Rush Enterprises, Inc. (NASDAQ:RUSHA) (NASDAQ:RUSHB), which
operates the largest network of commercial vehicle dealerships in
North America, today announced that for the year ended December 31,
2017, the Company achieved revenues of $4.7 billion and net income
of $172.1 million, or $4.20 per diluted share, compared with
revenues of $4.2 billion and net income of $40.6 million, or $1.00
per diluted share, in the year ended December 31, 2016.
Pretax income was reduced by $7.2 million, or $0.11 per diluted
share as the result of the Company’s decision to pay a one-time
discretionary bonus to all of its employees as a result of the
recently-passed tax reform legislation. Also, as a result of
the tax reform legislation, the Company’s tax expense was reduced
by $82.9 million, which resulted in an increase of $2.02 in
earnings per diluted share during 2017. This tax adjustment
was primarily attributable to the revaluation of the Company’s
deferred tax liabilities at the new federal income tax rate of 21%
compared to the previous rate of 35%.
“We are extremely proud of our record financial performance in
2017,” said W.M. “Rusty” Rush, Chairman, Chief Executive Officer
and President of Rush Enterprises, Inc. “Our strategic
initiatives, including our aftermarket offerings and vehicle
technologies’ solutions, were key contributors this year and made a
significant positive impact on our results, as did strong growth in
multiple industries that we support and the general strength of the
U.S. economy,” he said.
“In December, I was happy to present all of our employees with a
one-time discretionary $1,000 bonus. We viewed the
recently-passed tax reform legislation as a unique opportunity to
honor all of our employees’ important contributions to our Company.
As always, I am incredibly grateful for their unwavering
dedication to Rush Enterprises and our customers,” he added. “The
tax reform will lower our effective tax rate and we plan to use a
portion of these tax savings to further invest in our employees and
information technology as well as to accelerate the investment in
our strategic growth initiatives,” said Rush.
Operations
Aftermarket Solutions
Aftermarket products and services accounted for 65% of the
Company’s total gross profits in 2017, with parts, service and body
shop revenues reaching $1.5 billion, up 10.4% over 2016. The
Company achieved a record annual absorption ratio of
121%.
“Our aftermarket revenues and profits in 2017 were positively
impacted by broad-based activity across the variety of industry
sectors that we support, particularly refuse, construction and
energy,” said Rush. “These results also reflect a positive
financial impact from parts and service strategic initiatives,
which accelerated through the second half of the year,” Rush
said.
“During 2017, we reinforced our focus on aftermarket offerings
by expanding our all-makes parts business, adding to our already
talented team of aftermarket sales representatives and increasing
the number of service technicians we have across the country to
support our customers with all of their parts and service needs,”
he said. “We also continued to enhance our portfolio of
RushCare solutions by making further investments in multiple areas,
including telematics, RushCare Service Connect, our customer
support center, contract technicians, mobile service and
alternative fuel solutions,” Rush said.
“In addition to our overall strong year, I’d like to note that
our aftermarket revenues in the fourth quarter were up 16% over the
fourth quarter of 2016, and our absorption ratio in the fourth
quarter of 2017 was 128%, a record high. As we look to 2018,
we expect we will continue to see parts and service revenue growth
from our strategic initiatives and from continued strength in the
market segments we serve,” Rush said.
Truck Sales
In 2017, Rush Class 8 retail sales accounted for 6.6% of the
total U.S. Class 8 market, compared to 5.5% in 2016. The
Company sold 13,083 Class 8 trucks in 2017, an increase of 21%
compared to 2016, while the U.S. Class 8 market remained
essentially flat.
“A healthy economy, strength in most geographic market segments,
growth from customers in the energy sector and solid demand for
vocational trucks and from over-the-road fleets contributed to our
strong new truck sales performance,” Rush said.
ACT Research forecasts U.S. retail sales of Class 8 trucks to
total 247,000 units in 2018, a 25.2% increase compared to 2017. “We
believe continued economic growth, implementation of the ELD
mandate, improved fuel efficiency and continued strength in most
market segments, evidenced by near record-high order intake for
January, will drive Class 8 truck sales in 2018,” Rush
added.
“In 2017, our Class 8 market share grew to 6.6% due primarily to
the strong vocational market. Looking to 2018, we believe our
Class 8 truck sales will remain strong, though we expect our sales
mix to shift more towards over-the-road fleets and our market share
may normalize closer to historical levels,” Rush explained.
“Used truck values stabilized in 2017, and our used truck sales
remained flat compared to last year,” said Rush. “We believe there
will be a growing supply of used trucks entering the market in
2018, and we will monitor the market carefully. We are confident
our inventory and pricing strategy will support expected market
demand,” he added.
Rush’s U.S. Class 4-7 medium-duty truck sales reached 10,952
units in 2017, essentially flat compared to 2016. Rush’s
medium-duty new truck sales accounted for 4.5% of the total U.S.
Class 4-7 market in 2017.
“Our inventory of bodied-up medium-duty trucks that are ready to
support customers in a wide variety of business sectors nationwide
contributed to another good year for both medium- and light-duty
truck sales,” said Rush.
ACT Research forecasts U. S. retail sales of Class 4-7 vehicles
to reach 244,750 units in 2018, a 1.1% increase over 2017.
“We expect the Class 4-7 market to remain strong in 2018, due
primarily to expected growth in infrastructure spending, continued
strength in a wide variety of industries we support and positive
general economic conditions,” Rush said. “By remaining
focused on meeting our customers’ immediate needs with
ready-to-roll equipment in stock across the country, we believe our
medium-duty performance will be strong in 2018,” he added.
Financial Highlights
For the year ended December 31, 2017, the Company’s gross
revenues totaled $4.7 billion, compared to gross revenues of $4.2
billion reported in 2016. The Company reported net income for
the year of $172.1 million, or $4.20 per diluted share, compared
with net income of $40.6 million, or $1.00 per diluted share in
2016.
Aftermarket products and services revenues were $1.5 billion in
the year ended 2017, compared to $1.3 billion in the year ended
2016. The Company sold 32,756 new and used commercial
vehicles in 2017, a 6.9% increase compared to 30,635 new and used
commercial vehicles in 2016. The Company delivered 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, compared to 10,816 new heavy-duty trucks,
11,135 new medium-duty commercial vehicles, 1,676 new light-duty
commercial vehicles and 7,008 used commercial vehicles during
2016.
In the fourth quarter of 2017, the Company’s gross revenues
totaled $1.2 billion, compared to gross revenues of $1.0 billion
reported for the fourth quarter of 2016. Net income for the
quarter ended December 31, 2017 was $105.9 million, or $2.54 per
diluted share, compared to $12.5 million, or $0.31 per diluted
share, in the quarter ended December 31, 2016. Pretax income
was reduced by $7.2 million, or $0.11 per diluted share, as the
result of the Company’s decision to pay a one-time discretionary
bonus to all of its employees in December 2017. As a result
of the tax reform legislation, the Company’s tax expense was
reduced by $82.9 million, which resulted in an increase of $1.99 in
earnings per diluted share in the fourth quarter of 2017.
Aftermarket product and services revenues were $378.7 million in
the fourth quarter of 2017, compared to $325.3 million in the
fourth quarter of 2016. The Company’s absorption ratio was
128.0% in the fourth quarter of 2017, compared to 120.6% in the
fourth quarter of 2016. The Company delivered 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, compared to 2,521 new
heavy-duty trucks, 2,581 new medium-duty commercial vehicles, 380
new light-duty commercial vehicles and 1,728 used commercial
vehicles during the fourth quarter of 2016.
The Company’s Rush Truck Leasing operations increased its
revenues by 4.4% and widened its margins in 2017, primarily as a
result of a successful service model designed to maximize uptime
for contracted customers. Rush Truck Leasing now operates 45
Paclease and Idealease franchises in markets across the country
with more than 7,800 trucks in its lease and rental fleet and more
than 1,100 trucks under contract maintenance agreements.
“As in past years, employee benefits and payroll taxes will
negatively impact expenses in the first quarter of 2018 compared to
the fourth quarter of 2017,” Rush said. Changes in tax reform will
result in a reduction of the Company’s effective tax rate from its
historical range of 38% to 39% to an expected range of 25% to 26%.
“We intend to reinvest a portion of these tax savings to
accelerate investments in our strategic initiatives, which will
result in increased SG&A expenses throughout the year,” Rush
noted.
“We ended 2017 with $125 million in cash and in a strong
financial position to continue to invest in our long-term strategic
initiatives. During 2017, we repurchased approximately $34.0
million of stock and in November we adopted a $40.0 million stock
repurchase plan, illustrating our commitment to enhancing
shareholder value,” Rush said.
Conference Call
Information
Rush Enterprises will host its quarterly conference call to
discuss earnings for the fourth quarter and year-end on
Thursday, February 15, 2018, 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 2886259 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 10,
2018. Listen to the audio replay until February 22, 2018, by
dialing 855-859-2056 (US) or 404-537-3406
(International) and entering the conference ID
2886259.
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 21 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 body shop operations plus financing, insurance, leasing
and rental. Rush Enterprises' operations also provide CNG fuel
systems, telematics products and other vehicle technologies, as
well as vehicle up-fitting, chrome accessories and tires.
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 and the impact
of strategic initiatives and tax reform legislation 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.
-Tables and Additional Information to Follow-
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In Thousands, Except Shares and Per Share
Amounts) |
|
|
|
|
|
December 31, |
|
December 31, |
|
2017 |
|
2016 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
124,541 |
|
|
$ |
82,026 |
|
Accounts
receivable, net |
|
183,875 |
|
|
|
156,199 |
|
Note receivable
affiliate |
|
11,914 |
|
|
|
10,166 |
|
Inventories,
net |
|
1,033,294 |
|
|
|
840,304 |
|
Prepaid expenses
and other |
|
11,969 |
|
|
|
8,798 |
|
Assets held for
sale |
|
9,505 |
|
|
|
13,955 |
|
Total current
assets |
|
1,375,098 |
|
|
|
1,111,448 |
|
Investments |
|
6,375 |
|
|
|
6,231 |
|
Property and equipment,
net |
|
1,159,595 |
|
|
|
1,135,805 |
|
Goodwill |
|
291,391 |
|
|
|
290,191 |
|
Other assets, net |
|
57,680 |
|
|
|
59,372 |
|
Total
assets |
$ |
2,890,139 |
|
|
$ |
2,603,047 |
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Floor plan notes
payable |
$ |
778,561 |
|
|
$ |
646,945 |
|
Current
maturities of long-term debt |
|
145,139 |
|
|
|
130,717 |
|
Current
maturities of capital lease obligations |
|
17,119 |
|
|
|
14,449 |
|
Liabilities
directly associated with assets held for sale |
|
– |
|
|
|
783 |
|
Trade accounts
payable |
|
107,906 |
|
|
|
97,844 |
|
Customer
deposits |
|
27,350 |
|
|
|
18,418 |
|
Accrued
expenses |
|
96,132 |
|
|
|
83,974 |
|
Total current
liabilities |
|
1,172,207 |
|
|
|
993,130 |
|
Long-term debt, net of
current maturities |
|
466,389 |
|
|
|
472,503 |
|
Capital lease
obligations, net of current maturities |
|
66,022 |
|
|
|
70,044 |
|
Other long-term
liabilities |
|
9,837 |
|
|
|
7,214 |
|
Deferred income taxes,
net |
|
135,311 |
|
|
|
197,331 |
|
Shareholders’
equity: |
|
|
|
Preferred stock,
par value $.01 per share; 1,000,000 shares authorized; 0 shares
outstanding in 2017 and 2016 |
|
– |
|
|
|
– |
|
Common stock,
par value $.01 per share; 60,000,000 Class A shares and
20,000,000 Class B shares authorized; 31,345,116 Class A shares and
8,469,427 Class B shares outstanding in 2017; and 30,007,088 Class
A shares and 9,245,447 Class B shares outstanding in 2016 |
|
454 |
|
|
|
438 |
|
Additional
paid-in capital |
|
348,044 |
|
|
|
309,127 |
|
Treasury stock,
at cost: 934,171 class A shares and 4,625,181 class B shares
in 2017; and 934,171 class A shares and 3,650,491 class
B shares in 2016 |
|
(120,682 |
) |
|
|
(86,882 |
) |
Retained
earnings |
|
812,557 |
|
|
|
640,428 |
|
Accumulated
other comprehensive loss, net of tax |
|
– |
|
|
|
(286 |
) |
Total shareholders’
equity |
|
1,040,373 |
|
|
|
862,825 |
|
Total
liabilities and shareholders’ equity |
$ |
2,890,139 |
|
|
$ |
2,603,047 |
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(In Thousands, Except Per Share
Amounts) |
|
|
|
|
|
Three Months EndedDecember
31, |
|
Year EndedDecember
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
Revenues: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
$ |
762,046 |
|
|
$ |
635,783 |
|
$ |
2,993,015 |
|
|
$ |
2,640,019 |
Parts and service |
|
378,726 |
|
|
|
325,293 |
|
|
1,471,266 |
|
|
|
1,332,356 |
Lease and rental |
|
58,434 |
|
|
|
52,663 |
|
|
217,356 |
|
|
|
208,154 |
Finance and insurance |
|
4,896 |
|
|
|
4,376 |
|
|
17,988 |
|
|
|
18,582 |
Other |
|
4,001 |
|
|
|
3,156 |
|
|
14,257 |
|
|
|
15,503 |
Total revenue |
|
1,208,103 |
|
|
|
1,021,271 |
|
|
4,713,882 |
|
|
|
4,214,614 |
Cost of products sold: |
|
|
|
|
|
|
|
New and used commercial vehicle sales |
|
705,326 |
|
|
|
594,141 |
|
|
2,766,461 |
|
|
|
2,463,124 |
Parts and service |
|
240,484 |
|
|
|
208,760 |
|
|
934,394 |
|
|
|
851,438 |
Lease and rental |
|
49,384 |
|
|
|
45,422 |
|
|
183,091 |
|
|
|
182,040 |
Total cost of products sold |
|
995,194 |
|
|
|
848,323 |
|
|
3,883,946 |
|
|
|
3,496,602 |
Gross profit |
|
212,909 |
|
|
|
172,948 |
|
|
829,936 |
|
|
|
718,012 |
Selling,
general and administrative |
|
162,016 |
|
|
|
136,966 |
|
|
631,053 |
|
|
|
587,778 |
Depreciation and amortization |
|
12,695 |
|
|
|
12,779 |
|
|
50,069 |
|
|
|
51,261 |
(Loss)
gain on sale of assets |
|
(181 |
) |
|
|
184 |
|
|
(105 |
) |
|
|
1,755 |
Operating income |
|
38,017 |
|
|
|
23,387 |
|
|
148,709 |
|
|
|
80,728 |
Interest
expense, net |
|
3,594 |
|
|
|
2,992 |
|
|
12,310 |
|
|
|
14,279 |
Income before taxes |
|
34,423 |
|
|
|
20,395 |
|
|
136,399 |
|
|
|
66,449 |
(Benefit)
provision for income taxes |
|
(71,444 |
) |
|
|
7,905 |
|
|
(35,730 |
) |
|
|
25,867 |
Net income |
$ |
105,867 |
|
|
$ |
12,490 |
|
$ |
172,129 |
|
|
$ |
40,582 |
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
Basic |
$ |
2.65 |
|
|
$
|
.32 |
|
$ |
4.34 |
|
|
$ |
1.02 |
Diluted |
$ |
2.54 |
|
|
$
|
.31 |
|
$ |
4.20 |
|
|
$ |
1.00 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
40,025 |
|
|
|
39,340 |
|
|
39,627 |
|
|
|
39,938 |
Diluted |
|
41,626 |
|
|
|
40,322 |
|
|
40,980 |
|
|
|
40,603 |
This press release and the attached financial
tables contain certain non-GAAP financial measures as defined under
SEC rules, such as 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, 2017 |
|
December 31, 2016 |
New heavy-duty
vehicles |
|
$ |
472,438 |
|
|
$ |
347,475 |
|
New medium-duty
vehicles (including bus sales revenue) |
|
|
193,271 |
|
|
|
200,246 |
|
New light-duty
vehicles |
|
|
15,912 |
|
|
|
14,525 |
|
Used
vehicles |
|
|
76,820 |
|
|
|
68,667 |
|
Other
vehicles |
|
|
3,605 |
|
|
|
4,870 |
|
|
|
|
|
|
Absorption Ratio |
|
|
128.0 |
% |
|
|
120.6 |
% |
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 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) |
|
December 31, 2017 |
December 31, 2016 |
Floor plan notes
payable |
|
$ |
778,561 |
|
$ |
646,945 |
|
Current maturities of
long-term debt |
|
|
145,139 |
|
|
130,717 |
|
Current maturities of
capital lease obligations |
|
|
17,119 |
|
|
14,449 |
|
Liabilities directly
associated with asset held for sale |
|
|
− |
|
|
783 |
|
Long-term debt, net of
current maturities |
|
|
466,389 |
|
|
472,503 |
|
Capital lease
obligations, net of current maturities |
|
|
66,022 |
|
|
70,044 |
|
Total Debt
(GAAP) |
|
|
1,473,230 |
|
|
1,335,441 |
|
Adjustments: |
|
|
|
Debt related to
lease & rental fleet |
|
|
(598,512 |
) |
|
(579,819 |
) |
Floor plan notes
payable |
|
|
(778,561 |
) |
|
(646,945 |
) |
Adjusted Total
Debt (Non-GAAP) |
|
|
96,157 |
|
|
108,677 |
|
Adjustment: |
|
|
|
Cash and cash
equivalents |
|
|
(124,541 |
) |
|
(82,026 |
) |
Adjusted Net
(Cash) Debt (Non-GAAP) |
|
$ |
(28,384 |
) |
$ |
26,651 |
|
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 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, 2017 |
December 31, 2016 |
Net Income
(GAAP) |
|
$ |
172,129 |
|
$ |
40,582 |
|
(Benefit) provision for
income taxes |
|
|
(35,730 |
) |
|
25,867 |
|
Interest expense |
|
|
12,310 |
|
|
14,279 |
|
Depreciation and
amortization |
|
|
50,069 |
|
|
51,261 |
|
Loss (gain) on sale of
assets |
|
|
105 |
|
|
(1,755 |
) |
EBITDA
(Non-GAAP) |
|
|
198,883 |
|
|
130,234 |
|
Adjustment: |
|
|
|
Interest expense
associated with FPNP |
|
|
(10,121 |
) |
|
(11,901 |
) |
Restructuring
and impairment charges |
|
|
− |
|
|
8,930 |
|
Adjusted EBITDA
(Non-GAAP) |
|
$ |
188,762 |
|
$ |
127,263 |
|
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.
Management recorded a charge to selling, general and administrative
expense during the first and second quarters of 2016 related to the
closing of certain dealerships and the disposition of excess real
estate. Management believes adding back this charge to EBITDA
provides both the investors and management with supplemental
information regarding the Company’s core operating results.
“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, 2017 |
December 31, 2016 |
Net cash
provided by operations (GAAP) |
|
$ |
152,737 |
|
$ |
521,170 |
|
Acquisition of property
and equipment |
|
|
(209,917 |
) |
|
(196,965 |
) |
Free cash flow
(Non-GAAP) |
|
|
(57,180 |
) |
|
324,205 |
|
Adjustments: |
|
|
|
Draws (payments)
on floor plan financing, net |
|
|
112,261 |
|
|
(211,802 |
) |
Proceeds from
L&RFD |
|
|
152,562 |
|
|
121,188 |
|
Principal
payments on L&RFD |
|
|
(144,998 |
) |
|
(168,644 |
) |
Non-maintenance
capital expenditures |
|
|
28,734 |
|
|
45,003 |
|
Adjusted Free
Cash Flow (Non-GAAP) |
|
$ |
91,379 |
|
$ |
109,950 |
|
“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, 2017 |
December 31, 2016 |
Total Shareholders'
equity (GAAP) |
|
$ |
1,040,373 |
|
$ |
862,825 |
Adjusted net (cash)
debt (Non-GAAP) |
|
|
(28,384 |
) |
|
26,651 |
Adjusted
Invested Capital (Non-GAAP) |
|
$ |
1,011,989 |
|
$ |
889,476 |
“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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