
Financial performance
| Metric | 2011 | 2010 | Change or context |
|---|---|---|---|
| Net sales | $1,187.2 million | $640.4 million | Up 85.4% |
| Gross profit / margin | $66.7 million / 5.6% | $28.1 million / 4.4% | Improved with higher volume and diversified-product growth |
| Operating income (loss) | $19.8 million | $(15.4) million | Returned to operating profit |
| Net income (loss) | $15.0 million | $(141.8) million | 2010 included a $121.6 million noncash warrant fair-value charge |
| Diluted earnings (loss) per share | $0.22 | $(3.36) | 2010 common-stockholder loss also reflected preferred-stock dividends and early-extinguishment costs |
| Cash from operating activities | $(1.2) million | $(30.3) million | 2011 working-capital investment, especially inventory, largely offset earnings |
| Capital expenditures | $7.3 million | $1.8 million | Primarily growth and facility improvements |
| Cash / total debt and capital leases | $20.0 million / $69.8 million | $21.2 million / $59.6 million | Year-end 2011 revolving borrowings were $65.0 million |
| Working capital / total assets | $95.5 million / $388.1 million | $61.4 million / $302.8 million | Working capital increased with the recovery in activity |
Fourth-quarter 2011 sales were $341.7 million, gross profit was $20.7 million, net income was $7.5 million and diluted earnings per share were $0.11.
Business changes and drivers
- New-trailer shipments rose 91.2% to 47,600 units. Commercial Trailer Products external sales increased 90.9% to $1,010.1 million; Diversified Products sales increased 135.3% to $52.0 million; Retail sales increased 40.4% to $125.1 million.
- Overall trailer-industry shipments rose about 68% to approximately 209,000 units, according to industry estimates cited by the company. Wabash reported about 23% share of total U.S. trailer shipments and about 30% of van trailers.
- Diversified Products expanded through composite products and a new frac-tank manufacturing agreement; 2011 included about $7.3 million of frac-tank sales. The segment generated $14.6 million of operating income, while Commercial Trailer Products generated $18.5 million and Retail recorded a $0.3 million operating loss.
- Backlog was approximately $587 million at year-end, compared with $480 million a year earlier. Management expected most of it to be completed within 12 months.
Liquidity, outlook and risks
- Year-end liquidity, defined by the company as cash plus available borrowing capacity, was $125.7 million, up $65.3 million year over year. The revolving facility was increased to $175 million, matures in June 2016 and permits a further $25 million increase subject to conditions. Wabash said it was in covenant compliance.
- Management expected 2012 new-trailer sales of 50,000–56,000 units, up approximately 5%–18%, non-trailer product growth above 30%, and improved profitability. Planned 2012 capital expenditures were $10–$15 million. These are management expectations, not guaranteed results.
- Industry forecasters cited by management projected roughly 246,000–251,000 trailer shipments in 2012. Management highlighted potential pricing improvement, but also expected volatile and rising raw-material and component costs; pass-through may be limited by competition and fixed-price contracts.
- Key risks include the cyclical trailer market, dependence on a limited supplier base, commodity-price volatility, customer credit and concentration (the five largest customers represented 32% of sales), and the need to manage working capital as production grows. Availability under the asset-based credit facility and covenant thresholds are also important liquidity considerations.
- Wabash reported $166 million of federal tax-loss carryforwards, subject to limitations; a 2010 ownership change triggered Section 382 limits. A full valuation allowance remained against net deferred tax assets.
Contingencies and unusual items
- Brazil litigation: A Brazilian court issued a November 2011 judgment for approximately R$26.7 million (about $15.3 million), excluding potentially significant interest, fees or inflation adjustments. The company sought clarification and planned an appeal; the judgment was not enforceable at filing. Wabash had not accrued a loss and said it could not estimate a reasonably possible loss or range.
- Environmental matter: A proposed settlement concerning a former Arizona branch property was accrued; the filing reports a $0.2 million reserve. Approval remained pending.
- There were no common-stock dividends declared or paid in 2011. The independent auditor issued an unqualified opinion on the financial statements and internal controls; management also reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Whether expected 2012 trailer volumes, pricing and diversified-product growth translated into higher margins and sustained profitability.
- Whether operating cash flow improved as inventory and other working-capital needs grew, and how much revolving-facility availability remained under the borrowing base.
- Developments in the Brazil appeal, including any clarified judgment, potential interest or fee exposure, and subsequent accounting recognition.
- Actual raw-material and component cost changes, customer price pass-through, and the effect of fixed-price commitments.
- Use and realizability of tax-loss carryforwards, including Section 382 limitations, and any changes to the deferred-tax valuation allowance.