The “uniquely challenging time” presented by the COVID-19 economic slowdown has taken a toll on the bottom line of Wabash National Corp., as second-quarter trailer shipments fell 44% from the year before and the company posted a small net loss of $146,000, down from income of $31 million in Q2 2019.
Also uniquely, Wabash President and CEO Brent Yeagy praised the “remarkable level of dedication” of the organization in delivering results that, in a normal market, would be considered disappointing at best.
“I don't seek to lead the company to break-even quarters, but given the situation the world was in during the during the start of this quarter, I’m pleased with the financial performance during this historically difficult time,” Yeagy told investment analysts in an earnings call Wednesday.
Yeagy cited the efforts of the company’s “COVID response team,” as well as the rapid implementation of cost control measures for limiting the harm done by the pandemic.
“Overall, the mindset that we've employed in the past 120 days has been simply to stay healthy and stay smart. The same applies not only to everyone's physical health, but also to the business,” he said. “Within every short-term decision that needs to be made as a result of the current environment, we're applying a long-term lens in order to position ourselves for future out-performance—while ensuring that we also make the necessary adjustments to ride out near-term challenges.”
Total backlog as of June 30 was approximately $750 million compared to backlog of approximately $1 billion at the end the first quarter, as “normal seasonal trends indicate an expected sequential softening in backlog during the second quarter,” Wabash reported. Additionally, customer pick-ups of new equipment improved following disruption seen during the first quarter in the lead-up to COVID-19-related shutdowns.
As for the market, Yeagy suggested that while larger fleet customers have provided some stability, the indirect channel—which already had excess inventory before the pandemic slowdown—had struggled through May.
“What we're seeing now—which is very positive—is that inventory levels dropped materially within the indirect channel as we entered into the June time frame and as things began to reopen,” Yeagy said. “So now we're starting to see some quote activity and requisite commercial activity starting to break loose within that indirect channel, while those larger customers have remained solid and steady relative to the orders they have in the book right now.
“And it’s those larger customers, just as you would expect, that are beginning to talk about what 2021 could be as they enter their capital planning cycle—nothing out of the ordinary. Everything that we needed to check the box on, in terms of the commercial environment, has occurred as we entered in the June-July time frame. And it’s really reduced some of those fears that we would have felt in that early March-April time frame.”
In closing his remarks, Yeagy again emphasized the need to “stay healthy and stay smart.”
“We aim to control what we're able to control during this extraordinary time,” he said. “We continue to push forward with strategic improvement that will benefit our company and our shareholders in the years to come as we work to change how the world reaches you.
“Today we are proving that we are different, and that we are ready to accelerate as we all move forward.”
By the numbers
By business segment, Commercial Trailer Products’ net sales for the second quarter were $232 million, a decrease of 42.1% as compared to the prior year quarter, “as a result of a reduction in market demand.” Wabash shipped 8,000 new trailers in the quarter, down from 14,250 a year ago. Operating income was $18.6 million, down 53.4% from 2019’s second quarter.
Diversified Products’ net sales for the second quarter were $64 million, a decrease of 34.1%, again as a result of lower market demand. Operating income was $2.2 million or 3.5 percent of sales during the quarter. The segment shipped 400 trailers in the second quarter, compared to 750 in Q2 2019. Operating income was $2.2 million, a 74.8% decrease.
Final Mile Products’ net sales for the second quarter totaled $50.8 million, a decrease of 62.3%, as compared to the prior year. Operating loss was $6.6 million during the quarter as a result of weaker volume leverage over fixed costs, Wabash reported. The segment posted income of $9.2 million in the same quarter last year.