Michael Pettit - Vice President, Finance and Investor Relations Richard Giromini - President and Chief Executive Officer Jeff Taylor - Senior Vice President and Chief Financial Officer.

John Aschenbeck - Seaport Global Securities, LLC Alex Potter - Piper Jaffray Steve Dyer - Craig-Hallum Capital Group Jeff Kauffman - Buckingham Research Michael Baudendistel - Stifel Richard Carlson - BMO Capital Markets Kristine Kubacki - Avondale Partners.

Welcome to the First Quarter Earnings Conference Call. My name is Richard and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mike Pettit, Vice President of Finance and Investor Relations, you may begin..

Thank you, Richard, and good morning. Welcome everyone to the Wabash National Corporation 2016 first quarter earnings call. This is Mike Pettit, Vice President of Finance and Investor Relations.

Following this introduction, you’ll hear from Dick Giromini, President and Chief Executive Officer of Wabash National on the highlights of the first quarter, current operating environment and our outlook for the rest of 2016. After Dick, Jeff Taylor, our Chief Financial Officer will provide a detailed description of our financial results.

At the conclusion of the prepared remarks, we’ll open the call for questions from the listening audience. Before we begin, I’d like to cover two brief items. First, please note that this call is being recorded.

Second, as with all of these types of presentations, this morning’s call contains certain forward-looking information including statements about the Company’s prospects, adjusted earnings guidance, industry outlook, backlog information, financial conditions and other matters.

As you know, actual results could differ materially than those projected in the forward-looking statements. These statements should be viewed via the cautionary statements and risk factors set forth from time-to-time in the Company’s filings with the Securities and Exchange Commission.

With that, it’s my pleasure to turn the call over to Dick Giromini, President and CEO..

Thanks, Mike. Overall it was another record quarter for the company and a great start to the year. Actually, I should say it was the best first quarter in the company’s history and as such, we are on pace for 2016 to be another record year.

We remained focused on executing our corporate strategy, profitably grow and diversify the company for organic and strategic growth, as well as through prudent management of our capital structure. Having said that, we are now a more diverse business than we’ve ever been.

Today, we are far more than just a van trailer company and as a result, we have businesses realizing strong demand while others face demand headwinds. One thing consistent across all businesses is strong execution and effective management of the opportunities or challenges that each have been dealt.

Within CTP, effective management of a strong demand environment combined with exceptional operational execution, led to outstanding overall results. At the same time, the DPG team saddled with a much weaker demand environment was able to deliver strong gross margins through effective cost management decision-making.

Our first quarter results continue to validate our long-term strategic plan, first develop back in 2007 and demonstrates the progress we continue to make in executing that plan to profitably grow and diversify the business.

We’ve changed the fundamental composition of our business and continue to strive to make additional improvements to grow margins, ensure more stable earning stream and take advantage of macro growth trends.

With this focus, we’ve put ourselves into a position to take advantage of a very strong balance sheet, diverse businesses and world-class operations as we continue to execute these strategic moves. With that, let’s get down to specifics.

On a quarterly basis, consolidated net sales were $448 million on shipments of 14,500 units, significantly stronger than our prior guidance supported by accelerated customer pick ups and favorable weather conditions during the quarter.

The business also delivered strong first quarter build results totaling approximately 16,200 units, up approximately 100 units from the first quarter of 2015 and surpassing our internal build plan.

Operating income for the first quarter was $48.2 million representing a 77% year-over-year improvement driven by excellent operational execution across all areas of our business and significantly supported by a strong demand environment in the commercial trailer products business.

Operating margin came in at 10.8% marking the third consecutive quarter of operating margins exceeding 10%, a target that we had established mid last year, as a long-term corporate objective. Our trailing 12 month operating margin was 9.9% far outpacing any level the company has ever achieved.

It’s certainly clear that we have made significant progress towards transforming ourselves into a higher margin diversified manufacturer and we intend to continue this effort.

Overall, we delivered an exceptional first quarter with strong trailer shipments, builds and revenue which translated into increased profitability and operating EBITDA, as well as another quarter of very strong cash generation and a continually strengthening balance sheet.

Total backlog decreased slightly sequentially as expected and remains at a healthy $1.1 billion as of the end of the first quarter and represents approximately seven to eight months of build volume on average with both dry and refrigerated van trailer build slots now essentially booked for the full year.

In fact, quote demand for van trailers was such that build request for 2016 slots far exceeded our 2016 capacity and led to discussions on opening 2017 build slots early to allow acceptance of these orders now to lock those slots for the customers.

To add further clarity, current backlog does include some multi-year orders that flow over into 2017 along with overage from 2016 demand, while other product lines including aluminum and stainless tank trailers had experienced weaker demand and shorter backlogs until recently. Now let’s take a look at our individual reporting segments.

We’ll start with the diversified products group reporting segment or DPG, which includes our composites, tank trailers, aviation and truck equipment and process systems businesses. As expected and guided, the overall DPG financial results were lower both sequentially and year-over-year in the first quarter.

Despite revenues decreasing year-over-year by $25 million and operating income down $4 million, gross margin for the quarter remained a healthy 23.3% driven in large part by outstanding execution at the factory level within the business as our lean six sigma CI initiatives continue to pay dividends.

As discussed in the fourth quarter, DPG continues to experience some softness in certain product segments that is creating some top-line pressure in the business. We would expect the second quarter to be better sequentially. Furthermore, we still expect the second half to be materially stronger than the first half for this business segment.

Let me now discuss some of the business specifics and growth initiatives within DPG. Our tank trailer business continues to see pockets of reasonably stable demand in the food, dairy, beverage markets offset by continued weakness for products related to the oil and gas and chemical markets resulting in shorter than desired backlogs.

Despite these challenges, the tank trailer team has been proactive in taking necessary actions to mostly offset the weaker demand environment, which has allowed them to deliver strong gross margins and solid profit contribution.

I complement the whole team on their efforts to address the cost structure of the business effectively right-sizing to current demand levels.

Now with quote and order activity having picked up nicely, since the end of the year driving backlog increases the past two months, we may have already seen the bottom of the tank trailer cycle and as such we could see continued growth from these levels as we move forward through the year.

If that proves true, the tank trailer business could actually provide an uplift for the company at a point down the road when and if other parts of our business are impacted by a weaker demand environment.

In our Aviation and Truck Equipment business unit or AVTE, we are continuing our work to optimize the cost structure and footprint of this business. Most notably, through our recent decision to consolidate our two manufacturing facilities in the Kansas City area.

This effort will also enable us to more quickly adapt to customer needs with a flexible manufacturing layout and improve margins by leveraging an optimized footprint. Now nearing completion of the physical consolidation phase, focus consumes shift to direct labor productivity optimization efforts.

We firmly believe the AVTE business offers significant growth potential and this consolidation, while ongoing at this time, is expected to provide noticeable improvements in this business layer this year.

Our Process Systems business in which we produce isolators, downflow booths and mobile clean rooms for the pharma industry along with stationary silos and mixtures for the food dairy and beverage industry, is now seeing an increase in quote activity after a year long period of deferred quotes and order conversion.

March saw some of the highest quote activity we have seen in two years and we continue to leverage the growth potential of our manufacturing facility in Mexico.

In our Wabash Composites business, the efforts the past two years to increase new product development pipeline and accelerate the commercialization of these offerings is paying off as the business is now positioned to have their strongest year on record in 2016.

Now armed with a full suite of aerodynamic and mobile solution product offering including truck boxes and portable storage containers, the Wabash Composites team delivered their strongest results in any quarter since 2012.

In addition, the business unit continues to experience favorable order trends for truck body composite panels and LTL deck systems along with the recent international growth of our mobile solutions products with prospects for further growth opportunities.

To summarize, we are encouraged by the overall margin performance of the DPG business during these past few quarters along with the strong potential presented by the new product offerings already developed or in development within the group.

Obviously, we’d like to see overall growth at the top-line to help drive improvement in operating income but recognize the ebb and flow of this more diversified part of our business.

Also we recognized the significant opportunity to further improve overall performance within our Aviation and Truck Equipment business to make it a positive contributor to segment performance and are committed to make this happen.

Lastly, we need to take advantage of the strong recent quote activity in the process systems business with effective and timely order conversion, execution and deliveries.

Now let’s discuss the results of the Commercial Trailer Products segment or CTP consisting of our dry and refrigerated van products, platform trailers, used trailer sales, wood flooring operations and now truck bodies.

This segment continues to successfully execute its optimization strategy with an ongoing commitment to margin improvement, manufacturing excellence, and leadership and product innovation. First quarter revenues were very strong at $355 million marking the best first quarter for CTP in company history.

Gross margin of 16.8% was an all-time best for the segment along with a record operating income of $52.1 million, up 129% year-over-year.

The outstanding performance delivered in the first quarter was driven by the team’s continued execution of a pricing strategy committed to favoring margin over volume, a capable and engaged workforce focused on continuous improvement and productivity and material cost optimization leaded significantly by design improvements.

These margin enhancing strategies were fully realized during the quarter with operating income more than doubling year-over-year on only a 13% increase in revenues. Our CTP operations produced 450 more trailers than in the same period during 2015 and exceeded our internal build plan.

Our Lafayette van operations produced over 3400 more units in the first quarter of 2016 than we did just two years ago in 2014 representing a 30% improvement with roughly the same direct staffing levels. This long time focus on velocity optimization and waste elimination continues to deliver increased operating leverage for the business.

The strong volume numbers in the first quarter will also help the team get ahead of the previously announced road construction project that kicked off in early April here at our Lafayette dry van facility and help to mitigate potential unanticipated disruptions during the remainder of the year.

To top it off, the business delivered solid pricing gains as ASP increased by $1700 in the first quarter and year-over-year comparisons aided by favorable mix and price increases.

CTP has seen a steady increase in gross margins over the past three years, and while we will continue to drive improvement in the business, for the near-term, we would not expect to see margin levels rise materially above where we finished in Q1 as most of the favorable pricing has already been recognized.

Now let’s discuss CTP’s strategic initiatives. As discussed previously, CTP launched the production facility on our Lafayette North Kansas in support of a new key strategic initiative related to final mile delivery.

This repurpose production space has been retooled to support future production of LTL trailers, specially designed truck bodies and other product lines that specifically benefit for increasing demand in final mile and home delivery shipping trends. The CTP group remains very excited about the entry into the truck body space.

The reception we received on our new truck body products at the American Trucking Association’s Technology and Maintenance Council meetings in February, reinforced our belief that not only is this going to be a growth market over the next five years, whether our new products will find success in this market space.

We plan to sell approximately 500 truck bodies in 2016 and believe that our patent pending refrigerated truck body product introduces proprietary technologies that will provide a superior product for our customers. As mentioned on the fourth quarter call, we believe truck bodies can be in excess of $100 million revenue business for us at 2020.

With medium duty truck demand projected to grow by 20% over the next five year period, timing is optimal for our entry into this arena. In our more traditional trailer space, we are also very pleased with the reaction we received with the unveiling of our new prototype refrigerated trailer that utilizes our molded structural composite technology.

We believe that this technology may ultimately transform the refrigerated trailer market and we are optimistic about the growth opportunity it provides for CTP over the next five years, and following nearly two years of development, we are also rightfully proud of the introduction of our new ear impact guard design option for our dry van trailers.

This new patent pending design is constructed at advanced high strength steel features two additional vertical posts and a longer reinforced bumper two, all of which are engineered to work together to absorb energy more effectively and deflects rear impact at any point along the bumper.

The CTP team also remains focused on their other important strategic growth initiatives, namely more fully developing and already strong indirect channel by growing in underserved geographies, increasing their market presence in transportation aftermarket parts and continually improving product offerings through next-generation designs utilizing the latest material technologies.

All these efforts will support our objective to further decrease dependency on the more cyclical core dry van space thus reducing performance risk during the next down cycle.

Moving on to our retail segment, I’ll simply that it was a disappointing first quarter in which they reported their first operating loss in several years, driven largely by a shortfall in new trailer shipments and decreases in parts and service revenue.

We are clearly not satisfied with these results and are reviewing all areas of the retail business including profit streams and markets to determine how best to improve this performance.

However we do believe that a continued focus on an asset-like and higher margin strategy is presently delivered in tank parts and service and customer site service locations will be key to profitable growth in this segment as these areas continues to develop and have demonstrated nice profitability over the past few years.

However in the near term, we do expect to return to profitability for this segment in the current quarter, as new trailer shipments return to more expected levels. Before we discuss our specific guidance for the remainder of 2016, I’d like t highlight some economic industry and regulatory drivers that will impact or can have impact on our business.

The U.S. economy continued advancing slowly in the first quarter of 2016. On the bright side, the housing and auto sectors had remained strong, while job growth has continued at a high pace. Conversely, manufacturing activity and industrial production have continued to be subdued. Most analysts now anticipate the U.S.

economy to continue growing moderately at an approximately 2.0% rate in 2016. Although the general economy continues to reflect modest growth rates, key indicators within the trucking industry point to continued steady trailer demand and signal a positive outlook.

ATA’s truck tonnage increase, did decrease 4.5% in March to 137.6 from the all-time record of 144.0 in February. The index was 2.2% higher year-over-year and 3.9% higher year-to-date versus the same time period last year.

The latest report from ACT Research now forecast 2016 trailer shipments at 297,550 units with strength in both dry and refrigerated vans and 2017 shipments at 276,200 units, both strong years for the trailer industry. FPR is now forecasting 280,000 trailers to be produced in 2016 and 250,000 trailers in 2017.

And according to FPR the Class-8 active truck utilization has been running at a 95% rate so far in 2016, will likely rise to 96% by the end of this year and projected to be at 99% by the end of 2017 resulting in a tight market supporting stronger rings for carriers.

From a regulatory standpoint, the Environmental Protection Agency and the National Highway Traffic Safety Administration proposed new regulations last July in an effort to further reduce fuel consumption and carbon dioxide and other greenhouse gas emissions.

The propose will require fuel saving technologies such as trailer side skirts, low rolling resistance tires and automatic tire inflation systems becomes standard equipment starting in 2018. Additional regulations will be implemented in 2021, 2024, and 2027. Wabash National efficiently submitted comments on the proposed regulations in October.

We continue to work with EPA and NHTSA to ensure that this rule will not be overly burdensome to the industry or our customers and that will truly provide the fuel savings benefits expected.

The EPA and NHTSA are currently evaluating the comments from various stakeholders and we expect to see a final version of the regulation by the end of July or sometime in August. Also on the regulatory front, the FMCSA issued a mandate on December 10, 2015 that all carriers must install electronic logging devices or ELDs by December 2017.

Industry estimates on carrier productivity losses as a result of ELDs range from 3% to 10%. However in conversations with some of our customers who have recently deployed ELDs we’ve heard productivity losses exceeding 10%.

We believe this ruling is likely to have a more significant impact on capacity than anticipated and may ultimately drive increased demand for new equipment and surviving carriers attempt to recover lost productivity. With that, let me update you on Wabash National’s expectations for full year 2016.

We believe overall demand for trailers and commercial trailer products will remain strong and significantly above replacement levels for the rest of 2016 and into 2017 consistent with ACT and FTR projection. While there has been some pockets of softness in the transportation sector overall, several key drivers trailer demand remain relatively strong.

Weak trailer age, fleet utilization, customer profitability, used trailer values, regulatory compliance and access to financing, all support a continued strong longer-term demand environment for trailers. As stated, backlog levels remained strong in CTP’s dry and refrigerated van businesses are essentially full for the remainder of 2016.

Given this fact, we are confident with our internal projections for strong full year industry and company shipments.

As a reminder, our largest manufacturing facility in Lafayette which produces dry vans and components for refrigerated trailers will be impacted by a road construction project that kicked off in early April and is expected to last throughout the remainder of 2016.

As discussed on our last call, this project creates a logistics challenge that could limit our effective build capacity for the year by up to 3000 units. We were however successful in building and subsequently shipping more units in the first quarter than originally modeled in our plan in anticipation of this construction project.

So while we exceeded shipment projections for Q1, we are maintaining our full year shipment projection of 60,000 to 62,000 total trailers. At this time, as we do anticipate some impact to operational efficiencies and CTP margins in the second half of the year during the heaviest days of the project.

We should be in a much better position to provide a more meaningful update on the progress of the construction project and its impact on our Lafayette production on the second quarter conference call.

In terms of earnings, recognizing the productivity and cost optimization momentum by the businesses, we now expect full year 2006 EPS to be in the range of $1.65 to $1.75 earnings per share, up $0.15 or 10% from our previous guidance taking into account a very strong first quarter and a backlog that is essentially rounded out for CTP for 2016.

For the second quarter, we expect to continue our nine quarter string of improved year-over-year bottom-line performance as the quarter is highly likely to exceed the performance of the second quarter of 2015 in terms of EPS. Furthermore, we would expect total shipments to be 15,500 and 16,500 units.

Overall, 2016 is expected to be another record year for Wabash.

Strong cash generation coupled with a healthy balance sheet makes us very comfortable that we have ample resources to one, fund our capital expenditures, supporting both organic growth and productivity improvements, secondly, continue to reduce our debt and leverage, third, to return capital to shareholders as appropriate, and finally, to selectively continue to pursue strategic acquisitions.

In summary, we are certainly pleased to have delivered another and a long string of strong quarters driven by continued exceptional results from CTP that led to an all-time record for any first quarter in our company’s 31 year history.

Going forward, our commercial trailer products business needs to continue to identify additional attractive high margin growth opportunities to further drive its top line and further mitigate the inherent cyclicality of the dry van and platform businesses.

These efforts are well underway and we are excited about our progress today with our medium duty entry into truck bodies and our growth into aftermarket parts.

In DPG, we are pleased with the team’s efforts in managing cost within the business while dealing with demand softness in some sectors providing margin consistency and opportunity for future margin growth as we continue our progress with our lean six sigma implementation throughout those businesses.

However we need to accelerate our initiatives to grow aluminum tank market share, accelerate the development and introduction of new products out of Wabash Composites and continue our expansion in the growing food storage and processing area, as well as life sciences end-markets to once again drive top-line growth in our diversified products business.

And for retail, we need to continue to leverage the higher margin and asset light opportunities in our tank parts and service and customer site service locations and return to segment’s profitability. With that, I’ll turn the call over to Jeff Taylor, our Chief Financial Officer to provide more detail around the numbers.

Jeff?.

Thanks, Dick, and good morning, everyone. Let me start by saying that we are obviously pleased with the first quarter results. Our results truly reflect the high level of execution we have demonstrated over the past several years, but particularly during the last six quarters, as well as the progress we have made to grow and diversify the company.

Before discussing the results for the quarter, I’d like to comment on our recent capital allocation activities. As you know, we are executing a balanced capital allocation strategy where we are able to pay down debt and reduce our leverage, fund our corporate growth initiatives and return capital to shareholders.

In the first quarter, we allocated approximately $6.3 million to repurchase just under 500,000 shares of stock as part of our existing $100 million, two-year share repurchase program.

This activity highlights our commitment to increase shareholder value through return on capital and demonstrates our continued confidence that Wabash has a sustainable earnings stream and future cash flows. We also purchased $35 million in principal value of convertible notes, reducing the outstanding balance to $96 million at the end of the quarter.

The convertible notes which mature in May of 2018 represented only significant debt maturity for the next switch years and further highlights the strength of our balance sheet driven by the performance and stability of the business.

We continue to believe that our balanced capital allocation strategy will reward our shareholders by driving long-term value creation and de-risk the company all while providing flexibility to proactively grow our business into new and existing markets, both organically and strategically. With that, let’s turn to the financial results.

On a consolidated basis, revenue for the quarter was $448 million, an increase of $10 million or 2%, compared to the first quarter of last year. This represents an all-time record for consolidated first quarter revenue. This year-over-year improvement in revenue is attributable to continued strong demand in our Commercial Trailer Products segment.

Consolidated new trailer shipments were 14,500 units during the first quarter, above our trailer guidance on stronger-than-expected customer pickups supported by favorable weather conditions and outstanding operational execution.

At the segment level, Commercial Trailer Products or CTP’s net sales were $355 million which represents a $40 million or 13% increase year-over-year.

This growth was driven by an increase in new trailer shipments as 14,300 trailers shipped in the first quarter 2016 compared to 13,600 trailers shipped in the prior year period, as well as increased selling prices. New trailer average selling price or ASP increased by approximately $1700 per unit.

The ASP change was attributed to a higher value product mix which included a smaller percentage of lower priced converted, a higher percentage of the indirect channel trailers and favorable pricing year-over-year.

For the remainder of the year, we expect the product and channel mix to return to levels more consistent with historical norms resulting in the first quarter potentially being the highest ASP quarter for the year in CTP. As expected, net sales for commercial trailer products decreased from the fourth quarter due to normal seasonal variations.

Diversified products net sales was $75 decreased on a year-over-year basis by $25 million and sequentially by $26 million, both primarily driven by fewer tank trailer shipments. Sales for our Retail segment at $34 million decreased year-over-year and sequentially by 21% and 7% respectively.

Retail revenue was negatively impacted in the first quarter by lower new trailer sales with some customer pickups delayed at the end of the quarter, which we expect to recover in the second quarter. Looking at our various product lines, new trailer sales increased $11 million or 3% from the prior year on 14,500 units shipped.

The year-over-year increase was driven primarily by higher van trailer shipments, as well as improved pricing and mix within the Commercial Trailer Products segment. Components, parts and service revenue was $39 million in the quarter a decrease of $3 million or 7% from a year ago, driven primarily by lower parts sales in the process systems area.

Equipment and other revenue on a year-over-year basis increased slightly by $3 million to $32 million in the quarter. The increase was driven by higher equipment sales in the process systems business unit within Diversified Products.

Finally, used trailer revenue came in at approximately $5 million on 300 units, a decrease $1 million from the same quarter a year ago. Used trailer sales remained lower than historical levels due to continued tight supply in the used dry van trailer market.

In terms of operating results, consolidated gross profit for the quarter was $79.5 million or 17.8% of sales, which represents a $22.3 million or 470 basis point increase year-over-year. This increase in gross profit and gross margin was primarily driven by improved margins in Commercial Trailer Products.

Commercial Trailer Products’ gross profit improved by $30 million in the first quarter compared to the prior year period driven by higher new trailer shipments and an improved margin profile. Gross margin increased 740 basis points compared to the prior year period due to pricing, productivity, and volume gains.

Production during the quarter was 15,550 units, up approximately 450 units compared to the prior year quarter. Sequentially, gross margin increased by 260 basis points, primarily as a result of improved mix and pricing.

Diversified Products’ gross profit decreased $4.9 million in the first quarter or 21% compared to the prior year period, driven by a decrease in new trailer shipments of approximately 350 units.

Gross margin, however, improved by 80 basis points, highlighting the focus and effort from the DPG team to manage cost and maintain margins in a demand environment exhibiting some headwinds. Sequentially, gross profit was down $6.4 million, primarily as a result of lower tank trailer shipments.

Lastly, the Retail segment’s gross profit in the quarter decreased $1.1 million on lower new trailer shipments. However, gross margin was down only 10 basis points, driven by a higher mix from parts and service sales as well as customer site service locations.

On a consolidated basis for the first quarter, the company generated operating income of $48.2 million, an increase of $20.9 million or 77% year-over-year. At 10.8% of sales, operating margin was 460 basis points higher than the prior year’s performance and exceeded our 10% corporate objective, driven primarily by significant improvements in CTP.

In addition, operating EBITDA for the first quarter was $59.8 million, a year-over-year increase of $20.7 million or 53%. In trailing 12 months operating EBITDA was $250 million. Selling, general and administrative, or SG&A, excluding amortization, for the quarter was $26.4 million or 5.9% of revenue.

For the full year, SG&A is expected to be approximately 5% of revenue. Intangible amortization for the quarter was $5.0 million, down about $0.3 million from the prior year period.

Interest expense for the quarter consists primarily of borrowing costs totaling approximately $4.1 million, a year-over-year decrease of $1.1 million, primarily due to the reduction of convertible notes, as well as the refinancing of our term loan and revolving credit facilities early in 2015.

$0.9 million of our reported interest expense is non-cash and primarily relates to accretion charges associated with the convertible notes. All year interest expense is expected to be approximately $16 million at our current debt level. We recognized income tax expense of $16.2 million in the first quarter.

The effective tax rate for the quarter was 37%. We estimate that the full year 2016 tax rate will be between 36% to 37%. Finally, for the quarter, net income was $27.5 million or $0.42 per diluted share.

On a non-GAAP adjusted basis after adjusting for expenses related to the early extinguishment of debt, net income was $27.8 million also $0.42 per diluted share. In comparison, adjusted earnings for the first quarter 2015 were $13.8 million or $0.19 per diluted share, representing 121% earnings per share growth year-over-year.

Let’s move to the balance sheet and liquidity. Net working capital finished the first quarter in line with fourth quarter, which is notable as we typically see a seasonal increase in the first quarter. Capital spending was $3.0 million in the first quarter and we expect to see a higher rate of capital spending as we move through 2016.

We maintain our guidance for full year capital spending to be between $25 million to $30 million. The higher level of capital spending relative to prior years reflects a robust pipeline of growth and productivity projects, which are expected to generate an attractive return, as well as support growth of the top and bottom-line.

Our liquidity or cash plus available borrowings, as of March 31, was $338 million or 17% of trailing 12 months revenue; an increase of $68 million from prior year level. Our continued strong free cash flow allowed us to maintain liquidity at a healthy level.

Our first priority for capital allocation in addition to funding our organic growth initiatives and other capital allocation priorities. Our leverage ratios for gross and net debt are 1.2 times and 0.5 times respectively.

In summary, we are very pleased with the company’s strong performance for the first quarter in addition to setting several first quarter records, we established new all-time company records for gross and operating margin. We further strengthened our balance sheet during the quarter by reducing debt through the purchase of convertible notes.

We remained focused on further debt reduction when the opportunity presents itself.

Additionally, we remain committed to be an overall good stewards of the company’s resources by allocating capital to drive long-term value creation including debt pay down which I previously mentioned, growing the company organically and strategically, as well as returning capital to shareholders as appropriate.

We have a healthy backlog, a solid outlook as evidenced by our increase in our full year earnings guidance and we’ve demonstrated the ability to execute at a high level. With that, I will now turn the call back to Richard and we will take any questions that you have. Thank you..

Thank you. [Operator Instructions] Our first question online comes from Mike Shlisky. Shlisky, please go ahead..

Good morning. This is John in for Mike. Can you give us a sense of how Wabash did from market share perspective in Q1? Were there any categories you felt you did better and or any worsen? Thanks..

No, I think I’d say that was pretty consistent with where we have modeled and where we have done overall historically. So we generally will have overall market share, pretty consistently around the 20% level overall ranging 20%, 21% in any given year. It’s pretty consistent. .

Okay, thank you..

2015 and 2016 and we expect that to continue..

All right, well, thank you. .

Thank you, John..

Thank you. Our next question online comes from Alex Potter. Please go ahead. .

Hi guys. First question on gross margins in CTP, I mean, obviously just a monster quarter in Q1. So congrats there. With the construction projects and everything impacting shipments and presumably gross margin over the remainder of the year, you mentioned that Q1 is probably a peak for gross margin there.

Just trying to wrap my head around what the cadence of gross margin could be for the remainder of the year because of some of those external impacts?.

Yes, the impact will really be more notable in the second half of the year. That’s when the project gets into its heavier space.

So, from a modeling standpoint, we would expect, for your sake, we would expect second quarter to have some level of consistency with what was able to be delivered in the first quarter, because the construction project won’t change dramatically until we get into – early into the third quarter and that’s when the third quarter will have likely the most impact and that will carry through the balance of the year and we would….

Okay..

We would estimate – we would estimate at this time that we could see in the second half relative to CTP and relative to the business here in the Lafayette area, maybe a 1% to 1.5% impact in gross margin in the second half for the CTP business related to the van trailer segment. .

Okay, excellent. Thank you, that’s very helpful. I was wondering if you could also comment a bit on some of the non-trailer products in DPG, so non-tank trailer, you mentioned there that it looks like quoting activity for the tank trailer themselves has picked up and that seems like it has positive implications.

So what could be happening in the remainder of the year and over the next several quarters which is great. Just wondering if you can give some additional color on when you expect some of these other new products that are in the hopper just starts inflecting, do you have any visibility on that? Thanks. .

Yes, the tank trailer business, we always have lead time from the time you receive your quote and then you receive the order and then you have to engineer the product and you got the lead time to procure the materials, the component tree, suspension systems and alike.

So there generally is a couple months delay from the time of order received to the time you can actually start building. So we do have some of that, but we will start to see some benefit in the second quarter on the tank trailer side with some of those orders that were starting to flow in. In the composites business, that was a strong quarter.

They’ve seen some good order intake. So we would expect the next couple quarters in that business to be very solid. It’s always a fourth quarter problem for the composites business and filling backlog that tends to be their seasonally weakest quarter in that segment.

In the process systems part of the business, my comments were really directed at, now that we’ve seen some significant quote activity pick up, we’ve got to get many of those converted to orders and then start to process of getting them into the backlog. That one is a little more difficult to predict.

We expect improvement in it as it continues, but it’s difficult to time phase that for you as that business tends to be larger, longer lead time type component tree, its pharmaceutical downflow booths and isolator booths, high hour content, mobile clean rooms, those type of products, even the stationery silos.

Little more difficult to – they don’t have a line process flow that you have good predictability like you do with trailer products. So that gives you pretty much a high level insight into.

They are very diverse, and that’s the – it’s truly a diversified products business and that’s why we have this ebb and flow in those businesses that we are still working to not only better understand and make more predictable, but how to get better balance between those, we like the fact that they are diversified because it gives us some being up, some being down, it gives you that confidence that you are going to continue generating nice cash flow through the business.

But there is still periods of softness that we are having to deal with and most notably in the tank trailer side of it which looks like it maybe recovering now. .

Okay, excellent. Thanks very much for the color. Great quarter, obviously guys..

Thank you..

Thank you. Our next question online comes from Steve Dyer. Please go ahead. .

Thanks good morning, Dick. Good morning Jeff. .

Hi Steve. Good morning..

Couple of questions. You had talked about considering maybe opening some build slots for next year. It was unclear to me if you actually have done that, I know there is some other capacity coming online this year.

So is there any thoughts to doing that and trying to lock in some price and things like that earlier than you normally would?.

Yes, my comments on that Steve were, in some cases, we have some multi-year agreements where we have accepted some – taken some build slots that would be 2017 build slots until those baked on some multi-year agreements with some customers and in other cases we had customers who wanted slots in 2016, we were not able to provide them the number of slots that they would have liked, they need the equipment, so we have some rollover, I guess, you can call slots that we filled in 2017 to help accommodate those customers.

So, I don’t want to say that we have officially opened the 2017 build slots, but we have effectively, in some cases, to deal with some specifics instances. There is no question that the demand environment remains very strong despite what we are seeing in the more recent order rates that are reported by the forecasting firms.

We are seeing a lot of interest in products and in some cases orders just can’t be accepted by many folks. And so we’ve been very selective in what we have accepted to quote in.

My belief is that, we will have a similar expectation from customers this year that we had last year for officially opening the 2017 calendar year product build slots early in the cycle than we had last year. It is a little unique that we put some orders in. This really an exceptional year.

It’s just the excessively heavy demand throughout 2015 and into 2016 that have caused these special circumstances and the reason I sound like I am hedging a little bit is, we try not to get too far out in front because of the problem you have with projecting what the input cost will be further down the road that you get.

So we try and hold off opening slots, so we can get a little bit more clarity on what the input cost would be for both commodities and for converted components.

And we try to mitigate any risk as much as we can and we’ve shared on these calls in the past that about 70% of the input cost is mitigated through agreements with suppliers of components that we use and the forward contract positions we take on certain commodities, but there is always that element of risk and what it will be.

We build our cost models based on the best forecasts that are out there on what will happen with materials cost but as well all know it’s not an exact science. So we update those on a quarterly basis as we quote and so we try to mitigate as much risk as we can, but that’s why we hold off as long as we can.

But the pressure comes on to fill this – because customers these last couple of years have been locked out of getting slots, because the demand has been so strong and we believe that that will continue.

One other element that gives us that confidence is the – I think I shared this in the last call that there remains so many pieces of equipment in the active population of trailers that are out there in the fleets that they are 16, 17, 18 years old going back to the 1998-2000 timeframe, which was the record three years of demand for the industry at the time and a lot of that equipment had never gotten replaced because of the timing and depth and protracted nature of the last recession in 2008 to 2010.

So there is still equipment out there running that’s causing the fleets a lot of cost from an operating cost per mile, maintenance cost per mile, availability, because of breakdowns where they have to have in the shop repairing them. They still need to get that equipment out.

A recent analysis that was done by ACT Research was that only 22% of the active population of trailers are between 6 years and 10 years old.

And I think 78% of them either younger than that or older than that and when we look at the numbers of equipment built and replaced during the time, we have estimated that about 45% of the equipment is older than 10 years. So, those are all subject to replacement at some point and the very oldest of those really need to get off the highway.

So that’s why it gives us great confidence that the needs by customers and some customers really only recently getting back into the market and ordering trailers that phenomenon will continue to drive demand for a good period of time more. .

That’s very helpful.

Obviously, that kind of touched on my next question which is March looked a little bit softer on the dry van side and then just wondering if that’s a function of pull-forward maybe into Q4 last year or it’s just a function of you can’t accept the orders as you booked and would that lead to sort of another couple months that on their face looks softer because you can’t take the business?.

Yes, Steve, I think you hit on both points, because of the significant early pull ahead last year, where the summer time orders, the June, July, August timeframe last year was significantly stronger than historical trends would indicate.

And customers were getting in as early as they could because the prior year have been so strong and they’ve gotten locked out and we are seeing that phenomenon again and I think we came into the year effectively fully booked on the dry van side and not far off on the refrigerated side and now we are essentially full on both.

It’s an interesting anomaly that we are all dealing within the industry. I am confident we heard that some competitors have actually been taking orders for 2017, but I don’t think that’s excessive at this point.

But I do believe we will see normal – as we get to the middle of the year, you are going to see a – should see a significant pick up in order rates and maybe get a little bit more normalized in the second half of the year.

So, we are expecting, based on everything we are talking with customers and what their intentions are, it would seem that 2017 would be another strong year and that’s why we say we are consistent with where ACT Research really is on this year and next year from a demand standpoint. .

Thank you. Our next question online comes from Jeff Kauffman. Please go ahead. .

Thank you. Hey guys, congratulations. .

Hey, Joe..

Pardon me. It looks like the line has dropped from the queue. Our next question comes from Mike Baudendistel. Please go ahead. .

Thank you. Last quarter, you said that there was something like 35,000 to 50,000 units of capacity that your competitors added. Now that we are a couple months after that.

It shat still true or any more fewer units?.

Yes, our position was that we could only get to around 30,000. When you really read into any press releases or commentary that you hear through the proverbial grapevine and all would be more in that possibly 30,000 impact would be more of a 2017 rather than 2016 as these facilities or expansions are completed.

There is some misnomers and that’s where the 50,000 number comes in, the misnomers by some folks on what was being reported in the case of one of the competitors who is taking a facility and repurposing it to build dry vans, the likelihood is that that capacity will be transitioned over from a nearby older plant.

So it’s not an effective minor increase rather than what was being reported in another case, an expansion is really being done for – and based on the pres release that’s put out for chassis and containers, which will not impact van trailer production, there is only a small portion where a line has been added internally on an expanded facility but a new facility is strictly intended for chassis and containers.

So, all in, the best we can come up is something nearing the 30,000 unit increase in effective capacity and I will add what I shared last quarters prior to the recession downturn, there were about 50,000 more units of van capacity in the industry leading into the downturn.

So coming out of the downturn, 50,000 down, now, we are talking about potential of 30,000 up. So, from a comparison basis, we’ll still be 20,000 units as effective installed capacity less than what we had prior to the last downturn and the industry operated pretty effectively even at those levels.

I will share there has been some other offsets in the tank trailer side of the industry. So what we’ve been talking about right now is more in the van side, van trailer side. On the tank trailer side of the industry, there have been some folks who have left the industry, some smaller players.

It’s not appreciable in volume, but there actually has been more reductions than there had been additions. Polar announced the closure of two of three facilities that they have. So that’s going to take some capacity out of the industry. Hauler has left the industry building tank trailers.

We understand that Mak has repurposed their Billings Montana plants away from tank trailers to building dumps and other products. So, there is going to be a net reduction there that should help drive opportunities on the tank trailer side of the business. So there is some balancing going on in the industry. .

Thank you. Our next question online comes from Joel Tiss. Please go ahead. .

Hey guys, it’s Richard Carlson in for Joel. .

Good morning, Richard. .

Good morning, just hoping for little clarity around the guide, I look back over the past couple of years, it looks like, the first half is about 40% of the full year, so that has about 60%.

It seems like we are implying that’s going to be opposite this year and obviously the highway project Kevin want to do with that, but just trying to figure out, I know you said that’s going to be next quarter where you give us a full update, but how much are you baking in for that currently and what are some of the other key pieces that we need to think about when we model this out?.

We are trying to be very prudent in our projections at this point. We are off to a heck of a start for the year. There is some unknowns as we get into the second half on what the impact will truly turn out to be from the highway project.

So, we are doing everything we can to mitigate any impact working with the city, weekly meetings, working with the construction company who is doing the work to make sure we understand everything they are doing.

They’ve been very accommodating and support of and so far, some of the changes we made in access to the property, uniqueness from the property are working out real well, very smoothly. So we will have a much better insight into it.

So we have great confidence for the year, it could very well be if the impact is not a significant, we could have the opportunity to even ship more trailers than what we are projecting but we are – as my comments stated, at this point in time, we are sticking with the 60,000 to 62,000 total trailer units as we don’t want to over commit and under deliver because of unknowns about this highway project.

That’s one thing we don’t have 100% control over. So, if the city and construction company working with us, it can help us mitigate some of the impact that we’ve modeled in.

It could be a net plus to us and so we will have a much better idea as we get into the second quarter call, because we’ll be into that period of time where we are realizing what the impact truly is. .

Yes, and then, Richard, I think if you look back at past years, you’d see a much more pronounced seasonal profile. Obviously, Q1 has been the weakest of the quarters historically and in this quarter in particular we had an exceptional very strong first quarter. If you go back one to two years, you will hear us we were talking about.

We wanted to get more balanced across the four quarters. I think the strong demand environment and some of the actions we’ve taken had allowed us to do that and so, partly what you are seeing is really more of a flatter profile in the current year. .

Thank you. Our next question online comes from Kristine Kubacki please go ahead..

Hey, good morning guys. .

Hi, Kristine..

Just a question on raw material impacts, you’ve heard from some of the other suppliers talking about and I still will off of kind of high levels we seen but definitely made a move in the quarter, especially aluminum, steel. Just talk a little bit about the trends you are seeing.

Can you remind us if we do see some more significant moves there, how quickly can you pass that through to customers and is there any lag effects?.

Yes, great question Kristine. We are seeing commodities start to move up. So I think the bottom has been reached.

We are seeing aluminum, step up by a few pennies for a pound at this point, but certainly a move that we monitor it daily and we are seeing several cents per pound move up to in that $0.82, $0.83 per pound have their running $0.76, $0.77 per pound for quite some time. On the steel side, we are seeing the move up.

It’s gotten up into the mid-400s and it had been down probably $50, $60 lower than that at points over the past year.

We do go out on both those accounts and we do take forward positions when we quote a customer and receive a firm – the firm signed order from the customer, we will go out and take a forward position to protect a pricing that’s been built into the cost that is built into that trailer order. So we mitigate the risk on that part of it.

And then we update on a quarterly basis, we will update our cost model going out four quarters at least and using projections and updating to current trends for the more than subsequent quarter to build that into any new quotes that are being provided to customers.

So, we are pretty well protected and as I commented a little earlier about 70% of all the input cost from raw materials convert to components ends up being protected and then in the case of some large quotes which tends to be upwards 60% of the business we do in most quarters is protected because we have agreements with large suppliers to hold price so that we don’t have any forward risk on the margin that we would realize with some of those large longer-term quotes.

So we are trying to invest we can, but we are seeing some increases in some raw materials. It seems to be a real trend, I think things have bottomed out and not sure where they will settle in. They are not going up at a rapid pace, but we are seeing some upside for sure. .

I appreciate that color. And then just real quick on the used units and that’s a pretty small but it did follow where in terms of a little bit quarter-over-quarter and we’ve heard some of the fleets talk about that the used market has softened up even on the trailer side a little bit.

Can you comment there?.

Yes, Kristine, I think on the dry van side, it’s still a tight market.

It may have softened some, I hadn’t heard that commentary, but what I can tell you, we are just starting a lot of units out there that are available because of the low number of units that were built and shipped during the last downturn and so, that’s contributing to the tightness in the market there.

On the refrigerated side, there are more units out there that are available obviously. So, that one is a little softer.

And as you know, it’s like most pieces of our business that can be lumpy at times and it depends on what used units we have, what units we have taken on dry packages and those kinds of things and because of the strong market there haven’t been a lot of dry packages that we’ve taken in the quarter. .

Yes, if I can just add to that, in the years prior and I should say, several years prior, in prior to the last downturn, many of our customers would look to us to take their used equipment as part of trade package when they were – they are looking to replace the equipment to buy new.

During this cycle what we have seen is more and more customers doing the – selling their late model equipment on their own and have not made those available as part of the trade packages or have not expected us to take those as trade to do the new trailer deals.

So, it’s a different environment, obviously it can all turn as things slow down and they want to come to us for that, but that explains a lot why our used trailer volumes have gone down so much from what they were several years ago..

Thank you. Our final question comes from Jeff Kauffman. Please go ahead..

Hi, back again. Don’t know what happened there. Hey guys. Most of my questions have been answered, but Jeff, let me come back to cash flow.

Given the guidance you gave us for CapEx and share repurchase and what we’ve seen so far in terms of working capital debt reduction it still looks like based on your earnings guidance is about $60 million to $70 million of free cash unspoken for at this point.

And then I assume the view is keep it dry in case there if something opportunistic to do on the acquisition side, but can you talk about maybe where you might like to take debt levels if no acquisitions materialize, would you look to buyback more to convert at these levels or do you think you would just keep the powder dry?.

Yes, thanks, Jeff. I appreciate the question. In terms of our overall capital allocation strategy, it remains consistent with what we talked about in the past and obviously, making sure that we protect the business long-term by having a healthy liquidity as without a doubt our first priority, funding capital expenditures is part of that as well.

Beyond that, then it comes down to how do we create the most value and divert that capital to drive the value, obviously in the current environment, we’ve been able to take advantage of opportunities that come to us to repurchase the convertible notes. That’s something that we would like to continue to do when we have the opportunities to do that.

Obviously, you don’t have to be an attractive value for what something we would pursue further this year. That matures in May of 2018 and our goal would be to take that off the table. As soon as we can when it’s cost-effective to do so. So, I don’t have specific numbers to guide you through there.

And then, obviously after that, we do want to continue to look at and evaluate opportunities to grow this business strategically, we have increased the investment we are making on our organic growth initiatives as we’ve seen the step-up in capital expenditures. That remains something that is still a high priority for us.

But it’s also something that – as you’ve seen over the last couple of years, we are going to maintain our discipline and we are going to make sure that we are selective as we evaluate those opportunities. So that it’s something that we want to continue to do but we are not going to go out and overpay for any opportunity that it gets presented to us.

And then obviously, w also want to, as appropriate take advantage of return of capital to shareholders and as you know, we currently have a share repurchase program that’s authorized by the Board for $100 million on a two years that was authorized at the beginning of this year. .

Thank you. At this time, I see we have no further questions. I’d like to turn the call back over to Dick Giromini for closing remarks..

Thank you, Richard. So, while much has been done, opportunities bound. We will continue to be strategic but selective in pursuing opportunities to grow our business, in addition to the organic growth initiatives already underway.

We’ll continue to seek out ways to increase returns and value for all shareholders while assuring that the proper balance between risk and reward is considered in all decisions.

In closing, we are clearly on pace to deliver another record year in 2016 with a strong start, a solid backlog, a supported demand environment and a continued focus on execution in 2016. Thank you for your interest and support of Wabash National Corporation. Mike, Jeff and I, all look forward to speaking with all of you again on our next call.

Thank you..

Thank you, ladies and gentlemen this concludes today’s conference. Thank you for participating. You may now disconnect..