Rush Enterprises, Inc. (NASDAQ: RUSHA & RUSHB), which operates
the largest network of commercial vehicle dealerships in North
America, today announced that for the quarter ended March 31, 2020,
the Company achieved revenues of $1.287 billion and net income of
$23.1 million, or $0.62 per diluted share, compared with revenues
of $1.348 billion and net income of $37.1 million, or $0.98 per
diluted share, in the quarter ended March 31, 2019.
Additionally, the Company’s Board of Directors declared a cash
dividend of $0.13 per share of Class A and Class B Common Stock,
approximately $4.7 million in total, to be paid on June 10, 2020 to
all shareholders of record as of May 7, 2020.
“Given the industry-wide slowdown in new Class 8 truck sales,
which began in the fourth quarter of 2019, our first quarter 2020
performance was solid,” said W.M. “Rusty” Rush, Chairman, Chief
Executive Officer and President of Rush Enterprises, Inc.
“However, the effects of the COVID-19 pandemic on our Company began
late in the first quarter – impacting only the last few weeks of
March – and are not indicative of its future impact on the
Company. These are unprecedented times, and we are focused on
monitoring the impacts of the pandemic on our business and
throughout our industry, while taking appropriate action to
preserve the financial stability of Rush Enterprises.” “I am
immensely grateful to our employees for rising to the challenge and
continuing to support our customers while doing everything possible
to protect the health of loved ones, fellow employees, customers
and everyone in the communities we serve. I am also deeply
moved by our employees’ commitment to our Company, our economy and
our fellow citizens, which I witnessed firsthand while visiting
locations over the past few weeks. All of our 7,000-plus
employees are helping ensure much needed freight is moving in the
United States,” said Rush.
Our Response to the COVID-19 Pandemic and
Its Impact on Our Business and Outlook
“Though the effects of the COVID-19 pandemic on our revenues
were limited in the first quarter of 2020, we expect that the
negative impact on our revenues, and business in general, will be
substantial for the foreseeable future. We are following best
practices to protect the health of our employees, customers, and
the public, while responding to changing customer demand, making
adjustments based on our manufacturers’ plant closures and
remaining focused on maximizing the strength of our balance sheet
to ensure the long-term financial strength of Rush Enterprises,”
Rush said.
Supporting Essential Functions While Protecting the
Health and Safety of Employees, Customers and Communities
Rush Truck Centers are
classified as “essential businesses” and have remained fully operational across the
Company’s dealership network, though some hours of operation have
been modified and in-person truck sales have been curtailed.
“We are monitoring and
complying with CDC guidelines for limiting the spread of COVID-19
and complying with all applicable federal, state and local
executive orders. We also provided employees who are unable
to work as a direct result of COVID-19 with up to two weeks of
additional sick leave. In accordance with CDC guidelines, we
have mandated that all employees stay at least 6 feet away from
each other and our customers. In addition, we are requiring
employees throughout the Company to wear facemasks when required to
do so by applicable orders or whenever they cannot maintain safe
social distancing from customers or other employees, and we are
thoroughly cleaning and disinfecting our facilities on a regular
basis. We are also providing curbside parts pick-up, online parts
ordering and web-based vehicle service communication to reduce
in-person interactions. With 2,400 service bays and 500
mobile service vehicles operating, our service teams are minimizing
contact with customers and taking extra precautions to keep
high-touch areas on customer vehicles clean and
disinfected,” said
Rush.
Aftermarket Products and Services
“With only a few minor
exceptions, our parts supply chain has remained uninterrupted
to-date. However, we increased our parts inventories at all
our stores to support an estimated extra 30 days of demand in case
of any temporary supplier-related warehousing or logistics
challenges,” he said.
“We believe that the
investments we have made over the years in our aftermarket
strategic initiatives will serve us especially well while social
distancing is required. We recently expanded our RushCare Rapid
Parts Call Centers and are now even better equipped to handle
incoming calls. Our online ordering platforms are another
convenient and contactless way that customers can order parts for
shipping, delivery or pick-up. Additionally, our
Xpress services help expedite vehicle diagnosis and maintenance to
ensure customers receive same-day service. Our online
communications platform, RushCare Service Connect, is another way
we are leveraging technology to maintain continuous remote
communication with our customers. We believe these offerings, many of
which are the direct result of the successful implementation of our
strategic initiatives in recent years, will help us capture
additional sales in a tough operating environment,” Rush
added.
“We have prohibited our
aftermarket sales representatives from visiting customers
in-person, unless they are specifically asked to do so, but they
are regularly reaching out to customers and prospective customers
to understand their business needs and to offer support in every
way we can. Obviously, many of our customers have
significantly reduced their operations and at this time nobody
knows when the national economy, or society in general, will reopen
in any meaningful way. As a result, as we look ahead to the
second quarter, we anticipate our aftermarket products and services
revenues will be negatively impacted by the COVID-19 pandemic,” he
said.
Commercial Vehicle Sales Peterbilt suspended global production of
trucks and engines from March 24 until April 27. Navistar
shut down its plant in Ohio from March 23 through early May.
Although Navistar also suspended manufacturing operations at
its plants in Alabama and Mexico, production resumed at both
locations on April 13. Additionally, Hino, Isuzu and Ford
have each suspended manufacturing operations at their respective
plants. As a result of the COVID-19 pandemic, ACT Research
is currently forecasting new U.S. Class 8 retail sales to be
127,500 units in 2020, which would represent a 54.7% decrease
compared to 2019.
“Our truck sales representatives are in regular communication with our
customers to understand the impact the COVID-19 pandemic is having
on their businesses. Currently, we are not experiencing a
significant number of cancelled truck orders, but that can quickly
change. However, many customers are delaying purchases due to
the tremendous uncertainty right now about the economy and the
impact of the pandemic.
We
expect that the pandemic will have a significant negative impact on
new Class 8 truck sales in the second quarter, but it is
not clear just how significant the impact will be,” Rush said.
With respect to new U.S. Class 4-7 retail sales, ACT Research is
currently forecasting retail sales to be 147,400 units in 2020,
which would represent a 44.8% decrease compared to 2019.
“We also expect that our medium-duty truck sales will be
negatively impacted by the pandemic in the second quarter, as
medium-duty commercial vehicle sales usually track closely to the
general economy,” Rush added.
“We are approaching write-downs of new and used commercial
vehicle inventories more aggressively than in the past, and we
believe our inventories are appropriately valued to meet the needs
of the market,” he said.
Liquidity and Expense ReductionIn the first quarter, the Company repurchased
$19.9 million in stock. However, once the magnitude of the
COVID-19 pandemic became apparent, the Company suspended its stock
repurchase program. “Our cash position remains strong at $138
million. In March, we renewed a $100 million line of credit
for another two years. We currently have no outstanding draws
on the line of credit, but believe it is prudent to maintain this
credit line in these uncertain times. Our balance sheet is
healthy, and we believe the Company is well positioned to navigate
the economic and industry challenges that lie ahead,” Rush
said.
Notwithstanding the strength
of the Company’s balance sheet, the Company is taking steps to
reduce expenses. W.M. “Rusty” Rush, Chairman, Chief Executive
Officer and President of the Company, has reduced his salary by 25
percent, other members of his senior executive team also reduced
their salaries by 10 percent, and the members of the Board of
Directors voted to reduce the amount of their annual cash retainer
by 10 percent. “We are currently taking steps to reduce
expenses and delaying capital expenditures where appropriate to
navigate the tough economic conditions and industry specific
challenges that most certainly lie ahead,” Rush
added.
“On a positive
note, I have repeatedly emphasized to our employees that our
business is essential to our country’s response to this pandemic,
and they have wholeheartedly embraced their role in ensuring food,
medical supplies and other essentials continue to move where they
are needed. We are all honored to be able to support our
employees, customers, our communities and our country during this
challenging time,” Rush stated.
First Quarter Results –
Operations
Aftermarket Products and Services
Aftermarket products and services accounted for approximately
67% of the Company’s total gross profit in the first quarter of
2020, with parts, service and collision center revenues reaching
$428.0 million, down 2.4% compared to the first quarter of
2019. The Company achieved a quarterly absorption ratio of
114.3% in the first quarter of 2020, compared to 121.5% in the
first quarter of 2019. “Our first quarter results declined
slightly year-over-year, primarily due to overall softness in
demand for aftermarket products and services – a continuation of
what we began to see in the fourth quarter of 2019. Activity
from customers in the energy sector was down substantially in the
first quarter of 2020, compared to the first quarter of 2019, and
currently our business related to our energy customers is not a
material part of our aftermarket sales revenue. The COVID-19
pandemic had a slight negative impact on our aftermarket revenues
in the second half of March, but as I previously discussed, is
likely to have a significant negative impact on our aftermarket
revenues going forward,” Rush said. Commercial Vehicle
Sales
New U.S. Class 8 retail truck sales were 48,659 units in the
first quarter of 2020, down 24.4% over the same time period last
year, according to ACT Research. The Company sold 3,078 new
Class 8 trucks in the first quarter, a decrease of 13.5% compared
to the first quarter of 2019, and accounted for 6.3% of the new
U.S. Class 8 truck market. “Our Class 8 new truck sales were
the result of solid business from customers in the refuse and
construction sectors, as well as healthy sales of stock trucks
across the country. The COVID-19 pandemic had little impact
on our first quarter truck sales results, though this will change
going forward. Customers are delaying purchases due to
economic uncertainty, and, with temporary production suspensions,
there are questions about availability of new inventory,” said
Rush.
New U.S. Class 4 through 7 retail commercial vehicle sales were
54,702 units in the first quarter of 2020, down 11.5% over the same
time period last year, according to ACT Research. The Company
sold 3,264 Class 4-7 medium-duty commercial vehicles in the first
quarter, an increase of 24.9% compared to the first quarter of
2019, and accounted for 6.0% of the U.S. Class 4 through 7
commercial vehicle market.
“Our Class 4-7 new commercial vehicle sales results were strong
in the first quarter, and similar to our new Class 8 truck results,
minimally impacted by the COVID-19 pandemic. Our strong
medium-duty results were primarily driven by solid activity from
our grocery and food service customers, as well as strong stock
truck sales throughout our dealership network,” said Rush.
Used truck sales were down slightly through the first two months
of the quarter compared to 2019 due to the overall industry
downturn. We experienced significant decline in used truck
sales in March, which we attribute to the COVID-19 pandemic.
Financial Highlights
In the first quarter of 2020, the Company’s gross revenues
totaled $1.287 billion, a 4.6% decrease from $1.348 billion in the
first quarter of 2019. Net income for the quarter was $23.1
million, or $0.62 per diluted share, compared to net income of
$37.1 million, or $0.98 per diluted share, in the quarter ended
March 31, 2019.
Aftermarket products and services revenues were $428.0 million
in the first quarter of 2020, compared to $438.4 million in the
first quarter of 2019. The Company delivered 3,078 new
heavy-duty trucks, 3,264 new medium-duty commercial vehicles, 267
new light-duty commercial vehicles and 1,558 used commercial
vehicles during the first quarter of 2020, compared to 3,558 new
heavy-duty trucks, 2,614 new medium-duty commercial vehicles, 539
new light-duty commercial vehicles and 1,840 used commercial
vehicles during the first quarter of 2019.
The Company increased its lease and rental revenues by 2.3% in
the first quarter of 2020, compared to the first quarter of 2019,
but experienced a decrease in gross profit margins in the first
quarter of 2020, primarily due to decreased rental fleet demand and
utilization and decreased variable revenue. Rush Truck
Leasing operates 45 PacLease and Idealease franchises with more
than 8,100 trucks in its lease and rental fleet and more than 1,100
trucks under contract maintenance agreements.
Selling, general and administrative expenses increased in the
first quarter compared to the fourth quarter of 2019, as is
expected in the first quarter of every year, primarily due to
employee benefits and payroll taxes.
During the first quarter of 2020, the Company repurchased $19.9
million of its common stock pursuant to its stock repurchase plan,
which has been suspended as discussed above. In addition, the
Company paid a cash dividend of $4.7 million during the first
quarter. “We believe that we have taken appropriate actions
to solidify the strength of our
balance sheet to ensure that the Company can withstand the economic
issues that are certainly headed our way,” said Rush.
Conference Call Information
Rush Enterprises will host its quarterly
conference call to discuss earnings for the first quarter on
Thursday, April 23, 2020, at 10 a.m. Eastern/9 a.m.
Central. The call can be heard live by dialing
877-638-4557 (U.S.) or 914-495-8522
(International) 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 July 10, 2020. Listen to the audio replay
until April 30, 2020 by dialing 855-859-2056 (U.S.) or
404-537-3406 (International) and entering the
Conference ID 8584951.
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 North America, 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, FUSO, 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 in this release,
including those concerning current and projected market conditions,
sales forecasts, market share forecasts, demand for the Company’s
services, the effects the COVID-19 pandemic may have on our
business and financial results, 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). Such
forward-looking statements only speak as of the date of this
release and the Company assumes no obligation to update the
information included in this release. 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, the
duration and severity of the COVID-19 pandemic and governmental
mandates in connection therewith, one-time events and other factors
described herein and in filings made by the Company with the
Securities and Exchange Commission, including in our annual report
on Form 10-K for the fiscal year ended December 31, 2019. 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. Although we believe that these forward-looking
statements are based on reasonable assumptions, there are many
factors that could affect our actual business and financial results
and could cause actual results to differ materially from those in
the forward-looking statements. All future written and oral
forward-looking statements by us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except for our ongoing
obligations to disclose material information as required by the
federal securities laws, we do not have any obligations or
intention to release publicly any revisions to any forward-looking
statements to reflect events or circumstances in the future or to
reflect the occurrence of unanticipated events.
-Tables and Additional Information to Follow-
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In Thousands, Except Shares and Per Share
Amounts)
|
March 31, |
|
December 31, |
|
2020 |
|
2019 |
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
137,540 |
|
|
$ |
181,620 |
|
Accounts receivable, net of allowance |
|
214,597 |
|
|
|
183,704 |
|
Inventories, net |
|
1,190,319 |
|
|
|
1,326,080 |
|
Prepaid expenses and other |
|
14,726 |
|
|
|
20,728 |
|
Assets held for sale |
|
419 |
|
|
|
419 |
|
Total current assets |
|
1,557,601 |
|
|
|
1,712,551 |
|
Property and equipment, net |
|
1,276,055 |
|
|
|
1,279,931 |
|
Operating lease right-of-use assets, net |
|
55,994 |
|
|
|
57,197 |
|
Goodwill, net |
|
292,142 |
|
|
|
292,142 |
|
Other assets, net |
|
60,866 |
|
|
|
65,508 |
|
Total assets |
$ |
3,242,658 |
|
|
$ |
3,407,329 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Floor plan notes payable |
$ |
888,680 |
|
|
$ |
996,336 |
|
Current maturities of long-term debt |
|
183,727 |
|
|
|
189,265 |
|
Current maturities of finance lease obligations |
|
23,339 |
|
|
|
22,892 |
|
Current maturities of operating lease obligations |
|
10,141 |
|
|
|
10,114 |
|
Trade accounts payable |
|
122,830 |
|
|
|
133,697 |
|
Customer deposits |
|
25,994 |
|
|
|
42,695 |
|
Accrued expenses |
|
97,133 |
|
|
|
112,390 |
|
Total current liabilities |
|
1,351,844 |
|
|
|
1,507,389 |
|
Long-term debt, net of current maturities |
|
426,727 |
|
|
|
438,413 |
|
Finance lease obligations, net of current maturities |
|
75,300 |
|
|
|
69,478 |
|
Operating lease obligations, net of current maturities |
|
46,357 |
|
|
|
47,555 |
|
Other long-term liabilities |
|
19,817 |
|
|
|
20,704 |
|
Deferred income taxes, net |
|
157,137 |
|
|
|
164,297 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share; 1,000,000 shares
authorized; 0 shares outstanding in 2020 and 2019 |
|
– |
|
|
|
– |
|
Common stock, par value $.01 per share; 60,000,000 Class A
shares and 20,000,000 Class B shares authorized; 27,532,890 Class A
shares and 8,410,440 Class B shares outstanding in 2020; and
27,953,648 Class A shares and 8,240,486 Class B shares outstanding
in 2019 |
|
469 |
|
|
|
465 |
|
Additional paid-in capital |
|
406,725 |
|
|
|
397,267 |
|
Treasury stock, at cost: 5,610,906 Class A shares and 5,360,832
Class B shares in 2020 and 5,055,783 Class A shares and
5,306,341 Class B shares in 2019 |
|
(324,031 |
) |
|
|
(304,129 |
) |
Retained earnings |
|
1,083,906 |
|
|
|
1,065,553 |
|
Accumulated other comprehensive income |
|
(1,593 |
) |
|
|
337 |
|
Total shareholders’ equity |
|
1,165,476 |
|
|
|
1,159,493 |
|
Total liabilities and shareholders’ equity |
$ |
3,242,658 |
|
|
$ |
3,407,329 |
|
RUSH ENTERPRISES, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS
(In Thousands, Except Per Share
Amounts)(Unaudited)
|
Three Months EndedMarch 31, |
|
2020 |
|
2019 |
|
(Unaudited) |
|
(Unaudited) |
Revenues: |
|
|
|
New and used commercial vehicle sales |
$ |
789,554 |
|
$ |
838,283 |
Parts and service sales |
|
427,978 |
|
|
438,354 |
Lease and rental |
|
60,781 |
|
|
59,433 |
Finance and insurance |
|
4,467 |
|
|
6,610 |
Other |
|
3,883 |
|
|
5,637 |
Total revenue |
|
1,286,663 |
|
|
1,348,317 |
Cost of products sold: |
|
|
|
New and used commercial vehicle sales |
|
728,539 |
|
|
768,417 |
Parts and service sales |
|
271,415 |
|
|
273,189 |
Lease and rental |
|
52,208 |
|
|
49,795 |
Total cost of products sold |
|
1,052,162 |
|
|
1,091,401 |
Gross profit |
|
234,501 |
|
|
256,916 |
Selling, general and administrative expense |
|
185,074 |
|
|
187,181 |
Depreciation and amortization expense |
|
14,330 |
|
|
12,925 |
Gain on sale of assets |
|
100 |
|
|
57 |
Operating income |
|
35,197 |
|
|
56,867 |
Other income |
|
1 |
|
|
− |
Equity in earnings of unconsolidated entities |
|
1,240 |
|
|
49 |
Interest expense, net |
|
4,769 |
|
|
7,358 |
Income before taxes |
|
31,669 |
|
|
49,558 |
Provision for income taxes |
|
8,562 |
|
|
12,454 |
Net income |
$ |
23,107 |
|
$ |
37,104 |
|
|
|
|
Earnings per common share: |
|
|
|
Basic |
$ |
0.63 |
|
$ |
1.01 |
Diluted |
$ |
0.62 |
|
$ |
0.98 |
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
Basic |
|
36,485 |
|
|
36,817 |
Diluted |
|
37,326 |
|
|
37,834 |
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 |
Commercial Vehicle Sales Revenue (in
thousands) |
|
March 31, 2020 |
|
March 31, 2019 |
New heavy-duty vehicles |
|
$ |
470,784 |
|
|
$ |
530,918 |
|
New medium-duty vehicles (including bus sales revenue) |
|
|
243,972 |
|
|
|
199,680 |
|
New light-duty vehicles |
|
|
11,498 |
|
|
|
22,019 |
|
Used vehicles |
|
|
59,710 |
|
|
|
82,992 |
|
Other vehicles |
|
|
3,590 |
|
|
|
2,674 |
|
|
|
|
|
|
|
|
|
|
Absorption Ratio |
|
|
114.3 |
% |
|
|
121.5 |
% |
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.
Debt Analysis (in
thousands) |
|
March 31, 2020 |
March 31, 2019 |
Floor plan notes payable |
|
$ |
888,680 |
|
$ |
1,111,473 |
|
Line of credit |
|
|
− |
|
|
75,000 |
|
Current maturities of long-term debt |
|
|
183,727 |
|
|
157,213 |
|
Current maturities of finance lease obligations |
|
|
23,339 |
|
|
19,709 |
|
Long-term debt, net of current maturities |
|
|
426,727 |
|
|
438,794 |
|
Finance lease obligations, net of current maturities |
|
|
75,300 |
|
|
49,947 |
|
Total Debt (GAAP) |
|
|
1,597,773 |
|
|
1,905,410 |
|
Adjustments: |
|
|
|
Debt related to lease & rental fleet |
|
|
(648,054 |
) |
|
(597,182 |
) |
Floor plan notes payable |
|
|
(888,680 |
) |
|
(1,111,473 |
) |
Adjusted Total Debt (Non-GAAP) |
|
|
61,039 |
|
|
196,755 |
|
Adjustment: |
|
|
|
Cash and cash equivalents |
|
|
(137,540 |
) |
|
(126,572 |
) |
Adjusted Net Debt (Cash) (Non-GAAP) |
|
$ |
(76,501 |
) |
$ |
70,183 |
|
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) |
|
March 31, 2020 |
March 31, 2019 |
Net Income (GAAP) |
|
$ |
127,586 |
|
$ |
155,127 |
|
Provision for income taxes |
|
|
44,048 |
|
|
49,517 |
|
Interest expense |
|
|
26,218 |
|
|
22,734 |
|
Depreciation and amortization |
|
|
56,777 |
|
|
60,506 |
|
Loss (gain) on sale of assets |
|
|
59 |
|
|
(382 |
) |
EBITDA (Non-GAAP) |
|
|
254,688 |
|
|
287,502 |
|
Adjustment: |
|
|
|
Interest expense associated with FPNP |
|
|
(25,279 |
) |
|
(21,148 |
) |
Adjusted EBITDA (Non-GAAP) |
|
$ |
229,409 |
|
$ |
266,354 |
|
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) |
|
March 31, 2020 |
March 31, 2019 |
Net cash provided by operations (GAAP) |
|
$ |
599,342 |
|
$ |
58,445 |
|
Acquisition of property and equipment |
|
|
(279,411 |
) |
|
(253,616 |
) |
Free cash flow (Non-GAAP) |
|
|
319,931 |
|
|
(195,171 |
) |
Adjustments: |
|
|
|
(Payments) draws on floor plan financing, net |
|
|
(177,997 |
) |
|
261,536 |
|
Proceeds from L&RFD |
|
|
200,409 |
|
|
162,473 |
|
Principal payments on L&RFD |
|
|
(172,412 |
) |
|
(161,962 |
) |
Non-maintenance capital expenditures |
|
|
36,486 |
|
|
48,050 |
|
Adjusted Free Cash Flow (Non-GAAP) |
|
$ |
206,417 |
|
$ |
114,926 |
|
“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) |
|
March 31, 2020 |
March 31, 2019 |
Total Shareholders' equity (GAAP) |
|
$ |
1,165,476 |
|
$ |
1,083,421 |
Adjusted net debt (cash) (Non-GAAP) |
|
|
(76,501 |
) |
|
70,183 |
Adjusted Invested Capital (Non-GAAP) |
|
$ |
1,088,975 |
|
$ |
1,153,604 |
“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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