Rush Enterprises, Inc. (NASDAQ: RUSHA & RUSHB), which operates
the largest network of commercial vehicle dealerships in North
America, today announced that for the quarter ended June 30, 2019,
the Company achieved revenues of $1.545 billion and net income of
$41.6 million, or $1.10 per diluted share, compared with revenues
of $1.349 billion and net income of $29.4 million, or $0.72 per
diluted share, in the quarter ended June 30, 2018. During the
second quarter of 2018, the Company incurred an additional pre-tax
charge to amortization expense and a charge to selling, general and
administrative expense totaling of $10.7 million, or $0.20 per
diluted share, associated with the upgrade and replacement of
certain components of the Company’s Enterprise Resource Planning
software platform (ERP Platform). Excluding the charge related to
the ERP Platform, the Company’s adjusted net income in the second
quarter of 2018 was $37.7 million or $0.92 per diluted share.
Additionally, the Company’s Board of Directors declared a cash
dividend of $0.13 per share of Class A and Class B Common Stock, to
be paid on September 10, 2019, to all shareholders of record as of
August 9, 2019.
“We are proud of our solid financial results and everyone at the
Company who worked hard to achieve such a successful quarter,” said
W.M. “Rusty” Rush, Chairman, Chief Executive Officer and President
of Rush Enterprises, Inc. “A healthy economy, widespread activity
in the commercial vehicle market and the continued execution of our
aftermarket strategic initiatives positively impacted our results
in the second quarter. Our truck sales outpaced the commercial
vehicle market in both Class 8 and Class 4-7, and we achieved
record performance in medium-duty truck sales this quarter,” Rush
said. “I am also pleased to announce that our Board of Directors
approved a $0.01 increase in our quarterly cash dividend, our first
increase since we announced our intent to begin paying a quarterly
cash dividend in July 2018 as part of our capital allocation
strategy. This dividend increase represents an 8.3% increase over
the first quarter of 2019 dividend. The Company expects to increase
the dividend on an annual basis over time, although future
declarations of dividends are subject to approval by the Company’s
Board of Directors and may be adjusted as business needs or market
conditions change,” explained Rush.
“As always, it is important that I thank our employees for their
unmatched service to our customers and unwavering commitment to the
successful execution of our strategic initiatives,” said
Rush.
Operations
Aftermarket Products and
Services
Aftermarket products and services accounted for approximately
65% of the Company’s total gross profit in the second quarter of
2019, with parts, service and collision center revenues reaching
$448.2 million, up 6.0% compared to the second quarter of 2018. The
Company achieved a quarterly absorption ratio of 122.4% in the
second quarter of 2019.
“Industry-wide aftermarket parts and service demand across the
country increased marginally in the second quarter of 2019,
compared to the same time period last year, while our second
quarter aftermarket parts and service revenues outpaced the
industry and increased 6% compared to the second quarter of 2018.
This growth is directly attributable to our continued success
executing on our long-term strategic initiatives. I am pleased with
our aftermarket performance in the second quarter, especially when
considering the slower growth in industry-wide aftermarket demand
and the significant decline in demand from the energy sector
compared to the second quarter of 2018,” Rush said.
“In the first six months of 2019, we added 117 service
technicians to our dealership network and continued to support
customers with RushCare Xpress Services, which offers same-day
preventive maintenance and expedited diagnostics,” Rush said. “We
also enhanced our RushCare Complete program with a dedicated
service concierge team, telematics support and other services to
enhance our ability to keep our customers up and running,” added
Rush.
“RushCare Parts Connect, our comprehensive online ecommerce
source for all-makes parts, is gaining traction with customers, and
we are optimistic about its potential to generate revenues in the
future. Additionally, we continue to enhance our parts sales
efforts with customer and purchasing data and analytics and expand
our product breadth and availability across the country to achieve
higher fill rates and keep our customers up and running,” said
Rush.
“Our aftermarket initiatives continue to contribute
significantly to our financial results, and while we will continue
to monitor the industry, we believe our aftermarket sales growth
through the rest of 2019 will be on pace with our second quarter
performance,” Rush noted.
Commercial Vehicle Sales
New U.S. Class 8 retail truck sales were 72,835 units in the
second quarter, up 19.8% over the same period last year, according
to ACT Research. The Company sold 4,119 Class 8 trucks in the
second quarter, an increase of 28.0% compared to the second quarter
of 2018, and accounted for 5.7% of the new U.S. Class 8 truck
market. ACT Research forecasts U.S. retail sales for new Class 8
vehicles to be 275,100 units in 2019, a 7.5% increase compared to
2018.
“Our new Class 8 truck sales outpaced the market in the second
quarter of 2019, primarily driven by vocational and large fleet
deliveries throughout the market segments we support. However, due
to the high volume of trucks sold over the past two years, there is
excess freight capacity in the market, and Class 8 truck orders
have dramatically decreased in recent months. While we believe our
third quarter Class 8 truck sales results will be on pace with the
second quarter, current market conditions and various economic
indicators suggest that Class 8 truck sales may decline as soon as
the fourth quarter of 2019,” said Rush.
The Company sold 3,866 Class 4-7 medium-duty commercial vehicles
in the second quarter of 2019, an increase of 11.3% compared to the
second quarter of 2018, and accounted for 5.5% of the U.S. Class
4-7 commercial vehicle market. ACT Research forecasts U.S. retail
sales for Class 4-7 vehicles to reach 262,300 units in 2019, a 1.5%
increase over 2018.
“Strong demand from all of the medium-duty market segments we
support, especially construction and rental customers, and our
ability to deliver Ready-to-Roll medium-duty trucks across the
country contributed to our record-setting Class 4-7 results this
quarter. We believe our medium-duty sales will remain strong
through the second half of 2019,” said Rush.
The Company sold 2,101 used vehicles in the second quarter of
2019, an increase of 2.2% over the second quarter of 2018. “Due to
the large volume of new trucks sold over the past few years, there
is currently an oversupply of used trucks in the market, which is
beginning to put pressure on used truck values. We continue to
believe our used truck inventory is well positioned to meet demand,
and we are closely monitoring pricing changes in the market,” said
Rush.
Network Expansion
The Company expanded its network in the second quarter with the
addition of Rush Truck Center – Jacksonville East, a full service
Peterbilt dealership. “We also continue to invest in renovating
certain of our existing dealerships to enhance both the services
and experiences we provide our existing customers, as well as to
provide a platform to reach new customers,” said Rush.
Financial Highlights
In the second quarter of 2019, the Company’s gross revenues
totaled $1.545 billion, a 14.5% increase from gross revenues of
$1.349 billion reported in the second quarter of 2018. Net income
for the second quarter of 2019 was $41.6 million, or $1.10 per
diluted share, compared to net income of $29.4 million, or $0.72
per diluted share, in the second quarter of 2018. During the second
quarter of 2018, the Company incurred an additional pre-tax charge
to amortization expense and selling, general and administrative
expense of $10.7 million, or $0.20 per diluted share, associated
with the upgrade and replacement of certain components of the
Company’s ERP Platform. Excluding the charge related to the ERP
Platform, the Company’s adjusted net income in the second quarter
of 2018 was $37.7 million or $0.92 per diluted share.
Aftermarket products and services revenues were $448.2 million
in the second quarter of 2019, compared to $422.9 million in the
second quarter of 2018. The Company delivered 4,119 new heavy-duty
trucks, 3,866 new medium-duty commercial vehicles, 719 new
light-duty commercial vehicles and 2,101 used commercial vehicles
during the second quarter of 2019, compared to 3,218 new heavy-duty
trucks, 3,474 new medium-duty commercial vehicles, 679 new
light-duty commercial vehicles and 2,055 used commercial vehicles
during the second quarter of 2018.
The Company increased its lease and rental revenues by 4.4% in
the second quarter of 2019, compared to the second quarter of 2018,
primarily due to healthy lease fleet demand, management of
operating costs and execution of its lease fleet service model.
Rush Truck Leasing operates 45 PacLease and Idealease franchises
with more than 8,100 trucks in its lease and rental fleet and more
than 1,100 trucks under contract maintenance agreements.
During the second quarter of 2019, the Company repurchased $12.1
million of its common stock, bringing the total amount of
repurchases to $104.0 million since the adoption of a plan to
repurchase up to $150.0 million of stock in November of 2018. In
addition, the Company paid a cash dividend of $4.4 million during
the second quarter and today declared a dividend of $0.13 per
share, its fifth consecutive quarterly dividend and an 8.3%
increase over the $0.12 per share dividend declared in each of the
previous four quarters. “We continue to have confidence in our
ability to execute on our capital allocation strategy by returning
capital to our shareholders while growing our business and
investing in our company’s future,” said Rush.
Conference Call
Information
Rush Enterprises will host its quarterly
conference call to discuss earnings for the second quarter on
Thursday, July 25, 2019, at 10 a.m. Eastern/9 a.m.
Central. The call can be heard live by dialing
877-638-4557 (Toll Free) or 914-495-8522 (Conference ID
4691269) or via the Internet
at http://investor.rushenterprises.com/events.cfm.
For those who cannot listen to the live
broadcast, the webcast will be available on our website at the
above link until October 10, 2019. Listen to the audio replay until
August 1, 2019, by dialing 855-859-2056 (Toll Free) or
404-537-3406 and entering the Conference ID
4691269.
About Rush Enterprises,
Inc.
Rush Enterprises, Inc. is the premier solutions
provider to the commercial vehicle industry. The Company owns and
operates Rush Truck Centers, the largest network of commercial
vehicle dealerships in the United States, with more than 100
dealership locations in 22 states. These vehicle centers,
strategically located in high traffic areas on or near major
highways throughout the United States, represent truck and bus
manufacturers, including Peterbilt, International, Hino, Isuzu,
Ford, Mitsubishi, IC Bus and Blue Bird. They offer an integrated
approach to meeting customer needs — from sales of new and used
vehicles to aftermarket parts, service and collision center
operations plus financing, insurance, leasing and rental. Rush
Enterprises' operations also provide vehicle upfitting, CNG fuel
systems and vehicle telematics products. Additional information
about Rush Enterprises’ products and services is available at
www.rushenterprises.com. Follow our news on Twitter at
@rushtruckcenter and on Facebook at
facebook.com/rushtruckcenters.
Certain statements contained herein, including
those concerning current and projected market conditions, sales
forecasts, demand for the Company’s services, the impact of
strategic initiatives and the Company’s capital allocation
strategy, including future issuances of cash dividends and future
repurchases of the Company’s common stock, are “forward-looking”
statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include
risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements.
Important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking
statements include, but are not limited to, competitive factors,
general U.S. economic conditions, economic conditions in the new
and used commercial vehicle markets, customer relations,
relationships with vendors, the interest rate environment,
governmental regulation and supervision, product introductions and
acceptance, changes in industry practices, one-time events and
other factors described herein and in filings made by the Company
with the Securities and Exchange Commission. In addition, the
declaration and payment of cash dividends and authorization of
future share repurchase programs remains at the sole discretion of
the Company’s Board of Directors and the issuance of future
dividends and authorization of future share repurchase programs
will depend upon the Company’s financial results, cash
requirements, future prospects, applicable law and other factors
that may be deemed relevant by the Company’s Board of
Directors.
-Tables and Additional Information to Follow-
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In Thousands, Except Shares and Per Share
Amounts)
|
June 30, |
|
December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
111,346 |
|
|
$ |
131,726 |
|
Accounts receivable, net |
|
226,178 |
|
|
|
190,650 |
|
Note receivable affiliate |
|
16,365 |
|
|
|
12,885 |
|
Inventories, net |
|
1,512,445 |
|
|
|
1,339,923 |
|
Prepaid expenses and other |
|
15,788 |
|
|
|
10,491 |
|
Assets held for sale |
|
419 |
|
|
|
2,269 |
|
Total current assets |
|
1,882,541 |
|
|
|
1,687,944 |
|
Property and equipment,
net |
|
1,237,189 |
|
|
|
1,184,053 |
|
Operating lease right-of-use
assets, net |
|
51,590 |
|
|
|
– |
|
Goodwill, net |
|
292,142 |
|
|
|
291,391 |
|
Other assets, net |
|
67,233 |
|
|
|
37,962 |
|
Total
assets |
$ |
3,530,695 |
|
|
$ |
3,201,350 |
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Floor plan notes payable |
$ |
1,190,136 |
|
|
$ |
1,023,019 |
|
Line of credit |
|
60,000 |
|
|
|
– |
|
Current maturities of long-term debt |
|
149,743 |
|
|
|
161,955 |
|
Current maturities of finance lease obligations |
|
20,326 |
|
|
|
19,631 |
|
Current maturities of operating lease obligations |
|
9,524 |
|
|
|
– |
|
Trade accounts payable |
|
144,743 |
|
|
|
127,451 |
|
Customer deposits |
|
28,886 |
|
|
|
36,183 |
|
Accrued expenses |
|
94,893 |
|
|
|
125,056 |
|
Total current liabilities |
|
1,698,251 |
|
|
|
1,493,295 |
|
Long-term debt, net of current
maturities |
|
457,531 |
|
|
|
439,218 |
|
Finance lease obligations, net
of current maturities |
|
53,357 |
|
|
|
49,483 |
|
Operating lease obligations,
net of current maturities |
|
42,271 |
|
|
|
– |
|
Other long-term
liabilities |
|
19,552 |
|
|
|
11,118 |
|
Deferred income taxes,
net |
|
146,209 |
|
|
|
141,308 |
|
Shareholders’ equity: |
|
|
|
Preferred stock, par value $.01 per share; 1,000,000 shares
authorized; 0 shares outstanding in 2019 and 2018 |
|
– |
|
|
|
– |
|
Common stock, par value $.01 per share; 60,000,000 Class A
shares and 20,000,000 Class B shares authorized; 28,022,583 Class A
shares and 8,396,099 Class B shares outstanding in 2019; and
28,709,636 Class A shares and 8,290,277 Class B shares outstanding
in 2018 |
|
462 |
|
|
|
458 |
|
Additional paid-in capital |
|
384,940 |
|
|
|
370,025 |
|
Treasury stock, at cost: 4,682,727 Class A shares and 5,150,728
Class B shares in 2019 and 3,791,751 Class A shares and
5,030,787 Class B shares in 2018 |
|
(283,952 |
) |
|
|
(245,842 |
) |
Retained earnings |
|
1,012,195 |
|
|
|
942,287 |
|
Accumulated other comprehensive income |
|
(121 |
) |
|
|
– |
|
Total shareholders’ equity |
|
1,113,524 |
|
|
|
1,066,928 |
|
Total liabilities and shareholders’ equity |
$ |
3,530,695 |
|
|
$ |
3,201,350 |
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(In Thousands, Except Per Share
Amounts)(Unaudited)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2019 |
|
|
|
2018 |
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
$ |
1,024,801 |
|
|
$ |
857,025 |
|
$ |
1,863,084 |
|
|
$ |
1,630,125 |
Parts and service sales |
|
448,166 |
|
|
|
422,940 |
|
|
886,520 |
|
|
|
823,235 |
Lease and rental |
|
61,591 |
|
|
|
58,993 |
|
|
121,024 |
|
|
|
116,517 |
Finance and insurance |
|
6,401 |
|
|
|
5,492 |
|
|
13,011 |
|
|
|
10,233 |
Other |
|
3,602 |
|
|
|
4,381 |
|
|
9,239 |
|
|
|
9,502 |
Total revenue |
|
1,544,561 |
|
|
|
1,348,831 |
|
|
2,892,878 |
|
|
|
2,589,612 |
Cost of products
sold: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
|
951,121 |
|
|
|
791,608 |
|
|
1,719,538 |
|
|
|
1,502,522 |
Parts and service sales |
|
272,636 |
|
|
|
265,183 |
|
|
545,825 |
|
|
|
519,627 |
Lease and rental |
|
51,298 |
|
|
|
48,663 |
|
|
101,093 |
|
|
|
97,091 |
Total cost of products sold |
|
1,275,055 |
|
|
|
1,105,454 |
|
|
2,366,456 |
|
|
|
2,119,240 |
Gross
profit |
|
269,506 |
|
|
|
243,377 |
|
|
526,422 |
|
|
|
470,372 |
Selling, general and
administrative expense |
|
193,981 |
|
|
|
178,654 |
|
|
381,162 |
|
|
|
350,324 |
Depreciation and amortization
expense |
|
13,594 |
|
|
|
21,693 |
|
|
26,519 |
|
|
|
44,601 |
Gain (loss) on sale of
assets |
|
(139 |
) |
|
|
396 |
|
|
(82 |
) |
|
|
368 |
Operating
income |
|
61,792 |
|
|
|
43,426 |
|
|
118,659 |
|
|
|
75,815 |
Equity in earnings of
unconsolidated entities |
|
690 |
|
|
|
– |
|
|
739 |
|
|
|
– |
Interest expense, net |
|
8,072 |
|
|
|
4,494 |
|
|
15,430 |
|
|
|
8,800 |
Income before
taxes |
|
54,410 |
|
|
|
38,932 |
|
|
103,968 |
|
|
|
67,015 |
Provision for income
taxes |
|
12,789 |
|
|
|
9,543 |
|
|
25,243 |
|
|
|
16,587 |
Net
income |
$ |
41,621 |
|
|
$ |
29,389 |
|
$ |
78,725 |
|
|
$ |
50,428 |
|
|
|
|
|
|
|
|
Earnings per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
1.13 |
|
|
$ |
.75 |
|
$ |
2.14 |
|
|
$ |
1.27 |
Diluted |
$ |
1.10 |
|
|
$ |
.72 |
|
$ |
2.08 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
|
Weighted average
shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
36,852 |
|
|
|
39,399 |
|
|
36,847 |
|
|
|
39,567 |
Diluted |
|
37,695 |
|
|
|
40,690 |
|
|
37,764 |
|
|
|
40,967 |
|
|
|
|
|
|
|
|
This press release and the attached financial
tables contain certain non-GAAP financial measures as defined under
SEC rules, such as Adjusted net income, Adjusted total debt,
Adjusted net (cash) debt, EBITDA, Adjusted EBITDA, Free cash flow,
Adjusted free cash flow and Adjusted invested capital, which
exclude certain items disclosed in the attached financial tables.
The Company provides reconciliations of these measures to the most
directly comparable GAAP measures.
Management believes the presentation of these
non-GAAP financial measures provides useful information about the
results of operations of the Company for the current and past
periods. Management believes that investors should have the same
information available to them that management uses to assess the
Company’s operating performance and capital structure. These
non-GAAP financial measures should not be considered in isolation
or as a substitute for the most comparable GAAP financial measures.
Investors are cautioned that non-GAAP financial measures utilized
by the Company may not be comparable to similarly titled non-GAAP
financial measures used by other companies.
|
|
Three Months Ended |
Vehicle Sales Revenue (in thousands) |
|
June 30, 2019 |
|
June 30, 2018 |
New heavy-duty vehicles |
|
$ |
611,198 |
|
|
$ |
474,368 |
|
New medium-duty vehicles
(including bus sales revenue) |
|
|
288,003 |
|
|
|
257,012 |
|
New light-duty vehicles |
|
|
28,894 |
|
|
|
27,397 |
|
Used vehicles |
|
|
89,924 |
|
|
|
92,753 |
|
Other vehicles |
|
|
6,782 |
|
|
|
5,495 |
|
|
|
|
|
|
Absorption
Ratio |
|
|
122.4 |
% |
|
|
122.8 |
% |
Absorption RatioManagement uses
several performance metrics to evaluate the performance of its
commercial vehicle dealerships and considers Rush Truck Centers’
“absorption ratio” to be of critical importance. Absorption ratio
is calculated by dividing the gross profit from the parts, service
and collision center departments by the overhead expenses of all of
a dealership’s departments, except for the selling expenses of the
new and used commercial vehicle departments and carrying costs of
new and used commercial vehicle inventory. When 100% absorption is
achieved, then gross profit from the sale of a commercial vehicle,
after sales commissions and inventory carrying costs, directly
impacts operating profit.
This earnings release includes “adjusted net
income (non-GAAP)” and “adjusted net income per diluted share
(non-GAAP),” which are financial measures that are not in
accordance with U.S. generally accepted accounting principles,
since they exclude the charges related to the upgrade and
replacement of the ERP platform in 2018. These measures differ from
the most directly comparable measures calculated in accordance with
GAAP and may not be comparable to similarly titled non-GAAP
financial measures used by other companies. Reconciliations from
the most directly comparable GAAP measures of adjusted net income
(non-GAAP) and adjusted net income per diluted share (non-GAAP) are
as follows:
|
|
Three Months Ended |
Adjusted Net Income (in
thousands) |
|
June 30, 2019 |
June 30, 2018 |
Net Income |
|
$ |
41,621 |
$ |
29,389 |
Charges related to upgrade and
replacement of ERP platform, net of tax |
|
|
– |
|
8,011 |
Adjusted Net Income
(non-GAAP) |
|
$ |
41,621 |
$ |
37,400 |
|
|
|
|
Per Diluted Share |
|
|
|
Net Income |
|
$ |
1.10 |
$ |
0.72 |
Charges related to upgrade and
replacement of ERP platform, net of tax |
|
|
– |
|
0.20 |
Adjusted Net Income
(non-GAAP) |
|
$ |
1.10 |
$ |
0.92 |
|
|
Six Months Ended |
Adjusted Net Income (in
thousands) |
|
June 30, 2019 |
June 30, 2018 |
Net Income |
|
$ |
78,725 |
$ |
50,428 |
Charges related to upgrade and
replacement of ERP platform, net of tax |
|
|
– |
|
15,682 |
Adjusted Net Income
(non-GAAP) |
|
$ |
78,725 |
$ |
66,110 |
|
|
|
|
Per Diluted Share |
|
|
|
Net Income |
|
$ |
2.08 |
$ |
1.23 |
Charges related to upgrade and
replacement of ERP platform, net of tax |
|
|
– |
|
0.38 |
Adjusted Net Income
(non-GAAP) |
|
$ |
2.08 |
$ |
1.61 |
Debt Analysis (in
thousands) |
|
June 30, 2019 |
June 30, 2018 |
Floor plan notes payable |
|
$ |
1,190,136 |
|
$ |
867,992 |
|
Line of credit |
|
|
60,000 |
|
|
– |
|
Current maturities of
long-term debt |
|
|
149,743 |
|
|
155,743 |
|
Current maturities of finance
lease obligations |
|
|
20,326 |
|
|
17,137 |
|
Current maturities of
operating lease obligations |
|
|
9,524 |
|
|
– |
|
Long-term debt, net of current
maturities |
|
|
457,531 |
|
|
434,743 |
|
Finance lease obligations, net
of current maturities |
|
|
53,357 |
|
|
57,548 |
|
Operating lease obligations,
net of current maturities |
|
|
42,271 |
|
|
– |
|
Total Debt
(GAAP) |
|
|
1,982,888 |
|
|
1,533,163 |
|
Adjustments: |
|
|
|
Debt related to lease & rental fleet |
|
|
(638,513 |
) |
|
(579,434 |
) |
Floor plan notes payable |
|
|
(1,190,136 |
) |
|
(867,992 |
) |
Adjusted Total Debt
(Non-GAAP) |
|
|
154,239 |
|
|
85,737 |
|
Adjustment: |
|
|
|
Cash and cash equivalents |
|
|
(111,346 |
) |
|
(148,316 |
) |
Adjusted Net Debt
(Cash) (Non-GAAP) |
|
$ |
42,893 |
|
$ |
(62,579 |
) |
Management uses “Adjusted Total Debt” to reflect
the Company’s estimated financial obligations less debt related to
lease and rental fleet (L&RFD) and floor plan notes payable
(FPNP), and “Adjusted Net (Cash) Debt” to present the amount of
Adjusted Total Debt net of cash and cash equivalents on the
Company’s balance sheet. The FPNP is used to finance the Company’s
new and used inventory, with its principal balance changing daily
as vehicles are purchased and sold and the sale proceeds are used
to repay the notes. Consequently, in managing the business,
management views the FPNP as interest bearing accounts payable,
representing the cost of acquiring the vehicle that is then repaid
when the vehicle is sold, as the Company’s credit agreements
require it to repay loans used to purchase vehicles when such
vehicles are sold. The Company’s lease & rental fleet are fully
financed and are either (i) leased to customers under long-term
lease arrangements or (ii), to a lesser extent, dedicated to the
Company’s rental business. In both cases, the lease and rental
payments received fully cover the capital costs of the lease &
rental fleet (i.e., the interest expense on the borrowings used to
acquire the vehicles and the depreciation expense associated with
the vehicles), plus a profit margin for the Company. The
Company believes excluding the FPNP and L&RFD from the
Company’s total debt for this purpose provides management with
supplemental information regarding the Company’s capital structure
and leverage profile and assists investors in performing analysis
that is consistent with financial models developed by Company
management and research analysts. “Adjusted Total Debt” and
“Adjusted Net (Cash) Debt” are both non-GAAP financial measures and
should be considered in addition to, and not as a substitute for,
the Company’s debt obligations, as reported in the Company’s
consolidated balance sheet in accordance with U.S. GAAP.
Additionally, these non-GAAP measures may vary among companies and
may not be comparable to similarly titled non-GAAP measures used by
other companies.
|
|
Twelve Months Ended |
EBITDA (in thousands) |
|
June 30, 2019 |
June 30, 2018 |
Net Income (GAAP) |
|
$ |
167,359 |
|
$ |
186,079 |
|
(Benefit) provision for income
taxes |
|
|
52,763 |
|
|
(39,306 |
) |
Interest expense |
|
|
26,312 |
|
|
15,495 |
|
Depreciation and
amortization |
|
|
52,407 |
|
|
69,734 |
|
(Gain) loss on sale of
assets |
|
|
153 |
|
|
(294 |
) |
EBITDA
(Non-GAAP) |
|
|
298,994 |
|
|
231,708 |
|
Adjustments: |
|
|
|
Interest expense associated with FPNP |
|
|
(24,631 |
) |
|
(13,513 |
) |
Adjusted EBITDA
(Non-GAAP) |
|
$ |
274,363 |
|
$ |
218,195 |
|
The Company presents EBITDA and Adjusted EBITDA,
for the twelve months ended each period presented, as additional
information about its operating results. The presentation of
Adjusted EBITDA that excludes the addition of interest expense
associated with FPNP to EBITDA is consistent with management’s
presentation of Adjusted Total Debt, in each case reflecting
management’s view of interest expense associated with the FPNP as
an operating expense of the Company, and to provide management with
supplemental information regarding operating results and to assist
investors in performing analysis that is consistent with financial
models developed by management and research analyst. “EBITDA” and
“Adjusted EBITDA” are both non-GAAP financial measures and should
be considered in addition to, and not as a substitute for, net
income of the Company, as reported in the Company’s consolidated
statements of income in accordance with U.S. GAAP. Additionally,
these non-GAAP measures may vary among companies and may not be
comparable to similarly titled non-GAAP measures used by other
companies.
|
|
Twelve Months Ended |
Free Cash Flow (in thousands) |
|
June 30, 2019 |
June 30, 2018 |
Net cash (used in) provided by operations
(GAAP) |
|
$ |
(6,562 |
) |
$ |
211,998 |
|
Acquisition of property and
equipment |
|
|
(275,115 |
) |
|
(246,563 |
) |
Free cash flow
(Non-GAAP) |
|
|
(281,677 |
) |
|
(34,565 |
) |
Adjustments: |
|
|
|
Draws on floor plan financing, net |
|
|
326,602 |
|
|
106,203 |
|
Proceeds from L&RFD |
|
|
194,563 |
|
|
169,723 |
|
Principal payments on L&RFD |
|
|
(164,701 |
) |
|
(155,884 |
) |
Non-maintenance capital expenditures |
|
|
44,823 |
|
|
33,613 |
|
Adjusted Free Cash
Flow (Non-GAAP) |
|
$ |
119,610 |
|
$ |
119,090 |
|
“Free Cash Flow” and “Adjusted Free Cash Flow”
are key financial measures of the Company’s ability to generate
cash from operating its business. Free Cash Flow is
calculated by subtracting the acquisition of property and equipment
included in the Cash flows from investing activities from Net cash
provided by (used in) operating activities. For purposes of
deriving Adjusted Free Cash Flow from the Company’s operating cash
flow, Company management makes the following adjustments: (i) adds
back draws (or subtracts payments) on the floor plan financing that
are included in Cash flows from financing activities as their
purpose is to finance the vehicle inventory that is included in
Cash flows from operating activities; (ii) adds back proceeds from
notes payable related specifically to the financing of the lease
and rental fleet that are reflected in Cash flows from financing
activities; (iii) subtracts draws on floor plan financing, net and
proceeds from L&RFD related to business acquisition assets that
are included in Cash flows from investing activities; (iv)
subtracts principal payments on notes payable related specifically
to the financing of the lease and rental fleet that are included in
Cash flows from financing activities; and (v) adds back
non-maintenance capital expenditures that are for growth and
expansion (i.e. building of new dealership facilities) that are not
considered necessary to maintain the current level of cash
generated by the business. “Free Cash Flow” and “Adjusted Free Cash
Flow” are both presented so that investors have the same financial
data that management uses in evaluating the Company’s cash flows
from operating activities. “Free Cash Flow” and “Adjusted Free Cash
Flow” are both non-GAAP financial measures and should be considered
in addition to, and not as a substitute for, net cash provided by
(used in) operations of the Company, as reported in the Company’s
consolidated statement of cash flows in accordance with U.S. GAAP.
Additionally, these non-GAAP measures may vary among companies and
may not be comparable to similarly titled non-GAAP measures used by
other companies.
Invested Capital (in thousands) |
|
June 30, 2019 |
June 30, 2018 |
Total Shareholders' equity (GAAP) |
|
$ |
1,113,524 |
$ |
1,060,078 |
|
Adjusted net debt (cash)
(Non-GAAP) |
|
|
42,893 |
|
(62,579 |
) |
Adjusted Invested
Capital (Non-GAAP) |
|
$ |
1,156,417 |
$ |
997,499 |
|
“Adjusted Invested Capital” is a key financial
measure used by the Company to calculate its return on invested
capital. For purposes of this analysis, management excludes
L&RFD, FPNP, and cash and cash equivalents, for the reasons
provided in the debt analysis above and uses Adjusted Net Debt in
the calculation. The Company believes this approach provides
management a more accurate picture of the Company’s leverage
profile and capital structure, and assists investors in performing
analysis that is consistent with financial models developed by
Company management and research analysts. “Adjusted Net (Cash)
Debt” and “Adjusted Invested Capital” are both non-GAAP financial
measures. Additionally, these non-GAAP measures may vary among
companies and may not be comparable to similarly titled non-GAAP
measures used by other companies.
Contact: Rush Enterprises, Inc., San Antonio Steven L. Keller,
830-302-5226
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