Press Release Details
Rush Enterprises, Inc. Reports Second Quarter Results
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Quarterly revenues of
$1.3 billion ,$19.6 million net income - Second quarter absorption ratio of 118.9%
- Rush's Class 8 new truck sales outpace U.S. retail market
- Acquisition expands Rush Truck Centers network to 120 locations in 20 states
"Moderate freight growth driven by general economic improvement contributed to our strong financial performance this quarter, and we outpaced the industry in Class 8 truck sales again, despite the decline in activity in the energy sector. We also increased parts, service and body shop revenues compared to the second quarter of 2014. In addition, we expanded our Rush Truck Centers network from 112 locations to 120 locations and we continue to add to our aftermarket solutions offerings," said
"I would like to welcome the employees of the newly acquired truck centers in
Operations
Aftermarket Solutions
Aftermarket services accounted for approximately 63% of the Company's total gross profits with parts, service and body shop revenue up 6.7% as compared to the second quarter of 2014. The Company achieved a quarterly absorption ratio of 118.9% in the second quarter of 2015.
"Continued demand for repair and maintenance of vehicles in operation, pre-delivery inspection for new and used trucks sales and mobile services contributed to aftermarket revenues this quarter," said Rush. "Our RushCare Rapid Parts call centers improved customer service levels and an expanding parts sales organization also contributed to improved aftermarket revenues."
"Mobile service activity in the energy sector remained stable this quarter, however, we have begun to see some negative impact on revenues from vehicle modifications because of the decline in new truck sales to the energy sector. We expect this trend will continue throughout the remainder of the year, and we will continue to closely monitor any further impact decreased activity in this sector could have on our business," Rush explained.
"Our efforts to integrate and execute across all our operations with emphasis on sales strategy, improved procurement practices, asset management, and improved efficiency also contributed to our strong aftermarket performance this quarter," added Rush.
Truck Sales
U.S. Class 8 retail sales were 68,744 units in the second quarter, up 22% over the same time period last year. Rush's Class 8 sales increased 29% over the same time period, outpacing the industry and accounting for 6.8% of the U.S. Class 8 truck market.
"Our Class 8 new truck sales this quarter were primarily the result of deliveries to large over-the-road fleets benefitting from a healthy economy. New and used stock truck sales also increased this quarter as a result of our large inventory of vehicles throughout the country, " said Rush. "Our ability to meet the needs of large fleets, combined with the geographic diversity of our dealership network, has helped us to offset the significant decline in new truck sales to the energy sector."
Rush's Class 4-7 new truck sales accounted for 5.4% of the total U.S. market. U.S. Class 4-7 truck sales in the second quarter were 53,437 units, up 3% over the same time period in 2014. "As lead times from several medium-duty OEMs continue to lengthen, our Class 4-7 truck sales continue to benefit from our ability to offer a large inventory of Class 4-7 trucks and ready-to-roll equipment across the country."
"Having outpaced the industry for two consecutive quarters in Class 8 new truck sales, and with order intake slowing in the first half of 2015, our Class 8 truck sales may remain flat, to down slightly, in the third quarter. However, we are actively pursuing incremental business from our current customers, which include many of the industry's Top 100 for hire carriers, and we are always seeking to expand our new customer base. We believe that these efforts will help offset declines in our energy sector new truck sales. We are encouraged that both of our Class 8 manufacturers continue to have production build slots to help meet shorter-lead time vehicle requirements. We expect both Class 4-7 and used truck sales to remain steady through the third quarter."
Continued Growth
The Company officially launched its Momentum Fuel Technologies natural gas fuel system business in May, unveiling its product offering and capabilities at the Alternative Clean Transportation Expo in
"We completed the rollout of our network of regional RushCare Rapid Parts call centers this quarter, adding centers in
The Company also expanded its Rush Truck Centers dealership network during the second quarter to include a total of 120 locations in 20 states. In May, the Company acquired eight full service International truck dealerships in central and southern
"We also continue to augment our aftermarket portfolio with solutions that not only help keep our customers up and running, but also offer incremental revenue opportunities. Progress continues in introducing our telematics product offering. Our open architecture platform combines leading vehicle diagnostic technology with our ability to offer custom enhancements, as well as monitor vehicle performance and productivity through our RushCare customer service center. In addition, we are also in the process of completing the rollout of an advanced service management system throughout our network that will lead to real-time and transparent communication for customers with vehicles in our shops," Rush said.
Financial Highlights
In the second quarter, the Company's gross revenues totaled
Parts, service and body shop revenues were
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 expected production of our new Momentum Fuel Technologies compressed natural gas (CNG) fuel system solution, the expected introduction of our telematics product offerings, 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 | $ 72,948 | $ 191,463 |
| Accounts receivable, net | 174,392 | 170,027 |
| Note receivable affiliate | 9,797 | 8,168 |
| Inventories, net | 1,078,169 | 1,024,104 |
| Prepaid expenses and other | 11,153 | 28,312 |
| Asset held for sale | 5,053 | 5,053 |
| Deferred income taxes, net | 18,346 | 18,387 |
| Total current assets | 1,369,858 | 1,445,514 |
| Investments | 6,650 | 6,905 |
| Property and equipment, net | 1,028,685 | 923,080 |
| Goodwill, net | 285,975 | 265,145 |
| Other assets, net | 55,848 | 53,618 |
| Total assets | $ 2,747,016 | $ 2,694,262 |
| Liabilities and shareholders' equity | ||
| Current liabilities: | ||
| Floor plan notes payable | $ 871,418 | $ 845,977 |
| Current maturities of long-term debt | 129,745 | 149,065 |
| Current maturities of capital lease obligations | 11,724 | 11,231 |
| Liabilities directly associated with asset held for sale | 5,680 | 6,160 |
| Trade accounts payable | 125,357 | 124,555 |
| Customer deposits | 19,696 | 44,879 |
| Accrued expenses | 91,862 | 92,743 |
| Total current liabilities | 1,255,482 | 1,274,610 |
| Long-term debt, net of current maturities | 456,294 | 429,189 |
| Capital lease obligations, net of current maturities | 49,640 | 46,019 |
| Other long-term liabilities | 5,397 | 4,470 |
| Deferred income taxes, net | 172,007 | 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 | 281,290 | 272,486 |
| Treasury stock, at cost: 2,616,657 class B shares in 2015 and 2,560,580 class B shares in 2014 | (43,368) | (41,904) |
| Retained earnings | 570,150 | 533,793 |
| Accumulated other comprehensive loss, net of tax | (305) | (460) |
| Total shareholders' equity | 808,196 | 764,339 |
| Total liabilities and shareholders' equity | $ 2,747,016 | $ 2,694,262 |
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| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In Thousands, Except Per Share Amounts) | ||||
| (Unaudited) | ||||
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Three Months Ended |
Six Months Ended |
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| 2015 | 2014 | 2015 | 2014 | |
| Revenues: | ||||
| New and used truck sales | $ 917,878 | $ 797,291 | $ 1,718,072 | $ 1,398,191 |
| Parts and service | 353,268 | 330,982 | 690,290 | 639,956 |
| Lease and rental | 49,297 | 44,057 | 97,089 | 85,046 |
| Finance and insurance | 5,678 | 5,256 | 10,209 | 9,332 |
| Other | 4,182 | 4,875 | 8,178 | 8,603 |
| Total revenue | 1,330,303 | 1,182,461 | 2,523,838 | 2,141,128 |
| Cost of products sold: | ||||
| New and used truck sales | 856,274 | 738,851 | 1,600,534 | 1,296,993 |
| Parts and service | 222,225 | 212,016 | 436,922 | 410,719 |
| Lease and rental | 44,171 | 38,245 | 85,127 | 74,142 |
| Total cost of products sold | 1,122,670 | 989,112 | 2,122,583 | 1,781,854 |
| Gross profit | 207,633 | 193,349 | 401,255 | 359,274 |
| Selling, general and administrative | 161,309 | 149,260 | 313,936 | 283,705 |
| Depreciation and amortization | 10,829 | 9,177 | 20,823 | 17,995 |
| Gain (loss) on sale of assets | 65 | 20 | (607) | 104 |
| Operating income | 35,560 | 34,932 | 65,889 | 57,678 |
| Interest expense, net | 3,598 | 2,543 | 6,539 | 5,674 |
| Income before taxes | 31,962 | 32,389 | 59,350 | 52,004 |
| Provision for income taxes | 12,386 | 12,551 | 22,993 | 20,152 |
| Net income | $ 19,576 | $ 19,838 | $ 36,357 | $ 31,852 |
| Earnings per common share : | ||||
| Basic | $ .49 | $ .50 | $ .91 | $ .81 |
| Diluted | $ .48 | $ .49 | $ .89 | $ .78 |
| Weighted average shares outstanding: | ||||
| Basic | 40,275 | 39,751 | 40,171 | 39,544 |
| Diluted | 41,072 | 40,849 | 41,029 | 40,682 |
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 | ||
| Vehicle Sales Revenue (in thousands) |
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| New heavy-duty vehicles | $ 602,047 | $ 487,339 |
| New medium-duty vehicles (including bus sales revenue) | 202,154 | 206,547 |
| New light-duty vehicles | 16,590 | 14,975 |
| Used vehicles | 90,518 | 84,450 |
| Other vehicles | 6,569 | 3,980 |
| Absorption Ratio | 118.9% | 120.0% |
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.
| Debt Analysis (in thousands) | June 30, 2015 |
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| Floor plan notes payable | $ 871,418 | $ 686,897 |
| Current maturities of long-term debt | 129,745 | 129,509 |
| Current maturities of capital lease obligations | 11,724 | 9,759 |
| Liabilities directly associated with asset held for sale | 5,680 | ─ |
| Long-term debt, net of current maturities | 456,294 | 410,423 |
| Capital lease obligations, net of current maturities | 49,640 | 34,936 |
| Total Debt (GAAP) | 1,524,501 | 1,271,524 |
| Adjustments: | ||
| Debt related to lease & rental fleet | (569,968) | (475,540) |
| Floor plan notes payable | (871,418) | (686,897) |
| Adjusted Total Debt (Non-GAAP) | 83,115 | 109,087 |
| Adjustment: | ||
| Cash and cash equivalents | (72,948) | (130,963) |
| Adjusted Net (Cash) Debt (Non-GAAP) | $ 10,167 | $ (21,876) |
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 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 (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, 2015 | June 30, 2014 |
| Net Income (GAAP) | $ 84,462 | $ 61,890 |
| Provision for income taxes | 53,427 | 39,766 |
| Interest expense | 12,063 | 11,374 |
| Depreciation and amortization | 43,614 | 33,551 |
| (Gain) loss on sale of assets | 560 | (80) |
| EBITDA (Non-GAAP) | 194,126 | 146,501 |
| Adjustments: | ||
| Interest expense associated with FPNP | (10,261) | (8,200) |
| Adjusted EBITDA (Non-GAAP) | $ 183,865 | $ 138,301 |
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. "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, 2015 | June 30, 2014 |
| Net cash provided by operations (GAAP) | $ 104,669 | $ 181,274 |
| Acquisition of property and equipment | (308,819) | (225,270) |
| Free cash flow (Non-GAAP) | (204,150) | (43,996) |
| Adjustments: | ||
| Draws (payments) on floor plan financing, net | 173,882 | 86,427 |
| Proceeds from L&RFD | 185,271 | 210,699 |
| Debt proceeds related to business acquisitions | (5,645) | (53,650) |
| Principal payments on L&RFD | (118,886) | (101,074) |
| Non-maintenance capital expenditures | 86,792 | 31,344 |
| Adjusted Free Cash Flow (Non-GAAP) | $ 117,264 | $ 129,750 |
"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.
| Invested Capital (in thousands) | June 30, 2015 |
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| Total Shareholders' equity (GAAP) | $ 808,196 | $ 711,604 |
| Adjusted net (cash) debt (Non-GAAP) | 10,167 | (21,876) |
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$ 818,363 | $ 689,728 |
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CONTACT:Rush Enterprises, Inc. ,San Antonio Steven L.Keller , 830-626-5226
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