Mike Pettit – Vice President of Finance and Investor Relations Dick Giromini – Chief Executive Officer Brent Yeagy – President and Chief Operating Officer Jeff Taylor – Chief Financial Officer.

Brad Delco – Stephens Inc. Mike Shlisky – Seaport Global Winnie Dong – Piper Jaffray Steve Dyer – Craig-Hallum Mike Baudendistel – Stifel Jeff Kauffman – Aegis Capital.

Welcome to the Third Quarter Earnings Call. My name is Ashley 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’ll now turn the call over to Mike Pettit, Vice President of Finance and Investor Relations. Mike, you may begin..

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

Following this introduction, you’ll hear from Dick Giromini, Chief Executive Officer of Wabash National; as well as Brent Yeagy, our newly appointed President and Chief Operating Officer on results for the third quarter, the current operating environment and our outlook for the remainder of 2016, as well as an early look at 2017.

In addition, Jeff Taylor, our Chief Financial Officer, will provide an overview 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 and adjusted earnings per share guidance which has been provided in previous filings with the Securities and Exchange Commission; the industry outlook, backlog information, financial condition and other matters.

As you know, actual results could differ materially than those projected in the forward-looking statements. These statements should be viewed via the cautionary statements and risk factors set forth from time-to-time in the company’s filings with the SEC. With that, it’s my pleasure to turn the call over to Dick Giromini, CEO..

Thanks, Mike. The third quarter marked another excellent quarter for the company and delivered bottom line results that were among the best in the company’s history.

Our financial results continue to validate our long-term strategic plan and demonstrate the ongoing progress being made in executing that plan to profitably grow and diversify the business.

We’ve changed the fundamental composition of our business and it is clear we’ve made significant progress towards transforming ourselves into a higher margin diversified industrial manufacturer.

Taking another step in our journey, in September, we announced that Brent Yeagy would assume the role of President and Chief Operating Officer for Wabash National, which took effect on October 1.

With his appointment we’ve established and enhanced leadership structure to provide more effective and coordinated oversight of our growing a more diverse group of businesses. Brent’s proven leadership abilities clearly demonstrated with the CTP transformation.

Now it can be leveraged across all operating business units as we continue to grow and diversify the company.

Additionally, while we’ve continued to expand our product portfolio organically and strategically over the past five years, this move now allows me more time and freedom to increase my focus on further growing the company and continuing the great success that we’ve experienced in recent years.

As a result of these efforts today, we are now generating record margins, record cash flow, and possess a pristine balance sheet with only 0.4 times net debt leverage.

We have clearly positioned ourselves with ample resources to, one, fund our internal capital needs to support both organic growth and productivity improvements; two, to assure continue reduction of our debt obligations; third, to return capital to shareholders as appropriate; and fourth, selectively but more actively pursue strategic acquisitions.

On the M&A front, we recently initiated internal effort to proactively identify strategic acquisition targets that we believe can create sizable shareholder value.

This effort will yield us a cadre of targets that will allow us to utilize our strong financial position to accelerate our growth and diversification efforts by leveraging our strong confidences in manufacturing execution, sourcing, and innovative and engineering leadership to assure strong value creation.

I want to emphasize that we will however continue to remain selective in these efforts just as we have proven over these past five years and we’ll not pursue acquisitions just to grow, but we’ll ensure any transaction undertaken is a value-creating endeavor.

Recognizing a value creation through M&A activity can take time and reinforcing our continued confidence in our long-term cash generation. We remain committed to returning capital to shareholders.

In the third quarter we invested $22.3 million in the repurchase of over 1.6 million shares, raising our year-to-date total to over 2.8 million shares repurchased for $38.2 million, leaving us approximately $62 million available under our current authorized repurchase plan which runs through the end of 2017.

Let me now touch on a few specific financial highlights from the third quarter. Jeff will then provide more detail of the financial results in his remarks later in our discussion.

On a quarterly basis, consolidated net sales were $464 million on shipments of 15,450 units, coming in just shy of the low end of our prior guidance driven by some delayed shipments in our van’s business, but as well as some demand weakness in liquid tanks and platforms markets.

We produced approximately 14,600 units which were less than the prior period do in most part to a planned week long shut down in July related to the road construction project underway around our North campus in Lafayette.

While the market has remained reasonably strong for our van products we have however seen continued market softness in both our tank trailer and platform products with both of these product lines now expensing industry-wide numbers, they’re on pace to be down approximately 35% from last year’s levels, but then forecasted by ACT Research to increase again for next year.

So we may have already seen the bottom for these markets and as exhibited by our strong financial results, have managed through it quite well. Despite these market segment weaknesses, the operating businesses have done a very nice job of containing costs and maintaining a respectable margin levels within those product lines.

Leveraging our continued strong operational execution and long time expertise in Lean-Six Sigma across the enterprise, gross margin for the third quarter was a very strong 18.0% with operating margin of 11.8%, up 120 basis points from last year.

Trailing 12-month operating margin is now 11.2%, far surpassing the 10% operating margin goal we established in 2015. Sustainability is now the opportunity in front of us.

Operating income for the third quarter was a strong $54.9 million, driven once again by excellent operational execution across all areas of our business and significantly supported by continuing favorable demand environment in a Commercial Trailer Products business overall.

With that, I’d like to now ask Brent to provide some detail on results for each of our reporting segments.

Brent?.

Thanks, Dick. I will start with Diversified Products Group or DPG, which includes our composites, tank trailers, aviation and truck equipment, and process systems businesses.

Overall results in this segment were disappointing and lower than expected in Q3 with revenue of $87 million, an operating income of $6.2 million reflecting the continued soft market conditions in many of the end markets served by the DPG businesses.

The tank trailer business continues to experience softness in certain markets which is creating top line pressure in the segment’s largest business. This prolonged softness is creating weaker top and bottom line results than previously expected.

ACT recently lowered its 2016 forecast for liquid tank trailers to 4,900 units, which represents a 35% reduction from 2015 and down 31% from the tank trailer forecast at the beginning of the year.

Our tank trailer business continues to see 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 for both liquid and dry bulk products.

The positive news is that there has been industry capacity coming out of the liquid tanks space and we are well positioned to take advantage of stronger future demand. We also continue to be very proactive with cost management and have been – have had solid execution at the factory level.

These actions have allowed us to maintain a healthy gross margin of 21.7% for the segment, in line with our historical range of 21% to 25% despite the weaker top line.

While we don’t expect to see a return to the demand levels for tank trailers that we enjoy during the 2014 and 2015 timeframe any time soon, we do anticipate a stronger environment in 2017 and remain optimistic about the future as we have not only preserved margins and market share, but have positioned the business to capitalize on the recovery as we have made excellent progress with our Lean-Six Sigma efforts during the past 12 months to 18 months.

In our Aviation and Truck Equipment business or AVTE, the facility consolidation and subsequent labor optimization combined with an uptick in orders has started to drive improvements in the business.

Our work is far from over to bring this business to desirable levels of performance, but AVTE backlog is now at its highest level of the year and we’re well positioned to finish 2016 on a positive note..

In our Wabash Composites business, efforts to increase the new product development pipeline and commercialization process are ongoing, and now we have an exciting new technology that should accelerate those efforts.

In September, we announced an agreement with the Econcore, the technology leader for continuous flow production of honeycomb sandwich material to produce their patented honeycomb core technology in North America for specific markets.

We have the exclusive rights to manufacture and sale certain honeycomb sandwich material configurations in the containment and transportation industries in the United States, Canada, and Mexico.

This technology offers significant material property advantages compared to existing materials including weight savings, shear strength, and energy absorption.

These panels with applications with many of the core products, they are already in production or in development for Wabash Composites, but in addition we also see future product applications within the market served by our commercial trailer products segment.

To summarize, DPG will remain pleased – to summarize, we remain pleased by the overall margin performance of the businesses during the past two years as key markets had continued to contract along with strong potential presented by new product offerings or a developed or in development within the group.

Obviously we need to see growth return at the top line to help drive further improvement in operating income, but do recognize the market dynamics being faced by the segment. Factoring in recent market conditions, we now expect the second half of 2016 top line results to be more in line with the first half of the year.

We also expect lower bottom line results for DPG or the DPG segment has compared to the first half of the year as our mix continues a bit more skewed to some of the lower margin products.

The good news is that we have an improved infrastructure to leverage a higher demand environment without additional investment, and expanded product offering throughout the segment and it has made solid progress in our Lean-Six Sigma implementation efforts, that should aid in sustaining and further improving margins down the road.

Now let’s discuss the results of Commercial Trailer Products segment or CTP; consisting of our dry and refrigerated van products, platform trailers, dry and refrigerated truck bodies, retail parts and service, and wood flooring operations.

This segment continues to successfully execute its optimization strategy with an ongoing commitment to margin improvement, operational excellence, and leadership and product innovation. Third quarter proved to be another strong quarter for CTP.

Revenues were a solid $381 million and the profitability delivered in this segment was again very impressive. Gross and operating margins of 17% and 14.5% respectively, drove $55 million of operating income.

The outstanding performance delivered in the third quarter was a result of the team’s continued execution of a market strategy committed to optimizing both top and bottom line, a capable workforce focused on continues improvement and productivity utilizing our long-term expertise in Lean-Six Sigma and material cost optimization.

These margin enhancing strategies were clearly demonstrated during the quarter, with operating income of 20% year-over-year on revenue that was down 6%.

And as discussed in the last several calls, while our largest manufacturing facility in Lafayette which produces dry vans and componentry for refrigerated trailers, continues to be impacted by a road construction project that kicked off in early April, we are pleased with the progress to-date.

This project certainly created some logistics challenges, but thanks to outstanding cooperation and support from the city and contractor, this has been managed quite well, thus far through minimal disruption to production rates experienced.

So while we’ve experienced some impact of CTP’s operational efficiencies and margins during the second half of the year as communicated, including a production week – including a production down week during the heaviest phase of the project, we’ve effectively mitigated most of the negative effects.

Now discuss some updates on CTP’s strategic initiatives. The CTP team remains very excited about the entering into the truck body market in order to take advantage of future growth in the final-mile and home delivery space.

Truck body – dry truck body product assembled within our final-mile manufacturing facility has been positively received by both in customers and our growing number of indirect channel providers.

With the promise to provide innovative and robust products and an improved responsiveness taking root, we look to further develop our Midwest channel and begin expanding our indirect channel into the additional regions of the country with endpoints throughout 2017.

As a reminder, we are also in the process of developing our patent pending, molded structure composite technology that we believe why broad applications in the dry and refrigerated truck body are in refrigerated space.

We continue to validate this technology through designs that provide customers unparalleled value through significant improvements in weight, thermal performance, extended asset life, and other operational efficiencies.

We’re also making progress establishing strategic relationships with key partners in the composites growth for both development, manufacturing and further extension of technology.

As an example of an extension of this innovative technology, we now believe that the molded structural composite material can provide an effective flooring alternative and our dry truck body product that can significantly reduce the weight of the truck body by up to 350 pounds depending on the specification, while still providing industry leading capacity ratings.

This is just one tangible example of how we believe molded structural composites can be a transformative technology for us in the coming years. We’re also continued to believe that technology will provide a superior refrigerated truck body product for our customers.

First announced to the market in October of 2015, we have successfully commercialized the molded structural composite refrigerated truck body and have been successful meeting early stage growth targets. As mentioned previously, we believe our truck body business will prove to be a $100 million plus revenue business by 2020.

We’re well on our way to making this a reality. In our more traditional trailer space, we continue to believe that molded structural composite technology did continually or ultimately transform the refrigerated trailer market and we are optimistic about the growth opportunities that provide CTP over the next five years.

As we announced at ATA’s 2016 Technology & Maintenance Conference, we have secured several commercialization launch customers for molded structural composite reefer vans. And as communicated at that time, we’ll begin limited production in the first half of 2017 for those fleets.

I would probably like to thank those fleets for their trust and recognition of Wabash being the innovative leader within the trailer industry. Now I would like to update those on the call to regulatory items that pertain the Wabash National. The U.S.

EPA and that’s an agency’s proposed new greenhouse gas regulations in July of 2015, and an effort to reduce fuel consumption and production of carbon dioxide from heavy duty commercial vehicles. Following a comment period, the final rule was released in August of 2016.

The rule focuses mainly on van trailers as divide into four stages of increasingly stringent greenhouse gas reductions standards. The rule requires fuel saving technologies and van trailers such as trailer sites grids, low rolling resistance tyres and automatic tyre inflation systems to become standard equipments starting in January of 2018.

For tank trailers and flatbed trailers, the rule will require low rolling resistance tyres and automatic tyre inflation systems beginning in 2018.

More stringent van trailer standards will hit in model years 2021, 2024 and 2027, requiring more advanced fuel efficient technologies such as rear boat tails, higher percentage improvement aerodynamic sub-site skirts and low rolling resistance tyres. Now, I’ll give the floor back to Dick to discuss 2016 and 2017 expectations..

Thanks, Brent. Let me first give you a backdrop for my views on our market and prospects for the balance of this year and then next year. Looking forward, we are confident that overall demand for van trailers and our Commercial Trailer Products business will remain historically strong throughout next year and possibly beyond.

This belief is based on a number of factors that continue to be positive trailer demand drivers. First and probably most importantly is the excessively age nature of the van trailer population.

While the overall average age of trailers has come down in recent years, there continues to be a significant number of old vintage dry vans that have remained in use as a result of the massive industry under by of 2008 through 2010. By their very nature these pieces of equipment are less reliable, thereby costing more to maintain and operate.

Second, the regulatory environment including CSA and hours of service is influencing both driver and carrier behaviors leading to the continued need to refresh equipment or to add equipment to increase drop and hook opportunities.

Next carriers, we’re currently feeling the impact of periodic softness in load availability and pricing still remain nicely profitable and traditionally look to invest that cash flow into new equipment to optimize operating costs.

Lastly, well, somewhat choppy in 2016, capacity is expected to tighten in 2017, as freight rebounds and regulatory drivers such as ELDs constrict industry capacity. Illustrative of the ups and downs in the 2016 freight market, ATA’s truck tonnage index decreased 5.8% in September to 132.7, following a 5% increase in August.

Year-to-date, the truck tonnage index was 3% higher than in the same period last year. We also believe that ELDs are likely to have a more significant impact on capacity and some way it may anticipate and may alternately drive increased demand for new equipment as stronger carriers attempt to recover lost productivity.

Industry estimates vary widely on carrier productivity losses as a result of the ELDs, but somewhere in the range of 3% to 10% is probably what to be expected.

For our diversified products business, we are currently experiencing industry demand for 2016 tank trailers that is down significantly from what our industry had enjoyed the past five years, now nearing 2010 rebuilt rates.

Although there’s never any guarantee, the latest industry forecast would indicate 2016 is the bottom with a recovery in demand of 6% to 7% that may be in the cards for next year. Well modest, this improvement would allow us to leverage the progress that we have realized from our continued operational excellence initiatives this past year.

At the macro level, in terms of total equipment purchases for 2016, we’ve seen overall industry projections revised downward in recent updates with ACT research now projecting 282,500 trailers to be shipped in 2016, and FTR now calling for 276,300 trailers to be built this year.

Both representing historically strong numbers but down from projections just a couple months ago.

At a more micro level following two years of unusually early seasonal order placement that drove backlog historically high levels, it appears that this 2017 orders season is a return to normal for what it’s traditionally been expected for this time of year, with our total backlog now at a seasonally strong $643 million as of the end of the third quarter and representing approximately four months of build volume overall on average, including approximately five months of van production backlog.

It’s important to know that while we’ve seen sequential backlog decline, the September 30 backlog level lags only 2014 and 2015 for the highest third quarter backlog over the past 15 years as the fourth quarter marks the traditional start to the order season for the upcoming year.

While healthy backlog levels remain for dry and refrigerated van levels, other product lines including tank and platform trailers have continued to experience weaker demand and shorter backlogs as referenced earlier.

So in terms of earnings for full year 2016 recognizing the productivity and cost optimization momentum that was displayed in the first three quarters and contrasted with the somewhat weaker demand environment than what we had previously anticipated for the tank and platform businesses along with normal seasonally higher fourth quarter operating costs, we can now narrow our guidance for full year 2016 adjusted EPS to a range of $1.81 to $1.86 earnings per share or an improvement of approximately 23% from 2015’s record performance level which will remarks our fifth consecutive record year of earnings for the company.

We also now expect 2016 total unit shipments to be at the low end of our 60,000 to 62,000 shipment range communicated previously. Okay, so an another record year for 2016, what about 2017? Clearly there is a softening in overall demand for the upcoming year.

The two industry forecasters are closely to line in their views as ACT Research is now calling for 239,250 trailer units to be shipped in 2017.

And meanwhile, FTR projects approximately 240,000 units to be built next year, a more typical start to industry-wide orders year-to-date at a moderate level of net orders in the third quarter to generate as a strong narrative about a potentially weak 2017.

However while we do expect to see a decrease in order demand for the 2017 built year, our direct feedback from customers about what their expectations and needs are for next year was certainly support that overall demand will likely to be somewhat stronger than what the third-party forecasters have indicated.

While it is still too early to put any firm numbers around 2017 trailer projections as the typical order season can run through late first quarter, or early second quarter of 2017, most notably for the indirect channel, it does appear that we are heading for another solid year for overall trailer orders and would not be surprised to see an industry in the 240,000 to 250,000 unit range with Wabash National shipments somewhat north of 50,000 units.

We can certainly operate effectively in that environment. Obviously somewhat weaker demand environment for van trailers will put some pressure on revenue, margins and profit, but not at what history might imply.

We are far different company than what we were in past cycles with exceptional operational execution on all fronts driven by our highly ingrained Lean-Six Sigma culture.

With a much expanded and diversified product portfolio including extensive composites offerings, increased presence in non-trailer markets, and our medium duty truck body entry, we are confident that we are better positioned than ever to deliver solid results in a softer demand environment.

When our 2017 order book feels more completely as expected during the balances of the year, we’ll be better able to provide 2017 full year EPS guidance on our year end call in late January.

In summary, we’re certainly pleased to have delivered another in a long string of strong quarters, driven by continued exceptional execution results from the CTP segment, and disciplined cost management from DPG.

However, not wanting to rest on any of these accomplishments, we will continue our focused efforts to drive ongoing improvements throughout the business, develop new opportunities to once again grow our top line margins, and to assure that we capitalize on macro growth trends.

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. We’re very pleased with the third quarter consolidated results as we delivered operating income and net income which are comparable to our record performances over the past two years.

And we deliver these strong results despite the pockets of weakness we are experiencing in certain markets as Dick and Brent previously discussed. There is a high level of execution in our operations and business functions across the company which is reflected in our results, but this is more than just solid execution in operational improvement.

We are benefiting from the actions we’ve taken over the past several years to grow and to diversify the company into new products in new markets. Before discussing the results for the quarter in more detail, I’d like to comment on our recent share repurchase activity.

As you know we continue to execute a balanced capital allocation strategy, where we allocate capital to maintain our liquidity, deleverage the balance sheet, find our organic and strategic growth initiatives, and return capital to shareholders as appropriate.

In regards to return of capital to shareholders for the third quarter, we increased our share repurchase activity with a total spend of approximately $22.3 million for just over 1.6 million shares.

Since reinitiating share repurchase in early 2015, we have allocated over $98 million which represents approximately a 11% of our current market GAAP, and repurchased approximately 7.4 million share.

This activity demonstrates our commitment to increase share holder value to return of capital as part of our overall balanced capital allocation approach. With that, let’s turn to the financial results for the quarter. On a consolidated basis, revenue was $464 million, a decrease of $67 million or 13% compared to the third quarter of last year.

Consolidated new trailer shipments were 15,450 units during the second quarter, slightly below our shipment guidance, while used trailer came in at 250 units.

Components, parts and service revenue was $40 million in the quarter, down from 2015 levels, primarily due to lower parts and service revenue in our branch locations as we transitioned our Phoenix location to an independent dealer in July, enhanced significant flooding in our Baton Rouge tank parts and service location.

Equipment and other revenue also decreased on a year-over-year basis, primarily due to timing of sales and our AVTE and process systems businesses, but we expect to recover some of these sales on shipments in the fourth quarter. In terms of operating results, consolidated gross profit for the quarter was $83.5 million or 18% of sales.

While gross profit was down $2.6 million from 2015, gross margin increased by 180 basis points year-over-year. The company also generated operating income and margin of $54.9 million and 11.8% respectively. Operating margin for the trailing 12 months was a 11.2%, or eclipsing our corporate objective of 10%.

In addition, operating EBITDA for the third quarter was $66.8 million, bringing trailing 12 months operating EBITDA to $268 million or 13.9% of revenue. At the segment level, DPG produce net sales of $87 million, a decrease year-over-year of $40 million for the quarter, primarily driven by continued weakness in the tank trailer industry.

This weakness is also reflected in the DPG new trailer shipments in the quarter. However on a more positive note, we believe we have maintained market share in liquid tanks.

DPG gross margin was 21.7% and stayed within our typical range of 21% to 25% which highlights the focus and effort from the DPG team to manage costs in a demand environment exhibiting some headwinds. This weaker demand environment led to gross profit and operating income levels that were down in year-over-year and sequential comparisons.

However it is important to note that this segment has still solidly profitable with double-digit EBITDA margins even in a demand environment, where some other largest product lines are seeing industry volumes down over 35% from last year.

CTP’s net sales were $381 million, which represents a $26 million or 6% decrease year-over-year of new trailer shipments of 14,900 units. New trailer average selling price or ASP decreased by about $200 year-over-year which was largely driven by mix as we saw an increase in direct channel trailer shipments in the third quarter.

We experienced a significant increase in ASP sequentially which was also largely a mix event, as our shipments were skewed more towards higher ASP products as compared to the second quarter. Commercial Trailer Products once again recorded very strong margins with growth in operating margins of 17.0% and 14.5% respectively.

Operating margin was up 320 basis points compared to the prior year period due to pricing and productivity gains. Margins were down sequentially in line with previous guidance, as our Lafayette campus had a production down week in July in conjunction with the heaviest phase of the road construction project.

Nevertheless, CTP delivered operating income of $55 million. Selling, general and administrative or SG&A, excluding amortization for the quarter, was $23.6 million or 5.1% of revenue. For the full year, SG&A is still expected to be approximately 5.5% of revenue.

Intangible amortization for the quarter was $5.0 million, down about $0.3 million from the prior year period and is expected to be $20 million for the full year.

Interest expense for the quarter consisting primarily a borrowing cost, totaled approximately $3.9 million, a year-over-year decrease of $0.9 million, primarily due to the lower amount of convertible notes outstanding.

$0.9 million of our reported interest expense is non-cash and primarily relates to accretion charges associated with the convertible notes. Full year interest expense is expected to be approximately $16 million at our current debt levels. We recognized income tax expense of $18.4 million in the third quarter.

The effective tax rate for the quarter was 35.5%. The slightly lower quarterly rate reflects a deduction for research tax credits, we recognized in the third quarter. We now estimate the 2016 full year tax rate will be approximately 35.5%. Finally for the quarter, net income was $33.4 million or $0.51 per diluted share.

On a non-GAAP adjusted basis after adjusting for a non-recurring charge of $0.7 million in connection with the sale of certain assets of our Phoenix branch to a third-party dealer, net income was $32.9 million or $0.50 per diluted share.

In comparison, GAAP and adjusted earnings for the third quarter of 2015 were $31.8 million or $0.47 per diluted share, representing a 6% adjusted earnings per share growth year-over-year. Let’s move to the balance sheet and liquidity.

Net working capital finished the third quarter up, approximately $17 million from the second quarter, largely due to the timing of shipments in the quarter. We expect to have a fairly significant release of working capital in the fourth quarter of the year and to finish 2016 with net working capital levels below year end 2015 levels.

Capital spending was $7 million in the third quarter, and we expect to see fourth quarter capital spending to be in the same range depending on the final timing of project completions. We now expect our full year capital spending to be under $25 million.

Our liquidity or cash plus available borrowings as of September 30 was $359 million or 19% of trailing 12 months revenue, generally in line with second quarter levels.

Our continued strong free cash flow allowed us to maintain liquidity at a very healthy level and our first priority for capital allocation, in addition to funding our organic growth initiatives and other capital allocation priorities such as share repurchase. Our leverage ratios for gross and net debt are 1.1 times and 0.4 times respectively.

In summary, we’re very pleased with the company’s overall strong performance for the third quarter. We generated very strong levels of gross profit and operating income as well as gross and operating margins.

We further strengthened our balance sheet during the quarter and remain committed to being overall good stewards of the company’s resources by deploying capital to value creating projects that drive long-term growth, in addition to opportunistically paying down debt and returning capital to shareholders through our authorized share repurchase program.

We have a healthy backlog and a solid outlook for 2017 as evidenced by the Dick’s previous comments, in order to remain intensely focused on executing at a high level across the company. Thank you. And I will now turn the call back to Ashley and we will take any questions that you have..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And from Stephens Inc. we have Brad Delco..

Yes. Good morning gentlemen, and congrats Brent on the new role..

Thanks Brad. I appreciate it..

Dick, in your comments you mentioned some of your conversations with customers are a little more optimistic about trailer needs next year.

Can you give us a little bit more context there just in light of a lot of these truck loader reports were CapEx has been cut and the outlook for 2017 has been cut as well? Are you trying to make an extinction between what’s expected on the tractor side verse the trailers side?.

We certainly can only speak about what’s accruing on the trailer side and what our customer’s needs and expectations are for the upcoming year. We always do a bottoms up analysis and compare and contrast what customers stated needs are for the following year relative to what they purchase in the preceding year or two.

And in many cases customers are saying that they will be needing more trailers and plan to order more trailers. Other cases the numbers are about the same, and in some cases the numbers are less.

So it varies, but overall based on our assessment gives us confidence in the feedback and the current quote activity and discussions that are occurring in some of the orders that aren’t even placed, give us strong confidence that that it will be a respectable year, next year.

As I stated in my formal comments, it’ll be down over year-over-year, but not as much as what some folks are anticipating. And I am speaking mostly in those comments in the van segment of our business. As I noted, the tank trailer markets and the platform or flatbed markets have remained soft throughout the year.

And we’re not seeing a huge amount of upside activity, we’ve seen some notion of it on the tank trailer side with some increased quote activity.

But even with what ACT is projecting, 67% recovery in that market from where it is this year, it’s difficult for us at this time to say that it would be anything more than that, but on the van side we feel it’d be stronger than what they’re saying specifically on dry vans..

Now that makes sense.

To me it sounds like basically – at least sort of a worst case scenario back to normal replacement demand on the dry van side, is that fair way of thinking about it?.

I think it still be a little stronger.

If you really go back historically and look at demand levels, there’s still a pent-up demand for replacing extremely aged equipment going back to the 1998-2000 timeframe, there are still equipment in the market that is still operating and that equipment would have been replaced during the last downturn or shortly thereafter and there are still some catch up going on, trying to get that equipment out.

Many of the fleets were hurt significantly during the downturn as many of us were, and had to put on hold a lot of their replacement plans. And since that time there has been a lot of catch-up. And if you recall 1998 to 2000, were the three strongest years of trailer build and shipments in the history of our industry.

So it’s just timed itself with the downturn and a bad time for replacements. So that targeted group of equipment has just continued to age, 15, 16, 17 year old equipment nowadays.

And it’s just not reliable and our customers, the truckload carriers need to have highly reliable equipment in order to keep their operating costs in check, maintenance costs in checks, so they can turn a nice profit of course and service their customers. And then the other part is tracking and retaining drivers.

With CSA implementation four years or five years ago, drivers now – the best of drivers seek out carriers to drive forward, that will put them at least risk of getting caught in a roadside inspection. And with the potential of losing their CDL and they accumulate too many negative points for the road worthiness of equipment.

So that’s just one other factor that plays into this..

That makes sense..

And just expanding on that real quickly here, I think our view is replacement of demand for total trailers is the 200,000 to 220,000 levels of where – if we see the industry at 240, 000 to 250,000 total units then it’s slightly above replacement demand and as much as 10% to 15% potentially.

But it’s a very strong environment, even coming down from obviously the historical levels you saw in 2015..

That makes sense. And then maybe just one last question before I turn it back over. Dick, I don’t want to read into too much of your comments, but you did seem to sort of touch on exploring M&A opportunities. And again I don’t want to read too much into that.

But what specifically could be out there that you have interest in? And then maybe Jeff or Dick either one of you could comment on, would you be willing to increase the leverage on your balance sheet and to what levels?.

Well, at this point in time I certainly won’t share any specifics on what we’re considering. We’ve just started to undergo a process to clearly identify what those targets may look like. I will say that we want to leverage the core competencies that we have as an organization.

So obviously we’re not going to go significantly afar from the kinds of things we do, but we want to grow our non-trailer side of the business, we set that as a goal.

As you recall, to decrease the dependency especially on the dry van segment, not walking away from the dry van, but decreasing dependency by growing the business in other areas and other market, we certainly want to leverage the strong businesses that we acquired as part of the Walker acquisition that we did in 2012.

So some of the markets that they serve are adjacencies to those markets, certainly would in consideration as we go through our process going forward..

Yes. Thanks, Dick. And Brad, as Dick alluded to in his comments, obviously we have our pristine balance sheet with net leverage of 0.4 times. So we have tremendous flexibility to take the opportunity in front of us to evaluate strategic opportunities to grow. That could potentially include adding some leverage to the balance sheet.

I think we’re going to do that in a very thoughtful and meaningful way. If we come to that, we’re going to remain focused on the maintaining our bank ratings for the company. So we could add leverage to the balance sheet.

I won’t comment as exactly how much it depends on, what the credit markets look like, and what a potential target would look like, but we certainly have tremendous flexibility given the position we are in today..

That makes sense. Congrats guys on these results. And I agree the balance sheet does look great, so keep up the good work..

Thanks Brad..

Thank you. And next we have a question from Mike Shlisky with Seaport Global..

Good morning guys..

Good morning.

Good morning.

Can you give us some thoughts on your own your potential for decremental margins in 2017, kind of based on where you positioned yourself through Lean-Six Sigma. I mean, it’s going be a down year.

I think people might want to know through the kind of basic ranges, what the operating or the downside pull through might be on the offering income side?.

Yes. Thanks, Michael, and good morning. This is Jeff; I’ll speak on the company as a whole. Obviously as we look year-over-year it’s the van area where you’re going see the pullback slightly next year in total volume.

Having said that, our total margins today are in the 16% to 18% range, we have made tremendous improvements through operational efficiencies and productivity improvements. And as you know, we allocate a pretty significant portion of our CapEx budget to funding those initiatives.

We certainly expect to maintain those benefits as total volume pullback slightly next year. So I think it’s reasonable with the margins where they are in that 16% to 18% range. Obviously the decrementals will be slightly above that, potentially in the 18% to 22% range, is just a broad range of where you could see decrementals overall.

Having said that, we certainly have the potential for some of the markets that have been depressed in the current environment, specifically on the tank trailer in the platform side over time to turnaround and start to come up at exactly the time where we need them.

It’s exactly the reason why we did the diversification in the acquisition we did in 2012 and potentially setting up very nicely to see those benefits over the next couple of years. So nothing is currently settled there, but potentially that’s where we see potential decrementals going..

Is that what you saw coming into this year? I mean, clearly you have a down year, you’ve increased your margins by – I think it’s over three full points, so far this year.

Is that what you’re looking at before or this is just going to be how things flow at a bit lower volume level next year?.

The opportunity that we had this year was that, while the top line volumes may look like they come down in prior calls, we try to get folks to understand that when you’re running at the kind of levels that our industry was running it in 2015, there was an excessive amount of overtime that was being spent, which is not as cost effective as running on straight time.

So this year as a result of some pullback in the demand level to a more reasonably at still excessively strong environment, we were able to leverage that, and the CTP team did an outstanding job of producing the product on far or less overtime required to produce it, at the same time taking advantage of some capital investment in optimization initiatives on the factory floor.

So a combination of factors have led to the higher margin performance for the business..

Great. And I also want to ask one more thing about your M&A potential here. At this point of your shares are still roughly in the 20% range for the U.S. market.

Can you give us a thought as to whether you might be looking to buy another trailer maker right now? I mean if your company is trading at less than 5 times EBITDA and you’re one of the better operators in the sector, I would imagine that some of the other guys were smaller but less scalar, probably trying to hit much less than that EDITDA currently.

So there could be a chance – a good deal here you think or are you still looking at just – is it almost entirely outside of your core dry van reefer markets?.

It’s unlikely that you would see us buying another van trailer manufacture, if that was the question..

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

Thanks Michael..

Thank you. And our next question comes from Alex Potter with Piper Jaffray..

Hi, this is actually Winnie in for Alex. Hi, thanks for taking the call. The first question is, in the DPG segment, I guess if you have take the tank trailer revenue and divide that by the tank trailer volume, it looks like pricing was down quite a bit versus last quarter and actually is coming down in a longer term getting back to like the late 2013.

Can you elaborate a little bit more on that and what we should expect going forward?.

Yes. Winnie, I’m a bit perplexed because sequentially pricing is up pretty significantly and it’s largely driven on mix as I commented during my previous comments. So I think we can continue to see very strong pricing in the industry. Yes, so I’m –.

Okay..

I’m sorry, I was speaking to dry vans. For tanks, okay, so for tanks I think we have – there’s really two stories on the tank side of the business.

The first side is the food, dairy, beverage side, which as you know is the bigger portion of our portfolio, has been relatively stable through the current environment that overall industry is typically more stable and we see that maintaining approximate levels where they are going forward.

The ones where we do see some pressure on pricing in the tank side is certainly in the market that pullback then, oil and gas in the chemical side of it. And so we do see some price depression there, lower ASPs. Given that we think that volume has bottomed out.

Certainly our hope and our belief is that it’s going to stabilize around current levels with the potential to start to see those improve going forward as volumes improve..

I don’t I would – Winnie, this is Brent. One thing I would add on a qualitative basis is that we’ve seen relatively flat ASPs over last several months. It’s kind of building of adjust points that we had seen in the market somewhat bottom out at least be flat from a shipbuilding and order intake standpoint. So we feel good right now.

Relative to the pricing environment we think we’re well positioned for the upturn things like in 2017, but generally we feel good going forward..

Great, thanks. And then I guess I have a follow-up. Regarding I guess the non-trailer revenue in DPG segment, seems like now is the time that I guess we look to start materializing there. But given that the coming down during the cycle, by looks our revenue in the non-trailer revenue segment dropped, I guess 13% versus last quarter – in this quarter.

So the question is, do you still expect this sub-segment within DPG to be a sustainable source of revenue growth and if so when you think it will start imposing year-over-year revenue gains – positive revenue gains?.

This is Brent again..

Yes..

We saw some headwinds in Q3 relative to the movement of stock related non-trailer product. We still hope to see that turnaround somewhat in Q4. We’re actually seeing backlogs continue to improve in both the AVTE and process systems segment of DPG moving into Q4, so we’re seeing some early signs of some recovery.

And with relative strength and those specific markets going into 2017, we should see some improvement accordingly. So, early stages, it’s not going to be at the same scale what we would see in our van or tank businesses, but they’re serving their purpose and adding additional value in this upcoming year..

Okay. Thank you. I’ll turn over. Thanks..

Thank you. Our next question comes from Steve Dyer with Craig-Hallum..

Good morning, and my congratulations to Brent..

Thank you, sir..

Jeff, I kind of tuned out half of the commentary on decrementals for next year, what the numbers you’re giving and then whether that relates to total company margins or one of the segments?.

It generally relates to total company. Having said that CTP is obviously the largest segment and we’ll drive those numbers to a larger extent..

And what were those numbers if you could repeat those?.

Steve, I can’t believe you’re going to make me repeat those numbers. But having said that our gross margins have been in the 16% to 18% range with the pullback in van business potentially decrementals, would be slightly north of that somewhere in the 18% to 22% range potentially..

Okay, great. And then with respect to the CTP segment, you guys have obviously made a lot of improvements from a manufacturing standpoint, Six Sigma standpoint. You’ve also had a pretty good run of raw materials here as you guys have talked about in your filings.

Is it possible to talk a little bit about sort of how the early raw materials commentary looks for next year what it might mean to margins, and maybe bucket, how much of the improvement over the last, call it, a year to two years to three years? It’s been raw materials driven versus – is it 50-50, is it mostly manufacturing? How should we think about those two items going forward?.

Let me start with the last piece.

Yes, Steve, in terms of total margins and how they have improved obviously over the last year so, there have been multiple factors, there has been pricing, there have been productivity improvements and then obviously there have been manufacturing cost that includes materials but it also includes some of our labor costs as well.

In general, those have been fairly evenly split across the year. We’ve had nice price improvement year-over-year for sometime, that certainly translates to improvement on the bottom line. We have made significant improvements in our productivity. I think one of the prior questions talked in, it was the question about decrementals.

In fact that volume this year is down slightly from last year, yet our margins have improved, clearly demonstrates some of the productivity and operational improvements that we’ve made. And then obviously there’s a manufacturing cost component that’s provided some benefit there as well.

As I said before, I think those are relatively evenly split across all three. In terms of forward looking, Dick and Brent can chime in as well, but material costs are generally very stable.

We have early fluctuates, we see upticks, and we see downticks in steel and aluminum and plastic and those types of things, but in general they’ve been fairly range-bound..

Yes. Just as a reminder Steve, we will take forward positions on the aluminum content and on the steel content, they go into our trailers. Once we actually receive conformed order from a customer, we also build in those costs into our costing model when we’re pricing products.

So we end up protecting ourselves and levitating any of the fluctuation that can occur from the time we take an order and till the time we build it by doing that and that’s a major benefit to us. It ends up based on calculations we’ve done, ends up protecting about 70% of the input costs for raw materials into the product.

All the actions we take, there are others, but those are two key ones..

The only thing I would add is based on the commodity groupings that make up the bulk of material costs for the products that we produce. Material costs have some amount of inflationary component in some of the sectors as Jeff alluded to, some are actually going in the other direction.

As we look at the next several kind of quarters, matched up with the order season that which we said is kind of pushed out into the Q4-Q1 timeframe. We’re not looking at material costs that are terribly to similar to where we were at this time last year.

And with future positions as Dick alluded to, we’re in a decent position to manage our material costs accordingly..

Okay, great. And then lastly from me, I know that the order season has started, I guess more normally this year than in the past year or two. What are your thoughts, I guess, on pricing or what are your early conversations for next year seeming to indicate in others? There’s been some chatter about a little bit more capacity coming online.

And as we get later into this season, how are the pricing conversations changing if at all?.

Sure. This is Brent now. I say in general we’ve seen limited pricing pressure at common tailwind of 2016. It is a little too early to say definitively and what that will be for 2017, but we will see some level of market competitive pricing pressure based on what the market conditions will be.

I will say at this time, we feel generally well positioned with where the customer base is at the moment with the deals that we’ve closed. We feel it’s appropriate for where the market is that.

And we generally feel as if we’re in a good position, based on how well specifically the commercial trailer products business has performed in terms of responsiveness and just general value creation for the customers. So, well, yes, we’re going to see some pressure.

I think you’re going to see something a little bit better grew but less pointed to maybe what you would have seen at comparable periods in the past. So we generally feel good for where we stand right now..

Great. Okay. Thank you..

Thank you..

And next we have a question from Mike Baudendistel from Stifel..

Hi, thank you. I just wanted to ask you, you talk a little bit about the regulations and the impact that those the EPA regulations might have, but I also wanted to ask you about the food safety rule for refrigerated carriers.

Does that impact your refrigerator business at all?.

Not substantially with the – will say, after public comment and the rule that we as it reads today, it’s much less impact and leverageable from a manufacturers standpoint, is going to have impact on the physical carriers and the added requirements.

We don’t necessarily see that translating into any material impact from the manufacturer’s perspective at this time..

Okay, that’s helpful. And then I wanted to ask you about some of the industry data, I mean in these last few months there’s been an uptick in cancellation, I guess there has been some speculation that those weren’t really true cancellations, they were more cancellations that were going to be reordered for 2017 delivery.

Is that what you’re saying?.

I think cancellations are a mixed bag. I think across the industry there were some cancellations. As to your point that were just part of recalendarization, moving into 2017. I think most of the cancellations in general where – was then what I would call the small and medium tier players from an end customer standpoint, not the larger customers.

At least that was definite how we saw it from our perspective. And in general cancellations have began to really quiet as we move into the second – this fourth quarter. So we feel like the market has generally calmed down as reset itself moving in the 2017..

Great. That’s all from me. Thank you..

Thank you. And our next question comes from Jeff Kauffman from Aegis Capital..

Hey, guys..

Hi, Jeff..

Hey. Congratulations, Brent..

Thank you, sir..

This is great news. My next question – my question is for Dick, a lot of my questions have been answered. Dick, congratulations also on your new role.

And kind of listening to your commentary, should I think of this as now you have more time to focus and think about potential acquisition targets, so we’re going to take a look or we’ve got a lot that were looked and this is a change in gears on our strategy so to speak?.

Well, it sounds more like the former than the latter based on the way you described it. Certainly by – and that’s what I try to share in my comments, by appointing Brent into the role as Chief Operating Officer, he effectively fills a role that I’ve been carrying all this time. Well, I didn’t carry the title anymore, it’s a title I had previously.

And as we’ve expanded and grown the business, he gets that much more difficult to spend appropriate amount of time overseeing the myriad businesses that we now have. And this will allow me a little more freedom and time to focus on growth initiatives for the business.

So going back to the way you framed your question, yes, it should provide me a little bit more freedom to spend time looking at how we reinvigorate the growth opportunities for the business. So that can include acquisition growth, but it also will include our organic growth opportunities for the business..

Okay.

And just, I can’t remember, is this number right, but did you say in your longer term goals that the idea by 2020 is to have the core trailer dry van businesses as we think of it, be roughly at third to the total revenues?.

Yes. And we didn’t put a firm number around it because it has a lot to do with how we get there, but yes, that would be a nice place to end up. So as we exit the 2020 year, it will be nice to be looking at and having about a third to the business having, I’d call it a dependency on the dry van segment.

And that’s really been driven by an internal look at what our business struggled with back in the last downturn and going into the downturn we’ve recognized that we had a significant dependency on the dry van segment nearly 85% of the business was dependent on it.

And as I’ve said many times that great strength became a great weakness for us as we got into the great recession when demand levels dropped by about 80%. As you recall Jeff, we went from about 60,000 units of demand for our business in 2006 down to 12,000 units in 2009 and that was really driven by the dry van segment.

So less dependency on it, obviously we’re a much better business today, our dry van segment operates much better than it did going into the downturn, so we would manage through it more effectively.

But having a growth initiatives for the business that would not walking away, again, I want to emphasize, we’re not walking away at all from the dry van business, but growing the business in other areas other than dry van can really be helpful to us in the event that we someday in the future face that that kind of a challenge..

Congratulations on some terrific margins in real tough quarter, and best of luck. Thank you..

Thanks, Jeff..

Thank you. And we have not further question. I would like to turn the call back over to Dick Giromini..

Thank you, Ashley. So, well, much has been done, opportunities certainly are bound, we’ll 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 way 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’re again on pace to deliver another record year profitability 2016 with strong margins, continuing supported demand environment, and continued focus on execution. Thank you all for your interest and support of Wabash National Corporation. Mike, Brent, Jeff and I all look forward to speaking with you all 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..