Rush Enterprises, Inc. (NASDAQ: RUSHA & RUSHB), which operates
the largest network of commercial vehicle dealerships in North
America, today announced that for the year ended December 31, 2018,
the Company achieved revenues of $5.5 billion and net income of
$139.1 million, or $3.45 per diluted share, compared with revenues
of $4.7 billion and net income of $172.1 million, or $4.20 per
diluted share, for the year ended December 31, 2017.
Additionally, today the Company’s Board of Directors declared a
cash dividend of $0.12 per share of Class A and Class B Common
Stock, to be paid on March 15, 2019, to all shareholders of record
as of February 25, 2019.
During 2018, the Company incurred a non-cash charge to
amortization expense and a charge to selling, general and
administrative expense totaling $20.9 million associated with the
upgrade and replacement of certain components of the Company’s
Enterprise Resource Planning software platform (ERP
Platform). Excluding the charge related to the ERP Platform,
the Company’s adjusted net income in 2018 was $154.9 million ($3.85
per diluted share). In 2017, pretax income was reduced by
$7.2 million due to the Company’s decision to pay a one-time
discretionary bonus to all of its employees as a result of the tax
reform legislation passed in December 2017. Also as a result
of the tax reform legislation, the Company’s tax expense in 2017
was reduced by $82.9 million. Excluding the one-time
discretionary bonus and the one-time tax benefits, the Company’s
adjusted net income in 2017 was $93.7 million ($2.28 per diluted
share).
“We are incredibly proud of our outstanding financial
performance in 2018,” said W.M. “Rusty” Rush, Chairman, Chief
Executive Officer and President of Rush Enterprises, Inc. “We
remain committed to executing our strategic initiatives, including
our aftermarket growth initiatives, which continue to positively
impact our results. In addition to our success in executing
our strategic initiatives, the overall health of the economy,
strong freight demand and continued activity in the markets we
support also contributed to our success in 2018,” he added.
“As always, it is important that I recognize our employees who
once again did a great job supporting our customers and each other
throughout 2018. It is because of their valuable
contributions that our company was able to have such a successful
year,” Rush said.
Operations
Aftermarket Solutions
Aftermarket products and services accounted for 63.4% of the
Company’s total gross profits in 2018, with parts, service and
collision center revenues reaching $1.7 billion, up 13.5% over
2017. The Company achieved an annual absorption ratio of
122.4%.
“In 2018, we continued to focus on our strategic initiatives,
which, along with the solid economy and widespread aftermarket
activity, especially with respect to our refuse, construction and
over-the-road customers, positively impacted our financial
results,” said Rush. “Our team of talented service
technicians grew by 12.5%, which allowed us to better utilize our
facilities and serve customers across our dealership network.
This increase in technicians, along with the related investments we
made in training and employee retention, demonstrate our commitment
to achieving our parts and service goals and directly contributed
to our strong aftermarket products and service performance in
2018,” said Rush.
“Throughout 2018, we continued to invest in both internal and
customer-facing technologies that allow us to work more efficiently
and deliver best-in-class integrated solutions to our
customers. Our expanded all-makes parts product lines,
additional parts and service locations and increased hours of
service across our dealership network allow us to provide better
support to customers and improve customer up time when and where
they need us,” Rush said.
“Though we expect parts and service activity to remain strong in
2019, we anticipate that the pace of growth in the industry-wide
parts and service market will slow slightly in 2019 compared to
2018. However, we expect our aftermarket strategic
initiatives to enable us to outpace the industry in 2019 as we
continue to invest in people and technology and implement certain
customer-facing software solutions that we plan to roll out this
year,” said Rush. “We also have ambitious recruiting
objectives for both service technicians and aftermarket sales
representatives in 2019 and expect the number of employees in these
positions will continue to grow.”
Truck Sales
In 2018, Rush Class 8 retail sales accounted for 5.7% of the
total U.S. Class 8 market, compared to 6.6% in 2017. The
Company sold 14,666 Class 8 trucks in 2018, an increase of 12.1%
compared to 2017.
“Widespread activity across all market segments and geographies,
driven by a robust economy, contributed to our strong Class 8 new
truck sales performance in 2018,” said Rush. “Our market
share is down somewhat compared to 2017, primarily due to the
timing of customer purchases and the industry increase in large
over-the-road fleet deliveries in 2018, but we remain proud of our
solid performance. It is important to note that our fourth
quarter new truck sales improved by 42% compared to the fourth
quarter of 2017, making it the strongest truck sales quarter in our
company’s history,” he added.
ACT Research forecasts U.S. retail sales of Class 8 trucks to
total 259,500 units in 2019, a 1.5% increase compared to 2018.
“The industry-wide new truck order backlog for 2019 is nearly
full, and we believe truck sales in the first half of 2019 will
continue at the same pace as the second half of 2018,” Rush
said. “While the current outlook for 2019 Class 8 retail
truck sales is strong, our team will closely monitor cancellations,
used truck values, freight rates and other market factors which
could impact sales volumes in the latter half of 2019,” he
added.
“We believe our Class 8 new truck sales in 2019 will remain on
pace with the industry,” Rush said. “We continue to support
customers with a broad range of vehicle technologies, and we are
proud to represent manufacturers who continue to introduce
innovative new products to the market,” noted Rush.
“Our used truck sales increased 13.6% in 2018 compared to 2017
due to steady demand resulting from healthy freight rates and
extended delivery times for new truck orders,” said Rush.
“Used truck values remained stable throughout 2018, but the
expected increase in used truck supply in 2019, coupled with
expected flatter freight rates, will likely put pressure on used
truck values,” said Rush. “We carefully monitor the used
truck market and believe we are well positioned to support demand
with our current inventory and pricing levels,” he said.
Rush’s U.S. Class 4-7 medium-duty truck sales reached 12,949
units in 2018, an 18.2% increase compared to 2017. Rush’s
medium-duty new truck sales accounted for 5.0% of the total U.S.
Class 4-7 market in 2018. “Similar to Class 8 sales, our Class 4-7
new unit sales increased 37% compared to the fourth quarter of
2017,” said Rush.
“With our focus on providing ready-to-roll medium-duty inventory
nationwide, particularly to customers in the construction sector,
our Class 4-7 truck sales significantly outpaced the market in
2018, resulting in a record year for new Class 4-7 truck sales,”
said Rush.
ACT Research forecasts U.S. retail sales of Class 4-7 vehicles
to reach 262,300 units in 2019, a 1.6% increase over 2018.
“We expect another strong year in the Class 4-7 market in 2019,
and we believe our performance will be consistent with 2018 due to
continued growth across the markets we support and our unparalleled
ability to provide customers with work-ready inventory across the
country,” Rush added.
Financial Highlights
For the year ended December 31, 2018, the Company’s gross
revenues totaled $5.5 billion, compared to gross revenues of $4.7
billion reported in 2017. The Company reported net income for
the year of $139.1 million, or $3.45 per diluted share, compared
with net income of $172.1 million, or $4.20 per diluted share in
2017. During 2018, the Company incurred a non-cash charge to
amortization expense and a charge to selling, general and
administrative expense totaling $20.9 million associated with the
upgrade and replacement of certain components of the Company’s
Enterprise Resource Planning software platform (ERP
Platform). Excluding the charge related to the ERP Platform,
the Company’s adjusted net income in 2018 was $154.9 million ($3.85
per diluted share). In 2017, pretax income was reduced by
$7.2 million due to the Company’s decision to pay a one-time
discretionary bonus to all of its employees as a result of the tax
reform legislation passed in December 2017. Also as a result
of the tax reform legislation, the Company’s tax expense in 2017
was reduced by $82.9 million. Excluding the one-time
discretionary bonus and the one-time tax benefits, the Company’s
adjusted net income in 2017 was $93.7 million ($2.28 per diluted
share).
Aftermarket products and services revenues were $1.7 billion in
the year ended 2018, compared to $1.5 billion in the year ended
2017. The Company sold 37,797 new and used commercial
vehicles in 2018, a 15.4% increase compared to 32,756 new and used
commercial vehicles in 2017. The Company delivered 14,666 new
heavy-duty trucks, 12,949 new medium-duty commercial vehicles,
2,161 new light-duty commercial vehicles and 8,021 used commercial
vehicles during 2018, compared to 13,083 new heavy-duty trucks,
10,952 new medium-duty commercial vehicles, 1,661 new light-duty
commercial vehicles and 7,060 used commercial vehicles during
2017.
In the fourth quarter of 2018, the Company’s gross revenues
totaled $1.5 billion, compared to gross revenues of $1.2 billion
reported for the fourth quarter of 2017. Net income for the
quarter ended December 31, 2018 was $47.0 million, or $1.20 per
diluted share, compared to $105.9 million, or $2.54 per diluted
share, in the quarter ended December 31, 2017. In 2017,
pretax income was reduced by $7.2 million due to the Company’s
decision to pay a one-time discretionary bonus to all of its
employees in December 2017. Also as a result of the tax
reform legislation passed in December 2017, the Company’s tax
expense in 2017 was reduced by $82.9 million in the fourth quarter
of 2017. Excluding the one-time discretionary bonus and the
one-time tax benefits, the Company’s adjusted net income in the
fourth quarter of 2017 was $27.6 million ($0.66 per diluted
share).
Aftermarket product and services revenues were $420.0 million in
the fourth quarter of 2018, compared to $378.7 million in the
fourth quarter of 2017. The Company’s absorption ratio was
124.3% in the fourth quarter of 2018, compared to 128.0% in the
fourth quarter of 2017. The Company delivered 4,811 new
heavy-duty trucks, 3,421 new medium-duty commercial vehicles, 487
new light-duty commercial vehicles and 1,895 used commercial
vehicles during the fourth quarter of 2018, compared to 3,378 new
heavy-duty trucks, 2,498 new medium-duty commercial vehicles, 394
new light-duty commercial vehicles and 1,863 used commercial
vehicles during the fourth quarter of 2017.
The Company increased its lease and rental revenues by 9.6% and
expanded leasing and rental margins in 2018, primarily due to
increased rental fleet demand and utilization, along with reduced
operating costs and successful execution of its leasing service
model designed to maximize uptime for customers. Rush Truck
Leasing now operates 45 PacLease and Idealease franchises in
markets across the country with more than 8,100 trucks in its lease
and rental fleet and more than 1,000 trucks under contract
maintenance agreements.
“As in previous years, employee benefits and payroll taxes will
negatively impact expenses in the first quarter of 2019 compared to
the fourth quarter of 2018,” said Rush.
“During 2018, we repurchased $125.2 million of stock, and in
October, we adopted a repurchase plan that allows us to repurchase
$150 million of stock through December 31, 2019. As of
December 31, 2018, there is $84.1 million remaining to spend under
the plan. Further, we paid two cash dividends totaling $9.3
million to shareholders, reflecting our focus on enhancing
shareholder value and our commitment to our capital allocation
strategy. In addition to our commitment to our shareholder
return programs, we also continued to invest in our strategic
initiatives, and we ended the year in a strong financial position
with $131.7 million in cash,” Rush said.
Network Expansion
“As always, we remain committed to expanding our commercial
vehicle dealership network,” said Rush. “Since the beginning
of 2018, we have opened full-service Peterbilt dealerships in
Colorado Springs, Colorado, and Victoria and Beaumont, Texas.
We also opened new parts and service locations in Adairsville and
Savannah, Georgia, a used truck location in Miami, Florida, and a
location in Memphis, Tennessee, which offers used truck sales as
well as all-makes parts and service. In addition, we
expanded our Rush Truck Leasing facility in Birmingham, Alabama to
offer used trucks and all-makes parts,” Rush added.
“Last week, we announced that one of our subsidiaries plans to
enter into an agreement with Tallman Group, the largest
International Truck dealer in Canada, to form Rush Truck Centres of
Canada Limited, which will operate Tallman Group’s network of
commercial vehicle dealerships in the Province of Ontario,
Canada. Under the terms of the agreement, which is subject to
customary closing conditions, a subsidiary of the Company will
purchase 50% of the equity in Rush Truck Centres of Canada
Limited. This is a significant transaction for Rush
Enterprises because it is our first investment in operations
outside of the United States. The transaction is scheduled to
close on February 25, and we are looking forward to providing
Tallman Group’s customers with best-in-class service by combining
our technology solutions with the operational abilities of Tallman
Group,” Rush said.
“I am also pleased to announce that we acquired certain assets
of Country Ford, a Ford commercial vehicle dealership in Ceres,
California on February 11, 2019. This dealership is operating
as Rush Truck Center – Ceres and offers of a full range of Ford
trucks, as well as parts and service,” Rush added.
Conference Call
Information
Rush Enterprises will host its quarterly conference call to
discuss earnings for the fourth quarter and year-end on
Thursday, February 14, 2019, at 10 a.m. Eastern/9 a.m.
Central. The call can be heard live by dialing
877-638-4557 (US) or 914-495-8522 (International),
conference ID 8859977 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 April 15,
2019. Listen to the audio replay until February 21, 2019, by
dialing 855-859-2056 (US) or 404-537-3406
(International) and entering the conference ID
8859977.
About Rush Enterprises,
Inc.
Rush Enterprises, Inc. is the premier solutions
provider to the commercial vehicle industry. The Company owns and
operates Rush Truck Centers, the largest network of commercial
vehicle dealerships in the United States, with more than 100
dealership locations in 22 states. These vehicle centers,
strategically located in high traffic areas on or near major
highways throughout the United States, represent truck and bus
manufacturers, including Peterbilt, International, Hino, Isuzu,
Ford, Mitsubishi, IC Bus and Blue Bird. They offer an integrated
approach to meeting customer needs — from sales of new and used
vehicles to aftermarket parts, service and collision center
operations plus financing, insurance, leasing and rental. Rush
Enterprises' operations also provide vehicle upfitting, CNG fuel
systems and vehicle telematics products. Additional information
about Rush Enterprises’ products and services is available at
www.rushenterprises.com. Follow our news on Twitter at
@rushtruckcenter and on Facebook at
facebook.com/rushtruckcenters.
Certain statements contained herein, including
those concerning current and projected market conditions, sales
forecasts, market share forecasts, demand for the Company’s
services, the impact of strategic initiatives and the Company’s
capital allocation strategy, including future issuances of cash
dividends and future repurchases of the Company’s common stock, are
“forward-looking” statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995). Because such
statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such
forward-looking statements. Important factors that could cause
actual results to differ materially from those expressed or implied
by such forward-looking statements include, but are not limited to,
competitive factors, general U.S. economic conditions, economic
conditions in the new and used commercial vehicle markets, customer
relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, product
introductions and acceptance, changes in industry practices,
one-time events and other factors described herein and in filings
made by the Company with the Securities and Exchange Commission. In
addition, the declaration and payment of cash dividends and
authorization of future share repurchase programs remains at the
sole discretion of the Company’s Board of Directors and the
issuance of future dividends and authorization of future share
repurchase programs will depend upon the Company’s financial
results, cash requirements, future prospects, applicable law and
other factors that may be deemed relevant by the Company’s Board of
Directors.
|
-Tables and Additional Information to
Follow- |
|
|
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In Thousands, Except Shares and Per Share
Amounts) |
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
|
|
2017 |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
131,726 |
|
|
$ |
124,541 |
|
Accounts
receivable, net |
|
190,650 |
|
|
|
183,875 |
|
Note receivable
affiliate |
|
12,885 |
|
|
|
11,914 |
|
Inventories,
net |
|
1,339,923 |
|
|
|
1,033,294 |
|
Prepaid expenses
and other |
|
10,491 |
|
|
|
11,969 |
|
Assets held for
sale |
|
2,269 |
|
|
|
9,505 |
|
Total current
assets |
|
1,687,944 |
|
|
|
1,375,098 |
|
Investments |
|
– |
|
|
|
6,375 |
|
Property and equipment,
net |
|
1,184,053 |
|
|
|
1,159,595 |
|
Goodwill |
|
291,391 |
|
|
|
291,391 |
|
Other assets, net |
|
37,962 |
|
|
|
57,680 |
|
Total
assets |
$ |
3,201,350 |
|
|
$ |
2,890,139 |
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Floor plan notes
payable |
$ |
1,023,019 |
|
|
$ |
778,561 |
|
Current
maturities of long-term debt |
|
161,955 |
|
|
|
145,139 |
|
Current
maturities of capital lease obligations |
|
19,631 |
|
|
|
17,119 |
|
Trade accounts
payable |
|
127,451 |
|
|
|
107,906 |
|
Customer
deposits |
|
36,183 |
|
|
|
27,350 |
|
Accrued
expenses |
|
125,056 |
|
|
|
96,132 |
|
Total current
liabilities |
|
1,493,295 |
|
|
|
1,172,207 |
|
Long-term debt, net of
current maturities |
|
439,218 |
|
|
|
466,389 |
|
Capital lease
obligations, net of current maturities |
|
49,483 |
|
|
|
66,022 |
|
Other long-term
liabilities |
|
11,118 |
|
|
|
9,837 |
|
Deferred income taxes,
net |
|
141,308 |
|
|
|
135,311 |
|
Shareholders’
equity: |
|
|
|
|
|
|
|
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; 28,709,636 Class A shares and
8,290,277 Class B shares outstanding in 2018; and 31,345,116 Class
A shares and 8,469,247 Class B shares outstanding in 2017 |
|
458 |
|
|
|
454 |
|
Additional paid-in capital |
|
370,025 |
|
|
|
348,044 |
|
Treasury
stock, at cost: 3,791,751 Class A shares and 5,030,787 Class B
shares in 2018 and 934,171 Class A shares and 4,625,181 Class B
shares in 2017 |
|
(245,842 |
) |
|
|
(120,682 |
) |
Retained
earnings |
|
942,287 |
|
|
|
812,557 |
|
Total shareholders’
equity |
|
1,066,928 |
|
|
|
1,040,373 |
|
Total
liabilities and shareholders’ equity |
$ |
3,201,350 |
|
|
$ |
2,890,139 |
|
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In Thousands, Except Per Share Amounts) |
|
|
Three Months EndedDecember
31, |
|
Year EndedDecember
31, |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
Revenues: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
$ |
1,049,667 |
|
$ |
762,046 |
|
|
$ |
3,558,637 |
|
$ |
2,993,015 |
|
Parts and service |
|
419,972 |
|
|
378,726 |
|
|
|
1,670,052 |
|
|
1,471,266 |
|
Lease and rental |
|
60,896 |
|
|
58,434 |
|
|
|
238,238 |
|
|
217,356 |
|
Finance and insurance |
|
5,249 |
|
|
4,896 |
|
|
|
20,535 |
|
|
17,988 |
|
Other |
|
4,658 |
|
|
4,001 |
|
|
|
18,728 |
|
|
14,257 |
|
Total revenue |
|
1,540,442 |
|
|
1,208,103 |
|
|
|
5,506,190 |
|
|
4,713,882 |
|
Cost of products sold: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
|
969,810 |
|
|
705,326 |
|
|
|
3,280,966 |
|
|
2,766,461 |
|
Parts and service |
|
261,536 |
|
|
240,484 |
|
|
|
1,049,684 |
|
|
934,394 |
|
Lease and rental |
|
50,256 |
|
|
49,384 |
|
|
|
197,271 |
|
|
183,091 |
|
Total cost of products sold |
|
1,281,602 |
|
|
995,194 |
|
|
|
4,527,921 |
|
|
3,883,946 |
|
Gross profit |
|
258,840 |
|
|
212,909 |
|
|
|
978,269 |
|
|
829,936 |
|
Selling,
general and administrative |
|
177,497 |
|
|
162,016 |
|
|
|
705,226 |
|
|
631,053 |
|
Depreciation and amortization |
|
13,094 |
|
|
12,695 |
|
|
|
70,489 |
|
|
50,069 |
|
Gain
(loss) on sale of assets |
|
138 |
|
|
(181 |
) |
|
|
297 |
|
|
(105 |
) |
Operating income |
|
68,387 |
|
|
38,017 |
|
|
|
202,851 |
|
|
148,709 |
|
Interest
expense, net |
|
6,414 |
|
|
3,594 |
|
|
|
19,682 |
|
|
12,310 |
|
Income before taxes |
|
61,973 |
|
|
34,423 |
|
|
|
183,169 |
|
|
136,399 |
|
Provision
(benefit) for income taxes |
|
15,004 |
|
|
(71,444 |
) |
|
|
44,107 |
|
|
(35,730 |
) |
Net income |
$ |
46,969 |
|
$ |
105,867 |
|
|
$ |
139,062 |
|
$ |
172,129 |
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
Basic |
$ |
1.22 |
|
$ |
2.65 |
|
|
$ |
3.55 |
|
$ |
4.34 |
|
Diluted |
$ |
1.20 |
|
$ |
2.54 |
|
|
$ |
3.45 |
|
$ |
4.20 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
38,460 |
|
|
40,025 |
|
|
|
39,223 |
|
|
39,627 |
|
Diluted |
|
39,277 |
|
|
41,626 |
|
|
|
40,293 |
|
|
40,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
December 31, 2018 |
|
December 31, 2017 |
New heavy-duty
vehicles |
|
$ |
672,614 |
|
|
$ |
472,438 |
|
New medium-duty
vehicles (including bus sales revenue) |
|
|
262,797 |
|
|
|
193,271 |
|
New light-duty
vehicles |
|
|
20,200 |
|
|
|
15,912 |
|
Used
vehicles |
|
|
88,682 |
|
|
|
76,820 |
|
Other
vehicles |
|
|
5,374 |
|
|
|
3,605 |
|
|
|
|
|
|
Absorption Ratio |
|
|
124.3 |
% |
|
|
128.0 |
% |
|
|
|
|
|
|
|
|
|
Absorption RatioManagement uses
several performance metrics to evaluate the performance of its
commercial vehicle dealerships and considers Rush Truck Centers’
“absorption ratio” to be of critical importance. Absorption
ratio is calculated by dividing the gross profit from the parts,
service and collision center departments by the overhead expenses
of all of a dealership’s departments, except for the selling
expenses of the new and used commercial vehicle departments and
carrying costs of new and used commercial vehicle inventory.
When 100% absorption is achieved, then gross profit from the sale
of a commercial vehicle, after sales commissions and inventory
carrying costs, directly impacts operating profit.
This earnings release includes “adjusted net
income (non-GAAP)” and “adjusted net income per diluted share
(non-GAAP),” which are financial measures that are not in
accordance with U.S. generally accepted accounting principles,
since they exclude the one-time tax benefit from the tax reform
legislation and the one-time discretionary bonus in 2017 and the
charges related to the upgrade and replacement of the ERP platform
in 2018. These measures differ from the most directly
comparable measures calculated in accordance with GAAP and may not
be comparable to similarly titled non-GAAP financial measures used
by other companies. Reconciliations from the most directly
comparable GAAP measures of adjusted net income (non-GAAP) and
adjusted net income per diluted share (non-GAAP) are as
follows:
|
|
|
|
|
Three Months Ended |
Adjusted Net Income (in
thousands) |
|
December 31, 2018 |
December 31, 2017 |
Net Income |
|
$ |
46,969 |
$ |
105,867 |
|
One-time tax benefit
from tax reform legislation |
|
− |
|
(82,862 |
) |
One-time discretionary
bonus, net of tax |
|
− |
|
4,561 |
|
Adjusted Net
Income (non-GAAP) |
|
$ |
46,969 |
$ |
27,566 |
|
|
|
|
|
Per Diluted Share |
|
|
|
Net Income |
|
$ |
1.20 |
$ |
2.54 |
|
One-time tax benefit
from tax reform legislation |
|
− |
|
(1.99 |
) |
One-time discretionary
bonus, net of tax |
|
− |
|
0.11 |
|
Adjusted Net Income (non-GAAP) |
|
$ |
1.20 |
$ |
0.66 |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
Adjusted Net Income (in
thousands) |
|
December 31, 2018 |
December 31, 2017 |
|
Net Income |
|
$ |
139,062 |
$ |
172,129 |
|
One-time tax benefit
from tax reform legislation |
|
− |
|
(82,862 |
) |
One-time discretionary
bonus, net of tax |
|
− |
|
4,453 |
|
Charges related to
upgrade and replacement of ERP platform, net of tax |
|
|
15,886 |
|
− |
|
Adjusted Net
Income (non-GAAP) |
|
$ |
154,948 |
$ |
93,720 |
|
|
|
|
|
Per Diluted Share |
|
|
|
Net Income |
|
$ |
3.45 |
$ |
4.20 |
|
One-time tax benefit
from tax reform legislation |
|
− |
|
(2.02 |
) |
One-time discretionary
bonus, net of tax |
|
− |
|
0.10 |
|
Charges related to
upgrade and replacement of ERP platform, net of tax |
|
|
0.40 |
|
− |
|
Adjusted Net
Income (non-GAAP) |
|
$ |
3.85 |
$ |
2.28 |
|
|
Debt Analysis (in
thousands) |
|
December 31, 2018 |
December 31, 2017 |
Floor plan notes
payable |
|
$ |
1,023,019 |
|
$ |
778,561 |
|
Current maturities of
long-term debt |
|
|
161,955 |
|
|
145,139 |
|
Current maturities of
capital lease obligations |
|
|
19,631 |
|
|
17,119 |
|
Long-term debt, net of
current maturities |
|
|
439,218 |
|
|
466,389 |
|
Capital lease
obligations, net of current maturities |
|
|
49,483 |
|
|
66,022 |
|
Total Debt
(GAAP) |
|
|
1,693,306 |
|
|
1,473,230 |
|
Adjustments: |
|
|
|
Debt related to
lease & rental fleet |
|
|
(589,933 |
) |
|
(598,512 |
) |
Floor plan notes
payable |
|
|
(1,023,019 |
) |
|
(778,561 |
) |
Adjusted Total
Debt (Non-GAAP) |
|
|
80,354 |
|
|
96,157 |
|
Adjustment: |
|
|
|
Cash and cash
equivalents |
|
|
(131,726 |
) |
|
(124,541 |
) |
Adjusted Net
(Cash) Debt (Non-GAAP) |
|
$ |
(51,372 |
) |
$ |
(28,384 |
) |
|
|
|
|
|
|
|
|
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) |
|
December 31, 2018 |
December 31, 2017 |
Net Income
(GAAP) |
|
$ |
139,062 |
|
$ |
172,129 |
|
Provision (benefit) for
income taxes |
|
|
44,107 |
|
|
(35,730 |
) |
Interest expense |
|
|
19,682 |
|
|
12,310 |
|
Depreciation and
amortization |
|
|
70,489 |
|
|
50,069 |
|
(Gain) loss on sale of
assets |
|
|
(297 |
) |
|
105 |
|
EBITDA
(Non-GAAP) |
|
|
273,043 |
|
|
198,883 |
|
Adjustment: |
|
|
|
Interest expense
associated with FPNP |
|
|
(17,839 |
) |
|
(10,121 |
) |
Adjusted EBITDA
(Non-GAAP) |
|
$ |
255,204 |
|
$ |
188,762 |
|
|
|
|
|
|
|
|
|
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) |
|
December 31, 2018 |
December 31, 2017 |
Net cash
provided by operations (GAAP) |
|
$ |
215,364 |
|
$ |
152,737 |
|
Acquisition of property
and equipment |
|
|
(238,260 |
) |
|
(209,917 |
) |
Free cash flow
(Non-GAAP) |
|
|
(22,896 |
) |
|
(57,180 |
) |
Adjustments: |
|
|
|
Draws on floor
plan financing, net |
|
|
167,812 |
|
|
112,261 |
|
Proceeds from
L&RFD |
|
|
156,751 |
|
|
152,562 |
|
Principal
payments on L&RFD |
|
|
(163,734 |
) |
|
(144,998 |
) |
Non-maintenance
capital expenditures |
|
|
39,268 |
|
|
28,734 |
|
Adjusted Free
Cash Flow (Non-GAAP) |
|
$ |
177,201 |
|
$ |
91,379 |
|
|
|
|
|
|
|
|
|
“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) |
|
December 31, 2018 |
December 31, 2017 |
Total Shareholders'
equity (GAAP) |
|
$ |
1,066,928 |
|
$ |
1,040,373 |
|
Adjusted net (cash)
debt (Non-GAAP) |
|
|
(51,372 |
) |
|
(28,384 |
) |
Adjusted
Invested Capital (Non-GAAP) |
|
$ |
1,015,556 |
|
$ |
1,011,989 |
|
|
|
|
|
|
|
|
|
“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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