Press Release Details
Rush Enterprises, Inc. Reports First Quarter 2015 Results
- First quarter Class 8 and Class 4-7 truck sales outpace industry
- Product breadth and network reach help offset decline in energy sector activity
- Aftermarket revenues remain strong
- Progress continues on strategic growth initiatives
"We are extremely pleased with our strong financial performance this quarter despite a significant impact to Class 8 truck sales due to reduced activity in the energy sector. We have completed the rollout of our business operating system and continue to make progress on our strategic growth initiatives to expand our portfolio of aftermarket solutions," said
"I am extremely grateful to our employees for their contribution to our success this quarter. I am also extremely proud of their efforts to help implement growth initiatives, seek out new business opportunities and make progress toward continuous improvement while supporting all of our customers with excellent service around the country," continued Rush.
Operations
Aftermarket Solutions
Aftermarket services accounted for approximately 63% of the Company's total gross profit with parts, service and body shop revenue up 9.1% as compared to the first quarter of 2014. The Company achieved a quarterly absorption rate of 115.3% in the first quarter of 2015.
"Continued steady demand for repair and maintenance of vehicles fueled by general economic improvement, pre-delivery inspections and modifications from new and used truck sales and mobile service activity drove aftermarket revenues in the first quarter," said Rush.
"Aftermarket activity in the energy sector remained steady this quarter, although we have begun to see activity decrease slightly as compared to the end of 2014. As rig counts decrease, we expect that this decline will negatively impact parts and service revenues through the remainder of the year. We remain committed to working with our customers operating in this sector through this difficult period," Rush explained.
Truck Sales
U.S. Class 8 retail sales were 56,736 units in the first quarter, up 25% over the same time period last year. Rush's Class 8 sales increased 52% over the same time period, significantly outpacing the industry and accounting for 7.2% of the U.S. Class 8 truck market.
"We saw a significant negative impact from reduced activity in the energy sector to Class 8 truck sales this quarter, but we were able to offset this decline with incremental sales to mid- and large-size over-the-road fleets whose businesses primarily serve consumer retail markets. Steady demand continued from vocational customers operating in the construction segment as well," Rush said.
Rush's Class 4-7 medium-duty sales increased 37% over the first quarter of 2014, accounting for 5.6% of the total U.S. market and also significantly outpacing U.S. Class 4-7 truck sales in the first quarter, which increased by 12%. "Our strong medium-duty truck sales performance this quarter was driven by deliveries to several large leasing companies along with our continued ability to offer ready-to-roll equipment to vocational operators supporting infrastructure projects taking place throughout the country," Rush added.
"Our backlog remains stable through the second quarter, but as expected, order intake has softened from the peak order months at the end of last year. We expect our Class 8 truck sales to remain flat through the second quarter as we work to offset the decline in new truck sales to the energy sector with incremental business in other market segments and regions of the country benefiting from an improving economy," Rush explained.
Continued Growth
"We expanded our network of RushCare Rapid Parts regional parts call centers to include additional centers in
"We launched our telematics product offering this quarter, with units already operating on customers' vehicles and dedicated resources in place to support this product rollout. We are excited about the growth potential of this new technology, as we can provide an open-architecture platform that will integrate into virtually any fleet operation, enhancing our ability to monitor and measure vehicle performance in an effort to ultimately reduce our customers' overall costs of operation. Even further, we are piloting an advanced service management system in several of our shops that will lead to real-time status and transparent communication to customers," Rush continued.
"We are also unveiling our new Momentum Fuel Technologies compressed natural gas (CNG) fuel system solution next month at the Alternative Clean Transportation (ACT) Expo in
"We continue to invest in new facility construction, remodels and renovations to enhance our network service capabilities. In 2015, we expect to complete major projects in
Financial Highlights
In the first quarter, the Company's gross revenues totaled
Parts, service and body shop revenues were
"As expected, expenses for the first quarter increased due to employee benefits and payroll taxes and costs related to the accelerated rollout of our business operating system. We completed our business system rollout this quarter, but we will continue to incur expenses related to training and support as newly integrated dealership locations transition to the new operating system over the next several months," Rush explained.
Conference Call Information
For those who cannot listen to the live broadcast, the webcast will be available on our website at the above link until
About
Certain statements contained herein, including those concerning current and projected market conditions, sales forecasts, the growth potential of our telematics product offerings and the expected rollout and production of our new Momentum Fuel Technologies compressed natural gas (CNG) fuel system solution, demand for the Company's services and the impact of decreased energy sector activity 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
-Tables and Additional Information to Follow-
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| CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands, Except Shares and Per Share Amounts) | ||
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| 2015 | 2014 | |
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents |
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| Accounts receivable, net | 208,177 | 170,027 |
| Note receivable affiliate | 6,140 | 8,168 |
| Inventories, net | 1,124,953 | 1,024,104 |
| Prepaid expenses and other | 16,463 | 28,312 |
| Asset held for sale | 5,053 | 5,053 |
| Deferred income taxes, net | 18,569 | 18,387 |
| Total current assets | 1,426,630 | 1,445,514 |
| Investments | 6,905 | 6,905 |
| Property and equipment, net | 976,303 | 923,080 |
| Goodwill, net | 274,304 | 265,145 |
| Other assets, net | 54,581 | 53,618 |
| Total assets |
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| Liabilities and shareholders' equity | ||
| Current liabilities: | ||
| Floor plan notes payable |
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| Current maturities of long-term debt | 138,364 | 149,065 |
| Current maturities of capital lease obligations | 10,823 | 11,231 |
| Liabilities directly associated with asset held for sale | 5,920 | 6,160 |
| Trade accounts payable | 121,526 | 124,555 |
| Customer deposits | 38,548 | 44,879 |
| Accrued expenses | 65,099 | 92,743 |
| Total current liabilities | 1,292,880 | 1,274,610 |
| Long-term debt, net of current maturities | 434,267 | 429,189 |
| Capital lease obligations, net of current maturities | 48,554 | 46,019 |
| Other long-term liabilities | 4,192 | 4,470 |
| Deferred income taxes, net | 174,234 | 175,635 |
| Shareholders' equity: | ||
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Preferred stock, par value |
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Common stock, par value |
429 | 424 |
| Additional paid-in capital | 277,349 | 272,486 |
| Treasury stock, at cost: 2,616,657 class B shares | (43,368) | (41,904) |
| Retained earnings | 550,574 | 533,793 |
| Accumulated other comprehensive loss, net of tax | (388) | (460) |
| Total shareholders' equity | 784,596 | 764,339 |
| Total liabilities and shareholders' equity |
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| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In Thousands, Except Per Share Amounts) | ||
| (Unaudited) | ||
| Three Months Ended | ||
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| 2015 | 2014 | |
| Revenues: | ||
| New and used commercial vehicle sales |
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| Parts and service sales | 337,022 | 308,974 |
| Lease and rental | 47,792 | 40,989 |
| Finance and insurance | 4,531 | 4,076 |
| Other | 3,996 | 3,728 |
| Total revenue | 1,193,535 | 958,667 |
| Cost of products sold: | ||
| New and used commercial vehicle sales | 744,260 | 558,142 |
| Parts and service sales | 214,697 | 198,703 |
| Lease and rental | 40,956 | 35,897 |
| Total cost of products sold | 999,913 | 792,742 |
| Gross profit | 193,622 | 165,925 |
| Selling, general and administrative | 152,627 | 134,445 |
| Depreciation and amortization | 9,994 | 8,818 |
| Gain (loss) on sale of assets | (672) | 84 |
| Operating income | 30,329 | 22,746 |
| Interest expense, net | 2,941 | 3,131 |
| Income before taxes | 27,388 | 19,615 |
| Provision for income taxes | 10,607 | 7,601 |
| Net income |
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| Earnings per common share: | ||
| Earnings per common share - Basic | $ 0.42 | $ 0.31 |
| Earnings per common share - Diluted |
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| Weighted average shares outstanding: | ||
| Basic | 40,066 | 39,332 |
| Diluted | 40,985 | 40,511 |
This press release and the attached financial tables contain certain non-GAAP financial measures as defined under
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 available the same information that management uses to assess operating performance and assess capital structure of the Company. 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 | ||
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| Vehicle Sales Revenue (in thousands) | 2015 | 2014 |
| New heavy-duty vehicles |
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| New medium-duty vehicles (including bus sales revenue) | 188,758 | 140,888 |
| New light-duty vehicles | 12,941 | 15,689 |
| Used vehicles | 80,487 | 67,162 |
| Other vehicles | 5,139 | 4,113 |
| Absorption Ratio | 115.3% | 111.2% |
Absorption Ratio
Management 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 body shop 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.
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| Debt Analysis (in thousands) | 2015 | 2014 |
| Floor plan notes payable |
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| Current maturities of long-term debt | 138,364 | 103,725 |
| Current maturities of capital lease obligations | 10,823 | 10,697 |
| Liabilities directly associated with asset held for sale | 5,920 | ─ |
| Long-term debt, net of current maturities | 434,267 | 416,011 |
| Capital lease obligations, net of current maturities | 48,554 | 35,246 |
| Total Debt (GAAP) | 1,550,528 | 1,224,968 |
| Adjustments: | ||
| Debt related to lease & rental fleet | (552,223) | (453,531) |
| Floor plan notes payable | (912,600) | (659,289) |
| Adjusted Total Debt (Non-GAAP) | 85,705 | 112,148 |
| Adjustments: | ||
| Cash and cash equivalents | (47,275) | (94,369) |
| Adjusted Net Debt (Non-GAAP) |
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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 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 fully cover the capital costs of the lease & rental fleet (i.e., the principal repayments and 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 a more accurate picture of 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 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 | ||
| March 31, |
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| EBITDA (in thousands) | 2015 | 2014 |
| Net Income (GAAP) |
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| Provision for income taxes | 53,592 | 30,892 |
| Interest expense | 11,008 | 11,311 |
| Depreciation and amortization | 41,962 | 31,633 |
| (Gain) loss on sale of assets | 605 | (48) |
| EBITDA (Non-GAAP) | 191,891 | 121,472 |
| Adjustments: | ||
| Interest expense associated with FPNP | (8,683) | (8,090) |
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─ | 10,777 |
| Adjusted EBITDA (Non-GAAP) |
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The Company presents EBITDA and Adjusted EBITDA 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 a more accurate picture of its operating results and to assist investors in performing analysis that is consistent with financial models developed by management and research analysis. Management recorded a one-time charge to selling, general and administrative expense during the second quarter of 2013 related to the Retirement and Transition Agreement between
| Twelve Months Ended | ||
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| Free Cash Flow (in thousands) | 2015 | 2014 |
| Net cash provided by (used in) operations (GAAP) | $ (547) |
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| Acquisition of property and equipment | (290,073) | (214,631) |
| Free cash flow (Non-GAAP) | (290,620) | (105,399) |
| Adjustments: | ||
| Draws on floor plan financing, net | 233,961 | 125,339 |
| Proceeds from L&RFD | 191,915 | 193,453 |
| Debt proceeds related to business acquisitions | ─ | (54,663) |
| Principal payments on L&RFD | (119,063) | (91,312) |
| Non-maintenance capital expenditures | 77,993 | 35,262 |
| Adjusted Free Cash Flow (Non-GAAP) |
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"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 and the development of the business system) that are not considered necessary to maintain the current level of cash generated by the business. "Free Cash Flows" and "Adjusted Free Cash Flows" 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.
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2015 | 2014 |
| Total Shareholders' equity (GAAP) |
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| Adjusted net debt (Non-GAAP) | 38,430 | 17,779 |
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CONTACT:Rush Enterprises, Inc. ,San Antonio Steven L.Keller , 830-626-5226
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