Wabash National Corporation (WNC) Earnings Call Transcript & Summary

Welcome to the conference. My name is Lynn, and I will be your operator for today. [Operator Instructions] Please meet your speakers. I will now turn the call over to Dr. Martin Jischke. You may begin.

Good morning, and welcome to the 2020 Annual Meeting of Stockholders of Wabash National Corporation. I am Dr. Martin Jischke, Chairman of the Board of Directors of the company, and I will act as Chairman of this meeting. On behalf of the Board of Directors and our management, I thank you for joining us today. Given the unprecedented times in which we are living, we appreciate that each of you registered online and are joining us virtually here today. We believe that this format is prudent in light of the ongoing COVID-19 pandemic, and that this format provides greater access to all of our stockholders and maximizes their ability to engage meaningfully with us. Melanie D. Margolin, our General Counsel, will serve as Secretary of the meeting. All of the directors of the company are also attending virtually. Beginning on Page 13 of the 2020 Proxy Statement, you will find the biographies of the directors who are up for election. I would like to introduce them now: Therese Bassett; Jack Boss; John Kunz; Larry Magee; Ann Murtlow; Scott Sorensen; Stuart Taylor II; Brent Yeagy, our President and Chief Executive Officer. I would also like to introduce the other members of our management team who are attending today: Kristin Glazner, our Chief Human Resources Officer; Melanie Margolin, our General Counsel and Corporate Secretary; Kevin Page, our Senior Vice President of Customer Value Creation; Mike Pettit, our Chief Financial Officer; and Dustin Smith, our Senior Vice President, Global Operations. Finally, I would like to introduce Rob Hofinger and Doug Hunter of the company's independent registered public accounting firm, Ernst & Young, who are also attending this virtual meeting. We provided notice of this meeting on March 30, 2020 to stockholders as -- of record as of March 13, 2020. I now call the 2020 Annual Meeting of Stockholders of the company to order. At this time, I appoint [ Kevin Chao ] of the [ Carideo Group ] as Inspector of Elections. Mr. Chao, please confirm that you are present at this meeting.

I am present on March 13, 2020 (sic) [ May 12 ], the record date for the annual meeting. There were 52,846,930 shares of common stock outstanding. Each has 1 vote. 49,191,942 shares are represented by proxy. Therefore, a quorum is present.

Thank you. Based on the foregoing, I declare that the meeting is open for the conduct of business. The text of the agenda items and the proposals to be voted upon are included in the company's proxy statement, sent to all stockholders in connection with this meeting. No stockholder has requested that an item be included on the agenda. The electronic polls for voting on the proposals at this annual meeting will remain open through the conclusion of the presentation for all matters. Melanie, please address the formalities of the meeting.

Thank you, Dr. Jischke. The first agenda item is the election of 8 directors. The Board of Directors has nominated Therese Bassett, John Boss, John Kunz, Larry Magee, Ann Murtlow, Scott Sorensen, Stuart Taylor II and Brent Yeagy to serve as Directors of Wabash National Corporation until the 2021 Annual Meeting or until their successors are duly elected and qualified. The company has an advanced notice provision in its bylaws, and no nominations were received in accordance with that provision. Accordingly, all nominations are now closed. The Board recommends a vote for the election of each of the 8 director nominees. If there are any questions or comments at this time, please indicate that question in the electronic question box on your screen. The second agenda item is an advisory vote on the compensation of the company's named executive officers. The Board recommends a vote for this proposal. If there are any questions or comments about this proposal, please indicate that question in the electronic question-and-answer box at this time. The third agenda item is the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for Wabash National Corporation for the year ending December 31, 2020. The Board recommends a vote for this proposal. If there are any questions or comments about this third proposal, please indicate that in the question box on your electronic screen. Because no further business is scheduled to come before the stockholders, I declare that the polls for each matter to be voted on at this meeting are open and direct that a vote of the stockholders be taken by electronic and previously filed written ballots. Each holder of common stock is entitled to 1 vote for each share of common stock held of record at the close of business on March 13, 2020. Each stockholder or such stockholders' proxy has electronic voting capability at this time, and is entitled to vote at this actual meeting. Any stockholder who has previously given his or her proxy need not vote unless he or she desires to revoke the proxy and instead vote by electronic ballot at this meeting. We will pause for a moment to allow the votes. [ Voting ]

Thank you. Does anyone still need to vote electronically or to speak to the Inspector of Elections? Hearing none, I declare the polls for each matter voted upon at this meeting closed, and direct the Inspector of Elections to review and tabulate the votes. Given the number of shares voted by proxy, the Inspector of Elections is now able to provide a preliminary report of the voting results for each of the proposals. Because the results are preliminary, they are subject to final tabulation and verification by the Inspector of Elections. I now recognize Mr. Chao, the Inspector of Elections.

Thank you, Dr. Jischke. I have completed count of the proxy submitted and determined that a sufficient number of votes have been cast by proxy for me to provide this preliminary report. The preliminary report shows that all of our director nominees were elected and each of the other proposals were approved with at least the requisite stockholder majorities.

Thank you, Mr. Chao. Based on the inspector's report, I hereby declare that each of Therese M. Bass (sic) [ Bassett ], John G. Boss, John E. Kunz, Larry J. Magee, Ann D. Murtlow, Scott K. Sorensen, Stuart A. Taylor II and Brent L. Yeagy have been elected as a Director of Wabash National Corporation to serve as directors of the company until the 2021 Annual Meeting or until his or her successor has been duly elected and qualified. I further declare that the compensation paid to the Wabash National Corporation named executive officers, as disclosed in the company's proxy statement, has been approved by advisory vote. And finally, I declare that the appointment of Ernst & Young LLP, as the independent registered public accounting firm for Wabash National Corporation for the year ending December 31, 2020, has been ratified. The Inspector of Elections will provide the Secretary with a written report of the final vote count with respect to the matters voted on today, which will be included in the minutes of this meeting and reflected in our SEC filings. There being no further business, I hereby declare this annual meeting adjourned. Now I would like to turn the microphone over to Mr. Brent Yeagy to present the Chief Executive Officer's report. Before I do that though, I want to mention that today is my last day as a director. I have served on this Board for 18 years, and I am grateful to the shareholders for giving me this opportunity. I have enjoyed serving on the Wabash National Corporation Board of Directors. The company has made impressive progress over this time period, and I am confident, despite the current challenges, that the long-term prospects for Wabash National Corporation are bright. Wabash has excellent leadership and devoted employees. I have great confidence, a great deal of confidence in the Board of Directors that you have just elected, and I intend to remain a shareholder of the company. Thank you. Now Mr. Yeagy will present his report.

First, I want to thank Dr. Jischke for his dedication to Wabash National over the past 18 years. Dr. Jischke, the company that you leave today is stronger, more stable and has a brighter future, thanks to your leadership and counsel. On behalf of the Board of Directors and the leadership team at Wabash National, I want to thank you for your steadfast service to our company and our community. We wish you well. Looking ahead to the future. We are pleased to welcome Larry Magee as our incoming chairperson. Mr. Magee's dedication and leadership on the Board since 2005 has been instrumental to Wabash National's success and growth as an organization. We will look forward to continuing our business transformation under his guidance. Now we'll move to the presentation. So first, let me remind you of the safe harbor statement. Our actual results can differ materially from those anticipated in forward-looking statements. So let's move to the actual presentation deck. So first, let me cover our refreshed purpose, vision, mission and values for the company. This is something that we've embarked upon as we define our transformational future and use this to shape our strategy in the years to come. First, our purpose, to change how the world reaches you. It defines how we look to the future, how we will innovate and how we will grow our people accordingly. Our vision, to be the innovation leader of engineered solutions for the transportation, logistics and distribution industries. This aids us in defining the way that we will play the game and where we will play the game in the future. Our mission, to enable our customers to succeed with breakthrough ideas and solutions that help them move everything from first to final mile. This tells us how we will play the game today and how we plan to win. Our values: be curious, have a growth mindset, create remarkable teams. These are picked specifically to ensure that we align the organization with those values that most enable our strategy into the future. Our leadership principles: embrace diversity and inclusion; seek to listen; always learn; be authentic; and win together. These principles help define the critical decisions, behaviors for success, a framework for what winning looks like. Moving to the next slide. Our intent is not to be seen as only a van and trailer company. We're specifically a dry van trailer company. Over the last 4 to 5 years, our diversification has shown through. As we stand at the end of 2019 with over -- with approximately 50% of our business being of nonvan trailer origination, we have over $1 billion of annual revenue that has further diversified the company. But that is not the only change that we've made throughout the organization, and has allowed us to remain well-positioned even under this current pandemic and economic environment. We are a fundamentally stronger business, a seasoned and experienced management team. Many were here during the 2008, 2009 recessionary period. We've learned from those lessons. We've positioned the company accordingly, and we're taking action today in the spirit of what we learned during that time. We strengthened our balance sheet and our customer portfolio, all with the intent of making Wabash National stronger for just these times. Our liquidity position is the strongest that it has ever been prior to any recessionary period, and I refer you to the lower right-hand chart on this slide that represents the level of ending cash balance before any recessionary period. It demonstrates the fundamental change in the balance sheet of Wabash National. We have no mandatory debt obligations until March of 2022, all specifically managed that create a patient debt structure for anticipated recessionary periods. We also have significant assets that we monetize. And as we look to optimize our business, these are levers that we may choose to pull as we manage the overall liquidity of the business. We have an active strategic reorganization in place to improve the business output, as well as the efficiency of our resource deployment. We have enlarged and activated the enterprise lean initiatives spanning the entire organization. And today, we stand with the strongest, most diverse and inclusive as well as talented workforce in Wabash National's history. Now let me talk about on the next slide, a reflection on 2019 performance. At the prior shareholder meeting in 2018, we laid out 4 points of focus that we would execute during 2019, and I'm pleased to say that we acted on each and every one of those focus items. And as we turn the page, we can see that in our cash generation results through the end of 2019. As we look at the magnitude of change from 2018 to 2019 in net income. We increased net income 29%, operating cash flow of 30%. We maintained our capital expenditure as we deploy strategic initiatives across the company, our free cash flow improved 38% and our free cash flow conversion improved 800 basis points. We did what we said we would do. Turning the page. Now in 2020, we are navigating, along with the rest of the world, a new landscape defined by the illness, COVID-19. We are acting in 4 broad areas on our business, in response to these changing times. Our employees, our supply chain, our customers as well as all aspects of liquidity are in sharp focus across our company. Specifically on the employee front, we are highly focused at the highest priority within the business and assuring a safe workplace for our associates. Specifically, we've enlarged our remote work program with over 40% of our salaried workforce now working from home in response to the pandemic. We've implemented social distancing across all aspects of our manufacturing and our administrative functions, both in the United States, Mexico and Great Britain. Our supply chain operations are impacted by the fact that we are in the central business and require to operate during these times. And we have done so since the beginning of this pandemic worldwide. For our customers, we are assuring the flow of vital products and services, and we are working with them diligently to make sure that we are responsive to their needs as they assure that vital goods and services are moving across our country and the world. Specifically with liquidity, which I'll be a little bit more specific on. We're actively engaged in working capital reductions to free up excess cash. We have implemented significant spending reduction and control structures to ensure that we are optimizing resource efficiency during this time. We have reduced our CapEx outlay for 2020. However, we are still looking to maintain continuity with our basic strategic deployment of capital. We have temporarily suspended our stock buyback program as we look to understand the current environment better. We are highly engaged in exhaustive scenario planning as we stress test our business. We'll talk more about this on our earnings call on Thursday. We've implemented hiring and pay freezes across the company. And while vital but nonetheless painful, we have made deliberate decisions, both with our salaried and hourly workforce, to reduce -- to ensure that we are properly aligned with the future market. Moving to the next slide. Wabash is not standing by and allowing ourselves to be put on in a defensive posture. We are leading into this period and accelerating our transformational change. An aspect of that change is assuring that our strategy remains focused. So we continue to narrow our focus to be specific so that we can scale our core competencies around those aspects of our core markets that are growing, and targeting those customers that best propel us forward. We are increasing our commitment to innovation to make sure we provide differentiated breakthrough solutions for our customers now, into the near future and into the next decade. We're establishing a One Wabash approach to our customers and business. By assuring that our businesses are tied together, we look to improve value and reduce friction across our broad customer base. We have an exciting future, engineering the equipment that will support changes in transportation, logistics and distribution. We know where we plan to play. We are organizing to enable our strategy. We've implemented -- or we are in the process of unifying our sales organization to ensure we create maximum customer value. We're eliminating silos across the business. We are accelerating the implementation of our Wabash Management System during this critical time. We are standardizing processes to ensure that we have the backbone of success to allow us to scale our company as we continue our transformation efforts into 2021. And ultimately, we're embarking on a multiyear initiative to optimize our footprint and rationalize our manufacturing systems to place us in the most efficient posture possible to provide goods and services to our customers. Next slide. What we do will balance the value created for all of our stakeholders: our customers, our employees and our shareholders. These 3 sets of interrelated outcomes support all stakeholders as we create a new, more powerful and strengthened Wabash National. Next slide. We will leverage our current sustainable competitive advantages during this time more than ever, an industry-leading product portfolio; innovative technologies such as motor structural composite thermal technology; 15 years of lean manufacturing, operational excellence experience; and a strong customer base that encompasses the largest, best-capitalized and innovative customers in the markets that we serve. It is these competitive advantages that have set us apart in the past and will continue to set us apart in the future. Even more during this time of economic disruption, our customers will seek to do business with those whom they trust. Next slide. We remain focused on the megatrends that we've laid out in previous shareholder meetings: urbanization; final mile and home delivery; expansion of cold chain and food equipment; energy and chemical production and increased regulation, specifically in the area of food safety. Even during these times of uncertainty, we believe these 4 megatrends will continue to shape Wabash National's strategy into the future, and we remain focused on them. However, we do remain cognizant and open to understanding that this new environment may create additional opportunities for strategic innovation, new customer demand and new markets that Wabash National may be able to take advantage of in the future. We will seek to understand those accordingly. Moving to the next slide. As I close out this presentation, I want to assure you that we are managing today, but this leadership team is also looking to tomorrow. We understand that these 5 areas, when executed well, as shown by those companies that excel post the 2009 recession, give us the best chance of success as we map our path both from a post-COVID-19, but also as we rebound from a recessionary environment within our core markets. Through these lenses of these 5 areas of performance, we are building for tomorrow. For the last 10 years, we took action to diversify and create a more stable company. Now during this time of world and national crisis, we are hard at work to assure that our next 10 years are even greater. As I close, I want to specifically thank our Wabash National employees. In the last 60 days, we have asked them to do more than we ever thought possible. They are the reason we are the best at what we do. Thank you.

Mr. Yeagy would take a couple of questions now if there are any. If you have questions, please type them into your question box, which is found on your screen.

If there are no other further questions, once again, thank you for attending. This concludes our presentation. We look forward to you joining our earnings call on Thursday, May 14.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.