Wabash National maintains solid trailer order backlog


Wabash National Corp. (NYSE: WNC) maintains a $1 billion backlog of commercial trailers and other equipment to build and is seeing steady customer orders despite the COVID-19 pandemic.

Far from downplaying the health crisis and how it might impact the business going forward, company executives told analysts Thursday they feel they have a handle on the situation. 

“We have been preparing for several years for an eventual downturn in our end markets,” Wabash National CEO Brent Yeagy told analysts on a first-quarter earnings call Thursday. “Wabash National has been through difficult times before, and we have learned lessons that we have embraced to make us stronger and more agile heading into this one.”

A highly variable cost structure makes Wabash National “a more resilient company than we have ever been in the past,” he said.

It also helps that customers are paying on time and not seeking extensions.

By the numbers

Net sales for the first quarter of 2020 were $387 million as customers delayed pickups of equipment. Wabash sends invoices when orders are built but does not recognize the revenue until the trailers leave Wabash.

Wabash reported an operating loss of $110 million, mostly driven by a goodwill impairment from its acquisitions of Walker Group liquid transportation hauler and Supreme Industries, a body builder for final-mile delivery. Final mile is a sector focus for Wabash, as are commercial trailers and diversified products.

The non-GAAP adjusted operating loss was $2.9 million, or 4 cents a share, on lower revenue and a predicted shortfall in the final-mile segment that was worsened by the inability to ship products to COVID-19-impacted areas like New York City.

The backlog of products waiting to be assembled was just $100 million below the $1.1 billion backlog at the end of December 2019.

“This is much less than the 20% decline that is seen in the broader industry in the same time period,” Yeagy said. “From a commercial standpoint, our customers are still ordering and cancellations have remained non-material at this point. And that is a really good sign as we look at the remainder of the year.”

Cost cutting

Like most industrial companies, Wabash cut a range of expenses, including a 50% reduction in capital spending, layoff of hourly workers, elimination of travel and a hiring freeze. The company furloughed all production workers and 90% of its salaried employees for two weeks in April.

However, the company maintained its stock dividend where many others have suspended payouts to save money. It also repurchased $8.9 million in company stock before the pandemic hit.

Wabash’s liquidity stood at $277 million at the end of March, including $155 million in cash and access to borrowings of $122 million. It tapped a revolving line of credit for $45 million in March as it examined scenarios that included a 50% revenue decline in the current quarter. 

The worst-case scenario for COVID-19 as seen now would not have resulted in borrowing the money, executives said.

Looking ahead

“Wabash’s major customers do not want to allow their trailers to get too old like they experienced coming out of the Great Recession,” Yeagy said.

“Just as we have learned how to manage through a downturn, they have as well, he said.