Press Release Details
Rush Enterprises, Inc. Reports Second Quarter 2018 Results, Announces First Ever Quarterly Cash Dividend
- Revenues of
$1.35 billion, net income of $29.4 million
- Company declares initial cash dividend of
$0.12per share of Class A and Class B common stock
- Earnings per diluted share of
- Absorption ratio of 122.8%
- Growth driven by strong market and continued focus on aftermarket initiatives
“We are extremely proud of our exceptional performance this quarter and our teams who worked hard to achieve it,” said W.M. “Rusty” Rush, Chairman, Chief Executive Officer and President of
“As always, I’d like to thank our employees for their focus on our strategic growth initiatives, which continues to have a direct and positive impact on our financial results,” said Rush. “Their endless hard work and dedication to our customers has made and kept us successful for more than 53 years and I believe it will keep us successful for many years to come.”
In recognition of the Company’s strong cash flow generation and their confidence in the Company’s financial outlook, the Company’s Board of Directors authorized management of the Company to initiate a quarterly cash dividend as part of the Company’s capital allocation strategy, which also uses free cash flow from operations to fund the Company’s strategic growth initiatives and its share repurchase program. Accordingly, on
“Initiating a quarterly cash dividend reflects the confidence of both the Company’s Board of Directors and our executive management team in our strategic growth plan, strong balance sheet and our ability to generate positive free cash flow in all truck market cycles. We believe that issuing a quarterly dividend and continuing our share repurchase program, while continuing to invest in our strategic growth initiatives, strikes an optimal balance between our commitment to long-term growth and to returning capital to shareholders,” said Rush.
Aftermarket services accounted for approximately 64.8% of the Company's total gross profits, with parts, service and body shop revenues reaching
“Our strong aftermarket performance was driven by our strategic initiatives, particularly through additions to our aftermarket sales organization, focus on our all-makes and Rig Tough parts growth, and investment in technology and productivity improvements for our Parts operations. Our results were further supported by robust activity across
“We also added 300 technicians to our organization over the past year, significantly expanding our service capabilities throughout the country. Mobile technicians make up a significant portion of this growth, illustrating our abilities to serve customers no matter where and when they need us,” he said.
“With our aftermarket sales team building momentum and continued growth from our strategic initiatives, we believe our aftermarket results will remain solid through the second half of 2018,” Rush said.
U.S. Class 8 retail sales were 60,812 units in the second quarter, up 24.7% over the same period last year, according to
“Our new Class 8 truck deliveries were down slightly in the second quarter, primarily due to truck and component manufacturer production constraints. However, our new Class 8 truck deliveries are up 7.8% year to date as compared to the same time frame last year,” said Rush. “The healthy economy created significant activity in virtually all market segments and especially strong demand from over-the-road, construction and refuse customers,” he said.
“Our used truck unit sales were up 18% over the second quarter of 2017, and we continue to believe our inventory is well-positioned to support the market. The used truck market is strong, due in part to extended lead times for new Class 8 truck deliveries. We believe this will help stabilize used truck values and help lessen the impact of the large number of used trucks entering the market through the rest of the year,” Rush said.
“We expect our Class 8 vehicle sales will accelerate through the second half of 2018, although manufacturer production capacity limitations could delay some deliveries into 2019,” he added.
The Company sold 3,474 Class 4-7 medium-duty commercial vehicles in the second quarter, an increase of 13% compared to the second quarter of 2017, and accounted for 5.3% of the U.S. Class 4-7 commercial vehicle market.
“Our medium-duty truck sales significantly outpaced the market in the second quarter, due to the strong activity from the construction sector and our leasing and rental fleet customers,” said Rush. “Due to our continued ability to support customers with a nationwide inventory of ready-to-roll trucks, we believe our medium-duty sales will remain strong through the rest of the year,” said Rush. “Light-duty truck sales were also strong this quarter,” Rush noted.
In the second quarter of 2018, the Company’s gross revenues totaled
Parts, service and body shop revenues were
During the second quarter of 2018, the Company repurchased
“We are confident in our long-term profitability, which is reflected in our decision to announce a cash dividend. We remain well-positioned to invest in our strategic initiatives while returning capital to our shareholders,” Rush added.
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
Certain statements contained herein, including those concerning current and projected market conditions, sales forecasts, market share forecasts, demand for the Company’s services and the impact of strategic initiatives 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-
|RUSH ENTERPRISES, INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS
|(In Thousands, Except Shares and Per Share Amounts)|
|June 30,||December 31,|
|Cash and cash equivalents||$||148,316||$||124,541|
|Accounts receivable, net||201,197||183,875|
|Note receivable affiliate||17,368||11,914|
|Prepaid expenses and other||12,494||11,969|
|Assets held for sale||6,622||9,505|
|Total current assets||1,512,610||1,375,098|
|Property and equipment, net||1,166,814||1,159,595|
|Other assets, net||39,623||57,680|
|Liabilities and shareholders’ equity|
|Floor plan notes payable||$||867,992||$||778,561|
|Current maturities of long-term debt||155,743||145,139|
|Current maturities of capital lease obligations||17,137||17,119|
|Trade accounts payable||150,904||107,906|
|Total current liabilities||1,312,489||1,172,207|
|Long-term debt, net of current maturities||434,743||466,389|
|Capital lease obligations, net of current maturities||57,548||66,022|
|Other long-term liabilities||11,544||9,837|
|Deferred income taxes, net||140,061||135,311|
|Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2018 and 2017||–||–|
|Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 30,647,051 Class A shares and 8,430,123 Class B shares outstanding in 2018; and 31,345,116 Class A shares and 8,469,427 Class B shares outstanding in 2017||457||454|
|Additional paid-in capital||363,440||348,044|
|Treasury stock, at cost: 1,768,354 class A shares and 4,890,941 class B
shares in 2018 and 934,171 class A shares and 4,625,181 class B
shares in 2017
|Total shareholders’ equity||1,060,078||1,040,373|
|Total liabilities and shareholders’ equity||$||3,016,463||$||2,890,139|
|RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|(In Thousands, Except Per Share Amounts)
|Three Months Ended
|Six Months Ended
|New and used commercial vehicle sales||$||857,025||$||775,988||$||1,630,125||$||1,411,941|
|Parts and service sales||422,940||366,599||823,235||716,705|
|Lease and rental||58,993||53,048||116,517||104,292|
|Finance and insurance||5,492||4,392||10,233||8,321|
|Cost of products sold:|
|New and used commercial vehicle sales||791,608||718,253||1,502,522||1,306,373|
|Parts and service sales||265,183||231,992||519,627||456,458|
|Lease and rental||48,663||44,206||97,091||88,510|
|Total cost of products sold||1,105,454||994,451||2,119,240||1,851,341|
|Selling, general and administrative expense||178,654||159,353||350,324||309,756|
|Depreciation and amortization expense||21,693||12,444||44,601||24,936|
|Gain (loss) on sale of assets||396||132||368||(31||)|
|Interest expense, net||4,494||2,824||8,800||5,615|
|Income before taxes||38,932||34,583||67,015||56,641|
|Provision for income taxes||9,543||12,584||16,587||20,163|
|Earnings per common share:|
|Weighted average shares outstanding:|
This press release and the attached financial tables contain certain non-GAAP financial measures as defined under
Management believes the presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. Management believes that investors should have the same information available to them that management uses to assess the Company’s operating performance and capital structure. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures utilized by the Company may not be comparable to similarly titled non-GAAP financial measures used by other companies.
|Three Months Ended|
|Vehicle Sales Revenue (in thousands)||June 30, 2018||June 30, 2017|
|New heavy-duty vehicles||$||474,368||$||468,317|
|New medium-duty vehicles (including bus sales revenue)||257,012||213,192|
|New light-duty vehicles||27,397||18,216|
Management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships and considers Rush Truck Centers’ “absorption ratio” to be of critical importance. Absorption ratio is calculated by dividing the gross profit from the parts, service and body shop departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory. When 100% absorption is achieved, then gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit.
|Debt Analysis (in thousands)||June 30, 2018||June 30, 2017|
|Floor plan notes payable||$||867,992||$||692,125|
|Current maturities of long-term debt||155,743||137,320|
|Current maturities of capital lease obligations||17,137||15,443|
|Long-term debt, net of current maturities||434,743||443,465|
|Capital lease obligations, net of current maturities||57,548||66,313|
|Total Debt (GAAP)||1,533,163||1,354,666|
|Debt related to lease & rental fleet||(579,434)||(560,380)|
|Floor plan notes payable||(867,992)||(692,125)|
|Adjusted Total Debt (Non-GAAP)||85,737||102,161|
|Cash and cash equivalents||(148,316)||(123,807)|
|Adjusted Net Debt (Cash) (Non-GAAP)||$||(62,579)||$||(21,646)|
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, 2018||June 30, 2017|
|Net Income (GAAP)||$||186,079||$||63,848|
|(Benefit) provision for income taxes||(39,306)||37,491|
|Depreciation and amortization||69,734||50,729|
|(Gain) loss on sale of assets||(294)||(1,719)|
|Interest expense associated with FPNP||(13,513)||(9,747)|
|Adjusted EBITDA (Non-GAAP)||$||218,195||$||152,494|
The Company presents EBITDA and Adjusted EBITDA, for the twelve months ended each period presented, as additional information about its operating results. The presentation of Adjusted EBITDA that excludes the addition of interest expense associated with FPNP to EBITDA is consistent with management’s presentation of Adjusted Total Debt, in each case reflecting management’s view of interest expense associated with the FPNP as an operating expense of the Company, and to provide management with supplemental information regarding operating results and to assist investors in performing analysis that is consistent with financial models developed by management and research analyst. “EBITDA” and “Adjusted EBITDA” are both non-GAAP financial measures and should be considered in addition to, and not as a substitute for, net income of the Company, as reported in the Company’s consolidated statements of income in accordance with U.S. GAAP. Additionally, these non-GAAP measures may vary among companies and may not be comparable to similarly titled non-GAAP measures used by other companies.
|Twelve Months Ended|
|Free Cash Flow (in thousands)||June 30, 2018||June 30, 2017|
|Net cash provided by operations (GAAP)||$||211,998||$||428,976|
|Acquisition of property and equipment||(246,563)||(161,269)|
|Free cash flow (Non-GAAP)||(34,565)||267,707|
|Draws (payments) on floor plan financing, net||106,203||(151,966)|
|Proceeds from L&RFD||169,723||103,806|
|Principal payments on L&RFD||(155,884)||(159,665)|
|Non-maintenance capital expenditures||33,613||34,142|
|Adjusted Free Cash Flow (Non-GAAP)||$||119,090||$||94,024|
“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, 2018||June 30, 2017|
|Total Shareholders' equity (GAAP)||$||1,060,078||$||894,880|
|Adjusted net debt (cash) (Non-GAAP)||(62,579)||(21,646)|
|Adjusted Invested Capital (Non-GAAP)||$||997,499||$||873,234|
“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.
Source: Rush Enterprises, Inc.