Welcome to the First Quarter Earnings Call. My name is Yolanda, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. Please note that this conference is being recorded. It's now my pleasure to turn the call over to Mr. Mike Pettit. You may begin.

Thank you, Yolanda, and good morning. Welcome everyone to the Wabash National Corporation 2015 First Quarter Earnings Call. This is Mike Pettit, Vice President of Finance and Investor Relations. Following this introduction, you’ll hear from Dick Giromini, Chief Executive Officer of Wabash National on the highlights of the First Quarter, the current operating environment and our outlook for the rest of 2015. After Dick, Jeff Taylor, our Chief Financial Officer will provide a detailed description of our financial results. At the conclusion of the prepared remarks, we'll open the call for questions from the listening audience. Before we begin, I'd like to cover two quick items. First, please note that this call is being recorded. Second, as with all of these types of presentations, this morning's call contains certain forward-looking information including statements about the company's prospects, industry outlook, backlog information, financial condition and other matters. As you know, actual results could differ materially than those projected in the forward-looking statements. These statements should be viewed being the cautionary statements and risk factors set forth from time-to-time in the company's filings with the Securities and Exchange Commission. With that, it is my pleasure to turn the call over to Dick.

Thanks, Mike. Let me start by saying that we're very pleased with the ongoing progress that we continue to make with the business and in the execution of our strategic plan. Importantly, we started off 2015 with an accelerated pace of improvement from a record-breaking 2014. During this past quarter, we achieved all time records for any first quarter in our company's 30-year history and revenue, gross profit and operating income is historically strong and more balanced topline and bottom line results were delivered across our three segments. These results demonstrate and validate the transformative nature of our strategic growth and diversification initiatives and the success is provided for the successful initiation of our previously announced share repurchase program, acquiring 1.3 million shares during the quarter. Trailer shipments for the quarter were strong 14,350 units coming in above our communicated range of 12,000 to 13,000 trailers as customer pickups accelerated through the back half of the quarter at stronger levels than previously anticipated. Additionally strong productivity out of the gate led to exceptional first quarter build levels that total approximately 16,100 trailers, exceeding the first quarter of 2014 by some 3,200 trailers. Net sales for the quarter were all time first quarter record $438 million representing an $80 million or 22% increase compared to first quarter of 2014, which was the previous first quarter record. Consolidated gross profit of $57.2 million also set an all time first quarter record, exceeding first quarter '14 by $10.5 million, while gross margin increased to 13.1% for the quarter. Operating income for the first quarter was $27.3 million representing a $7.8 million or 40% increase year-over-year, largely driven by significant strides made in the commercial trailer product segment, partially offset by a slight decline in diversified products. Operating EBITDA, which we believe is an…

Thanks Dick and good morning, everyone. In addition to the press release, we filed the 10-Q after the market closed yesterday, so I plan to hit the key points. With that let’s get into some of the first quarter financial highlights. Consolidated revenue for the quarter was $438 million, an increase of $80 million or 22% compared to the first quarter of last year. Total new trailer shipments were 14,350 units exceeding our guidance of 12,000 to 13,000 and 4,400 units higher year-over-year. Sequentially, consolidated revenue decreased $90 million or approximately 17% due to a very strong fourth quarter and the normal seasonal slowdown in the first quarter. Commercial Trailer products net sales were $315 million, which represents an $87 million or 38% increase on a year-over-year basis due to higher new trailer shipments of approximately 4,350 units. New trailer average sales price or ASP decreased approximately $500 per unit primarily resulting from customer and product mix that was biased towards smaller and lower price products such as LTL trailers and converted alias. While these products do carry a lower ASP, they do not necessarily have a lower margin profile. Furthermore, while average sales price decreased, we actually saw an increase in net pricing by approximately $400 per unit, which is evidenced in CTP’s improving margins year-over-year. Diversified Products net sales decreased 4% or $4 million on a year-over-year basis to $104 million. Walker Group revenue was down year-over-year primarily due to product mix and some continued pricing pressure within certain product lines of Walker Group. On the sequential basis, Diversified Products net sales declined 16% primarily due to lower tank trailer shipments in the first quarter. Retail segment net sales on a same-store basis after adjusting for the transition of three West Coast branch locations in May of 2014…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have a question from Mike Shlisky. Your line is open.

Hi good morning, this is Lee on the line for Mike. I just wanted to touch on the order turns that you guys are seeing, how far out are you currently booked?

Well the $1.2 billion in backlog, if you look at it on a consolidated and compressed basis, it translates to about eight months, worth of backlog.

Okay, great. Are you considering opening your order books for 2016 early at this point?

Not at this juncture. It’s a little early in the process to be looking at 2016 needs customers will become more serious about that as we get later into the year as we get into mid-year. Our prediction is that you’ll see actually an earlier interest by customers to start the dialog than they would typically because of wanting to lock up slots. As I shared in my formal comments some customers have actually faced needs for equipment and have had to delay taking on that equipment because they couldn’t find slots in the industry. So I think you’ll see -- you’ll see a little bit of an earlier trend in getting on Board and wanting to have those conversations to lock-in slots earlier.

Okay. Great and then one last follow-up if I could? Are you -- what kind of pricing are you seeing was currently in your backlog? Is it around the same pricing you saw in Q1 or would you say it’s slightly better given that you’re able to be more selective now?

Well, as I stated in my comments, as we progress through the year, we believe that you’ll see a continued improvement on year-over-year comparisons on our pricing, on a net pricing basis. Mix can always have an impact as you get some of the smaller lower priced product, but it doesn’t impact the margin that we get from there. So what you’ll tend to see is continuing year-over-year improvement in net pricing output specifically from the Commercial Trailer Products business.

Okay. Great. I’ll leave it there. Thanks.

Thank you.

The next question is from Alex Potter. Your line is open.

Hi this is actually Winnie in for Alex. Last quarter you guys had mentioned that this year Q3 will be the quarter in which the gross margin in DPG get back to the 21% to 23%. But obviously that wasn’t the case. It rose to 22% in Q1. I think you briefly touched upon this. Can you elaborate on what changed and is the current margin run rate sustainable both in terms of gross margin and in terms of SG&A, thanks?

Yes good question actually. Really it was operational execution that really drove the improvement for the business. They did have some favorable mix in product but the team has really tried to step up and address some of the challenges that they had previously faced and are working hard to continue to do that as we progress through the year. I do want to reemphasize what I commented on in my formal comments earlier as that as we transition from the results of the first quarter through the second quarter we'll have to have some patience. We're looking at probably a flat quarter-over-quarter performance by that business, Diversified Products as they transition and get these new expansions up and running effectively get some of their product, the new product produced, shipped and start getting able to recognize some of those efforts as we go forward. But as we progress through the latter half of the year, we should expect some marked improvement, but our 21% to 24% previous guidance for gross margin for the Diversified Products business stays as our guidance for that. So that’s what we’re trying to achieve and maintain in that range.

Okay. Great, thank you so much for the color. And then another question is the non-trailer revenue in the DPG segment had a pretty meaningful step down seems like on a sequential basis. How much of that was due to seasonality? How much was it due to ASP pressure other cost and can we -- or we justified in modeling that bounce back in there?

Yes, I wouldn’t get into too much granular there. There are so many moving parts within the Diversified Products business, but some of the non-trailer product would be coming out of our Wabash Composites business and we previously -- in previous calls discussed some of the pricing pressures on the Workhorse DuraPlate AeroSkirt product. So that dynamic remains the same. And then in the engineered products part of the Walker business, they have some timing seasonal issues as they build some of the product in that business takes longer periods of time to build, construct and ship. So there tends to be some timing delays from time to time on getting that product completed and shipped. Stationary silos, some of the pharmaceutical down flow booths and isolator booths, those are the types of things that will tend to be lumpy throughout the year. So the DuraPlate products business or excuse me, the Diversified Products business has a lot of that lumpiness from quarter-to-quarter that you have to contend with, within the Engineered Products business and within the Wabash Composites business. So I wouldn't read anything into it. Just patience through the second quarter as we build up and get into the latter half of the year.

And there is just some natural variation that occurs in that business as a result of as Dick mentioned the diverse set of businesses, products in markets that we serve in the Diversified Products Group. So some of that to be expected.

Okay. Thanks. I'll pass it on.

Thank you.

Our next question is from John Mims. Your line is open.

Hey good morning, guys. Let me ask Dick, kind of following up on the question on backlog and pricing power and what not. I am curious to know how much flexibility you have for slots in the back half of the year in terms of being able to kind of triage more aggressively priced trailers or how much of that is just locked in with the larger kind of longstanding orders that you're still selling?

The drive in segment is the one that has had the largest increase in demand across the industry and obviously that’s the part of the business that gets build up the earliest and has pretty much been that way. What we have done as the orders were coming in late last fall in droves we were standing very firm and strict on our commitment to favor major over volume. So we were looking at each one of those and adjusting pricing where we could. Remaining slots we have been extremely tight on scrutinizing just which order opportunities, which code opportunities has actually been converted to orders to get the most price benefit that we could out of them. So we've been very selective. We feel we've done a very good job with that. I always hate to say that we're completely filled up because the Commercial Trailer Product team just continues to drive productivity improvement efforts within the business and that’s what's allowed us to increase our projections for the year. Some of those activities and efforts that have resulted in creating effectively additional capacity without having to invest anything in the business to create it other than the productivity improvement efforts through our CI activities and events.

Okay. That makes sense. And I know you have the backlog to be technically full, but when you look at build slots, are you all actually full or do you save a pocket of production capacity for emergency orders, high priced orders that may come in and need to be filled quickly?

Yes. We don’t effectively save the slots. We -- I guess you could say some of the higher bidder, I hate to use that expression, but we've been as my earlier comments, we try and be very selective in how we fill the remaining slots, but the team while we're not effectively saving slots, the team has found ways to be able to take advantage of small, smaller opportunities here and there -- through their productivity improvement initiatives to create some of them. And we always have some overtime that we will use on weekends to take advantage to some very attractive priced opportunities. But no, we do not do any slot holding per se that make go on in other pockets of the industry.

Sure, that makes sense. And then on the labor side, can you comment on wages, labor availability wage inflation if I look at G&A excluding depreciation, I ticked up a little bit of percentage of revenue this quarter and the first quarter is kind of tough to read for the full year. But are you having to do across the Board wage increases? Are you paying more overtime this year than last year? Any help there would be helpful.

Well there may be some more. We've not had any wage pressures per se. We have normal adjustments that we will pass along, but nothing out of the ordinary. On the overtime front, clearly as I stated about being opportunistic on attractive code opportunities to accept orders that would provide an opportunity to utilize overtime to build those, we're going to be obviously paying an overtime premium to build those on weekends. So yes, we're going to see an increase in this environment in the amount of overtime, but those are taking advantage for the opportunity.

Sure and that still -- any increase in overtime there is still within that 5% SG&A target that you put out Jeff.

Well on a full year basis, we expect to still be around 5%. Obviously the first quarter is 1% of revenue is one of the highest quarters we have. The good news is this year first quarter as a percent of revenue was lower than it was last year. I think the increases you see in any kind of SG&A is really related to the company performing at a higher level the growth we experienced and some investment in the future growth opportunities that we're pursuing and investigating.

And just to clarify John, the overtime increase cost would be reflected up in the cost of goods sold.

Okay. That’s right. That’s helpful. Okay. And then just one last one and I'll turn it back, when you're in this kind of environment where everybody is making trailer as fast as they can and truckers are running around and freight assessors they can, can you charge the mileage for the trailer that you're manufacturing but people are too busy to come pick up that’s in new yard as well.

Not really. We've looked at that in the past and it's just not something that generally works well in the industry. What we have done though is we work much more closely with our customers to get them to indentify which product and which orders that they intend to pick up themselves we call customer pickup versus turning it over to us to prepare and plan for the delivery of it. And what we've changed in our system and why we're in recent quarters having better success is actually working with them prior to the build completion to actually identifying which approach they want to take and that’s something that helps the process get started earlier in the planning process for it and it gives a little bit more predictability. I am not going to say it's perfect yet, but it gives us a little bit more predictability on what we will be able to accomplish and that’s relatively recent change that we've made and it seems to becoming more effective in getting a steadier flow of shipments out of the door. A little early for us to say that with the 99% confidence and predictability, but it seems to be getting much better over these last couple quarters.

All right, understood. Okay. Well thanks so much. Great quarter and great start to the year.

Thanks John.

Our next question is from Jeff Kauffman your line is open.

Hey guys.

Hey Jeff. Good morning.

Hey. Good morning. Congratulations. That was fantastic quarter. Nice to see. A couple follow-ups with Jeff, Jeff you mentioned with the term loan, the positives, the lower rate, the absence of financial convenience would save you about a $1 million in interest expense. But your guidance a little bit earlier was that interest expense was going to be only about a $1 million lower than last year. So should I assume that none of the guidance you've given in corporate setting debt paid down from this date forward?

Yes, I don’t forecast debt pay down. We take that on a quarter by quarter basis. It's a discussion as you know Dick and I have with our Board of Directors on a regular basis and obviously you know that’s part of our overall capital allocation strategy as well.

Okay. And the share repo, you said I think you bought back about 1.3 million shares.

Yes. Just short of 1.3 million.

Okay. Was that late in the quarter because it didn’t seem like there was a big change in shares outstanding?

Well, there are couple of moving pieces there and when you look at the outstanding shares especially on a diluted basis John, so, sorry Jeff…

That’s okay.

Like we said, we repurchased approximately 1.3 million on a diluted basis so the convertible notes will add about 1.7 million shares to the calculation. So you have to take that into account when you look at the total diluted share count. I think the good news is, is we came out of the gate very strong on the share repurchased program. We made significant progress in the first quarter and it gives us great flexibility over the next seven quarters as we evaluate that form of return of capital and other forms of return of capital.

Okay. And just a follow-up on that, you do have the convertible security out there I guess the good news is we’re starting to worry about getting in the money eventually. Can you refresh on what the options are for using cash to maybe repurchase that if you choose to do so and kind of what those prices are that would trigger some of those events?

Sure. So let me try to just give a high level summary of the $150 million convertible notes that are due in May of 2018. The conversion price is around $11.70 per share. So from that perspective Jeff the share would already be in the money at the current share price. Having said that, the holders of those notes don’t have the ability to convert and still our share price is above 30% above the conversion price for 20 out of 30 days at the end of the quarter. So that translates into $15.21. So we haven’t triggered that mechanism for them to be able to convert at this point in time. And during the last six months of the convertible notes, they can convert it anytime as long as the price is above the conversion price.

Okay. Thank you.

And then we don’t have a call provision on that. So those notes are not callable by us Jeff. So it’s I'll say not easy to repurchase those shares. We could either repurchase in the open market or obviously if there are big holders that were willing to do it a private transaction we could investigate that as well.

I guess where I’m going with this is if I take your earnings guidance and subtract the CapEx even with the share repurchase that you’re looking at somewhere between $80 million and $90 million of uncommitted cash flow for this year and I know acquisitions or alternative dividends are alternative. But does it make sense to raise cash levels in the event that the share price doesn’t have a whole lot more to go to trigger that maybe have some cash in reserve or how do you think about capital deployment that way?

Well I think you have to plan for all of the potential outcomes there Jeff and so we need to be in a position to meet any of those scenarios. And I think obviously we've kicked the term loan out for another seven years that’s in a good spot. It allows us to turn on occasion for the convertible notes. We'll evaluate opportunities for further de-levering against the convertible notes as those opportunities present themselves. And in the interim, I think if you look at our de-levering in terms of our net debt leverage is potentially we do hold more cash on the balance sheet.

All right guys. Hey thanks so much Jeff.

Well thank you, Jeff.

Our next question is from James Goodfellow. Your line is open.

Hi good morning, guys. This is Jamie on for Kristine this morning.

Good morning.

Stepping on for Christine, I wanted to dig into what’s going on in the tanker market? What you’ve seen in terms of pricing and basically is it fair to assume that your competitors who might have heavier exposure directly to energy end markets are feeling some pricing pressure and might those pressures flow through to the broader market, including the players not serving those markets directly?

Yes it’s great assessment James. What we have -- we have some direct exposure as everyone knows, which the Walker business itself 10% to 12% exposure to the energy sector. So while we have some of impact there, some impact there, there is also the indirect impact and that’s since those competitors who maybe more exposed will shift their focus to other products and therefore we end up feeling some of the indirect impact of the softness in the O&G space. So yes, that is creating some of the pricing pressures that we shared and described last quarter and those have continued and we’re hopeful as O&G the price of the oil -- barrel of oil tends to stabilize, go up and we may see some moderation there, but that’s been some of the effect that we’ve talked about.

Can you quantify to any extent what the pricing is done and where it’s trending there?

James, we’re not going to talk about unfortunately pricing in individual market segments within the Diversified Products Group. I think as a whole, you’ve seen that there has been some price pressure there. Some of that is related to the product mix. As you know we sort of a diverse set of markets there from energy which is crude oil, refined fuels, food, dairy, beverage, chemical, environmental in all of those market segments. So as Dick mentioned the indirect impact on oil and gas I think it does put pressure on some of those other markets and probably the vast visibility is through the -- through just the average sales price that you see in the overall segment.

Got it. Well that’s very helpful. Congrats on the quarter guys.

Thank you.

Our next question is from Brad Delco. Your line is open.

Good morning, Dick. Good morning, Jeff. How are you guys?

Hi Brad.

Very good.

May have missed this. I apologize I've been on two calls, but you made a comment about seeing kind of sequential flat performance in Diversified Products, were you speaking specifically about revenue or gross margins or earnings or anymore color there would be helpful?

Yes, I think you want to look at both lines, revenue and the profit line as they’re transitioning and getting the new facilities, the facility in Frankfurt that is the new leased facility for the Wabash Composites business to get the needed floor space to be able to expand the business and introduce the new product offerings, the new aerodynamic offerings they’ve got. And then you’ve got the expansion in our Mexico facility for the introduction of stationary silos for food, dairy, beverage industries to service the Mexican market. That’s a growth initiative, but it’s in its ramp up phase. The expansion in Mexico was completed late last year and we got production started up earlier this past quarter and we'll start seeing some shipments flowing out of there this quarter. So that’s going to help the business going forward. But we need a little bit of patience as we transition through those ramp ups and get the operating efficiencies in line and get into the second half and that’s all I was trying to communicate there. You got a combination of a number of factors, those ramp ups, the introduction of those new products and then you got the -- some of the softness that’s been created by slowdowns in the oil and gas sector that have had some direct impact on our business. But then the indirect impact of competitors that are refocusing their efforts and creating not only some pricing pressures but some competitive nature as they shift away from some of the O&G product that they produced to try and produce some of the other product that they were not producing previously which would be more in our warehouse. So you’ve got a combination of a number of factors that are impacting it and we’re just trying to remain cautious as we go through the second quarter because of some of that noise. So that's much stronger as we enter the second half.

Okay. So that’s what I was sort of getting that in terms of what’s embedded in guidance, it seems as if flat into 2Q, but because of these investments in growth, we should see maybe some acceleration in the back half of the year, is that a fair way to describe that?

Absolutely.

And then just want to touch on put up really strong margins in the CTP sector on a lot of volumes running through the plant. Is the idea I guess going into second and third quarter is that those margins can improve because of I guess the improved price in the backlog or is there additional productivity that can be realized from just your higher production rates?

Yes you get a little bit of both. Certainly as we continue to fill out the backlog, as we were taking newer, newer quotes were coming in and filling out the balance of the backlog. The pricing environment is better today than it was several months ago. So we’ve taken advantage of that and with the maturity of the workforce, the number of productivity improvement initiatives that the team is able to throw at the workforce is with a much more mature group. They are able to handle it. So we’re getting improvements in velocity, in productivity, in efficiency times being improved. So we’re getting more out of what we already have installed in the factories and that’s what allowed us to make the adjustment on the top line for total trailer output for the year is leveraging some of that newly created capacity along with some opportunities to grab some attractive orders and work over time to fulfill those.

Yes and Brad, recall we ramp up in first quarter. So there is some first quarter ramp up there. As you get into second quarter, you’re really firing on all cylinders and you get the benefit of that in the second and third quarters and the rest of the year.

Okay. Got it. That makes sense. And then this maybe a very random question, but looking at some of these truckload names, you’re hearing a lot about driver wage inflation, I’m just curious to get your perspective, are you seeing any wage inflation pressures from your workforce or is there a way for us to think about wage inflation in your business over the course of the year and maybe in the next year?

Yes that was a question that was asked previously. So I’d just reiterate. We have not seen anything unusual in our business. Obviously you're always going to have certain locations that may need if you have location that has eight mechanics and you’re going to have to go out and find the mechanic you may end up making some adjustments. But for the masses talking about here in the main headquarters location in Lafayette, where we actually have a total of 3,500 of our associates are here, we’ve not seen anything unusual. The workforce is far more stable today than it has been in a number of years. So the turnover rates are lower and we’ve got programs in place that provide incentives for performance, but we’ve not seen anything unusual from a wage pressure unlike what our customers may be seeing as they fight for decreasing pool of drivers.

Okay great. Sorry for making you repeat that but thanks for the time and congrats on the quarter.

Thanks.

We have no further questions at this time. I'll turn the call back over to Dick Giromini for final remarks.

Thank you. In conclusion, we’re extremely pleased with the results we’re able to deliver in the first quarter of 2015. That said, we see even further opportunities to accelerate top line growth, expand product and market breadth and to deliver even greater performance in almost all aspects of our business. With a hyper focus on execution and delivering results, I’m confident that we’ll do just that. Thank you for your interest and support of Wabash National Corporation. Jeff, Mike and I, all look forward to speaking with all of you again on our next call. Thank you.