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, 2020,
the Company achieved revenues of $1.003 billion and net income of
$16.8 million, or $0.46 per diluted share, compared with revenues
of $1.545 billion and net income of $41.6 million, or $1.10 per
diluted share, in the quarter ended June 30, 2019.
Additionally, the Company’s Board of Directors declared a cash
dividend of $0.14 per share of Class A and Class B Common Stock, to
be paid on September 10, 2020, to all shareholders of record as of
August 7, 2020.
“As expected, the COVID-19 pandemic and resulting shutdown
orders that forced many businesses to close, combined with the
previously expected industry downturn in new commercial vehicle
sales, and the unexpected energy price war and precipitous drop in
oil prices, had a significant negative impact on our financial
results in the second quarter,” said W.M. “Rusty” Rush, Chairman,
Chief Executive Officer and President of Rush Enterprises,
Inc. “To address the challenging market conditions, we
expeditiously implemented steps to appropriately reduce and manage
expenses in order to maintain profitability,” he said.
“Based on current market conditions, we believe the worst is
behind us. We will continue to carefully monitor the pandemic and
its impact on our customers and the general economy. We believe any
recovery will be gradual and intermittent over the next few
quarters,” Rush said.
“Despite challenging market conditions and in recognition of
management’s ability to effectively manage costs while also
delivering superior customer service, our Board of Directors
approved a $0.01 increase in our quarterly cash dividend, our
second 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 a 7.7%
increase over the first quarter of 2020 dividend and is further
evidence of our intent to increase the dividend on an annual basis,
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. “In
addition, we are lifting the previously announced suspension of our
stock repurchase program, effective immediately. While we intend to
be cautious on stock repurchases going forward, we believe that our
cash position and business outlook are both strong enough to
warrant resuming repurchasing activity,” he added.
“As always, but especially now, I am sincerely thankful for our
dedicated employees across the country. They remain focused
on what’s important: protecting the health and safety of
themselves and those around them while helping keep our customers
up and running. Our employees are a vital part of our
nation’s economic recovery and they are helping ensure that medical
equipment, food and supplies get where it is needed. And in
these difficult times, our employees are keeping their spirits up,
which inspires me every day,” said Rush.
Our Response to the COVID-19 Pandemic and
Its Impact on Our Business and Outlook
“As anticipated, following the limited effects of
the COVID-19 pandemic on our revenues in the first quarter of 2020,
we experienced significant revenue declines in the second
quarter. We expect our business to be negatively impacted by
COVID-19 for the foreseeable future, but we are cautiously
optimistic that we will not see any further declines in
revenues. With the expense reductions we have put in place
over the past two quarters, we feel we are rightsized to meet the
demands of the market while ensuring our Company’s long-term
financial strength,” said Rush.
“It should be noted that our first and foremost
concern remains the health and safety of our employees, customers
and communities. Accordingly, we have implemented appropriate
policies and procedures to ensure that our locations are operating
in as safe a manner as possible,” Rush added.
Supporting Essential Functions While
Focusing on Health and Safety Classified as
“essential businesses,” Rush Truck Centers have remained fully
operational across the Company’s dealership network, though some
hours of operation remain modified to accommodate previous staffing
reductions and frequent cleaning and sanitizing of locations.
The Company continues to provide curbside parts pick-up,
online parts ordering and web-based vehicle service
communications.
“We continue to stress the importance of compliance
with CDC guidelines and all applicable federal, state and local
executive orders for limiting the spread of COVID-19. In
addition, we are frequently communicating with employees regarding
our mandatory COVID-19 policies and procedures. Even in
states or cities in which face coverings are not required, our
employees are required to wear face coverings at all of our
locations,” said Rush.
Liquidity and Expense
Reduction In the second quarter, the Company
continued the expense reduction measures initiated in the first
quarter to help navigate the challenging economic and industry
conditions. “Our expense reduction measures were widespread,
came from all areas of the business, and barring any major
unforeseen event, we don’t anticipate making any further expense
reductions at this time,” said Rush.
“It is also important to note that, despite our
cost containment efforts, in early July we announced an increase to
the minimum wage that we pay our hourly employees. All of our
hourly employees now make a minimum of $15 per hour. We made
this change to improve the lives of our employees and their
families, and encourage them to build long careers with us,” said
Rush. “Earlier this week, we also announced that the wage
freeze that we implemented during the second quarter has been
lifted for our service technicians in recognition of the important
work they are doing to keep our customers up and running,” he
added.
“While none of us have experienced a global
pandemic before, we have gone through numerous other economic
downturns and crises, and we used the lessons learned and
experiences gained from those times to take swift action to manage
expenses based on our expectations of future market conditions,”
said Rush. “Our balance sheet and cash position are strong,
even in this challenging market, and we believe we are well
positioned to navigate through the downturn,” said Rush. The
Company ended the second quarter with $215.6 million in cash,
compared to $137.5 million as of March 31, 2020, and had no
outstanding draws on its $100 million line of credit. “As
evidenced by our decision to increase our quarterly dividend to
$0.14 per share, and to resume purchases under our stock repurchase
plan, we remain firmly committed to returning value to
shareholders,” Rush said.
Operations
Aftermarket Products and Services
Aftermarket products and services accounted for approximately 73%
of the Company’s total gross profit in the second quarter of 2020,
with parts, service and collision center revenues reaching $377.6
million. The Company achieved a quarterly absorption ratio of
110.2% in the second quarter of 2020.
“Our second quarter aftermarket revenue declined
15.8% compared to the second quarter of last year, due to declines
across the country in almost every market segment we support, which
is consistent with what is happening across the industry,” said
Rush. “Activity from the energy sector remains the most
severely impacted. Global pricing actions have negatively affected
rig counts and the number of energy vehicles in service, and this
segment is not expected to improve in the near term,” he added.
“Early in the second quarter, we saw the negative impact of
COVID-19 on parts sales. However, as the quarter progressed
the decline in demand for vehicle upfitting, reduced pre-delivery
inspections as a result of fewer new truck sales and a reduction of
our service technician workforce caused service revenues to lag
behind parts revenues.
“Looking ahead, there is still tremendous
uncertainty about the strength of our overall economy. We
expect that any recovery will be gradual, and that COVID-19 will
continue to impact our aftermarket revenues for the foreseeable
future,” Rush said. “That said, we will continue to execute
our strategy and invest with discipline, especially in the
technologies that are helping us support customers safely during
the pandemic. For example, our RushCare Call Centers are
fully equipped to handle customer phone calls within seconds, Parts
Connect offers online ordering and Service Connect offers 24/7
real-time communications. Each of these technologies enable
our customers to transact business with us safely, efficiently and
conveniently, no matter where they need us. We plan to expand and
enhance these types of product offerings in the future,” Rush
said.
Commercial Vehicle SalesNew U.S.
Class 8 retail truck sales were 36,042 units in the second quarter
of 2020, down 50.5% over the same period last year, according to
ACT Research. The Company sold 1,866 new Class 8 trucks in
the second quarter, a decrease of 54.7% compared to the second
quarter of 2019, and accounted for 5.2% of the new U.S. Class 8
truck market. ACT Research forecasts U.S. retail sales for
new Class 8 vehicles to be 159,000 units in 2020, a 43.5% decrease
compared to 2019.
“Our Class 8 new truck sales in the second quarter
were down significantly from the same time period in 2019, as we
expected they would be, due to the anticipated industry downturn in
new Class 8 truck sales and the COVID-19 pandemic. New truck
sales were further impacted by production shutdowns in the
beginning of the quarter by the truck manufacturers we
represent. It is worth noting that ACT Research’s current
estimate of 159,000 new U.S. Class 8 retail truck sales in 2020 has
increased from last quarter, when ACT Research estimated annual
sales would only reach 127,500 units,” said Rush.
“In the second quarter, we experienced overall
declines in demand for new Class 8 vehicles from all customer
segments. While we are beginning to see quoting activity
increase, we believe customers remain hesitant to purchase new
vehicles due to uncertainty regarding the COVID-19 pandemic, the
economy and the upcoming presidential election. Our truck
sales professionals remain focused on understanding the needs of
our customers and are positioned to support them during these
challenging times. Additionally, most of the truck
manufacturers we represent are offering favorable financing terms
to support customers and stimulate new truck sales,” Rush
added.
New U.S. Class 4 through 7 retail
commercial vehicle sales were 50,287 units in the second quarter of
2020, down 28% over the same time period last year, according
to ACT Research. The Company sold 2,333 new Class 4-7
medium-duty commercial vehicles in the second quarter of 2020, a
decrease of 39.7% compared to the second quarter of 2019, and
accounted for 4.6% of the U.S. Class 4-7 commercial vehicle
market. ACT Research forecasts U.S. retail sales for new
Class 4 through 7 vehicles to reach 176,500 units in 2020, a 33.9%
decrease compared to 2019.
“Similar to our Class 8 new truck sales, our second
quarter Class 4 through 7 new commercial vehicle sales were
significantly impacted by the COVID-19 pandemic and overall
industry downturn,” said Rush. “Uncertainty about our economy
remains a concern for our medium-duty customers, as many are small
businesses. Though we have seen some cancellations of Class 4
through 7 new truck orders, those cancellations are not as
prevalent as we expected,” he said. “We believe our
medium-duty truck sales will continue to be negatively impacted by
the pandemic and overall weakness of the economy,” said Rush.
The Company sold 1,768 used commercial trucks in
the second quarter of 2020, a decrease of 15.8% over the second
quarter of 2019. “In anticipation of a decline in used truck
sales resulting from the pandemic, we took aggressive action to
reduce inventory and used truck pricing. Following a
significant decline in sales in April and May, used truck sales
began to stabilize in June, and we expect used truck sales to
remain steady moving forward. A bright spot in the market is
that spot freight rates are healthy, which is encouraging more new
businesses to enter the market, and those new business usually
begin by purchasing used trucks,” Rush said.
Financial Highlights
In the second quarter of 2020, the Company’s gross
revenues totaled $1.003 billion, a 35.1% decrease from gross
revenues of $1.545 billion reported in the second quarter of
2019. Net income for the second quarter of 2020 was $16.8
million, or $0.46 per diluted share, compared to net income of
$41.6 million, or $1.10 per diluted share, in the second quarter of
2019.
Aftermarket products and services revenues were $377.6 million
in the second quarter of 2020, compared to $448.2 million in the
second quarter of 2019. The Company delivered 1,866 new
heavy-duty trucks, 2,333 new medium-duty commercial vehicles, 254
new light-duty commercial vehicles and 1,768 used commercial
vehicles during the second quarter of 2020, compared to 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.
The Company’s lease and rental revenues decreased by 7.0% in the
second quarter of 2020, compared to the second quarter of
2019. Rush Truck Leasing operates 45 PacLease and Idealease
franchises with more than 8,800 trucks in its lease and rental
fleet and more than 1,300 trucks under contract maintenance
agreements. The Company paid a cash dividend of $4.7 million during
the second quarter of 2020. “Our cash position remains strong
at $216 million, and we believe that even with the current
uncertainty in our industry and economy, we have taken appropriate
steps to help ensure our financial strength,” said Rush.
Conference Call
Information
Rush Enterprises will host its quarterly
conference call to discuss earnings for the second quarter on
Thursday, July 23, 2020, 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
3687848) 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, 2020. Listen to the audio replay
until July 30, 2020, by dialing 855-859-2056 (Toll Free) or
404-537-3406 and entering the Conference ID
3687848.
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 North America, 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, FUSO, 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 in this release,
including those concerning current and projected market conditions,
sales forecasts, market share forecasts, demand for the Company’s
services, the effects the COVID-19 pandemic may have on our
business and financial results, 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). Such
forward-looking statements only speak as of the date of this
release and the Company assumes no obligation to update the
information included in this release. 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, the
duration and severity of the COVID-19 pandemic and governmental
mandates in connection therewith, one-time events and other factors
described herein and in filings made by the Company with the
Securities and Exchange Commission, including in our annual report
on Form 10-K for the fiscal year ended December 31, 2019 and our
quarterly report on Form 10-Q for the quarter ended March 31,
2020. 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. Although we believe that these forward-looking
statements are based on reasonable assumptions, there are many
factors that could affect our actual business and financial results
and could cause actual results to differ materially from those in
the forward-looking statements. All future written and oral
forward-looking statements by us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except for our ongoing
obligations to disclose material information as required by the
federal securities laws, we do not have any obligations or
intention to release publicly any revisions to any forward-looking
statements to reflect events or circumstances in the future or to
reflect the occurrence of unanticipated events.
-Tables and Additional Information to Follow-
RUSH ENTERPRISES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (In Thousands, Except Shares and Per Share
Amounts)
|
June 30, |
|
December 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
215,556 |
|
|
$ |
181,620 |
|
Accounts receivable, net of allowance |
|
162,677 |
|
|
|
183,704 |
|
Inventories, net |
|
1,004,624 |
|
|
|
1,326,080 |
|
Prepaid expenses and other |
|
15,482 |
|
|
|
20,728 |
|
Assets held for sale |
|
– |
|
|
|
419 |
|
Total current assets |
|
1,398,339 |
|
|
|
1,712,551 |
|
Property and equipment,
net |
|
1,251,876 |
|
|
|
1,279,931 |
|
Operating lease right-of-use
assets, net |
|
57,266 |
|
|
|
57,197 |
|
Goodwill, net |
|
292,142 |
|
|
|
292,142 |
|
Other assets, net |
|
64,978 |
|
|
|
65,508 |
|
Total
assets |
$ |
3,064,601 |
|
|
$ |
3,407,329 |
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Floor plan notes payable |
$ |
724,946 |
|
|
$ |
996,336 |
|
Current maturities of long-term debt |
|
177,742 |
|
|
|
189,265 |
|
Current maturities of finance lease obligations |
|
24,223 |
|
|
|
22,892 |
|
Current maturities of operating lease obligations |
|
9,939 |
|
|
|
10,114 |
|
Trade accounts payable |
|
98,011 |
|
|
|
133,697 |
|
Customer deposits |
|
17,609 |
|
|
|
42,695 |
|
Accrued expenses |
|
111,183 |
|
|
|
112,390 |
|
Total current liabilities |
|
1,163,653 |
|
|
|
1,507,389 |
|
Long-term debt, net of current
maturities |
|
408,580 |
|
|
|
438,413 |
|
Finance lease obligations, net
of current maturities |
|
82,145 |
|
|
|
69,478 |
|
Operating lease obligations,
net of current maturities |
|
47,922 |
|
|
|
47,555 |
|
Other long-term
liabilities |
|
21,881 |
|
|
|
20,704 |
|
Deferred income taxes,
net |
|
153,860 |
|
|
|
164,297 |
|
Shareholders’ equity: |
|
|
|
Preferred stock, par value $.01 per share; 1,000,000 shares
authorized; 0 shares outstanding in 2020 and 2019 |
|
– |
|
|
|
– |
|
Common stock, par value $.01 per share; 60,000,000 Class A
shares and 20,000,000 Class B shares authorized; 27,728,493 Class A
shares and 8,410,440 Class B shares outstanding in 2020; and
27,953,648 Class A shares and 8,240,486 Class B shares outstanding
in 2019 |
|
471 |
|
|
|
465 |
|
Additional paid-in capital |
|
414,812 |
|
|
|
397,267 |
|
Treasury stock, at cost: 5,610,906 Class A shares and 5,360,832
Class B shares in 2020 and 5,055,783 Class A shares and
5,306,341 Class B shares in 2019 |
|
(324,031) |
|
|
|
(304,129) |
|
Retained earnings |
|
1,095,976 |
|
|
|
1,065,553 |
|
Accumulated other comprehensive (loss) income |
|
(668) |
|
|
|
337 |
|
Total shareholders’
equity |
|
1,186,560 |
|
|
|
1,159,493 |
|
Total liabilities and shareholders’ equity |
$ |
3,064,601 |
|
|
$ |
3,407,329 |
|
|
|
|
|
|
|
|
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(In Thousands, Except Per Share
Amounts) (Unaudited)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
$ |
559,062 |
|
$ |
1,024,801 |
|
|
$ |
1,348,616 |
|
$ |
1,863,084 |
|
Parts and service sales |
|
377,553 |
|
|
448,166 |
|
|
|
805,531 |
|
|
886,520 |
|
Lease and rental |
|
57,290 |
|
|
61,591 |
|
|
|
118,071 |
|
|
121,024 |
|
Finance and insurance |
|
4,960 |
|
|
6,401 |
|
|
|
9,427 |
|
|
13,011 |
|
Other |
|
3,647 |
|
|
3,602 |
|
|
|
7,530 |
|
|
9,239 |
|
Total revenue |
|
1,002,512 |
|
|
1,544,561 |
|
|
|
2,289,175 |
|
|
2,892,878 |
|
Cost of products
sold |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
|
521,494 |
|
|
951,121 |
|
|
|
1,250,033 |
|
|
1,719,538 |
|
Parts and service sales |
|
237,196 |
|
|
272,636 |
|
|
|
508,611 |
|
|
545,825 |
|
Lease and rental |
|
51,491 |
|
|
51,298 |
|
|
|
103,699 |
|
|
101,093 |
|
Total cost of products sold |
|
810,181 |
|
|
1,275,055 |
|
|
|
1,862,343 |
|
|
2,366,456 |
|
Gross
profit |
|
192,331 |
|
|
269,506 |
|
|
|
426,832 |
|
|
526,422 |
|
Selling, general and
administrative expense |
|
156,195 |
|
|
193,981 |
|
|
|
341,269 |
|
|
381,162 |
|
Depreciation and amortization
expense |
|
14,516 |
|
|
13,594 |
|
|
|
28,846 |
|
|
26,519 |
|
Gain (loss) on sale of
assets |
|
1,381 |
|
|
(139) |
|
|
|
1,481 |
|
|
(82) |
|
Operating
income |
|
23,001 |
|
|
61,792 |
|
|
|
58,198 |
|
|
118,659 |
|
Equity in earnings of
unconsolidated entities |
|
1,720 |
|
|
690 |
|
|
|
2,961 |
|
|
739 |
|
Interest expense, net |
|
2,209 |
|
|
8,072 |
|
|
|
6,978 |
|
|
15,430 |
|
Income before
taxes |
|
22,512 |
|
|
54,410 |
|
|
|
54,181 |
|
|
103,968 |
|
Provision for income
taxes |
|
5,696 |
|
|
12,789 |
|
|
|
14,258 |
|
|
25,243 |
|
Net
income |
$ |
16,816 |
|
$ |
41,621 |
|
|
$ |
39,923 |
|
$ |
78,725 |
|
|
|
|
|
|
|
|
|
Earnings per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.46 |
|
$ |
1.13 |
|
|
$ |
1.10 |
|
$ |
2.14 |
|
Diluted |
$ |
0.46 |
|
$ |
1.10 |
|
|
$ |
1.08 |
|
$ |
2.08 |
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
36,291 |
|
|
36,852 |
|
|
|
36,387 |
|
|
36,847 |
|
Diluted |
|
36,900 |
|
|
37,695 |
|
|
|
37,113 |
|
|
37,764 |
|
|
|
|
|
|
|
|
|
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, 2020 |
|
June 30, 2019 |
New heavy-duty vehicles |
|
$ |
287,721 |
|
|
$ |
611,198 |
|
New medium-duty vehicles
(including bus sales revenue) |
|
|
191,760 |
|
|
|
288,003 |
|
New light-duty vehicles |
|
|
11,212 |
|
|
|
28,894 |
|
Used vehicles |
|
|
66,856 |
|
|
|
89,924 |
|
Other vehicles |
|
|
1,513 |
|
|
|
6,782 |
|
|
|
|
|
|
Absorption
Ratio |
|
|
110.2% |
|
|
|
122.4% |
|
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.
Debt Analysis (in
thousands) |
|
June 30, 2020 |
June 30, 2019 |
Floor plan notes payable |
|
$ |
724,946 |
|
$ |
1,190,136 |
|
Line of credit |
|
− |
|
|
60,000 |
|
Current maturities of
long-term debt |
|
|
177,742 |
|
|
149,743 |
|
Current maturities of finance
lease obligations |
|
|
24,223 |
|
|
20,326 |
|
Long-term debt, net of current
maturities |
|
|
408,580 |
|
|
457,531 |
|
Finance lease obligations, net
of current maturities |
|
|
82,145 |
|
|
53,357 |
|
Total Debt
(GAAP) |
|
|
1,417,636 |
|
|
1,931,093 |
|
Adjustments: |
|
|
|
Debt related to lease & rental fleet |
|
|
(633,543) |
|
|
(638,513) |
|
Floor plan notes payable |
|
|
(724,946) |
|
|
(1,190,136) |
|
Adjusted Total Debt
(Non-GAAP) |
|
|
59,147 |
|
|
102,444 |
|
Adjustment: |
|
|
|
Cash and cash equivalents |
|
|
(215,556) |
|
|
(111,346) |
|
Adjusted Net Debt
(Cash) (Non-GAAP) |
|
$ |
(156,409) |
|
$ |
(8,902) |
|
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, 2020 |
June 30, 2019 |
Net Income (GAAP) |
|
$ |
102,781 |
|
$ |
167,359 |
|
Provision for income
taxes |
|
|
36,955 |
|
|
52,763 |
|
Interest expense |
|
|
20,355 |
|
|
26,312 |
|
Depreciation and
amortization |
|
|
57,699 |
|
|
52,407 |
|
(Gain) loss on sale of
assets |
|
|
(1,461) |
|
|
153 |
|
EBITDA
(Non-GAAP) |
|
|
216,329 |
|
|
298,994 |
|
Adjustments: |
|
|
|
Interest expense associated with FPNP |
|
|
(19,682) |
|
|
(24,631) |
|
Adjusted EBITDA
(Non-GAAP) |
|
$ |
196,647 |
|
$ |
274,363 |
|
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, 2020 |
June 30, 2019 |
Net cash (used in) provided by operations
(GAAP) |
|
$ |
871,425 |
|
$ |
(6,562) |
|
Acquisition of property and
equipment |
|
|
(222,656) |
|
|
(275,115) |
|
Free cash flow
(Non-GAAP) |
|
|
648,769 |
|
|
(281,677) |
|
Adjustments: |
|
|
|
(Payments) draws on floor plan financing, net |
|
|
(415,803) |
|
|
326,602 |
|
Proceeds from L&RFD |
|
|
154,488 |
|
|
194,563 |
|
Principal payments on L&RFD |
|
|
(177,548) |
|
|
(164,701) |
|
Non-maintenance capital expenditures |
|
|
32,143 |
|
|
44,823 |
|
Adjusted Free Cash
Flow (Non-GAAP) |
|
$ |
242,049 |
|
$ |
119,610 |
|
“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, 2020 |
June 30, 2019 |
Total Shareholders' equity (GAAP) |
|
$ |
1,186,560 |
|
$ |
1,113,524 |
|
Adjusted net debt (cash)
(Non-GAAP) |
|
|
(156,409) |
|
|
(8,902) |
|
Adjusted Invested
Capital (Non-GAAP) |
|
$ |
1,030,151 |
|
$ |
1,104,622 |
|
“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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