UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________________ to _______________________
Commission File Number
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
| incorporation or organization) |
(Address of principal executive offices)
(Zip Code)
(
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller Reporting company |
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of October 31, 2023.
| Number of Shares | ||
| Title of Class | Outstanding | |
| Class A Common Stock, $.01 Par Value | ||
| Class A Common Stock, $.01 Par Value |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares)
|
September 30, |
December 31, |
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2023 |
2022 |
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|
(unaudited) |
||||||||
| Assets | ||||||||
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Current assets: |
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Cash, cash equivalents and restricted cash |
$ | $ | ||||||
|
Accounts receivable, net |
||||||||
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Inventories, net |
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Prepaid expenses and other |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets, net |
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Goodwill, net |
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Other assets, net |
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Total assets |
$ | $ | ||||||
|
Liabilities and shareholders’ equity |
||||||||
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Current liabilities: |
||||||||
|
Floor plan notes payable |
$ | $ | ||||||
|
Current maturities of long-term debt |
||||||||
|
Current maturities of finance lease obligations |
||||||||
|
Current maturities of operating lease obligations |
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Trade accounts payable |
||||||||
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Customer deposits |
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Accrued expenses |
||||||||
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Total current liabilities |
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Long-term debt, net of current maturities |
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Finance lease obligations, net of current maturities |
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Operating lease obligations, net of current maturities |
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Other long-term liabilities |
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Deferred income taxes, net |
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Shareholders’ equity: |
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Preferred stock, par value $ per share; |
||||||||
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Common stock, par value $ per share; |
||||||||
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Additional paid-in capital |
||||||||
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Treasury stock, at cost: |
( |
) | ( |
) | ||||
|
Retained earnings |
||||||||
|
Accumulated other comprehensive income (loss) |
( |
) | ( |
) | ||||
|
Total Rush Enterprises, Inc. shareholders’ equity |
||||||||
|
Noncontrolling interest |
||||||||
|
Total shareholders’ equity |
||||||||
|
Total liabilities and shareholders’ equity |
$ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
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Revenues |
||||||||||||||||
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New and used commercial vehicle sales |
$ | $ | $ | $ | ||||||||||||
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Aftermarket products and services sales |
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Lease and rental sales |
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Finance and insurance |
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Other |
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Total revenue |
||||||||||||||||
| Cost of products sold | ||||||||||||||||
|
New and used commercial vehicle sales |
||||||||||||||||
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Aftermarket products and services sales |
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Lease and rental sales |
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Total cost of products sold |
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Gross profit |
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Selling, general and administrative expense |
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Depreciation and amortization expense |
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Gain on sale of assets |
||||||||||||||||
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Operating income |
||||||||||||||||
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Other income (expense) |
( |
) | ||||||||||||||
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Interest expense, net |
||||||||||||||||
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Income before taxes |
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Income tax provision |
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Net income |
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Less: Net income attributable to noncontrolling interest |
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Net income attributable to Rush Enterprises, Inc. |
$ | $ | $ | $ | ||||||||||||
|
Net income attributable to Rush Enterprises, Inc. per share of common stock: |
||||||||||||||||
|
Basic |
$ | $ | $ | $ | ||||||||||||
|
Diluted |
$ | $ | $ | $ | ||||||||||||
|
Weighted average shares outstanding: |
||||||||||||||||
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Basic |
||||||||||||||||
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Diluted |
||||||||||||||||
|
Dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
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Net income |
$ | $ | $ | $ | ||||||||||||
|
Other comprehensive income (loss), net of tax: |
||||||||||||||||
|
Foreign currency translation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Reclassification of currency translation related to equity method accounting |
– | – | – | ( |
) | |||||||||||
|
Other comprehensive income (loss) attributable to Rush Enterprises, Inc. |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Comprehensive income |
$ | $ | $ | $ | ||||||||||||
|
Less: Comprehensive income attributable to noncontrolling interest |
||||||||||||||||
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Comprehensive income attributable to Rush Enterprises, Inc. |
$ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In Thousands)
(Unaudited)
|
Common Stock Shares Outstanding |
$0.01 Par |
Additional Paid -In |
Treasury |
Retained |
Accumulated Other Comprehensive |
Total Rush Enterprises, Inc. Shareholders’ |
Noncontrolling |
Total Shareholders’ |
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Class A |
Class B | Value | Capital | Stock | Earnings | Income (Loss) | Equity | Interest | Equity | |||||||||||||||||||||||||||||||
|
Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | 18,531 | $ | |||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Vesting of restricted share awards |
– | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Vesting of restricted share awards |
– | – | – | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Retirement of treasury shares and par value adjustment |
– | – | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
|
Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | ( |
) | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Balance, September 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)
(In Thousands)
(Unaudited)
| Common Stock
Shares Outstanding |
$0.01 Par |
Additional Paid -In |
Treasury |
Retained |
Accumulated Other Comprehensive |
Total Rush Enterprises, Inc. Shareholders’ |
Noncontrolling |
Total Shareholders’ |
||||||||||||||||||||||||||||||||
| Class A | Class B | Value | Capital | Stock | Earnings | Income (Loss) | Equity | Interest | Equity | |||||||||||||||||||||||||||||||
|
Balance, December 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | $ | – | $ | ||||||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | 13,793 | ||||||||||||||||||||||||||||||||
|
Vesting of restricted share awards |
– | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Dividend Class A common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | (8,189 | ) | |||||||||||||||||||||||||||
|
Dividend Class B common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | (2,505 | ) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | – | 445 | ||||||||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | – | 92,453 | ||||||||||||||||||||||||||||||||
|
Balance, March 31, 2022 |
$ | $ | $ | ( |
) | $ | $ | $ | – | $ | ||||||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Vesting of restricted share awards |
– | – | – | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Dividend Class A common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Dividend Class B common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | ( |
) | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Reclassification of foreign currency translation related to equity method |
– | – | – | – | – | – | ( |
) | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Noncontrolling interest equity |
– | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
|
Stock options exercised and stock awards |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
|
Vesting of restricted share awards |
– | – | ( |
) | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
– | |||||||||||||||||||||||||||||||||||||||
|
Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
|
Dividend Class A common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Dividend Class B common stock |
– | – | – | – | – | ( |
) |
–– |
( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
– | – | – | – | – | – | ( |
) | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
|
Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
|
Balance, September 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
|
Nine Months Ended |
||||||||
|
September 30, |
||||||||
|
2023 |
2022 |
|||||||
| Cash flows from operating activities: | ||||||||
|
Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
|
Depreciation and amortization |
||||||||
|
Gain on sale of property and equipment |
( |
) | ( |
) | ||||
|
Gain on joint venture transaction |
( |
) | ||||||
|
Gain on business acquisition |
( |
) | ||||||
|
Stock-based compensation expense related to stock options and employee stock purchases |
||||||||
|
Provision for deferred income tax expense |
||||||||
|
Change in accounts receivable, net |
( |
) | ( |
) | ||||
|
Change in inventories, net |
( |
) | ( |
) | ||||
|
Change in prepaid expenses and other, net |
( |
) | ||||||
|
Change in trade accounts payable |
||||||||
|
Change in customer deposits |
( |
) | ||||||
|
Change in accrued expenses |
( |
) | ||||||
|
Other, net |
( |
) | ( |
) | ||||
|
Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: | ||||||||
|
Acquisition of property and equipment |
( |
) | ( |
) | ||||
|
Proceeds from the sale of property and equipment |
||||||||
|
Business disposition |
||||||||
|
Business acquisition, net of cash acquired |
( |
) | ||||||
|
Other |
( |
) | ( |
) | ||||
|
Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: | ||||||||
|
Draws on floor plan notes payable – non-trade, net |
||||||||
|
Proceeds from long-term debt |
||||||||
|
Principal payments on long-term debt |
( |
) | ( |
) | ||||
|
Principal payments on finance lease obligations |
( |
) | ( |
) | ||||
|
Proceeds from issuance of shares relating to employee stock options and employee stock purchases |
||||||||
|
Taxes paid related to net share settlement of equity awards |
( |
) | ( |
) | ||||
|
Payments of cash dividends |
( |
) | ( |
) | ||||
|
Common stock repurchased |
( |
) | ( |
) | ||||
|
Net cash provided by financing activities |
||||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
( |
) | ||||||
|
Effect of exchange rate on cash |
( |
) | ) | |||||
|
Cash, cash equivalents and restricted cash, beginning of period |
||||||||
|
Cash, cash equivalents and restricted cash, end of period |
$ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
|
Cash paid during the period for: |
||||||||
|
Interest |
$ | $ | ||||||
|
Income taxes, net of refunds |
$ | 80,759 | $ | 74,320 | ||||
| Noncash investing and financing activities: | ||||||||
|
Assets acquired under finance leases |
$ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 – Principles of Consolidation and Basis of Presentation
The interim consolidated financial statements included herein have been prepared by Rush Enterprises, Inc. and its subsidiaries (collectively referred to as the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All adjustments have been made to the accompanying interim consolidated financial statements, which, in the opinion of the Company’s management, are necessary for a fair presentation of its operating results. All adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is recommended that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.
Restricted Cash
Restricted cash consists of deposits for the statutory restriction on cash related to the Company’s captive insurance company of $
Stock Split
On July 25, 2023, the Board of Directors of the Company declared a
Authorized Shares
On May 16, 2023, the Company’s shareholders approved the Certificate of Amendment to the Restated Articles of Incorporation of the Company to increase the number of authorized shares of Class A Common Stock from
Treasury Stock Retirement
During the third quarter of 2023, the Company retired
Foreign Currency Transactions
The functional currency of the Company’s foreign subsidiary, Rush Truck Centres of Canada Limited (“RTC Canada”), is the local currency, the Canadian dollar. Results of operations for RTC Canada are translated to USD using the average exchange rate on a monthly basis during each quarter. The assets and liabilities of RTC Canada are translated into USD using the exchange rate in effect on the balance sheet date. The related translation adjustments are recorded as a separate component of the Company’s Consolidated Statements of Shareholders’ Equity in accumulated other comprehensive income (loss).
2 – Commitments and Contingencies
From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability insurance, including product liability coverage, in amounts deemed adequate by management. However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the Company’s financial condition or results of operations. As of September 30, 2023, the Company believes that there are no pending claims or litigation, individually or in the aggregate, that are reasonably likely to have a material adverse effect on its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations for the fiscal period in which such resolution occurred.
3 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share information):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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|
2023 |
2022 |
2023 |
2022 |
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|
Numerator: |
||||||||||||||||
|
Numerator for basic and diluted earnings per share – Net income available to common shareholders |
$ | $ | $ | $ | ||||||||||||
|
Denominator: |
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|
Denominator for basic earnings per share – weighted average shares outstanding |
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|
Effect of dilutive securities – Employee and director stock options and restricted share awards |
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|
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions |
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|
Basic earnings per common share |
$ | $ | $ | $ | ||||||||||||
|
Diluted earnings per common share and common share equivalents |
$ | $ | $ | $ | ||||||||||||
Options to purchase shares of common stock that were outstanding for the three months and nine months ended September 30, 2023 and 2022 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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|
2023 |
2022 |
2023 |
2022 |
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|
Weighted average anti-dilutive options |
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4 – Stock Options and Restricted Stock Awards
Valuation and Expense Information
The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718-10, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors, including employee stock options, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair values.
Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options, and included in selling, general and administrative expense, was $
As of September 30, 2023, the Company had $
5 – Financial Instruments and Fair Value
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Financial instruments consist primarily of cash, accounts receivable, accounts payable and floor plan notes payable. The carrying values of the Company’s financial instruments approximate fair value due either to their short-term nature or existence of variable interest rates, which approximate market rates. Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments as of September 30, 2023, and December 31, 2022. The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.
The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, variable interest rate, credit rating, collateral and liquidity. Accordingly, the Company concluded that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar debt and the Company’s current credit standing. Thus, the carrying amount of such debt approximates fair value.
6 – Segment Information
The Company currently has reportable business segment - the Truck Segment. The Truck Segment includes the Company’s operation of a network of commercial vehicle dealerships throughout the United States and Ontario, Canada that provide an integrated one-stop source for the commercial vehicle needs of its customers, including retail sales of new and used commercial vehicles; aftermarket parts, service and collision center facilities; and financial services, including the financing of new and used commercial vehicle purchases, insurance products and truck leasing and rentals. The commercial vehicle dealerships are deemed a single reporting unit because they have similar economic characteristics. The Company’s chief operating decision maker considers the entire Truck Segment, not individual dealerships or departments within its dealerships, when making decisions about resources to be allocated to the segment and assessing its performance.
The Company also has revenues attributable to other operating segments. These segments include a retail tire company, an insurance agency and a guest ranch operation and are included in the All Other column below. None of these segments has ever met any of the quantitative thresholds for determining reportable segments.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on income before income taxes, not including extraordinary items.
The following table contains summarized information about reportable segment revenues, segment income or loss from continuing operations and segment assets for the periods ended September 30, 2023 and 2022 (in thousands):
|
Truck Segment |
All Other |
Total |
||||||||||
|
As of and for the three months ended September 30, 2023 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
(54 | ) | ||||||||||
|
Segment income before taxes |
( |
) | ||||||||||
|
Segment assets |
||||||||||||
|
For the nine months ended September 30, 2023 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
||||||||||||
|
Segment income before taxes |
||||||||||||
|
As of and for the three months ended September 30, 2022 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
||||||||||||
|
Segment income before taxes |
||||||||||||
|
Segment assets |
||||||||||||
|
For the nine months ended September 30, 2022 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
||||||||||||
|
Segment income before taxes |
380,397 | 682 | 381,079 | |||||||||
7 – Income Taxes
The Company had unrecognized income tax benefits totaling $
The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of September 30, 2023, the tax years ended December 31, through 2022, remained subject to audit by federal tax authorities, and the tax years ended December 31, through 2022, remained subject to audit by state tax authorities.
8 – Revenue
The Company’s non-lease and rental revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue from such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, the arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
The following table summarizes the Company’s disaggregated revenue by revenue source, excluding lease and rental revenue, for the three months and nine months ended September 30, 2023 and 2022 (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Commercial vehicle sales revenue |
$ | $ | $ | $ | ||||||||||||
|
Parts revenue |
||||||||||||||||
|
Commercial vehicle repair service revenue |
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|
Finance revenue |
||||||||||||||||
|
Insurance revenue |
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|
Other revenue |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time. The Company did not have any material contract assets or contract liabilities on the balance sheet as of September 30, 2023. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.
9 – Leases
Lease of Vehicles as Lessor
The Company primarily leases commercial vehicles that the Company owns to customers primarily over periods of to years. The Company does not separate lease and nonlease components. Nonlease components typically consist of maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option for the lessee to purchase the commercial vehicle at the end of the lease term.
The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.
Lease and rental income during the three and nine months ended September 30, 2023 and September 30, 2022 consisted of the following (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Minimum rental payments |
$ | $ | $ | $ | ||||||||||||
|
Nonlease payments |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
10 – Accumulated Other Comprehensive Income (Loss)
The following table shows the components of accumulated other comprehensive income (loss) (in thousands):
|
Balance as of December 31, 2022 |
$ | ( |
) | |
|
Foreign currency translation adjustment |