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WABASH NATIONAL Corp - Quarter Report: 2023 June (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2023
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                         to                         
Commission File Number: 001-10883
WABASH NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
Wabash-Logo.jpg
52-1375208
(State of Incorporation)(IRS Employer Identification Number)
3900 McCarty Lane
LafayetteIndiana47905
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (765) 771-5310
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
WNC
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock outstanding at July 19, 2023 was 46,999,391.


Table of Contents
WABASH NATIONAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Page

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Table of Contents
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

June 30,
2023		December 31,
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$98,791 $58,245 
Accounts receivable, net231,748 255,577 
Inventories, net342,470 243,870 
Prepaid expenses and other55,419 34,927 
Total current assets728,428 592,619 
Property, plant, and equipment, net314,133 271,116 
Goodwill188,411 188,434 
Intangible assets, net92,824 99,231 
Other assets61,245 52,123 
Total assets$1,385,041 $1,203,523 
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt$— $— 
Accounts payable231,036 189,141 
Other accrued liabilities202,374 158,327 
Total current liabilities433,410 347,468 
Long-term debt396,138 395,818 
Deferred income taxes33,381 27,758 
Other non-current liabilities40,759 34,354 
Total liabilities903,688 805,398 
Commitments and contingencies
Noncontrolling interest329 512 
Wabash National Corporation stockholders’ equity:
Common stock 200,000,000 shares authorized, $0.01 par value, 47,065,370 and 47,675,796 shares outstanding, respectively
774 766 
Additional paid-in capital671,769 665,941 
Retained earnings305,834 188,241 
Accumulated other comprehensive loss(3,004)(882)
Treasury stock at cost, 30,438,260 and 28,972,928 common shares, respectively
(494,349)(456,453)
Total Wabash National Corporation stockholders' equity481,024 397,613 
Total liabilities, noncontrolling interest, and equity$1,385,041 $1,203,523 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited – dollars in thousands, except per share amounts)

Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Net sales$686,620 $642,769 $1,307,572 $1,189,530 
Cost of sales535,593 564,735 1,040,518 1,053,441 
Gross profit151,027 78,034 267,054 136,089 
General and administrative expenses37,318 30,944 73,358 57,276 
Selling expenses7,194 7,376 14,078 13,585 
Amortization of intangible assets3,203 3,803 6,406 8,842 
Impairment and other, net2 3 2 343 
Income from operations103,310 35,908 173,210 56,043 
Other income (expense):
Interest expense(4,987)(5,218)(9,981)(10,131)
Other, net475 (327)862 (398)
Other expense, net(4,512)(5,545)(9,119)(10,529)
Income before income tax expense98,798 30,363 164,091 45,514 
Income tax expense24,324 7,624 38,221 10,701 
Net income74,474 22,739 125,870 34,813 
Net income attributable to noncontrolling interest146 187 329 187 
Net income attributable to common stockholders$74,328 $22,552 $125,541 $34,626 
Net income attributable to common stockholders per share:
Basic$1.57 $0.46 $2.64 $0.71 
Diluted$1.54 $0.46 $2.58 $0.70 
Weighted average common shares outstanding (in thousands):
Basic47,452 49,034 47,610 49,019 
Diluted48,373 49,535 48,737 49,662 
Dividends declared per share$0.08 $0.08 $0.16 $0.16 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited – dollars in thousands)

Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Net income$74,474 $22,739 $125,870 $34,813 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment502 (303)1,066 (60)
Unrealized loss on derivative instruments(2,952)(19,610)(3,188)(6,025)
Total other comprehensive loss(2,450)(19,913)(2,122)(6,085)
Comprehensive income72,024 2,826 123,748 28,728 
Comprehensive income attributable to noncontrolling interest146 187 329 187 
Comprehensive income attributable to common stockholders$71,878 $2,639 $123,419 $28,541 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – dollars in thousands)
Six Months Ended
June 30,
20232022
Cash flows from operating activities
Net income$125,870 $34,813 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation13,760 16,482 
Amortization of intangibles6,406 8,842 
Net loss (gain) on sale of property, plant and equipment2 (642)
Deferred income taxes6,653 (139)
Stock-based compensation5,681 4,647 
Impairment— 986 
Non-cash interest expense477 426 
Accounts receivable23,829 (55,114)
Inventories(98,600)(67,717)
Prepaid expenses and other(9,148)814 
Accounts payable and accrued liabilities69,793 142,869 
Other, net1,608 (3,593)
Net cash provided by operating activities146,331 82,674 
Cash flows from investing activities
Cash payments for capital expenditures(55,820)(22,369)
Expenditures for revenue generating assets(3,244)— 
Proceeds from the sale of assets— 1,445 
Net cash used in investing activities(59,064)(20,924)
Cash flows from financing activities
Proceeds from exercise of stock options155 735 
Dividends paid(8,366)(8,278)
Borrowings under revolving credit facilities103,731 56,739 
Payments under revolving credit facilities(103,731)(30,773)
Principal payments under finance lease obligations— (59)
Debt issuance costs paid(102)(83)
Stock repurchases(37,896)(13,325)
Distribution to noncontrolling interest(512)— 
Net cash (used in) provided by financing activities(46,721)4,956 
Cash and cash equivalents:
Net increase in cash, cash equivalents, and restricted cash40,546 66,706 
Cash, cash equivalents, and restricted cash at beginning of period58,245 71,778 
Cash, cash equivalents, and restricted cash at end of period$98,791 $138,484 
Supplemental disclosures of cash flow information:
Cash paid for interest$9,545 $10,177 
Net cash paid (refunds received) for income taxes$40,905 $(3,312)
Period end balance of payables for property, plant, and equipment$18,362 $9,288 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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WABASH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited – dollars in thousands)

 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
 SharesAmount
Balances at December 31, 202247,675,796 $766 $665,941 $188,241 $(882)$(456,453)$397,613 
Net income attributable to common stockholders for the period51,213 51,213 
Foreign currency translation564 564 
Stock-based compensation480,463 8 2,758 2,766 
Stock repurchase(540,875)(23,566)(23,566)
Common stock dividends(4,055)(4,055)
Unrealized loss on derivative instruments, net of tax(236)(236)
Common stock issued in connection with:
Stock option exercises10,683 144 144 
Balances at March 31, 202347,626,067 $774 $668,843 $235,399 $(554)$(480,019)$424,443 
Net income attributable to common stockholders for the period74,328 74,328 
Foreign currency translation502 502 
Stock-based compensation24,550 2,915 2,915 
Stock repurchase(585,997)(14,330)(14,330)
Common stock dividends(3,893)(3,893)
Unrealized loss on derivative instruments, net of tax(2,952)(2,952)
Common stock issued in connection with:
Stock option exercises750 11 11 
Balances at June 30, 202347,065,370 $774 $671,769 $305,834 $(3,004)$(494,349)$481,024 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
 SharesAmount
Balances at December 31, 202148,954,482 $759 $653,978 $92,111 $859 $(422,168)$325,539 
Net income for the period12,074 12,074 
Foreign currency translation243 243 
Stock-based compensation277,124 5 2,272 2,277 
Stock repurchase(247,174)(8,013)(8,013)
Common stock dividends(4,065)(4,065)
Unrealized gain on derivative instruments, net of tax13,585 13,585 
Common stock issued in connection with:
Stock option exercises48,208 613 613 
Balances at March 31, 202249,032,640 $764 $656,863 $100,120 $14,687 $(430,181)$342,253 
Net income attributable to common stockholders for the period22,552 22,552 
Foreign currency translation(303)(303)
Stock-based compensation16,416 2,370 2,370 
Stock repurchase(360,659)(5,312)(5,312)
Common stock dividends(3,901)(3,901)
Unrealized loss on derivative instruments, net of tax(19,610)(19,610)
Common stock issued in connection with:
Stock option exercises12,690 122 122 
Balances at June 30, 202248,701,087 $764 $659,355 $118,771 $(5,226)$(435,493)$338,171 

The accompanying notes are an integral part of these Condensed Consolidated Statements.
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WABASH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF THE BUSINESS & BASIS OF PRESENTATION
Wabash National Corporation (the “Company,” “Wabash,” “we,” “our,” or “us”) was founded in 1985 and incorporated as a corporation in Delaware in 1991, with its principal executive offices in Lafayette, Indiana. The Company was founded as a dry van trailer manufacturer—today, the Company enables customers to thrive by providing insight into tomorrow and delivering pragmatic solutions today to move everything from first to final mile. The Company designs, manufactures, and services a diverse range of products, including dry freight and refrigerated trailers, platform trailers, tank trailers, dry and refrigerated truck bodies, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade processing equipment. This diversification has been achieved through acquisitions, organic growth, and product innovation.
The condensed consolidated financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed consolidated financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company, its results of operations, and its cash flows. The Company consolidates into its financial statements the accounts of the Company and any partially owned subsidiary it has the ability to control (see Note 5). The Company does not have any subsidiaries it consolidates based solely on the power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, its affiliates are businesses established and maintained in connection with its operating strategy and are not special purposes entities. All intercompany transactions and balances have been eliminated.
The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
2. NEW ACCOUNTING PRONOUNCEMENTS
The Company has reviewed recently issued accounting standards, which have not yet been adopted, in order to determine their potential effect, if any, on its financial condition or results of operations. Based on the review of recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial condition, results of operations, cash flows, or disclosures.
3. REVENUE RECOGNITION
The Company recognizes revenue from the sale of its products when obligations under the terms of a contract with our customers are satisfied; this occurs with the transfer of control of our products and replacement parts or throughout the completion of service work. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring promised goods or services to a customer and excludes all taxes collected from the customer. Shipping and handling fees are included in Net sales and the associated costs included in Cost of sales in the Condensed Consolidated Statements of Operations. For shipping and handling costs that take place after the transfer of control, the Company applies the practical expedient and treats such costs as a fulfillment cost. Incidental items that are immaterial in the context of the contract are recognized as expense. For performance obligations satisfied over time, which primarily relate to service work whereby the customer simultaneously receives and consumes the benefits provided, the Company recognizes revenue on the basis of the Company’s efforts or inputs to the satisfaction of these performance obligations, measured by actual total cost incurred to the total estimated costs for each project. Total revenue recognized over time was not material to the condensed consolidated financial statements for all periods presented.
The Company has identified three separate and distinct performance obligations: (1) the sale of a trailer or equipment, (2) the sale of replacement parts, and (3) service work. For trailer, truck body, equipment, and replacement part sales, control is transferred and revenue is recognized from the sale upon shipment to, or pick up by, the customer in accordance with the contract terms. The Company does not have any material extended payment terms as payment is received shortly after the point of sale. Accounts receivable are recorded when the right to consideration becomes unconditional. The Company does have customers who pay for the product prior to the transfer of control which is recorded as customer deposits in Other accrued liabilities as shown in Note 11. Customer deposits are recognized as revenue when the Company performs its obligations under the contract and transfers control of the product.
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4. GOODWILL & OTHER INTANGIBLE ASSETS
As further described in Note 19, the Company has established two operating and reportable segments: Transportation Solutions (“TS”) and Parts & Services (“P&S”). These operating and reportable segments have also been determined to be the applicable reporting units for purposes of goodwill assignment and evaluation. As of June 30, 2023, goodwill allocated to the TS and P&S segments was approximately $120.5 million and $67.9 million, respectively. The Company considered whether there were any indicators of impairment during the three and six months ended June 30, 2023 and concluded there were none.
The changes in the carrying amounts of goodwill from December 31, 2021 through the six-month period ended June 30, 2023 were as follows (in thousands):
Transportation SolutionsParts & ServicesTotal
Balance at December 31, 2021
Goodwill$188,764 $108,079 $296,843 
Accumulated impairment losses(68,257)(40,143)(108,400)
Net balance as of December 31, 2021120,507 67,936 188,443 
Effects of foreign currency(5)(4)(9)
Balance at December 31, 2022
Goodwill188,759 108,075 296,834 
Accumulated impairment losses(68,257)(40,143)(108,400)
Net balance as of December 31, 2022120,502 67,932 188,434 
Effects of foreign currency(8)(4)(12)
Balance at March 31, 2023
Goodwill188,751 108,071 296,822 
Accumulated impairment losses(68,257)(40,143)(108,400)
Net balance as of March 31, 2023120,494 67,928 188,422 
Effects of foreign currency(7)(4)(11)
Balance at June 30, 2023
Goodwill188,744 108,067 296,811 
Accumulated impairment losses(68,257)(40,143)(108,400)
Net balance as of June 30, 2023$120,487 $67,924 $188,411 

5. NONCONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES (“VIEs”)
VIEs & Consolidation
The Company consolidates those entities in which it has a direct or indirect controlling financial interest based on either the variable interest model (the “VIE model”) or the voting interest model (the “VOE model”).
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.
The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE through its interest in the VIE.
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To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (typically management and representation on the board of directors as well as control of the overall strategic direction of the entity) and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.
To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, which primarily include the obligation to absorb losses or fund expenditures or losses (if needed), that are deemed to be variable interests in the VIE. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing the significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.
At the VIE’s inception, the Company determines whether it is the primary beneficiary and if the VIE should be consolidated based on the facts and circumstances. The Company then performs on-going reassessments of the VIE based on reconsideration events and reevaluates whether a change to the consolidation conclusion is required each reporting period. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with the applicable GAAP.
Entities that do not qualify as a VIE are assessed for consolidation under the VOE model. Under the VOE model, the Company consolidates the entity if it determines that it, directly or indirectly, has greater than 50% of the voting shares and that other equity holders do not have substantive voting, participating or liquidation rights. The Company has no entities consolidated under the VOE model.
At each reporting period, the Company reassesses whether it remains the primary beneficiary for VIEs consolidated under the VIE model.
Wabash Parts LLC
During the second quarter of 2022, the Company unified and expanded its parts and distribution capabilities by executing an agreement with a partner to create a new legal entity (Wabash Parts LLC, “WP”) to operate a parts and services distribution platform. The Company holds 50% ownership in WP while its partner holds the remaining 50%. Initial capital contributions were insignificant. WP has no debt or other financial obligations other than typical operating expenses and costs. Creditors of WP do not have recourse to the general credit of the Company. The operating agreement requires excess cash distributions, as defined in the agreement, no later than 30 days after the end of the second and fourth quarters of each year in proportion to the respective ownership interests.
The operating agreement provides the Company’s partner with a put right that would require the Company to purchase its partner’s interest in WP. Upon receiving notice that the Company’s partner has exercised the put right, a valuation will occur as stipulated within the operating agreement. Such put right has not been exercised by the Company’s partner and is therefore not mandatorily redeemable as of the current period end date, however the existence of the put right that is beyond the Company’s control requires the noncontrolling interest to be presented in the temporary equity section of the Company’s Condensed Consolidated Balance Sheets.
Because the entity does not have sufficient equity at risk to permit it to carry on its activities without additional financial support, the Company concluded that WP is a VIE. The Company has the power to direct the activities of WP through majority representation on the Board of Directors as well as control related to the management and overall strategic direction of the entity. In addition, the Company has the obligation to absorb the benefits and losses of WP that could potentially be significant to the entity. The Company also has a requirement to provide funding to the entity if needed. Given the facts and circumstances specific to WP, the Company concluded that it is the primary beneficiary and, as such, is required to consolidate the entity. WP’s results of operations are included in the Parts & Services operating and reportable segment. Through June 30, 2023, the Company did not provide financial or other support to this VIE that it was not contractually obligated to provide. As of June 30, 2023, the Company does not have any obligations to provide financial support to WP.
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The following table presents the assets and liabilities of the WP VIE consolidated on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (in thousands):
June 30,
2023		December 31,
2022
Assets
Current assets:
Cash and cash equivalents$2,002 $1,379 
Accounts receivable, net1,776 1,509 
Inventories, net143 138 
Prepaid expenses and other130 16 
Total current assets4,051 3,042 
Property, plant, and equipment, net— — 
Other assets229 141 
Total assets$4,280 $3,183 
Liabilities
Current liabilities:
Accounts payable$3,607 $2,136 
Other accrued liabilities16 23 
Total current liabilities3,623 2,159 
Other non-current liabilities— — 
Total liabilities$3,623 $2,159 
The following table is a rollforward of activities in the Company’s noncontrolling interest (in thousands):
20232022
Balance at January 1$512 $— 
Net income attributable to noncontrolling interest183 — 
Other comprehensive income (loss)— — 
Distributions declared to noncontrolling interest— — 
Balance at March 31695 — 
Net income attributable to noncontrolling interest146 187 
Other comprehensive income (loss)— — 
Distributions declared to noncontrolling interest(512)— 
Balance at June 30$329 $187 

6. INVENTORIES, NET
Inventories are stated at the lower of cost, determined on either the first-in, first-out or average cost method, or net realizable value. Inventories, net of reserves, consist of the following components (in thousands):
June 30,
2023		December 31,
2022
Raw materials and components$180,971 $176,080 
Finished goods140,859 50,005 
Work in progress12,300 9,983 
Aftermarket parts7,490 7,065 
Used trailers850 737 
$342,470 $243,870 
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7. PREPAID EXPENSES AND OTHER
Prepaid expenses and other current assets consist of the following (in thousands):
June 30,
2023		December 31,
2022
Chassis converter pool agreements$33,842 $20,345 
Assets held for sale— — 
Income tax receivables5,068 2,358 
Insurance premiums & maintenance/subscription agreements9,076 3,949 
Commodity swap contracts521 2,674 
All other6,912 5,601 
$55,419 $34,927 
Chassis converter pool agreements represent chassis transferred to the Company on a restricted basis by the manufacturer, who retains the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales to the manufacturer’s dealers. There were no assets held for sale as of either date presented. Insurance premiums and maintenance/subscription agreements are charged to expense over the contractual life, which is generally one year or less. As further described in Note 9, commodity swap contracts relate to our hedging activities (that are in an asset position) to mitigate the risks associated with fluctuations in commodity prices. Other items primarily consist of investments held by the Company’s captive insurance subsidiary and other various prepaid and other assets. As of June 30, 2023 and December 31, 2022, there was no restricted cash included in prepaid expenses and other current assets.
8. DEBT
Long-term debt consists of the following (in thousands):
June 30,
2023		December 31,
2022
Senior Notes due 2028$400,000 $400,000 
Revolving Credit Agreement— — 
400,000 400,000 
Less: unamortized discount and fees(3,862)(4,182)
Less: current portion— — 
$396,138 $395,818 
Senior Notes due 2028
On October 6, 2021, the Company closed on an offering of $400 million in aggregate principal amount of its 4.50% unsecured Senior Notes due 2028 (the “Senior Notes”). The Senior Notes were issued pursuant to an indenture dated as of October 6, 2021, by and among the Company, certain subsidiary guarantors named therein (the “Guarantors”) and Wells Fargo Bank, National Association, as trustee (the “Indenture”). The Senior Notes bear interest at the rate of 4.50% and pay interest semi-annually in cash in arrears on April 15 and October 15 of each year. The Senior Notes will mature on October 15, 2028. At any time prior to October 15, 2024, the Company may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes being redeemed plus an applicable make-whole premium set forth in the Indenture and accrued and unpaid interest to, but not including, the redemption date.
Prior to October 15, 2024, the Company may redeem up to 40% of the Senior Notes at a redemption price of 104.500% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, with the proceeds of certain equity offerings so long as if, after any such redemption occurs, at least 60% of the aggregate principal amount of the Senior Notes remain outstanding. On and after October 15, 2024, the Company may redeem some or all of the Senior Notes at redemption prices (expressed as percentages of principal amount) equal to 102.250% for the twelve-month period beginning on October 15, 2024, 101.125% for the twelve-month period beginning October 15, 2025 and 100.000% beginning on October 15, 2026, plus accrued and unpaid interest to, but not including, the redemption date. Upon the occurrence of a Change of Control (as defined in the Indenture), unless the Company has exercised its optional redemption right in respect of the Senior Notes, the holders of the Senior Notes will have the right to require the Company to repurchase all or a portion of the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the date of repurchase.
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The Senior Notes are guaranteed on a senior unsecured basis by all direct and indirect existing and future domestic restricted subsidiaries, subject to certain restrictions. The Senior Notes and related guarantees are the Company’s and the Guarantors’ general unsecured senior obligations and will be subordinated to all of the Company and the Guarantors’ existing and future secured debt to the extent of the assets securing that secured obligation. In addition, the Senior Notes are structurally subordinated to any existing and future debt of any of the Company’s subsidiaries that are not Guarantors, to the extent of the assets of those subsidiaries.
Subject to a number of exceptions and qualifications, the Indenture restricts the Company’s ability and the ability of certain of its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, its capital stock or with respect to any other interest or participation in, or measured by, its profits; (iii) make loans and certain investments; (iv) sell assets; (v) create or incur liens; (vi) enter into transactions with affiliates; and (vii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications.
During any time when the Senior Notes are rated investment grade by at least two of Moody’s, Fitch and Standard & Poor’s Ratings Services and no Default (as defined in the Indenture) has occurred and is continuing, many of such covenants will be suspended and the Company and its subsidiaries will cease to be subject to such covenants during such period.
The Indenture contains customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs. As of June 30, 2023, the Company was in compliance with all covenants.
Contractual coupon interest expense and accretion of fees for the Senior Notes for each three- and six-month period ended June 30, 2023 was $4.5 million and $0.2 million, and $9.0 million and $0.3 million, respectively. Contractual coupon interest expense and accretion of fees for the Senior Notes are included in Interest expense in the Company’s Condensed Consolidated Statements of Operations. Contractual coupon interest expense and accretion of fees for the Senior Notes for each three- and six-month period ended June 30, 2022 was $4.5 million and $0.2 million, and $9.0 million and $0.3 million, respectively.
Revolving Credit Agreement
On September 23, 2022, the Company entered into the Third Amendment to Second Amended and Restated Credit Agreement among the Company, certain of its subsidiaries as borrowers (together with the Company, the “Borrowers”), certain of its subsidiaries as guarantors, the lenders party thereto, and Wells Fargo Capital Finance, LLC, as the administrative agent (the “Agent”), which amended the Company’s existing Second Amended and Restated Credit Agreement dated as of December 21, 2018 (as amended from time to time, the “Revolving Credit Agreement”).
Under the Revolving Credit Agreement, the lenders agree to make available a $350 million revolving credit facility to the Borrowers with a scheduled maturity date of September 23, 2027. The Company has the option to increase the total commitments under the facility by up to an additional $175 million, subject to certain conditions, including obtaining agreements from one or more lenders, whether or not party to the Revolving Credit Agreement, to provide such additional commitments. Availability under the Revolving Credit Agreement is based upon quarterly (or more frequent under certain circumstances) borrowing base certifications of the Borrowers’ eligible inventory, eligible leasing inventory and eligible accounts receivable, and is reduced by certain reserves in effect from time to time.
Subject to availability, the Revolving Credit Agreement provides for a letter of credit subfacility in the amount of $25 million and allows for swingline loans in the amount of $35 million. Outstanding borrowings under the Revolving Credit Agreement bear interest at an annual rate, at the Borrowers’ election, equal to (i) adjusted term Secured Overnight Financing Rate plus a margin ranging from 1.25% to 1.75% or (ii) a base rate plus a margin ranging from 0.25% to 0.75%, in each case depending upon the monthly average excess availability under the Revolving Credit Agreement. The Borrowers are required to pay a monthly unused line fee equal to 0.20% times the average daily unused availability along with other customary fees and expenses of the Agent and the lenders.
The Revolving Credit Agreement is guaranteed by certain subsidiaries of the Company (the “Guarantors”) and is secured by substantially all personal property of the Borrowers and the Guarantors.
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The Revolving Credit Agreement contains customary covenants limiting the ability of the Company and certain of its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock, enter into transactions with affiliates, merge, dissolve, repay subordinated indebtedness, make investments and dispose of assets. In addition, the Company will be required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 as of the end of any period of 12 fiscal months when excess availability under the Revolving Credit Agreement is less than the greater of (a) 10.0% of the lesser of (i) the total revolving commitments and (ii) the borrowing base (such lesser amount, the “Line Cap”) and (b) $25 million. As of June 30, 2023, the Company was in compliance with all covenants.
If availability under the Revolving Credit Agreement is less than the greater of (i) 10% of the Line Cap and (ii) $25 million for three consecutive business days, or if there exists an event of default, amounts in any of the Borrowers’ and the Guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the facility.
The Revolving Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the lenders may, among other things, require the immediate payment of all amounts outstanding and foreclose on collateral. In addition, in the case of an event of default arising from certain events of bankruptcy or insolvency, the lenders’ obligations under the Revolving Credit Agreement would automatically terminate, and all amounts outstanding under the Revolving Credit Agreement would automatically become due and payable.
The Company’s liquidity position, defined as cash on hand and available borrowing capacity on the Revolving Credit Agreement, amounted to $441.1 million as of June 30, 2023 and $401.2 million as of December 31, 2022.
During the three-month period ended June 30, 2023, the Company had net payments of principal of $60.4 million and net borrowings of principal of $60.4 million. During the six-month period ended June 30, 2023, the Company had net payments of principal totaling $103.7 million and net borrowings of principal totaling $103.7 million. As of June 30, 2023, there were no amounts outstanding under the Revolving Credit Agreement.
During the three-month period ended June 30, 2022, the Company repaid $30.0 million of principal under the Revolving Credit Agreement. During the six-month period ended June 30, 2022, the Company had net payments of principal totaling $30.8 million and net borrowings of principal totaling $56.7 million. As of June 30, 2022, there was $59.0 million outstanding under the Revolving Credit Agreement.
Interest expense under the Revolving Credit Agreement for the three- and six-month periods ended June 30, 2023 was approximately $0.3 million and $0.5 million, respectively. During the three- and six-month periods ended June 30, 2022, interest expense under the Revolving Credit Agreement was approximately $0.5 million and $0.8 million, respectively. Interest expense under the Revolving Credit Agreement is included in Interest expense in the Company’s Condensed Consolidated Statements of Operations.
9. FINANCIAL DERIVATIVE INSTRUMENTS
Commodity Pricing Risk
As of June 30, 2023, the Company was party to commodity swap contracts for specific commodities with notional amounts of approximately $60.0 million. The Company uses commodity swap contracts to mitigate the risks associated with fluctuations in commodity prices impacting its cash flows related to inventory purchases from suppliers. The Company does not hedge all commodity price risk.
At inception, the Company designated the commodity swap contracts as cash flow hedges. The contracts mature at specified monthly settlement dates and will be recognized into earnings through January 2024. The effective portion of the hedging transaction is recognized in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and transferred to earnings when the forecasted hedged transaction takes place or when the forecasted hedged transaction is no longer probable to occur.
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Financial Statement Presentation
As of June 30, 2023 and December 31, 2022, the fair value carrying amount of the Company’s derivative instruments were recorded as follows (in thousands):
Asset / (Liability) Derivatives
Balance Sheet CaptionJune 30,
2023		December 31,
2022
Derivatives designated as hedging instruments
Commodity swap contractsPrepaid expenses and other$521 $2,674 
Commodity swap contractsAccounts payable and Other accrued liabilities(4,392)(1,653)
Total derivatives designated as hedging instruments$(3,871)$1,021 
The following table summarizes the gain or loss recognized in AOCI as of June 30, 2023 and December 31, 2022 and the amounts reclassified from AOCI into earnings for the three and six months ended June 30, 2023 and 2022 (in thousands):
Amount of (Loss) Gain Recognized in AOCI on Derivatives (Effective Portion, net of tax)Location of Gain (Loss) Reclassified from AOCI into Earnings
(Effective Portion)		Amount of Gain (Loss)
Reclassified from AOCI into Earnings
June 30,
2023		December 31,
2022		Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Derivatives instruments
Commodity swap contracts$(2,279)$909 Cost of sales$(369)$7,265 $117 $12,563 
Over the next 12 months, the Company expects to reclassify approximately $3.0 million of pretax deferred losses, related to the commodity swap contracts, from AOCI to cost of sales as inventory purchases are settled.
10. LEASES
Lessee Activities
The Company records a right-of-use (“ROU”) asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration.
The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
During the six months ended June 30, 2023, leased assets obtained in exchange for new operating lease liabilities totaled approximately $6.5 million. During the six months ended June 30, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $9.8 million. As of June 30, 2023, obligations related to operating leases that the Company has executed but have not yet commenced totaled approximately $0.4 million.
As described in the Company’s Annual Report on Form 10-K for the year ended December, 31, 2022, during 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. Certain of the transactions occurred with a related party—such transactions were at market value and arm’s length.



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Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):
ClassificationJune 30, 2023December 31, 2022
Right-of-Use Assets
OperatingOther assets$26,130 $23,003 
Liabilities
Current
OperatingOther accrued liabilities$6,897 $6,120 
Noncurrent
OperatingOther non-current liabilities19,233 16,883 
Total lease liabilities$26,130 $23,003 
Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):
ClassificationThree Months Ended
June 30, 2023		Three Months Ended
June 30, 2022
Operating lease costCost of sales, selling expenses and general and administrative expense$2,128 $1,209 
Finance lease cost
Amortization of ROU leased assetsDepreciation and amortization within Cost of sales— — 
Interest on lease liabilitiesInterest expense— — 
Net lease cost$2,128 $1,209 
ClassificationSix Months Ended
June 30, 2023		Six Months Ended
June 30, 2022
Operating lease costCost of sales, selling expenses and general and administrative expense$4,085 $2,318 
Finance lease cost
Amortization of ROU leased assetsDepreciation and amortization within Cost of sales— 36 
Interest on lease liabilitiesInterest expense— 1 
Net lease cost$4,085 $2,355 
Maturity of the Company’s lease liabilities as of June 30, 2023 is as follows (in thousands):
Operating LeasesFinance LeasesTotal
2023 (remainder)$4,162 $— $4,162 
20247,389 — 7,389 
20256,260 — 6,260 
20265,654 — 5,654 
20273,410 — 3,410 
Thereafter2,141 — 2,141 
Total lease payments$29,016 $— $29,016 
Less: interest2,886 — 
Present value of lease payments$26,130 $— 
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As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:
June 30, 2023December 31, 2022
Weighted average remaining lease term (years)
Operating leases4.24.3
Weighted average discount rate
Operating leases4.95 %4.92 %
Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):
Six Months Ended
June 30, 2023		Six Months Ended
June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$4,114 $2,342 
Operating cash flows from finance leases$— $1 
Financing cash flows from finance leases$— $59 
Lessor and Sublessor Activities
The Company leases dry van trailers to customers under full-service lease agreements and operating lease agreements. At the inception of a contract, in accordance with the applicable accounting guidance (ASC 842, Leases) the Company considers whether the arrangement contains a lease and, as applicable, performs the required lease classification tests. The Company, as a lessor, has no sales-type or direct financing lease arrangements as of June 30, 2023.
The Company’s full-service lease agreements are an integrated service that include lease component amounts related to the use of the trailer, as well as non-lease components for preventative maintenance, certain repairs as defined in the related agreement, and ad valorem taxes. In accordance with the applicable accounting guidance (ASC 842, Leases), the Company has elected to combine lease and non-lease components when reporting revenue for the full-service underlying class of leased assets.
Initial lease terms are generally three to five years. Certain of the Company’s leases provide customers with renewal options that provide the ability to extend the lease term for a period of generally one to five years. In addition, some leases include options for the customer to purchase the trailers at fair market value, as determined by the Company at or near the end of the lease. The Company’s lease agreements generally do not have residual value guarantees nor permit customers to terminate the lease agreements prior to natural expiration. As stipulated in the lease agreements, the Company may receive reimbursements from customers for certain damage or required repairs to the trailers.
During the year ended December 31, 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for all periods presented but such revenue is included in the tables below.
Certain of the Company’s leases and subleases are with a related party—such transactions were at market value and entered into at arm’s length.
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Lease income is included in Net sales on the Company’s Condensed Consolidated Statements of Operations, and is recorded in the Parts & Services operating segment. For the three and six months ended June 30, 2023 and 2022, the Company’s lease income consisted of the following components (in thousands):
Three Months Ended
June 30, 2023		Three Months Ended
June 30, 2022
Operating lease income
Fixed lease income$117 $18 
Variable lease income— — 
Total lease income1
$117 $18 
Six Months Ended
June 30, 2023		Six Months Ended
June 30, 2022
Operating lease income
Fixed lease income$179 $21 
Variable lease income— — 
Total lease income1
$179 $21 
—————————
(1) As noted above, net revenue related to subleases was insignificant for all periods presented but such revenue is included in the tables above.
The following table shows the Company’s future contractual receipts from noncancelable operating leases for the years ended December 31 as of June 30, 2023 (in thousands):
Operating Leases1
2023 (remainder)$542 
20241,189 
20251,177 
20261,177 
20271,064 
Thereafter470 
Total contractual receipts$5,619 
—————————
(1) The future contractual receipts due under the Company’s full-service operating leases include amounts related to preventative maintenance, certain repairs as defined in the related agreements, and ad valorem taxes. Net revenue related to the Company’s subleases are also included in the table above.
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11. OTHER ACCRUED LIABILITIES
The following table presents the major components of Other accrued liabilities (in thousands):
June 30,
2023		December 31,
2022
Warranty$21,745 $22,061 
Chassis converter pool agreements33,842 20,345 
Payroll and related taxes29,369 29,219 
Customer deposits64,274 32,129 
Self-insurance11,496 10,718 
Accrued interest3,814 3,854 
Operating lease obligations6,897 6,120 
Accrued taxes17,363 24,793 
All other13,574 9,088 
$202,374 $158,327 
The following table presents the changes in the product warranty accrual included in Other accrued liabilities (in thousands):
20232022
Balance as of January 1$22,061 $22,045 
Provisions and revisions to estimates1,770 663 
Payments(2,086)(1,502)
Balance as of June 30$21,745 $21,206 
The Company offers a limited warranty for its products with a coverage period that ranges between 1 and 5 years, except that the coverage period for DuraPlate® trailer panels is 10 years and the coverage period for steel main beams on flatbed trailer products exceeds 10 years. The Company passes through component manufacturers’ warranties to our customers. The Company’s policy is to accrue the estimated cost of warranty coverage at the time of the sale.
12. FAIR VALUE MEASUREMENTS
The Company’s fair value measurements are based upon a three-level valuation hierarchy. These valuation techniques are based upon the transparency of inputs (observable and unobservable) to the valuation of an asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:
▪Level 1 — Valuation is based on quoted prices for identical assets or liabilities in active markets;
▪Level 2 — Valuation is based on quoted prices for similar assets or liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for the full term of the financial instrument; and
▪Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
Recurring Fair Value Measurements
The Company maintains a non-qualified deferred compensation plan which is offered to senior management and other key employees. The amount owed to participants is an unfunded and unsecured general obligation of the Company. Participants are offered various investment options with which to invest the amount owed to them, and the plan administrator maintains a record of the liability owed to participants by investment. To minimize the impact of the change in market value of this liability, the Company has elected to purchase a separate portfolio of investments through the plan administrator similar to those chosen by the participant.
The investments purchased by the Company include mutual funds, which are classified as Level 1, and life-insurance contracts valued based on the performance of underlying mutual funds, which are classified as Level 2. Additionally, the Company holds a pool of investments made by a wholly owned captive insurance subsidiary. These investments are comprised of mutual funds, which are classified as Level 1.
The fair value of the Company’s derivatives is estimated with a market approach using third-party pricing services, which have been corroborated with data from active markets or broker quotes, and are classified as Level 2.
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Fair value measurements and the fair value hierarchy level for the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 are shown below (in thousands):
FrequencyAsset / (Liability)Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
June 30, 2023
Commodity swap contractsRecurring$(3,871)$— $(3,871)$— 
Mutual fundsRecurring$8,620 $8,620 $— $— 
Life-insurance contractsRecurring$17,332 $— $17,332 $— 
December 31, 2022
Commodity swap contractsRecurring$1,021 $— $1,021 $— 
Mutual fundsRecurring$6,579 $6,579 $— $— 
Life-insurance contractsRecurring$15,509 $— $15,509 $— 
Estimated Fair Value of Debt
The estimated fair value of debt at June 30, 2023 consists primarily of the Senior Notes due 2028 and any borrowings under the Revolving Credit Agreement (see Note 8). The fair value of the Senior Notes due 2028 are based upon third party pricing sources, which generally do not represent daily market activity or represent data obtained from an exchange, and are classified as Level 2. The interest rates on the Company’s borrowings under the Revolving Credit Agreement are adjusted regularly to reflect current market rates and thus carrying value approximates fair value for any borrowings.
The Company’s carrying and estimated fair value of debt at June 30, 2023 and December 31, 2022 were as follows (in thousands):
June 30, 2023December 31, 2022
Carrying
Value		Fair ValueCarrying
Value		Fair Value
Level 1Level 2Level 3Level 1Level 2Level 3
Instrument
Senior Notes due 2028$396,138 $— $345,630 $— $395,818 $— $337,237 $— 
Revolving Credit Agreement— — — — — — — — 
$396,138 $— $345,630 $— $395,818 $— $337,237 $— 
The fair value of debt is based on current public market prices for disclosure purposes only. Unrealized gains or losses are not recognized in the financial statements as long-term debt is presented at carrying value, net of unamortized premium or discount and unamortized deferred financing costs in the condensed consolidated financial statements.
13. COMMITMENTS AND CONTINGENCIES
As of June 30, 2023, the Company was named as a defendant or was otherwise involved in numerous legal proceedings and governmental examinations, including class action lawsuits, in connection with the conduct of its business activities in various jurisdictions, both in the United States and internationally. On the basis of information currently available to it, management does not believe that existing proceedings and investigations will have a material impact on our consolidated financial condition or liquidity if determined in a manner adverse to the Company except for the matter described in further detail below. However, such matters are unpredictable, and we could incur judgments or enter into settlements for current or future claims that could materially and adversely affect our financial statements. Costs associated with the litigation and settlements of legal matters are reported within General and administrative expenses in the Condensed Consolidated Statements of Operations.
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Legal Matter Estimated Liability
As of June 30, 2023, the Company was named as a defendant in California state court in two purported class action lawsuits, alleging wage and hour claims under California-specific employment laws (collectively, “the Matters”). The defense of both lawsuits is being handled in conjunction with one another. During the three months ended March 31, 2023, in accordance with ASC 450, the Company concluded a liability related to the Matters was probable and estimable. As such, an estimated liability of $3.0 million is included in General & administrative expenses in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2023. During the second quarter of 2023, the Company reached an agreement to resolve the Matters via settlement for an amount materially consistent with the estimated liability.
Environmental Disputes
In August 2014, the Company received notice as a potentially responsible party (“PRP”) by the South Carolina Department of Health and Environmental Control (the “DHEC”) pertaining to the Philip Services Site located in Rock Hill, South Carolina pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and corresponding South Carolina statutes. PRPs include parties identified through manifest records as having contributed to deliveries of hazardous substances to the Philip Services Site between 1979 and 1999. The DHEC’s allegation that the Company was a PRP arises out of four manifest entries in 1989 under the name of a company unaffiliated with Wabash National Corporation (or any of its former or current subsidiaries) that purport to be delivering a de minimis amount of hazardous waste to the Philip Services Site “c/o Wabash National Corporation.” As such, the Philip Services Site PRP Group (the “PRP Group”) notified Wabash in August 2014 that it was offering the Company the opportunity to resolve any liabilities associated with the Philip Services Site by entering into a Cash Out and Reopener Settlement Agreement (the “Settlement Agreement”) with the PRP Group, as well as a Consent Decree with the DHEC. The Company has accepted the offer from the PRP Group to enter into the Settlement Agreement and Consent Decree, while reserving its rights to contest its liability for any deliveries of hazardous materials to the Philips Services Site. The requested settlement payment is immaterial to the Company’s financial conditions and results of operations, and as a result, if the Settlement Agreement and Consent Decree are finalized, the payment to be made by the Company thereunder is not expected to have a material adverse effect on the Company’s financial condition or results of operations.
On November 13, 2019, the Company received a notice that it was considered one of several PRPs by the Indiana Department of Environmental Management (“IDEM”) under CERCLA and state law related to substances found in soil and groundwater at a property located at 817 South Earl Avenue, Lafayette, Indiana (the “Site”). The Company has never owned or operated the Site, but the Site is near certain of the Company’s owned properties. In 2020, the Company agreed to implement a limited work plan to further investigate the source of the contamination at the Site and worked with IDEM and other PRPs to finalize the terms of the work plan. The Company submitted its initial site investigation report to IDEM during the third quarter of 2020, indicating that the data collected by the Company’s consultant confirmed that the Company’s properties are not the source of contamination at the Site. In December 2021, after completing further groundwater sampling work, the Company submitted to IDEM a supplemental written report, which again stated that the Company is not a responsible party and the Company’s properties are not a source of any contamination. In June 2022, the Company and other PRPs finalized Work Plan Addendum No. 3, which provided for additional groundwater sampling on another PRP property. The Company completed all additional sampling during the second quarter of 2023, and all available information establishes there is no source of any contamination on the Company’s owned properties. As of June 30, 2023, based on the information available, the Company does not expect this matter to have a material adverse effect on its financial condition or results of operations.
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Chassis Converter Pool Agreements
The Company obtains most vehicle chassis for its specialized vehicle products directly from the chassis manufacturers under converter pool agreements. Chassis are obtained from the manufacturers based on orders from customers, and in some cases, for unallocated orders. The agreements generally state that the manufacturer will provide a supply of chassis to be maintained at the Company’s facilities with the condition that we will store such chassis and will not move, sell, or otherwise dispose of such chassis except under the terms of the agreement. In addition, the manufacturer typically retains the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales of the chassis to the manufacturer’s dealers. The manufacturer also does not transfer the certificate of origin to the Company nor permit the Company to sell or transfer the chassis to anyone other than the manufacturer (for ultimate resale to a dealer). Although the Company is party to related finance agreements with manufacturers, the Company has not historically settled, nor expects to in the future settle, any related obligations in cash. Instead, the obligation is settled by the manufacturer upon reassignment of the chassis to an accepted dealer, and the dealer is invoiced for the chassis by the manufacturer. Accordingly, as of June 30, 2023, the Company’s outstanding chassis converter pool with the manufacturer totaled $33.8 million and the Company has included this financing agreement on the Company’s Condensed Consolidated Balance Sheets within Prepaid expenses and other and Other accrued liabilities. All other chassis programs are handled as consigned inventory belonging to the manufacturer and totaled approximately $3.4 million. Under these agreements, if the chassis is not delivered to a customer within a specified time frame, the Company is required to pay a finance or storage charge on the chassis. Additionally, the Company receives finance support funds from manufacturers when the chassis are assigned into the Company’s chassis pool. Typically, chassis are converted and delivered to customers within 90 days of the receipt of the chassis by the Company.
14. NET INCOME PER COMMON SHARE
Basic earnings per common share is calculated based on the weighted average number of common shares outstanding during the period, including vested shares deferred under our non-qualified deferred compensation plan. Diluted earnings per common share is determined based on the weighted average number of common shares outstanding during the period combined with the incremental average common shares that would have been outstanding assuming the conversion of all potentially dilutive common shares into common shares as of the earliest date possible. The calculation of basic and diluted net income attributable to common stockholders per common share is determined using net income attributable to common stockholders as the numerator and the number of shares included in the denominator as shown below (in thousands, except per share amounts).
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Basic net income attributable to common stockholders per share:
Net income attributable to common stockholders$74,328 $22,552 $125,541 $34,626 
Weighted average common shares outstanding47,452 49,034 47,610 49,019 
Basic net income attributable to common stockholders per share$1.57 $0.46 $2.64 $0.71 
Diluted net income attributable to common stockholders per share:
Net income attributable to common stockholders$74,328 $22,552 $125,541 $34,626 
Weighted average common shares outstanding47,452 49,034 47,610 49,019 
Dilutive stock options and restricted stock921 501 1,127 643 
Diluted weighted average common shares outstanding48,373 49,535 48,737 49,662 
Diluted net income attributable to common stockholders per share$1.54 $0.46 $2.58 $0.70 

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15. STOCK-BASED COMPENSATION
The Company recognizes all share-based payments based upon their grant date fair value. The Company grants restricted stock units subject to specific service, performance, and/or market conditions. The Company’s policy is to recognize expense for awards that have service conditions only subject to graded vesting using the straight-line attribution method. In addition, the Company’s policy is to estimate expected forfeitures on share-based awards. The fair value of service and performance-based units is based on the market price of a share of underlying common stock at the date of grant. The fair values of the awards that contain market conditions are estimated using a Monte Carlo simulation approach in a risk-neutral framework to model future stock price movements based upon historical volatility, risk-free rates of return, and correlation matrix. The amount of compensation costs related to restricted stock units and performance units not yet recognized, excluding estimated forfeitures, was $19.5 million at June 30, 2023, for which the expense will be recognized through 2026.
16. STOCKHOLDERS’ EQUITY
Share Repurchase Program
In August 2021, the Company announced that the Board of Directors approved the repurchase of an additional $150 million in shares of common stock over a three-year period. This authorization was an increase to the previous $100 million repurchase programs approved in November 2018, February 2017, and February 2016. The repurchase program is set to expire in August 2024. Stock repurchases under this program may be made in the open market or in private transactions at times and in amounts determined by the Company. As of June 30, 2023, $76.7 million remained available under the program.
Common and Preferred Stock
The Board of Directors has the authority to issue common and unclassed preferred stock of up to 200 million shares and 25 million shares, respectively, with par value of $0.01 per share, as well as to fix dividends, voting and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions.
Accumulated Other Comprehensive Income (Loss)
Changes in AOCI by component, net of tax, for the six months ended June 30, 2023 are summarized as follows (in thousands):
Foreign Currency TranslationDerivative InstrumentsTotal
Balances at December 31, 2022$(1,791)$909 $(882)
Net unrealized gains (losses) arising during the period(a)
564 130 694 
Less: Net realized gains (losses) reclassified to net income(b)
— 366 366 
Net change during the period564 (236)328 
Balances at March 31, 2023(1,227)673 (554)
Net unrealized gains (losses) arising during the period(c)
502 (3,229)(2,727)
Less: Net realized gains (losses) reclassified to net income(d)
— (277)(277)
Net change during the period502 (2,952)(2,450)
Balances at June 30, 2023$(725)$(2,279)$(3,004)
—————————
(a) Derivative instruments net of less than $0.1 million of tax liability for the three months ended March 31, 2023.
(b) Derivative instruments net of $0.1 million of tax liability for the three months ended March 31, 2023.
(c) Derivative instruments net of $1.0 million of tax benefit for the three months ended June 30, 2023.
(d) Derivative instruments net of $0.1 million of tax benefit for the three months ended June 30, 2023.

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Changes in AOCI by component, net of tax, for the six months ended June 30, 2022 are summarized as follows (in thousands):
Foreign Currency TranslationDerivative InstrumentsTotal
Balances at December 31, 2021$(1,989)$2,848 $859 
Net unrealized gains (losses) arising during the period(e)
243 17,555 17,798 
Less: Net realized gains (losses) reclassified to net loss(f)
— 3,970 3,970 
Net change during the period243 13,585 13,828 
Balances at March 31, 2022(1,746)16,433 14,687 
Net unrealized gains (losses) arising during the period(g)
(303)(14,165)(14,468)
Less: Net realized gains (losses) reclassified to net income(h)
— 5,445 5,445 
Net change during the period(303)(19,610)(19,913)
Balances at June 30, 2022$(2,049)$(3,177)$(5,226)
—————————
(e) Derivative instruments net of $5.9 million of tax liability for the three months ended March 31, 2022.
(f) Derivative instruments net of $1.3 million of tax liability for the three months ended March 31, 2022.
(g) Derivative instruments net of $4.7 million of tax benefit for the three months ended June 30, 2022.
(h) Derivative instruments net of $1.8 million of tax liability for the three months ended June 30, 2022.
17. INCOME TAXES
For the three months ended June 30, 2023, the Company recognized income tax expense of $24.3 million compared to $7.6 million for the same period in the prior year. The Company recognized income tax expense of $38.2 million in the first six months of 2023 compared to $10.7 million for the same period in the prior year. The effective tax rates for the first six months of 2023 and 2022 were 23.3% and 23.5%, respectively. For the first six months of 2023 and 2022, the effective tax rate differs from the U.S. Federal statutory rate of 21% primarily due to the impact of state and local taxes net of discrete items incurred related to stock-based compensation.
18. PROPERTY, PLANT, AND EQUIPMENT
There were no material impairments or sales of property, plant, and equipment during the three and six months ended June 30, 2023. During the second quarter of 2023, the Company placed into service approximately $90.4 million of property, plant, and equipment assets related to its previously disclosed dry van manufacturing capacity increase.
During the first quarter of 2022, the Company impaired approximately $1.0 million of construction-in-progress projects that were no longer expected to be completed. In addition, the Company sold a building (and the related land) for net proceeds of $1.1 million. A gain on sale of approximately $0.7 million was recognized as part of the sale. The impairment and gain on sale are included in Impairment and other, net in the Condensed Consolidated Statements of Operations.
19. SEGMENTS
a. Segment Reporting
Based on how the Chief Operating Decision Maker (“CODM”) manages the business, allocates resources, makes operating decisions, and evaluates operating performance, the Company manages its business in two operating and reportable segments: Transportation Solutions and Parts & Services.
Additional information related to the composition of each segment is included below.
▪Transportation Solutions (“TS”): The TS segment comprises the design and manufacturing operations for the Company’s transportation-related equipment and products. This includes dry and refrigerated van trailers, platform trailers, and the Company’s wood flooring production facility. The Company’s EcoNex™ products, which are under the Company’s AcuthermTM portfolio of solutions designed for intelligent thermal management, are also reported in the TS segment. In addition, the TS segment includes tank trailers and truck-mounted tanks. Finally, truck-mounted dry and refrigerated bodies and service and stake bodies are also in the TS segment.
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▪Parts & Services (“P&S”): The P&S segment is comprised of the Company’s parts and services business as well as the upfitting component of our truck bodies business. In addition, the Company’s Composites business, which focuses on the use of DuraPlate® composite panels beyond the semi-trailer market, is also part of the P&S segment. This segment also includes the Wabash Parts LLC parts and distribution entity we created with our partner during the second quarter of 2022 as further described in Note 5. Our Trailers as a Service (TAAS)SM initiatives are included in the P&S segment as well. Finally, the P&S segment includes the Company’s Engineered Products business, which manufactures stainless-steel storage tanks and silos, mixers, and processors for a variety of end markets. Growing and expanding the parts and services businesses is a key strategic initiative for the Company moving forward.
The accounting policies of the TS and P&S segments are the same as those described in the summary of significant accounting policies except that the Company evaluates segment performance based on income (loss) from operations. The Company has not allocated certain corporate related administrative costs, interest, and income taxes included in the corporate and eliminations segment to the Company’s other reportable segments. The Company accounts for intersegment sales and transfers at cost. Segment assets are not presented as it is not a measure reviewed by the CODM in allocating resources and assessing performance.
Reportable segment information is as follows (in thousands):
Three Months Ended June 30, 2023Transportation SolutionsParts & ServicesCorporate and
Eliminations		Consolidated
Net sales
External customers$625,718 $60,902 $— $686,620 
Intersegment sales4,964 1,164 (6,128)— 
Total net sales$630,682 $62,066 $(6,128)$686,620 
Income (loss) from operations$115,806 $12,937 $(25,433)$103,310 
Three Months Ended June 30, 2022Transportation SolutionsParts & ServicesCorporate and
Eliminations		Consolidated
Net sales
External customers$593,125 $49,644 $— $642,769 
Intersegment sales2,857 751 (3,608)— 
Total net sales$595,982 $50,395 $(3,608)$642,769 
Income (loss) from operations$47,973 $8,138 $(20,203)$35,908 
Six Months Ended June 30, 2023Transportation SolutionsParts & ServicesCorporate and
Eliminations		Consolidated
Net sales
External customers$1,201,014 $106,558 $— $1,307,572 
Intersegment sales7,739 2,648 (10,387)— 
Total net sales$1,208,753 $109,206 $(10,387)$1,307,572 
Income (loss) from operations$202,922 $22,146 $(51,858)$173,210 
Six Months Ended June 30, 2022Transportation SolutionsParts & ServicesCorporate and
Eliminations		Consolidated
Net sales
External customers$1,094,165 $95,365 $— $1,189,530 
Intersegment sales3,882 1,738 (5,620)— 
Total net sales$1,098,047 $97,103 $(5,620)$1,189,530 
Income (loss) from operations$79,670 $14,927 $(38,554)$56,043 
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b.  Product Information
The Company offers products primarily in four general categories: (1) new trailers, (2) used trailers, (3) components, parts and services, and (4) equipment and other (which includes truck bodies). The following table sets forth the major product categories and their percentage of consolidated net sales (dollars in thousands):
Three Months Ended June 30, 2023Transportation SolutionsParts & ServicesEliminationsConsolidated
New trailers$523,537 $— $(2,002)$521,535 76.0 %
Used trailers— 517 — 517 0.1 %
Components, parts and services— 39,794 — 39,794 5.8 %
Equipment and other107,145 21,755 (4,126)124,774 18.2 %
Total net sales$630,682 $62,066 $(6,128)$686,620 100.0 %
Three Months Ended June 30, 2022Transportation SolutionsParts & ServicesEliminationsConsolidated
New trailers$508,430 $188 $(361)$508,257 79.1 %
Used trailers— 1,120 — 1,120 0.2 %
Components, parts and services— 37,473 37,473 5.8 %
Equipment and other87,552 11,614 (3,247)95,919 14.9 %
Total net sales$595,982 $50,395 $(3,608)$642,769 100.0 %
Six Months Ended June 30, 2023Transportation SolutionsParts & ServicesEliminationsConsolidated
New trailers$1,008,785 $— $(2,364)$1,006,421 77.0 %
Used trailers— 1,056 — 1,056 0.1 %
Components, parts and services— 75,476 — 75,476 5.8 %
Equipment and other199,968 32,674 (8,023)224,619 17.2 %
Total net sales$1,208,753 $109,206 $(10,387)$1,307,572 100.0 %
Six Months Ended June 30, 2022Transportation SolutionsParts & ServicesEliminationsConsolidated
New trailers$946,393 $242 $(672)$945,963 79.5 %
Used trailers— 1,689 — 1,689 0.1 %
Components, parts and services— 71,037 — 71,037 6.0 %
Equipment and other151,654 24,135 (4,948)170,841 14.4 %
Total net sales$1,098,047 $97,103 $(5,620)$1,189,530 100.0 %

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report of Wabash National Corporation (together with its subsidiaries, “Wabash,” “Company,” “us,” “we,” or “our”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. Forward-looking statements convey the Company’s current expectations or forecasts of future events. Our “forward-looking statements” include, but are not limited to, statements regarding:
▪demand for our products and the sensitivity of demand to economic conditions;
▪the highly cyclical nature of our business;
▪economic weakness and its impact on the markets and customers we serve;
▪our backlog and indicators of the level of our future revenues;
▪ongoing inflation;
▪the COVID-19 pandemic, or other outbreaks of disease or similar public health threats;
▪reliance on a limited number of suppliers of raw materials and components, price increases of raw materials and components, and our ability to obtain raw materials and components;
▪our ability to realize all of the expected enhanced revenue, earnings, and cash flow from our agreement to create Wabash Parts LLC;
▪reliance on information technology to support our operations and our ability to protect against service interruptions or security breaches;
▪our ability to attract and retain key personnel or a sufficient workforce;
▪our ability to execute on our long-term strategic plan and growth initiatives or to meet our long-term financial goals;
▪volatility in the supply of vehicle chassis and other vehicle components;
▪changes in our customer relationships or in the financial condition of our customers;
▪significant competition in the industries in which we operate including offerings by our competitors of new or better products and services or lower prices;
▪our competition in the highly competitive specialized vehicle industry;
▪market acceptance of our technology and products or market share gains of competing products;
▪disruptions of manufacturing operations;
▪our ability to effectively manage, safeguard, design, manufacture, service, repair, and maintain our leased (or subleased) trailers;
▪current and future governmental laws and regulations and costs related to compliance with such laws and regulations;
▪changes to U.S. or foreign tax laws and the effects on our effective tax rate and future profitability;
▪changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences;
▪the effects of product liability and other legal claims;
▪climate change and related public focus from regulators and various stakeholders;
▪our ability to meet environmental, social, and governance (“ESG”) expectations or standards or to achieve our ESG goals;
▪impairment in the carrying value of goodwill and other long-lived intangible assets;
▪our ability to continue a regular quarterly dividend;
▪our ability to generate sufficient cash to service all of our indebtedness;
▪our indebtedness, financial condition and fulfillment of obligations thereunder;
▪increased risks of international operations;
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▪provisions of our Senior Notes which could discourage potential future acquisitions of us by a third party;
▪the risks related to restrictive covenants in our Senior Notes indenture and Revolving Credit Agreement (each, as defined below), including limits on financial and operating flexibility;
▪price and trading volume volatility of our common stock; and
▪assumptions relating to the foregoing.
Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in this Quarterly Report. Important risks and factors that could cause our actual results to be materially different from our expectations include the factors that are disclosed in “Item 1A-Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. Each forward-looking statement contained in this Quarterly Report reflects our management’s view only as of the date on which that forward-looking statement was made. We are not obligated to update forward-looking statements or publicly release the result of any revisions to them to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as required by law.
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Inflationary Cost Environment and Supply Chain Disruption
During the three and six months ended June 30, 2023, we continued to experience a certain degree of inflation across our supply chain, increased freight and logistics costs, and overall volatility. While we continue to expect the global market downturn and overall impacts on our operations to be temporary, the duration and severity of the impacts cannot be estimated at this time. Continued or worsening disruptions to, and impacts on, our production, supply chain, demand for our products, and overall business could have a material adverse effect on our results of operations, financial condition, and cash flows.
Results of Operations
The following table sets forth certain operating data as a percentage of net sales for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of sales78.0 %87.9 %79.6 %88.6 %
Gross profit22.0 %12.1 %20.4 %11.4 %
General and administrative expenses5.4 %4.8 %5.6 %4.8 %
Selling expenses1.0 %1.1 %1.1 %1.1 %
Amortization of intangibles0.5 %0.6 %0.5 %0.7 %
Impairment and other, net— %— %— %— %
Income from operations15.0 %5.6 %13.2 %4.7 %
Interest expense(0.7 %)(0.8 %)(0.8 %)(0.9 %)
Other, net0.1 %(0.1 %)0.1 %— %
Income before income tax expense14.4 %4.7 %12.5 %3.8 %
Income tax expense3.5 %1.2 %2.9 %0.9 %
Net income10.8 %3.5 %9.6 %2.9 %
For the three-month period ended June 30, 2023, we recorded net sales of $686.6 million compared to $642.8 million in the prior year period. Net sales for the three-month period ended June 30, 2023 increased $43.9 million, or 6.8%, compared to the prior year period. New trailer shipments decreased 13.5% while new truck body shipments increased 1.9%. Despite the decrease in new trailer shipments, revenue per new trailer unit increased across all product lines and for truck bodies which drove an increase of 5.8% in net sales within the TS reportable segment. Net sales within the P&S reportable segment increased $11.7 million compared to the prior year period, which was primarily due to an increase in sales within our Engineered Products business. Gross profit margin increased to 22.0% in the second quarter of 2023 compared to 12.1% in the prior year period primarily driven by higher revenue per new trailer unit and truck body that increased proportionately higher than our manufacturing costs. We remain focused on positioning ourselves to profitably capitalize on current demand while being vigilant to respond to any potential softening of the industry and overall economy.
For the three-month period ended June 30, 2023, selling, general and administrative expenses increased $6.2 million as compared to the same period in 2022. As a percentage of net sales, selling, general and administrative expenses were 6.5% in the second quarter of 2023 as compared to 6.0% in the prior year period. The overall increase in selling, general and administrative expenses in the current year period compared to the same period in the prior year was largely due to an increase in professional fees and outside services costs as well as higher employee-related costs, including benefits and incentive programs.
Our management team continues to be focused on increasing overall stockholder value by optimizing our manufacturing operations to match the current demand environment, implementing cost savings initiatives and enterprise lean techniques, strengthening our capital structure and maintaining strong liquidity, developing innovative products that enable our customers to succeed, improving earnings, and continuing diversification of the business into higher margin opportunities that leverage our intellectual and process capabilities.
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Three Months Ended June 30, 2023 Compared with the Three Months Ended June 30, 2022
Net Sales
Net sales in the second quarter of 2023 increased $43.9 million, or 6.8%, compared to the second quarter of 2022. By business segment, prior to the elimination of intercompany sales, sales and related units sold were as follows (dollars in thousands):
Three Months Ended June 30,Change
20232022Amount%
(prior to elimination of intersegment sales)
Sales by Segment
Transportation Solutions$630,682 $595,982 $34,700 5.8 %
Parts & Services62,066 50,395 11,671 23.2 %
Eliminations(6,128)(3,608)(2,520)
Total$686,620 $642,769 $43,851 6.8 %
New Units Shipped(units)
Trailers11,825 13,670 (1,845)(13.5 %)
Truck bodies4,025 3,950 75 1.9 %
Total15,850 17,620 (1,770)(10.0 %)
Used Units Shipped(units)
Trailers15 40 (25)(62.5 %)
TS segment sales, prior to the elimination of intersegment sales, were $630.7 million for the second quarter of 2023, an increase of $34.7 million, or 5.8%, compared to the second quarter of 2022. New trailers shipped during the second quarter of 2023 totaled 11,825 trailers compared to 13,670 trailers in the prior year period, a decrease of 13.5% (or a 9% decrease when excluding conventional refrigerated van trailers), which was primarily driven by lower dry van shipments as well as our previously announced intentional ramp-down of manufacturing conventional refrigerated van trailers. While we continued to experience a certain degree of supply chain challenges, new truck bodies shipped during the second quarter of 2023 totaled 4,025 truck bodies compared to 3,950 truck bodies in the prior year period, an increase of 1.9%. Despite the decrease in new trailer shipments, higher revenue per new trailer unit along with the increase in truck body shipments and truck body revenue per unit resulted in an overall increase in new trailer and truck body revenue. The increases were primarily due to increased pricing to account for inflation, our curated customer portfolio, and improved pricing processes.
P&S segment sales, prior to the elimination of intersegment sales, were $62.1 million for the second quarter of 2023, an increase of $11.7 million, or 23.2%, compared to the second quarter of 2022. The overall increase in sales for this segment was due primarily to an increase in sales within our Engineered Products business of approximately $7.6 million, which was largely attributable to product mix and higher revenue per unit. In addition, our upfitting solutions and services businesses increased approximately $4.0 million from the prior year period due to strong demand for these offerings.
Cost of Sales
Cost of sales was $535.6 million in the second quarter of 2023, a decrease of $29.1 million, or 5.2%, compared to the prior year period. Cost of sales is comprised of material costs, a variable expense, and other manufacturing costs, comprised of both fixed and variable expenses, including direct and indirect labor, outbound freight, overhead expenses, and depreciation.
TS segment cost of sales was $496.7 million in the second quarter of 2023, a decrease of $33.2 million, or 6.3%, compared to the prior year period. The decrease in cost of sales, which was primarily driven by lower shipment volumes, was due to a decrease in materials costs of $40.6 million along with a decrease in certain other manufacturing costs. These decreases were partially offset by an increase in labor and employee-related costs of approximately $5.3 million as well as an increase in operating supplies and maintenance and repairs costs totaling approximately $5.0 million.
P&S segment cost of sales was $45.0 million in the second quarter of 2023, an increase of $6.4 million, or 16.6%, compared to the prior period. The increase in cost of sales for this segment was due in part to an increase in materials costs of approximately $2.5 million, or 8.0%. In addition, labor and employee-related costs increased approximately $1.0 million from the prior year period as well as certain other manufacturing costs.
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Gross Profit
Gross profit was $151.0 million in the second quarter of 2023, an increase of $73.0 million from the prior year period. Gross profit as a percentage of net sales was 22.0% for the second quarter of 2023, compared to 12.1% for the same period in 2022. Gross profit by segment was as follows (dollars in thousands):
Three Months Ended June 30,Change
20232022Amount%
Gross Profit by Segment
Transportation Solutions$133,945 $66,055 $67,890 102.8 %
Parts & Services17,082 11,830 5,252 44.4 %
Corporate & Eliminations— 149 (149)
Total$151,027 $78,034 $72,993 93.5 %
TS segment gross profit was $133.9 million for the second quarter of 2023 compared to $66.1 million for the second quarter of 2022. Gross profit, prior to the elimination of intersegment sales, as a percentage of net sales, was 21.2% in the second quarter of 2023 compared to 11.1% in the comparative 2022 period. The overall increase in gross profit from the prior year period was primarily driven by an increase in our dry vans products of approximately $46.8 million. In addition, our truck bodies, platforms, and tank trailers had increases from the prior year period. Each of these increases, as well as the increase in gross profit as a percentage of net sales, was primarily attributable to higher revenue per new trailer unit and truck body due to increased pricing to account for inflation, our curated customer portfolio, and improved pricing processes.
P&S segment gross profit was $17.1 million for the second quarter of 2023 compared to $11.8 million for the second quarter of 2022. Gross profit, prior to the elimination of intersegment sales, as a percentage of net sales, was 27.5% in the second quarter of 2023 compared to 23.5% in the 2022 period. The overall increase in gross profit was primarily related to an increase within our Engineered Products business of approximately $3.1 million. In addition, our upfitting solutions and services businesses increased approximately $1.3 million from the prior year period due to strong demand for these offerings. Finally, our Composites business, which focuses on the use of DuraPlate® composite panels beyond the semi-trailer market, increased approximately $1.1 million compared to the prior year period.
General and Administrative Expenses
General and administrative expenses for the second quarter of 2023 increased $6.4 million, or 20.6%, from the prior year period. The increase from the prior year period was due in part to an increase in professional and outside services costs of approximately $3.8 million. In addition, there was an increase of approximately $2.1 million in general and administrative employee-related costs, including benefits and incentive programs. Also, the reserve for expected losses increased approximately $0.4 million. As a percentage of net sales, general and administrative expenses were 5.4% for the second quarter of 2023 compared to 4.8% for the second quarter of 2022. The overall increase in general and administrative expenses as a percentage of net sales was primarily attributable to the increase in professional and outside services costs and employee-related costs.
Selling Expenses
Selling expenses were $7.2 million in the second quarter of 2023, a decrease of $0.2 million, or 2.5%, compared to the prior year period. The decrease was primarily attributable to lower advertising and promotional expenses and professional and outside services costs of approximately $0.6 million and $0.5 million, respectively. These decreases were partially offset by an increase in the reserve for expected losses of approximately $0.5 million. In addition, there was an increase in sales employee-related costs, including benefits and incentive programs, of approximately $0.4 million. As a percentage of net sales, selling expenses were 1.0% for the second quarter of 2023 compared to 1.1% for the second quarter of 2022. The decrease in selling expenses as a percentage of net sales was due in part to the decrease in advertising and promotional expenses and professional and outside services costs.
Amortization of Intangibles
Amortization of intangibles was $3.2 million for the second quarter of 2023 compared to $3.8 million in the prior year period. Amortization of intangibles was the result of expenses recognized for intangible assets recorded from previous acquisitions. The decrease from the prior year period is related to certain of the intangible assets that became fully amortized during the second quarter of 2022.
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Impairment and Other, Net
Impairment and other, net was nominal for both the three months ended June 30, 2023 and the three months ended June 30, 2022.
Other Income (Expense)
Interest expense for the second quarter of 2023 totaled $5.0 million compared to $5.2 million in the second quarter of 2022. Interest expense relates to interest and non-cash accretion charges on our Senior Notes due 2028 and Revolving Credit Agreement. Interest expense in the current year period was slightly lower than the prior year period due to lower average outstanding balances under the Revolving Credit Facility.
Other, net for the second quarter of 2023 represented income of $0.5 million as compared to expense of $0.3 million for the prior year period. Income for the current year period primarily relates to interest income. Expense for the prior year period is related to individually insignificant items.
Income Taxes
We recognized income tax expense of $24.3 million in the second quarter of 2023 compared to $7.6 million for the same period in the prior year. The effective tax rate for this period was 24.6% compared to a rate of 25.1% for the same period in the prior year. For the first six months of 2023 and 2022, the effective tax rate differs from the U.S. Federal statutory rate of 21% primarily due to the impact of state and local taxes net of discrete items incurred related to stock-based compensation.
Six Months Ended June 30, 2023 Compared with the Six Months Ended June 30, 2022
Net Sales
Net sales in the first six months of 2023 increased $118.0 million, or 9.9%, compared to the first six months of 2022. By business segment, prior to the elimination of intercompany sales, sales and related units sold were as follows (dollars in thousands):
Six Months Ended June 30,Change
20232022Amount%
(prior to elimination of intersegment sales)
Sales by Segment
Transportation Solutions$1,208,753 $1,098,047 $110,706 10.1 %
Parts & Service109,206 97,103 12,103 12.5 %
Eliminations(10,387)(5,620)(4,767)
Total$1,307,572 $1,189,530 $118,042 9.9 %
New Units Shipped(units)
Trailers23,610 25,535 (1,925)(7.5)%
Truck bodies7,835 7,435 400 5.4 %
Total31,445 32,970 (1,525)(4.6)%
Used Units Shipped(units)
Trailers30 60 (30)(50.0)%
TS segment sales prior to the elimination of intersegment sales were $1,208.8 million for the first six months of 2023, an increase of $110.7 million, or 10.1%, compared to the first six months of 2022. Trailers shipped during the first six months of 2023 totaled 23,610 trailers compared to 25,535 trailers in the prior year period, a 7.5% decrease (or a 3% decrease when excluding conventional refrigerated van trailers), which was primarily driven by our previously announced intentional ramp-down of manufacturing conventional refrigerated van trailers and fewer dry van shipments. New truck bodies shipped during the first six months of 2023 totaled 7,835 compared to 7,435 truck bodies in the prior year period, an increase of 5.4%, primarily due to strong demand despite continuing to experience a certain degree of supply chain challenges. While new trailer shipments decreased from the prior year period, higher revenue per new trailer unit along with the increase in truck body shipments and truck body revenue per unit resulted in an overall increase in new trailer and truck body revenue. The increases were primarily due to increased pricing to account for inflation, our curated customer portfolio, and improved pricing processes.
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P&S segment sales prior to the elimination of intersegment sales were $109.2 million for the first six months of 2023, an increase of $12.1 million, or 12.5%, compared to the same period of 2022. The overall increase in sales was primarily attributable to a $7.8 million increase in our upfitting solutions and services businesses based on strong demand for these offerings. In addition, the Wabash Parts LLC parts and distribution entity had higher sales in the current year period of approximately $6.0 million, which was primarily attributable to the fact that the entity was established with our partner during the second quarter of 2022 as further described in Note 5.
Cost of Sales
Cost of sales was $1,040.5 million in the first six months of 2023, a decrease of $12.9 million, or 1.2%, compared to the prior year period. Cost of sales is comprised of material costs, a variable expense, and other manufacturing costs, comprised of both fixed and variable expenses, including direct and indirect labor, outbound freight, overhead expenses, and depreciation.
TS segment cost of sales was $971.2 million in the first six months of 2023, a decrease of $13.1 million, or 1.3%, compared to the prior year period. The decrease in cost of sales, which was primarily driven by lower shipment volumes, was due to a decrease in materials costs of $35.1 million along with a decrease in certain other manufacturing costs. These decreases were partially offset by an increase in labor and employee-related costs of approximately $20.0 million as well as an increase in operating supplies and maintenance and repairs costs totaling approximately $9.6 million.
P&S segment cost of sales was $79.7 million in the first six months of 2023, an increase of $5.0 million, or 6.6%, compared to the prior period. The increase in cost of sales for this segment was primarily due to an increase in labor and employee-related costs of approximately $2.2 million. In addition, outside services, freight, and lease/rent costs increased in the aggregate by approximately $1.3 million.
Gross Profit
Gross profit was $267.1 million in the first six months of 2023, an increase of $131.0 million from the prior year period. Gross profit as a percentage of sales was 20.4% for the first six months, compared to 11.4% during the same period in 2022. Gross profit by segment was as follows (dollars in thousands):
Six Months Ended June 30,Change
20232022$%
Gross Profit by Segment
Transportation Solutions$237,549 $113,737 $123,812 108.9 %
Parts & Services29,505 22,352 7,153 32.0 %
Corporate & Eliminations— — — 
Total$267,054 $136,089 $130,965 96.2 %
TS segment gross profit was $237.5 million for the first six months of 2023 compared to $113.7 million for the prior year period. Gross profit prior to the elimination of intersegment sales, as a percentage of net sales, was 19.7% in 2023 compared to 10.4% in the prior period. The overall increase in gross profit from the prior year period was primarily driven by an increase in our dry vans products of approximately $85.5 million. In addition, our truck bodies, platforms, and tank trailers had increases from the prior year period. Each of these increases, as well as the increase in gross profit as a percentage of net sales, was primarily attributable to higher revenue per new trailer unit and truck body due to increased pricing to account for inflation, our curated customer portfolio, and improved pricing processes.
P&S segment gross profit was $29.5 million for the first six months of 2023 compared to $22.4 million in the same period of 2022. Gross profit prior to the elimination of intersegment sales, as a percentage of net sales, was 27.0% in the 2023 period compared to 23.0% in the prior period. The overall increase in gross profit was primarily related to an increase within our Engineered Products business of approximately $3.1 million. In addition, our upfitting solutions and services businesses increased approximately $2.2 million from the prior year period on strong demand for these offerings. Finally, our Composites business, which focuses on the use of DuraPlate® composite panels beyond the semi-trailer market, increased approximately $1.1 million compared to the prior year period.
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General and Administrative Expenses
General and administrative expenses for the first six months of 2023 increased $16.1 million, or 28.1%, from the prior year period. The increase from the prior year period was due in part to an increase of approximately $8.6 million in professional and outside services costs, which includes the estimated liability for the Matters, as defined and further described in Note 13. There was also an increase in general and administrative employee-related costs, including benefits and incentive programs, of approximately $6.5 million. In addition, our reserve for expected losses and travel-related expenses increased in total by approximately $0.7 million. As a percentage of sales, general and administrative expenses were 5.6% for the 2023 period as compared to 4.8% for the same period of 2022. The overall increase in general and administrative expenses as a percentage of net sales was primarily attributable to the increase in professional and outside services costs and employee-related costs.
Selling Expenses
Selling expenses were $14.1 million in the first six months of 2023, an increase of $0.5 million, or 3.6%, compared to the prior year period. The increase was primarily attributable to an increase in sales employee-related costs, including benefits and incentive programs, of approximately $1.2 million. In addition, there was an increase in our reserve for expected losses and travel-related expenses totaling approximately $0.7 million. These increases were partially offset by a decrease in professional and outside services costs of approximately $1.2 million and advertising and promotional expenses of $0.3 million. As a percentage of net sales, selling expenses were 1.1% for both the 2023 period and the 2022 period. The overall consistency in selling expenses as a percentage of net sales was primarily attributable to sales increasing in proportion to the increase in selling expenses.
Amortization of Intangibles
Amortization of intangibles was $6.4 million for the first six months of 2023 compared to $8.8 million in the prior year period. Amortization of intangibles was the result of expenses recognized for intangible assets recorded from previous acquisitions. The decrease from the prior year period is related to certain of the intangible assets that became fully amortized during the second quarter of 2022.
Impairment and Other, Net
Impairment and other, net was nominal during the first six months of 2023 compared to a net loss of $0.3 million during the first six months of 2022. Activity during the prior year period primarily related to the impairment of $1.0 million of construction-in-progress projects that were no longer expected to be completed, partially offset by the sale of a building (and the related land). These items are further described in Note 18.
Other Income (Expense)
Interest expense for the first six months of 2023 totaled $10.0 million compared to $10.1 million in the prior year period. Interest expense relates to interest and non-cash accretion charges on our Senior Notes due 2028 and Revolving Credit Agreement. Interest expense was materially consistent year-over-year.
Other, net for the first six months of 2023 represented income of $0.9 million as compared to expense of $0.4 million for the prior year period. Income for the current year period primarily relates to interest income. Expense for the prior year period is related to individually insignificant items.
Income Taxes
The Company recognized income tax expense of $38.2 million in the first six months of 2023 compared to income tax expense of $10.7 million for the same period in the prior year. The effective tax rates for the first six months of 2023 and 2022 were 23.3% and 23.5%, respectively. For the first six months of 2023 and 2022, the effective tax rate differs from the U.S. Federal statutory rate of 21% primarily due to the impact of state and local taxes net of discrete items incurred related to stock-based compensation.
Liquidity and Capital Resources
Capital Structure
Our capital structure is comprised of a mix of debt and equity. As of June 30, 2023, our debt-to-equity ratio was approximately 0.8:1.0. Our long-term objective is to generate operating cash flows sufficient to support the growth within our businesses and increase shareholder value. This objective will be achieved through a balanced capital allocation strategy of sustaining strong liquidity, maintaining healthy leverage ratios, investing in the business, both organically and strategically, and returning capital to our shareholders. The Board of Directors has designated a Finance Committee for the primary purpose of assisting the Board in its oversight of the Company’s capital structure, financing, investment, and other financial matters of importance to the Company.
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During the first six months of 2023, in keeping with this balanced approach, we paid dividends of approximately $8.4 million and repurchased shares under our Board approved share repurchase program totaling $28.2 million. Also, as further described in our Annual Report on Form 10-K for the year ended December 31, 2022, during the third quarter of 2022 we amended our Revolving Credit Agreement. The amendment increased the total revolving commitments to $350.0 million and extended the maturity to September 2027, which is the nearest maturity date of our long-term debt. As of June 30, 2023, there were no amounts outstanding under the Revolving Credit Agreement. Collectively, these actions demonstrate our confidence in the financial outlook of the Company and our ability to generate cash flow, both near and long term, and reinforce our overall commitment to deliver shareholder value while maintaining the flexibility to continue to execute our strategic plan for profitable growth and diversification.
Our liquidity position, defined as cash on hand and available borrowing capacity under the Revolving Credit Agreement, amounted to $441.1 million as of June 30, 2023, an increase of 48% compared to $298.1 million as of June 30, 2022 and an increase of 10% from $401.2 million as of December 31, 2022. The increase as of June 30, 2023 compared to June 30, 2022 is primarily attributable to higher available capacity on the Revolving Credit Agreement (which as noted above was amended during the third quarter of 2022), partially offset by a lower cash balance as of June 30, 2023. For the remainder of 2023 and continuing into 2024, we expect to continue our commitment to fund our working capital requirements, capital expenditures, and our Trailers as a Service (TAAS)SM initiative from operations or available borrowing capacity under the Revolving Credit Agreement (as needed). This includes adding 20% more dry van manufacturing capacity, with production beginning during the second quarter of 2023. We continue to believe this additional manufacturing capacity will allow us to go-to-market with a portfolio-based selling approach that leverages the breadth of our products. In addition, in August 2022 we announced a $20 million investment to be made in our manufacturing capacity to scale our EcoNexTM technology within refrigerated vans, truck bodies, and other transportation and logistics related products. Along with these investments, we will also maintain our assets to react to any economic and/or industry changes, while also responsibly returning capital to our shareholders. We will continue to move rapidly to adjust to the current environment to preserve the strength of our balance sheet, while prioritizing the safety of our employees and ensuring the liquidity and financial well-being of the Company.
Debt Agreements and Related Amendments
Senior Notes due 2028
On October 6, 2021, we closed on an offering of $400 million in aggregate principal amount of its 4.50% unsecured Senior Notes due 2028 (the “Senior Notes”). The Senior Notes were issued pursuant to an indenture dated as of October 6, 2021, by and among Wabash, certain subsidiary guarantors named therein (the “Guarantors”) and Wells Fargo Bank, National Association, as trustee (the “Indenture”). The Senior Notes bear interest at the rate of 4.50% and pay interest semi-annually in cash in arrears on April 15 and October 15 of each year. The Senior Notes will mature on October 15, 2028. At any time prior to October 15, 2024, we may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes being redeemed plus an applicable make-whole premium set forth in the Indenture and accrued and unpaid interest to, but not including, the redemption date.
Prior to October 15, 2024, we may redeem up to 40% of the Senior Notes at a redemption price of 104.500% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, with the proceeds of certain equity offerings so long as if, after any such redemption occurs, at least 60% of the aggregate principal amount of the Senior Notes remain outstanding. On and after October 15, 2024, we may redeem some or all of the Senior Notes at redemption prices (expressed as percentages of principal amount) equal to 102.250% for the twelve-month period beginning on October 15, 2024, 101.125% for the twelve-month period beginning October 15, 2025 and 100.000% beginning on October 15, 2026, plus accrued and unpaid interest to, but not including, the redemption date. Upon the occurrence of a Change of Control (as defined in the Indenture), unless we have exercised its optional redemption right in respect of the Senior Notes, the holders of the Senior Notes will have the right to require us to repurchase all or a portion of the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the date of repurchase.
The Senior Notes are guaranteed on a senior unsecured basis by all direct and indirect existing and future domestic restricted subsidiaries, subject to certain restrictions. The Senior Notes and related guarantees are our and the Guarantors’ general unsecured senior obligations and will be subordinated to all of our and the Guarantors’ existing and future secured debt to the extent of the assets securing that secured obligation. In addition, the Senior Notes are structurally subordinated to any existing and future debt of any of our subsidiaries that are not Guarantors, to the extent of the assets of those subsidiaries.
Subject to a number of exceptions and qualifications, the Indenture restricts our ability and the ability of certain of its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, its capital stock or with respect to any other interest or participation in, or measured by, its profits; (iii) make loans and certain investments; (iv) sell assets; (v) create or incur liens; (vi) enter into transactions with affiliates; and (vii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications.
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During any time when the Senior Notes are rated investment grade by at least two of Moody’s, Fitch and Standard & Poor’s Ratings Services and no Default (as defined in the Indenture) has occurred and is continuing, many of such covenants will be suspended and we and our subsidiaries will cease to be subject to such covenants during such period.
The Indenture contains customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs. As of June 30, 2023, we were in compliance with all covenants.
Contractual coupon interest expense and accretion of fees for the Senior Notes for each three- and six-month period ended June 30, 2023 was $4.5 million and $0.2 million, and $9.0 million and $0.3 million, respectively. Contractual coupon interest expense and accretion of fees for the Senior Notes are included in Interest expense in our Condensed Consolidated Statements of Operations. Contractual coupon interest expense and accretion of fees for the Senior Notes for each three- and six-month period ended June 30, 2022 was $4.5 million and $0.2 million, and $9.0 million and $0.3 million, respectively.
Revolving Credit Agreement
On September 23, 2022, we entered into the Third Amendment to Second Amended and Restated Credit Agreement among us, certain of our subsidiaries as borrowers (together with us, the “Borrowers”), certain of our subsidiaries as guarantors, the lenders party thereto, and Wells Fargo Capital Finance, LLC, as the administrative agent (the “Agent”), which amended our existing Second Amended and Restated Credit Agreement, dated as of December 21, 2018 (as amended from time to time, the “Revolving Credit Agreement”).
Under the Revolving Credit Agreement, the lenders agree to make available a $350 million revolving credit facility to the Borrowers with a scheduled maturity date of September 23, 2027. We have the option to increase the total commitments under the facility by up to an additional $175 million, subject to certain conditions, including obtaining agreements from one or more lenders, whether or not party to the Revolving Credit Agreement, to provide such additional commitments. Availability under the Revolving Credit Agreement is based upon quarterly (or more frequent under certain circumstances) borrowing base certifications of the Borrowers’ eligible inventory, eligible leasing inventory and eligible accounts receivable, and is reduced by certain reserves in effect from time to time.
Subject to availability, the Revolving Credit Agreement provides for a letter of credit subfacility in the amount of $25 million and allows for swingline loans in the amount of $35 million. Outstanding borrowings under the Revolving Credit Agreement bear interest at an annual rate, at the Borrowers’ election, equal to (i) adjusted term Secured Overnight Financing Rate plus a margin ranging from 1.25% to 1.75% or (ii) a base rate plus a margin ranging from 0.25% to 0.75%, in each case depending upon the monthly average excess availability under the Revolving Credit Agreement. The Borrowers are required to pay a monthly unused line fee equal to 0.20% times the average daily unused availability along with other customary fees and expenses of the Agent and the lenders.
The Revolving Credit Agreement is guaranteed by certain of our subsidiaries (the “Guarantors”) and is secured by substantially all personal property of the Borrowers and the Guarantors.
The Revolving Credit Agreement contains customary covenants limiting our ability and certain of our subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock, enter into transactions with affiliates, merge, dissolve, repay subordinated indebtedness, make investments and dispose of assets. In addition, we will be required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 as of the end of any period of 12 fiscal months when excess availability under the Revolving Credit Agreement is less than the greater of (a) 10.0% of the lesser of (i) the total revolving commitments and (ii) the borrowing base (such lesser amount, the “Line Cap”) and (b) $25 million. As of June 30, 2023, we were was in compliance with all covenants.
If availability under the Revolving Credit Agreement is less than the greater of (i) 10% of the Line Cap and (ii) $25 million for three consecutive business days, or if there exists an event of default, amounts in any of the Borrowers’ and the Guarantors’ deposit accounts (other than certain excluded accounts) will be transferred daily into a blocked account held by the Agent and applied to reduce the outstanding amounts under the facility.
The Revolving Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the lenders may, among other things, require the immediate payment of all amounts outstanding and foreclose on collateral. In addition, in the case of an event of default arising from certain events of bankruptcy or insolvency, the lenders’ obligations under the Revolving Credit Agreement would automatically terminate, and all amounts outstanding under the Revolving Credit Agreement would automatically become due and payable.
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Our liquidity position, defined as cash on hand and available borrowing capacity on the Revolving Credit Agreement, amounted to $441.1 million as of June 30, 2023 and $401.2 million as of December 31, 2022.
During the three-month period ended June 30, 2023, we had net payments of principal of $60.4 million and net borrowings of principal of $60.4 million. During the six-month period ended June 30, 2023, we had net payments of principal totaling $103.7 million and net borrowings of principal totaling $103.7 million. As of June 30, 2023, there were no amounts outstanding under the Revolving Credit Agreement.
During the three-month period ended June 30, 2022, we repaid $30.0 million of principal under the Revolving Credit Agreement. During the six-month period ended June 30, 2022, we had net payments of principal totaling $30.8 million and net borrowings of principal totaling $56.7 million. As of June 30, 2022, there was $59.0 million outstanding under the Revolving Credit Agreement.
Interest expense under the Revolving Credit Agreement for the three- and six-month periods ended June 30, 2023 was approximately $0.3 million and $0.5 million, respectively. During the three- and six-month periods ended June 30, 2022, interest expense under the Revolving Credit Agreement was approximately $0.5 million and $0.8 million, respectively. Interest expense under the Revolving Credit Agreement is included in Interest expense in our Condensed Consolidated Statements of Operations.
Cash Flows
Cash provided by operating activities for the first six months of 2023 totaled $146.3 million, compared to providing $82.7 million during the same period in 2022. Cash provided by operations during the current year period was the result of net income adjusted for various non-cash activities including depreciation, amortization, deferred taxes, stock-based compensation, accretion of debt fees and discount, and a $14.1 million increase in working capital. Changes in key working capital accounts for 2023 and 2022 are summarized below (in thousands):
Six Months Ended June 30,
20232022Change
Source (Use) of cash:
Accounts receivable$23,829 $(55,114)$78,943 
Inventories(98,600)(67,717)(30,883)
Accounts payable and accrued liabilities69,793 142,869 (73,076)
Net source (use) of cash$(4,978)$20,038 $(25,016)
Accounts receivable decreased $23.8 million in the first six months of 2023 as compared to a $55.1 million increase in the prior year period. Days sales outstanding, a measure of working capital efficiency that measures the amount of time a receivable is outstanding, was 31 days and 32 days for the three months ended June 30, 2023 and 2022, respectively. The decrease in accounts receivable during the first six months of 2023 was primarily due to the timing of shipments and receipt of customer payments. Inventory increased by $98.6 million during the first six months of 2023 as compared to an increase of $67.7 million in the 2022 period. Our inventory turns, a commonly used measure of working capital efficiency that measures how quickly inventory turns per year, was approximately 6 times in both the 2023 and 2022 periods. The increase in inventory for the 2023 period was primarily attributable to higher finished goods inventory. Accounts payable and accrued liabilities increased by $69.8 million in 2023 compared to an increase of $142.9 million for the same period in 2022. Days payable outstanding, a measure of working capital efficiency that measures the amount of time a payable is outstanding, was 39 days for the three months ended June 30, 2023 compared to 49 days for the three months ended June 30, 2022.
Investing activities used $59.1 million during the first six months of 2023, as compared to using $20.9 million during the same period in 2022. Investing activities for the first six months of 2023 included capital expenditures for property, plant, and equipment of $55.8 million, which was an increase compared to $22.4 million during the same period in 2022. In addition, expenditures related to revenue generating assets totaled $3.2 million. For the first six months of 2023, investing activities included no proceeds from the sale of assets compared to approximately $1.4 million during the first six months of 2022.
Financing activities used $46.7 million during the first six months of 2023 as compared to providing $5.0 million during the same period in 2022. Net cash used by financing activities during the current year period primarily relates to common stock repurchases and withholdings of $37.9 million and cash dividend payments of $8.4 million. Borrowings under our Revolving Credit Agreement totaled $103.7 million, which were fully offset by principal, interest, and unused fee payments made under our Revolving Credit Agreement totaling $103.7 million. Net cash provided by financing activities during the first six months of 2022 primarily related to borrowings under our Revolving Credit Agreement totaling $56.7 million and proceeds from the exercise of stock options of $0.7 million. These items were partially offset by payments under our Revolving Credit Agreement totaling $30.8 million, common stock repurchases and withholdings of $13.3 million, and cash dividend payments of $8.3 million.
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As of June 30, 2023, our liquidity position, defined as cash on hand and available borrowing capacity under our Revolving Credit Agreement, amounted to $441.1 million, representing an increase of $143.0 million (or 48%) compared to June 30, 2022 and an increase of $39.9 million (or 10%) compared to December 31, 2022. The increase as of June 30, 2023 compared to June 30, 2022 is primarily attributable to higher available capacity on the Revolving Credit Agreement (which as noted above was amended during the third quarter of 2022). Total debt obligations amounted to $400.0 million as of June 30, 2023.
For the remainder of 2023 and continuing into 2024, we expect to continue our commitment to fund our working capital requirements, capital expenditures, and our Trailers as a Service (TAAS)SM initiative from operations or available borrowing capacity under the Revolving Credit Agreement (as needed). This includes adding 20% more dry van manufacturing capacity, with production beginning during the second quarter of 2023. We continue to believe this additional manufacturing capacity will allow us to go-to-market with a portfolio-based selling approach that leverages the breadth of our products. In addition, in August 2022 we announced a $20 million investment to be made in our manufacturing capacity to scale our EcoNexTM technology within refrigerated vans, truck bodies, and other transportation and logistics related products. Along with these investments, we will also maintain our assets to react to any economic and/or industry changes, while also responsibly returning capital to our shareholders. We will continue to move rapidly to adjust to the current environment to preserve the strength of our balance sheet, while prioritizing the safety of our employees and ensuring the liquidity and financial well-being of the Company.
Capital Expenditures
Capital spending related to property, plant, and equipment amounted to approximately $55.8 million for the first six months of 2023. In addition, expenditures for revenue generating assets totaled $3.2 million for the first six months of 2023.
We believe our capital expenditures for 2023 related to property, plant, and equipment will be in the range of $100 to $110 million, while capital expenditures supporting our Trailers as a Service (TAAS)SM growth initiative with revenue generating assets are expected to be in the range of $20 to $25 million. In addition to the previously announced actions to retool our existing capacity to support expanded dry van production, capital spending for 2023 has been and is expected to be utilized to support our growth strategies (including TAAS) as well as our maintenance and productivity improvement initiatives within our facilities.
Goodwill
We considered whether there were any indicators of impairment during the three and six months ended June 30, 2023 and concluded there were none.
Contractual Obligations and Commercial Commitments
A summary of payments of our contractual obligations and commercial commitments, both on and off balance sheet, as of June 30, 2023 are as follows (in thousands):
20232024202520262027ThereafterTotal
Debt:
Revolving Credit Agreement (due 2027)$— $— $— $— $— $— $— 
Senior Notes (due 2028)— — — — — 400,000 400,000 
Interest payments on Revolving Credit Agreement and Senior Notes due 20281
9,000 18,000 18,000 18,000 18,000 18,000 99,000 
Total debt9,000 18,000 18,000 18,000 18,000 418,000 499,000 
Other:
Operating Leases4,162 7,389 6,260 5,654 3,410 2,141 29,016 
Total other4,162 7,389 6,260 5,654 3,410 2,141 29,016 
Other commercial commitments:
Letters of Credit5,702 — — — — — 5,702 
Raw Material Purchase Commitments60,000 — — — — — 60,000 
Chassis Agreements and Programs37,242 — — — — — 37,242 
Total other commercial commitments102,944 — — — — — 102,944 
Total obligations$116,106 $25,389 $24,260 $23,654 $21,410 $420,141 $630,960 
1 Future interest payments on variable rate long-term debt (if any) are estimated based on the rate in effect as of June 30, 2023, and only include interest payments (not unused line fees). However, as of June 30, 2023, there was no variable rate debt (Revolving Credit Agreement) outstanding.
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Borrowings under the Revolving Credit Agreement bear interest at a variable rate based on the Secured Overnight Financing Rate (“SOFR”) or a base rate determined by the lender’s prime rate plus an applicable margin, as defined in the agreement. Any outstanding borrowings under the Revolving Credit Agreement bear interest at a rate, at our election, equal to (i) adjusted term SOFR plus a margin ranging from 1.25% to 1.75% or (ii) a base rate plus a margin ranging from 0.25% to 0.75%, in each case depending upon the monthly average excess availability under the Revolving Credit Agreement. We are required to pay a monthly unused line fee equal to 0.20% times the average daily unused availability along with other customary fees and expenses of our agent and lenders. During the six-month period ended June 30, 2023, we had borrowings of principal and payments of principal totaling $103.7 million under the Revolving Credit Agreement. As of June 30, 2023, there were no amounts outstanding under the Revolving Credit Agreement.
The Senior Notes due 2028 bear interest at the rate of 4.5% per annum from the date of issuance, payable semi-annually on April 15 and October 15.
Operating leases represent the total future minimum lease payments that have commenced. As of June 30, 2023, obligations related to operating leases that we have executed but have not yet commenced totaled approximately $0.4 million.
We have standby letters of credit totaling $5.7 million issued in connection with workers compensation claims and surety bonds.
We have $60.0 million in purchase commitments through December 2023 for various raw material commodities, including aluminum, steel, polyethylene and nickel as well as other raw material components which are within normal production requirements.
We obtain most vehicle chassis for our specialized vehicle products directly from the chassis manufacturers under converter pool agreements. Chassis are obtained from the manufacturers based on orders from customers, and to a lesser extent, for unallocated orders. Although each manufacturer’s agreement has different terms and conditions, the agreements generally state that the manufacturer will provide a supply of chassis to be maintained from time to time at our various facilities with the condition that we will store such chassis and will not move, sell, or otherwise dispose of such chassis except under the terms of the agreement. The manufacturer transfers the chassis to us on a “restricted basis,” retaining the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales of the chassis to the manufacturer’s dealers. The manufacturer also does not transfer the certificate of origin to us nor permit us to sell or transfer the chassis to anyone other than the manufacturer (for ultimate resale to a dealer). Although we are party to related finance agreements with manufacturers, we have not historically settled, nor expect to in the future settle, any related obligations in cash. Instead, the obligation is settled by the manufacturer upon reassignment of the chassis to an accepted dealer, and the dealer is invoiced for the chassis by the manufacturer. Accordingly, as of June 30, 2023 our outstanding chassis converter pool with the manufacturer totaled $33.8 million and we have included this financing agreement on our Condensed Consolidated Balance Sheets within Prepaid expenses and other and Other accrued liabilities. All other chassis programs are handled as consigned inventory belonging to the manufacturer and totaled approximately $3.4 million. Under these agreements, if the chassis is not delivered to a customer within a specified time frame, we are required to pay a finance or storage charge on the chassis. Additionally, we receive finance support funds from manufacturers when the chassis are assigned into our chassis pool. Typically, chassis are converted and delivered to customers within 90 days of our receipt of the chassis.
Backlog
Orders that have been confirmed by customers in writing and have defined delivery timeframes are included in our backlog. Orders that comprise our backlog may be subject to changes in quantities, delivery, specifications, terms, or cancellation. The following table presents backlog information as of June 30, 2023, December 31, 2022, and June 30, 2022 (in millions):
June 30, 2023December 31, 2022ChangeJune 30, 2023June 30, 2022Change
12-month backlog$2,092 $2,787 (25)%$2,092 $2,227 (6)%
Total backlog$2,423 $3,396 (29)%$2,423 $2,297 5%
The decrease in rolling 12-month backlog and total backlog from December 31, 2022 is primarily attributable to the fulfillment of orders during the first six months of 2023 outpacing new orders (which we generally expected). The increase in rolling 12-month backlog and total backlog from June 30, 2022 is primarily related to high demand for our products in 2023, higher expected production and revenue per trailer and truck body unit, and long-term relationship agreements with certain strategic customers (including J.B. Hunt Transport Inc., which we announced in January 2023). We believe our backlog of orders remains strong as of June 30, 2023—refer to the “Outlook” section below for additional details related to industry and market conditions.


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Outlook
The trailer industry generally follows the transportation industry’s cycles. According to ACT Research Company (“ACT”), total United States trailer production in 2022 was approximately 308,000 trailers, a 15% increase from 2021. While there remains some uncertainty in the industry, including but not limited to overall economic conditions and supply chain disruptions, the outlook for the overall trailer market is generally strong, and we believe our backlog of orders continues to provide a solid foundation for 2023. Current estimates from ACT and FTR Associations (“FTR”) for 2023 United States trailer production are 310,000 and 322,000, respectively, representing materially consistent production levels compared to 2022. These increases are generally in-line with our expectations due to strong 2023 demand throughout the industry.
ACT is forecasting annual new trailer production levels for 2024, 2025, 2026, 2027, and 2028 of approximately 273,000, 304,000, 308,000, 313,000, and 292,000, respectively. In addition, FTR is forecasting annual new trailer production levels of 243,000 and 275,000 for 2024 and 2025, respectively. These estimates are generally more consistent with historical trailer industry production levels, and in some years higher than historical production levels. However, overall economic uncertainty and supply chain disruptions have begun to soften demand in the industry to a certain degree and could continue to impact these estimates. This uncertainty and potential softening are evident in the ACT and FTR forecasts, particularly for 2024 production—however, we believe that our strategic plan and actions taken over the last several years have positioned us to not only capitalize on demand in 2023, but to remain well-suited to adapt to changes in the industry and demand environment due to our strong balance sheet and liquidity profile.
Other potential risks we face for the remainder of 2023 primarily relate to our ability to effectively manage our manufacturing operations, including disruption of our supply chain and economic uncertainty, and our overall business with the increase in production to meet demand. In addition, the cost of raw materials, commodities, and components are also potential risks. Significant increases in the cost of certain commodities, raw materials or components have had, and may continue to have, an adverse effect on our results of operations. As has been our practice, we will endeavor to pass raw material and component price increases to our customers in addition to continuing our cost management and hedging activities in an effort to minimize the risk that changes in material costs could have on our operating results. In addition, we rely on a limited number of suppliers for certain key components and raw materials in the manufacturing of our products, including tires, landing gear, axles, suspensions, aluminum extrusions, chassis and specialty steel coil. While we have taken actions to mitigate certain of these risks, which include our previously announced supply agreements with Hydro and Ryerson, at the current and expected demand levels, there may be additional or increased shortages of supplies of raw materials or components which would have an adverse impact on our ability to meet demand for our products. Despite these risks, we believe we are well positioned to capitalize on overall demand levels while maintaining or growing margins through improvements in product pricing as well as productivity and other operational excellence initiatives.
For the remainder of 2023, we will continue to adjust to changes in the current environment, preserve the strength of our balance sheet, prioritize the safety of our employees, and ensure the liquidity and financial well-being of the Company. We believe we remain well-positioned for both near-term and long-term success in the transportation, logistics, and distribution industries because: (1) our core customers are among the major participants in the transportation, logistics, and distribution industries; (2) our technology and innovation provide value-added solutions for our customers by reducing operating costs, improving revenue opportunities, and solving unique transportation problems; (3) our Wabash Management System (“WMS”) principles and processes and enterprise-wide lean efforts drive focus on the interconnected processes that are critical for success across our business; (4) our significant brand recognition, including our January 2022 rebranding as Wabash®, presence throughout North America, and the utilization of our extensive dealer network to market and sell our products; and (5) our One Wabash approach to create a consistent, superior experience for all customers who seek our connected solutions in the transportation, logistics, and distribution markets. By continuing to be an innovation leader in the transportation, logistics, and distribution industries we expect to leverage our existing assets and capabilities into higher margin products and markets by delivering connected, value-added customer solutions.
Critical Accounting Policies and Estimates
We have included a summary of our Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to the summary provided in that report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In addition to the risks inherent in our operations, we have exposure to financial and market risk resulting from volatility in commodity prices, interest rates and foreign exchange rates. The following discussion provides additional detail regarding our exposure to these risks.
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Commodity Prices
We are exposed to fluctuation in commodity prices through the purchase of various raw materials that are processed from commodities such as aluminum, steel, lumber, nickel, copper, and polyethylene. Given the historical volatility of certain commodity prices, this exposure can significantly impact product costs. We manage some of our commodity price changes by entering into fixed price contracts with our suppliers and through financial derivatives. To the extent that we are unable to offset the increased commodity costs in our product prices, our results would be materially and adversely affected. As of June 30, 2023, we had $60.0 million in raw material purchase commitments through December 2023 for materials that will be used in the production process, as compared to $59.2 million as of December 31, 2022. We typically do not set prices for our products more than 45-90 days in advance of our commodity purchases and can, subject to competitive market conditions, take into account the cost of the commodity in setting our prices for each order. As of June 30, 2023, a hypothetical ten percent change in commodity prices based on our raw material purchase commitments through December 2023 would result in a corresponding change in cost of goods sold of approximately $6.0 million. This sensitivity analysis does not account for the change in the competitive environment indirectly related to the change in commodity prices and the potential managerial action taken in response to these changes.
Interest Rates
As of June 30, 2023, we had no floating rate debt outstanding under our Revolving Credit Agreement. The only other outstanding debt on our Condensed Consolidated Balance Sheets as of June 30, 2023 were the Senior Notes, which carry a fixed interest rate of 4.50%. Based on the current borrowings under our Revolving Credit Agreement, a hypothetical 100 basis-point change in the floating interest rate would result in no corresponding change in interest expense over a one-year period. This sensitivity analysis does not account for the change in the competitive environment indirectly related to the change in interest rates and the potential managerial action taken in response to these changes.
Foreign Exchange Rates
We are subject to fluctuations in the Mexican peso exchange rates that impact transactions with our foreign subsidiaries, as well as U.S. denominated transactions between these foreign subsidiaries and unrelated parties. A ten percent change in the Mexican peso exchange rates would have an immaterial impact on results of operations. We do not hold or issue derivative financial instruments for speculative purposes.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of June 30, 2023.
Changes in Internal Controls over Financial Reporting
There were no changes in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the second quarter of fiscal year 2023 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022. See also Note 13, “Commitments and Contingencies”, to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Item 1A. Risk Factors
You should carefully consider the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022 including those under the heading “Risk Factors” appearing in Item 1A of Part I of the Form 10-K and other information contained in this Quarterly Report before investing in our securities. Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Our Equity Securities
PeriodTotal Number of
Shares Purchased		Average Price
Paid per
Share		Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs		Maximum Amount That May Yet Be Purchased Under the Plans or Programs
($ in millions)
April 1 - 30, 2023199,202 $22.62 199,202 $86.5 
May 1 - 31, 2023234,305 $24.32 234,305 $80.7 
June 1 - 30, 2023152,490 $26.22 152,490 $76.7 
Total585,997 $24.24 585,997 $76.7 
In August 2021, the Company announced that the Board of Directors approved the repurchase of an additional $150 million in shares of common stock over a three-year period. This authorization was an increase to the previous $100 million repurchase programs approved in November 2018, February 2017, and February 2016. The repurchase program is set to expire in August 2024. For the quarter ended June 30, 2023, we repurchased 585,997 shares pursuant to our repurchase program. Additionally, during this period there were no shares repurchased to cover minimum employee tax withholding obligations upon the vesting of restricted stock awards.
Item 5. Other Information
(c)
During the second quarter of 2023, none of our directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K).
Item 6. Exhibits
(a)
Exhibits
101The following materials from Wabash National Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 are filed herewith, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022, and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
104Cover Page Interactive Data File (formatting as Inline XBRL and contained in Exhibit 101)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WABASH NATIONAL CORPORATION
Date: July 26, 2023By:/s/ Michael N. Pettit
Michael N. Pettit
Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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