Wabash National Corporation

Good morning, ladies and gentlemen, and welcome to the Q2 2020 Wabash National Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchstone telephone. As a reminder, this conference call is being recorded. Mr. Ryan Reed, Director of Investor Relations

and any non-GAAP reconciliations are all available at ir.wabashnational.com. Please refer to slide two in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it over and ask that you please refer to slide three as Brent gets us started with his highlights.

Thanks, Ryan. Good morning, everybody, and thank you for joining us today. Let me begin by saying that we hope that you and your families are all well. With COVID-19 having a meaningful impact on all of our lives over the past several months, I will start by addressing our approach to occupational health as well as the impact of COVID-19 on our operations. As the COVID-19 pandemic began to impact North America in early March, we quickly assembled a pandemic response team to oversee and deploy our countermeasures to this highly transmittable disease. That team had three objectives, to mount a risk-based defense to protect our employees, to assure continuity of operations, and to stay ahead of the facts on the ground in the emerging science. I can say with certainty that this team has performed magnificently over this trying time. Within our factories, we have launched a risk-based assessment of all jobs within the company, continued to prioritize engineering controls first and foremost, redesigned how work is performed, implemented best-in-class contact tracing and deployed medical management practices such as testing protocols and daily health monitoring. We remain diligent in applying our proven methods to protect our employees. We continue to educate and lead our people to stay home if they feel even the slightest symptom or have any potential known exposure to a positive COVID contact. No organization is immune to the risk of COVID-19 transmission in the workplace, regardless of the defense mounted. However, we have been highly successful at preventing workplace transmission and ensuring the ongoing continuity of our operations. I am pleased to say that COVID-19 did not significantly impact Wabash National's operational capability during this period. As an essential business, our workforce by and large understands the important role our products have in keeping goods moving during this challenging time for our nation and the world. I'd like to take this opportunity to thank all of our employees for their dedication throughout these unprecedented times and for their commitment to adhering to health protocols that have helped us to continue to operate effectively, efficiently and without interruption in the second quarter. Overall, the mindset that we've employed during the past 120 days has been simply to stay healthy and stay smart. This saying applies not only to everyone's physical health, but also to the business. Within every short-term decision that needs to be made as a result of the current environment, We are applying a long-term lens in order to position ourselves for future outperformance while assuring that we also make the necessary adjustments to ride out near-term challenges. As we talk through the quarter, I believe this theme of stay healthy and stay smart will be apparent in many of the decisions you'll hear about. Let's move on to an update of the landscape for our suppliers and our customers. Our supply chain performed well in the second quarter and continued to strengthen as we entered into the third quarter. We have been successfully working with our Tier 1 suppliers to proactively manage potential sub-supply threats within our supply chain. However, we still have residual risk within chassis supply. We were able to avoid meaningful unplanned chassis disruption in Q2, but extended chassis OEM shutdowns are likely to have some impact on chassis availability during the second half of the year. This is a situation we're monitoring closely and working with our OEM partners and customers to reduce risk accordingly. In terms of our customers, I would like to personally commend their efforts and the resolve of their employees. Drivers, dock workers, dispatchers, and mechanics all work together to keep transporting goods across the country and to the home. They braved uncertainty and unknowns in those early days of March and April to ensure the continued flow of goods throughout the country. During the quarter, we saw several extremes within the transportation market. Clearly, April was very weak from a freight market perspective. Conditions steadily improved throughout the quarter to the point where spot rates started to look relatively healthy during the end of the period, and that has continued into July. While all companies are closely managing capital expenditures, we see an appreciation for wanting to maintain average equipment ages at reasonable levels. This is evidenced by a lack of meaningful cancellation activity and a continued robustness in our backlog. We also continue to see a resilience in our customers as they have continued to stay the course in 2020 and are looking forward to an interesting contract season and top line growth in 2021. As a result, we've begun the process of discussing the 2021 order season with our customers and all indications at this time remain positive. Let's now move to customer orders and backlog. I'll start by level setting because the second quarter is normally a seasonally weak period for order intake and this year has continued to follow that pattern. Wabash National's backlog ended the second quarter at approximately $750 million after registering a $1 billion backlog at the end of Q1. This reduction in backlog and requisite commercial activity was in line with our expectations. As the third quarter began, meaningful increases in customer commercial activity are visible and encouraging. We continue to feel good about what these industry figures imply for our commercial execution, share position, and what it indicates about the strength of our customer portfolio. Now we'll move on to financial results for the second quarter. I don't seek to lead the company to break even quarters, but given the situation the world was in during the start of the second quarter, I'm pleased with our financial performance during this historically difficult time. We managed a 15% decremental margins at the operating income line, which shows very nimble execution during the quarter and support the guidance given on our last call. Our spending control in the second quarter was exceptional and testament to how our people have responded to leadership's direction while navigating unprecedented challenges in the quarter. Flat net income during the quarter provided a level of stability that allowed us to increase our overall liquidity by creating up working capital. Additionally, our execution in the quarter enabled us to continue to invest in our company, to fund our dividend, and to repay our previous pull on our revolving line of credit, which was executed as a precaution during late Q1. Our balance sheet remains in great shape, and we continue to expect to generate positive free cash flow in 2020. Moving to slide four, we discussed the short-term levers we pulled during the quarter as part of the tactical moves that need to be made during uncertain times. Thinking about longer-term initiatives, I'd also like to provide an update on the continued actions we're taking to align our organizational structure with our long-term strategic plan for continued growth that we've been executing for the last two years. As the saying goes, never let a crisis go to waste, and this pandemic has afforded us the opportunity to move faster with these planned changes to our organizational structure. In late March, we announced that Dustin Smith, formerly Senior Vice President and Group President of Commercial Trailer Products, was appointed Senior Vice President of Operations. Kevin Page, formerly Senior Vice President and Group President of Diversified Products and recently Final Mile Products, was appointed Senior Vice President of Customer Value Creation. These assignments capitalize on each of their backgrounds and strengths while aligning the organization to meet our key business priorities of serving dynamic customers that span across our broad business landscape within the transportation, logistics, and distribution industries in a way that no other company can. We expect these changes to enhance our operating effectiveness, speed of action, and improve alignment as silos between businesses are replaced with a one wall bash approach to both problem solving and value creation. Now best practices can migrate more easily across and throughout the business as talent ideas are able to flow without the barriers present in the prior structure. At the same time, we expect to achieve a greater level of intimacy with our customers by allowing our sales force to work with customers to understand their diverse equipment and solution needs across our broad and innovative product portfolio that spans from the first to the final mile. We see these enhanced relationships and deeper levels of intimacy as the fuel that will drive greater levels of customer value-creating innovation going forward. We expect that breaking down these business unit barriers will not only provide improved operating performance and better customer experience, but also a more efficient organizational structure. Once these changes are fully implemented, we anticipate annualized cost savings in the range of $20 million by the beginning of 2021 and the ability to outperform the given market in the future. Staying with our long-term strategy, please reference slide five as we circle back to our refreshed vision, mission, and values that we've laid out on prior calls and spend a moment to explain how our company's culture relates to social issues that have recently been at the forefront and center for all of us. If you focus on our leadership principles, our first principle is to embrace diversity and inclusion. However, every one of our leadership principles in one way or another references the inclusive culture that we are building at Wabash National. Recent protests and civil unrest have been driven by deep pain and highlight so much that we must work on to improve the fabric of this great country so that every citizen feels safe and equal. No human being should live in fear of those entrusted to keep them safe and no American should rest until we've accomplished that objective. We make our impact where we can, so I've emphasized to all of our employees in the strongest manner possible that there is zero room for racism, bigotry, or hatred in all of its many manifestations of Wabash National. The diversity of the people that make up this company makes us stronger, and it is those differences that build the diversity of thought and experience that we will use to drive our improvement and their innovation. We all have a choice to either say something or to say nothing within this important social discussion, and I believe it's essential how we share our stance on this matter as it relates to our culture and our values. So in closing, we aim to control what we're able to control during this extraordinary time. Our focus has been to stay healthy and stay smart, and we have executed in that manner. Strength and stability in our backlog, excellent decremental margins, A strong balance sheet coupled with a leaner and more strategic organizational structure all provide us the ability and the confidence to continue to demonstrate that Wabash Nationally is structurally improved as compared to prior cycles. 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. With that, I'll turn it over to Mike for his comments.