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Text: Couple of items before we get started.
I'll now hand it over to Brent for his highlights.
As eager as everyone is to move on to 2021, we will start today's call by providing some perspective on 2020.
As we all know, we learn the most about ourselves and the organizations from the challenges we encounter.
It is also through these challenges that we prove what we are capable of.
First and foremost, our employees came through for us in 2020.
Our team was able to see through the disruption caused by the pandemic and worked through near term challenges like modifying our shop or environments and managing a disrupted supply chain to safely keep our manufacturing running for our customers.
At the same time, our employees remained focused on our purpose to Change How the World reaches You and executing on our First to Final Mile strategy.
Together, we are creating a new Wabash environment where we are prioritizing ease of doing business for our customers, creating a growing portfolio of innovative engineered solutions that span from First to Final Mile and a culture that continually seeks for better process that creates value for our customers, our employees and our shareholders.
Secondly, we learned about the resilience of our product portfolio we've created over the last decade and the processes we've embedded within our businesses.
Our process discipline enabled Wabash National to observe a notable reduction in volume, while minimizing the impact to operating income as shown through 14% decremental margins for the full year of 2020.
We generated $104 million of free cash flow during 2020, which enabled us to maintain our dividend through the cycle, a feat never remotely accomplished during a significantly challenging environment in the history of Wabash National.
I hope our strong financial performance during 2020 indicates the structural improvements that have taken place within our company over the last decade, but especially over the last two years.
We aim to continue this improvement in financial performance as we leverage our customer-centric organizational structure, along with our opportunities for strategic growth.
There is something special brewing at Wabash National and we are starting to see that this leadership team, our employees are vying into a new way to operate.
This is a good point to circle back to our broader strategy.
Our refreshed purpose to Change How the World Reaches You positions us with a renewed focus on being the innovation leader within the transportation, logistics and distribution markets.
This clarification has our team pulling in the same direction and we took action to streamline our portfolio by selling assets that do not offer strong strategic threat.
As we finished pruning our portfolio, we are also setting the stage to backfill the adjusted revenue by continuing the diversification of our company with both expanded and new revenue streams within this transportation, logistics and distribution markets.
Our customers are some of the most dynamic participants in the industry who will be responsible for shaping future trends.
This is another benefit of our customer-centric org structure, as we seek to capture customer pain points to feed into our innovation efforts and develop unique solutions that add value to -- for them.
We have proven that we have enhanced our ability to operate.
Now we will show we can profitably grow this business in a more sustainable and interesting manner.
Moving on to specific efforts to grow and diversify our revenue streams and product development.
I'd like to start with an update on Molded Structure Composite technology.
MSC or Molded Structural Composite technology was developed as a revolutionary new material with lighter weight and improved thermal properties for the refrigerated van market.
As carriers continue to pilot this technology to assess the value created by lower operating costs and reduced emissions, we have found interesting applications for MSC within the refrigerated truck space.
In 2020, we worked with a major grocery that piloted MSC truck body, designed specifically for home delivery of groceries.
We believe that this is likely to be a rapidly expanding market segment where MSC continues to offer unique value to customers with its durability, reduced weight and improved thermal efficiency.
Our expertise in composites will be a competitive differentiator within the electric chassis space as well.
Our ability to innovate with lighter weight composite materials for truck bodies and trailers are all the more meaningful in the EV space where total vehicle weight has a direct impact on vehicle range and payload.
When you combine MSCs lightweight properties with its superior thermal efficiency, this composite technology will be intriguing for customers looking for innovative and sustainable solutions in the refrigerated space.
Consistent feedback from interested parties is that our technology offers benefits they have been unable to find elsewhere.
Additionally, within our cold chain efforts, we have completed an agreement to manufacturer Gruau refrigerated inserts for the Ford Transit within the United States to serve their rapidly expanding routes [Phonetic] like grocery home delivery market.
While traditionally constructed refrigerated cargo vans are insulated using spray foam, which can be subject to off-gassing and mold intrusion, Gruau inserts are engineered to fit specific manned models and provide a superior finish with 30% to 50% thermal efficiency than standard refrigerated body construction, thus improving total cost of ownership, reducing spoilage and improving food safety.
This is an important space for Wabash to participate in with our technology as it sets us up to better serve the smaller light-duty upgrade market compared to our larger more traditional truck body product models.
We expect that the rapid progress made in the home delivery of groceries and within the refrigerated home delivery will remain after the pandemic, and we're excited about how products like MSC and Gruau inserts position us to add value for customers in this space.
This provides a natural transition into corporate responsibility or, as some may say, ESG strategy, with particular focus on the environmental segment, because it ties in so much with our discussion on the benefits of our new products.
Removing weight and improving thermal efficiency are not the only ways we allow our customers to reduce their operating costs.
They also reduce our customers' environmental impact in a world that is becoming aware of carbon net zero thinking.
We are developing Tech Net [Phonetic] technology that not only reduces carbon impact by the use of our products, but it also creates numerous opportunities to reduce our impact on the natural resource consumption within our manufacturing processes.
We have seen many of our customers increase their commitment to ESG in recent years and I'd like to echo our own commitment to these principles.
Whether it's innovating with environmental impact in mind, ensuring diversity of backgrounds and viewpoints on our Board of Directors or simply standing up for what we believe is right on social issues like racial equality, for example, I believe our ESG focus sets us apart and uniquely positions us as a desirable supplier to customers who value ESG principles.
We are a company well positioned, well read and with the values that align with the changing world.
On that note, I want to take the time to reflect on the highly unfortunate assault on our nation's Capitol.
First, I would say that lawlessness, rioting and destruction of property and affronts to personal safety are unacceptable across the board.
However, the events that occurred at the Capitol were especially appalling to me and I've ensured both internally at Wabash and externally that my position is clear; it was wrong, an embarrassment to our country and for our democracy to be so specifically assaulted while a peaceful transition of power was under way.
CEOs and value-minded companies have an opportunity to lead on social issues and we choose to do so.
Now we'll move on to market conditions and backlog.
Freight rates remained at strong levels for carriers throughout the peak season and it continue to remain elevated into 2021.
As such, industry reports have shown strength in new trailer order activity and we have clearly benefited from the recovery of demand in the marketplace.
Overall, backlog ended the fourth quarter at approximately $1.5 billion, up sequentially by approximately $500 million from the end of Q3.
Our backlog reflects a normal split within our businesses, which is to say that the backlog build was primarily Commercial Trailer Products.
Order to shipment cycles tend to be much more compact in both DPG and particularly FMP and conversations with customers in those segments continue to indicate constructive market conditions for 2021 in these businesses.
We mentioned on our last call that the availability of labor could be a headwind as we look to ramp our operations in 2021.
While I believe this to remain true based on our own experience and feedback from suppliers, customers and peers, I do want to call out that we were able to successfully hire approximately 600 new employees across our business during the fourth quarter.
This hiring activity equated to adding to our workforce by about 15%.
We fully expect to add another 900 employees during the first half of 2021 based on our progress to date.
I will now address our outlook for 2021.
We are initiating our full year revenue outlook at just under $2 billion.
In this environment, we are seeing earnings per share of approximately $0.75 at the midpoint.
While early to talk about 2022, we believe that structural changes occurring across the industry as a result of asset and balance, forthcoming regulations with a new administration in Washington, as well as the further pace of logistics and supply chain disruption brought on by the current pandemic will positively impact our revenue outlook beyond 2021.
I'd like to conclude my comments by saying that I couldn't be more proud of how our employees responded to the challenges that confronted us this year.
But I'm excited to turn the page on 2020 and begin to talk about what comes next.
With early and significant wins with our new organizational structure reducing friction for customers, allowing us to think in new and interesting ways, our purposed vision mission that provides common direction throughout our organization, and the growth of a culture shaped by our Wabash Management System, we are ready to act with a growing strategic purpose.
The future is bright for Wabash National.
With that, I'll ask Mike to provide additional color on both our 2020 financial performance and our 2021 outlook.
Turning now to Slide 4.
On a consolidated basis, fourth quarter revenue was $404 million.
Consolidated new trailer shipments were approximately 10,600 units during the quarter.
We achieved our strongest shipments and revenue of the year during Q4 as a result of increasing customer demand.
In terms of operating results, consolidated gross profit for the quarter was $45.5 million or 11.3% of sales.
The company generated operating income of $10 million and operating margin of 2.5% during the fourth quarter.
Consolidated decremental margins were 12% during the fourth quarter, which is a performance we're very proud to have achieved.
Our strong financial performance was bolstered by our cost savings efforts and has structurally reduced our SG&A footprint.
Compared to Q4 of last year, SG&A expense was lower by about $5.6 million or 16%.
Operating EBITDA for the fourth quarter was $25.2 million or 6.2% of sales.
Finally, for the quarter, GAAP net income was $5.5 million or $0.10 per diluted share.
Let's move on to look at the segments, beginning with CTP.
From a segment perspective, Commercial Trailer Products performed very well with revenue of $283 million and non-GAAP adjusted operating income of $23.3 million.
Average selling price for new trailers within CTP was about $27,000 in the fourth quarter, which is roughly flat with the same quarter of last year.
Diversified Products Group generated $75 million of revenue in the quarter with non-GAAP adjusted operating income of $3.3 million.
As a reminder, we completed the sale of a niche business in our Tank Trailer portfolio at the end of Q4.
This business is responsible for approximately $20 million during 2020, which is revenue that will not be part of DPG's results going forward.
This is a business that manufacture a narrow specification of aluminum tank trailers with a low center of gravity that were geared toward the train in the Pacific Northwest.
With returns not met in our threshold and limited opportunity to grow the business, we felt it was best to redeploy the resources into more scalable opportunities.
We continue to see our remaining Tank Trailer businesses that began to bolster our overall portfolio of First to Final Mile transportation.
As we discussed on our last earnings call, Final Mile Products continues to operate below breakeven volumes as COVID has impacted demand in this segment differently than other end markets.
FMP generated $52 million of revenue during the quarter with an operating loss of $4.5 million.
Due to the burden of depreciation and increasing amortization in the business, it's important to point out that FMPs fourth quarter EBITDA was a loss of only $600,000.
We expect this part of our business to begin showing positive EBITDA in the first half of 2021 and to be solidly EBITDA profitable full year 2021, and around breakeven on the OI line.
Slide 8 shows the walk to year-to-date free cash flow for 2020.
With operating cash flow of approximately $124 million, roughly $20 million was reinvested to be a capital expenditure, leaving $104 million of free cash flow.
We are extremely pleased with the work the team did to register $104 million of free cash flow during a pandemic.
To put that number in a little bit of perspective, it is a higher level of free cash flow than the average of 2018 and 2019, which were peak years for the trailer and truck body markets.
While we benefited from a reduction of working capital due to declining revenues, we do believe our organizational structure has allowed us to permanently improve working capital efficiency, which will help enable continued strong free cash flow performance in the future.
During 2020, we made solid progress on our efforts to free resources from non-core assets.
We successfully closed the sale of our Columbus, Ohio branch location.
We also closed the sale of the Beall brand of Tank Trailers.
Streamlining our portfolio has positioned us to align internal talent around strategic growth initiatives, which include cold chain, home delivery and parts and services.
With regard to capital allocation during the fourth quarter, we utilized $11.2 million to pay down debt, $8.7 million to repurchase shares and invested $6.4 million in capital projects and paid our quarterly dividend of $4.2 million.
Moving now to Slide 9 with our outlook for 2021.
We expect revenue of approximately $1.9 billion to $2 billion.
CTP is clearly poised for a meaningful bounce in activity.
We also expect to see substantial rebounds in revenue, particularly for FMP and, to a lesser extent, DPG, as a result of the absence of divested revenue.
SG&A as a percent of revenue is expected to be approximately 6.5% for the full year and we remain positioned to sustain the reduction in our cost structure by $20 million from 2019 with around $15 million of that cost-out residing within SG&A.
Operating margins are expected to be 4% at the midpoint.
While we've talked about both incremental and decremental margins for the company being in the 20% range on a normalized basis, the base on which we're calculating incremental margins for 2021 have considerable furlough savings included, which does temporarily serve to depress incremental margins.
We had approximately $25 million to $30 million of one-time reductions in areas such as furloughs and incentive compensation in 2020 that will return in 2021.
With that in mind, we would expect decrementals to be closer to the low-teens in 2021.
But we would expect 20% incrementals from 2021 to calendar year 2022.
Lastly, I'd like to make on the full year calendar -- consolidated P&L is that amortization of the tangibles does step up again in 2021 by about $2 million.
On a segment basis, the step-up in amortization will be seen entirely within FMP, bringing this segment's full-year amortization to $12.4 million.
Full-year capital spending is expected to rebound in 2021 compared to the prior year as we catch up on project that were deferred during COVID.
In total, we estimate 2021 capital spending of between $35 million and $40 million.
As we return to normal seasonal patterns, I'd like to remind everyone that Q1 tends to be our lowest quarter in terms of revenue and earnings per share generation.
Combining those seasonal trends with the massive capacity ramp we are undertaking to keep up with the demand, that has us adding roughly 1,500 hourly employees from September 30 to March 31, and we would expect Q1 to be pressured.
We should see increasing quarterly revenue, margins and earnings per share as we move through 2021, however.
Our expectation is for first quarter revenue to come in between $390 million and $420 million with new trailer shipments of 9,500 to 10,500 and to be approximately breakeven from an earnings per share perspective.
From a cash perspective, working capital will become a use of cash, given the volume growth we're expecting throughout the business as inventory expands and accounts receivable increase.
We continue to look for opportunities to drive structural improvements to working capital, though, in the short term and we do expect in 2021 to consume upwards of $50 million of cash, most of which will occur in the first half of the year.
On long-term targets, I'd like to circle back and discuss what was laid out in our 2019 Investor Day.
We had outlined targets that centered around achieving a consolidated operating margin of 8%.
While the world has obviously changed immensely since we initially released these targets, I do want to reiterate that the team still see the 8% operating margin as a reasonable goal in the medium term.
Given our longer-term planning, I believe the 8% operating margin is achievable over the next two to three years.
In closing, I'm proud of the actions are employees took to deal with short-term challenges and also progress our longer-term plans.
I'm also excited by the financial results we've achieved this year.
Excellent decremental margins, positive full year earnings per share and exceptional free cash flow generation, [Indecipherable] 2020 financial performance has raised the floor relative to prior troughs.
Just as critical, however, it is important to note that we did not slow down our growth initiatives or compromise our business in any way during the downturn and we are poised to recover rapidly during the cyclical bounce back, while also developing sustainable revenue streams for years to come.
Our organization is excited to move forward with our One Wabash approach to the customer and our strong backlog helps to provide visibility well into 2021.
We look forward to ramping up capital expenditures to support our growth initiatives, while maintaining our dividend and becoming more active with debt reduction and share repurchases.

user
q4 earnings per share $0.10.
sees fy 2021 earnings per share $0.75.
backlog as of december 31, 2020 was approximately $1.5 billion as new order activity remained strong during q4.2021 earnings per share outlook initiated at $0.75 per diluted share; range of $0.70 to $0.80.
issued guidance of $1.9 billion to $2.0 billion in sales for 2021.

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