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)
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(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
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incorporation or organization) |
(Address of principal executive offices)
(Zip Code)
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(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.
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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 August 1, 2024.
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Number of Shares |
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Title of Class |
Outstanding |
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Class A Common Stock, $.01 Par Value |
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Class B 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
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Item 1. |
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Consolidated Balance Sheets - June 30, 2024 (unaudited) and December 31, 2023 |
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Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2024 and 2023 (unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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ITEM 1. Financial Statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2024, AND DECEMBER 31, 2023
(In Thousands, Except Shares)
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June 30, |
December 31, |
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2024 |
2023 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash, cash equivalents and restricted cash |
$ | $ | ||||||
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Accounts receivable, net |
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Notes receivable from affiliate |
– |
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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 |
$ | $ | ||||||
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Floor plan notes payable |
$ | $ | ||||||
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Current maturities of finance lease obligations |
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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: |
( |
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Retained earnings |
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Accumulated other comprehensive income |
( |
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Total Rush Enterprises, Inc. shareholders’ equity |
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Noncontrolling interest |
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Total shareholders’ equity |
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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)
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2024 |
2023 |
2024 |
2023 |
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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 |
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Cost of products sold |
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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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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 (loss) on sale of assets |
( |
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Operating income |
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Other (expense) income |
( |
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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 (loss) attributable to noncontrolling interest |
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Net income attributable to Rush Enterprises, Inc. |
$ | $ | $ | $ | ||||||||||||
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Net income attributable to Rush Enterprises, Inc. per share of common stock: |
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Basic |
$ | $ | $ | $ | ||||||||||||
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Diluted |
$ | . |
$ | $ | $ | |||||||||||
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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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)
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Three Months Ended |
Six Months Ended |
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June 30, 2024 |
June 30, 2023 |
June 30, 2024 |
June 30, 2023 |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation |
( |
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Other comprehensive income (loss) attributable to Rush Enterprises, Inc. |
( |
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Comprehensive income |
$ | $ | $ | $ | ||||||||||||
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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)
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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 | |||||||||||||||||||||||||||||||
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Balance, December 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | 19,537 | $ | |||||||||||||||||||||||||||
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Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
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Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
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Vesting of restricted share awards |
– | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
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Common stock repurchases |
( |
) | – | – | – | ( |
) | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||||||
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Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
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Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
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Foreign currency translation adjustment |
– | – | – | – | – | – | ( |
) | ( |
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Net income |
– | – | – | – | – | – | ( |
) | ||||||||||||||||||||||||||||||||
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Balance, March 31, 2024 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
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Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
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Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
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Vesting of restricted share awards |
– | – | – | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
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Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
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Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Foreign currency translation adjustment |
– | – | – | – | – | – | ( |
) | ( |
) | – | ( |
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Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
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Balance, June 30, 2024 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
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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 | |||||||||||||||||||||||||||||||
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Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
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Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
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Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | 13,080 | ||||||||||||||||||||||||||||||||
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Vesting of restricted share awards |
– | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
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Common stock repurchases |
( |
) | ( |
) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
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Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | (8,897 | ) | |||||||||||||||||||||||||||
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Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | (2,692 | ) | |||||||||||||||||||||||||||
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Foreign currency translation adjustment |
– | – | – | – | – | – | – | 232 | ||||||||||||||||||||||||||||||||
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Net income |
– | – | – | – | – | – | 90,790 | |||||||||||||||||||||||||||||||||
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Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
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Stock options exercised and stock awards |
– | – | – | – | – | |||||||||||||||||||||||||||||||||||
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Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
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Vesting of restricted share awards |
– | – | – | ( |
) | – | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
– | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
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Common stock repurchases |
(890 | ) | (194 | ) | – | – | ( |
) | – | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||
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Cash dividends declared on Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Cash dividends declared on Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||||||||||||||
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Foreign currency translation adjustment |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
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Net income |
– | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
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Balance, June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
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)
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Six Months Ended |
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June 30, |
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2024 |
2023 |
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Cash flows from operating activities: |
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Net income |
$ | $ | ||||||
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Adjustments to reconcile net income to net cash provided by operating activities- |
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Depreciation and amortization |
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Gain on sale of property and equipment, net |
( |
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Stock-based compensation expense related to employee equity awards and employee stock purchases |
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Deferred income tax expense |
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Change in accounts and notes receivable, net |
( |
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Change in inventories, net |
( |
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Change in prepaid expenses and other, net |
( |
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Change in trade accounts payable |
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Change in customer deposits |
( |
) | ( |
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Change in accrued expenses |
( |
) | ( |
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Other, net |
( |
) | ( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Acquisition of property and equipment |
( |
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Proceeds from the sale of property and equipment |
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Business acquisition, net of cash acquired |
– | – | ||||||
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Other |
( |
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Net cash used in investing activities |
( |
) | ( |
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Cash flows from financing activities: |
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Draws on floor plan notes payable – non-trade, net |
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Proceeds from long-term debt |
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Principal payments on long-term debt |
( |
) | ( |
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Principal payments on finance lease obligations |
( |
) | ( |
) | ||||
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Proceeds from issuance of shares relating to equity awards and employee stock purchases |
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Taxes paid related to net share settlement of equity awards |
( |
) | ( |
) | ||||
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Payments of cash dividends |
( |
) | ( |
) | ||||
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Common stock repurchased |
( |
) | ( |
) | ||||
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Net cash provided by financing activities |
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Net decrease in cash, cash equivalents and restricted cash |
( |
) | ( |
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Effect of exchange rate on cash |
( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
$ | $ | ||||||
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest |
$ | $ | ||||||
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Income taxes, net of refunds |
$ | 37,151 | $ | 46,502 | ||||
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Noncash activities: |
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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, 2023. 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.
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
Stock Split
On July 25, 2023, the Company’s Board of Directors declared a -for- stock split with respect to both the Company’s Class A and Class B common stock. The stock split was effected in the form of a stock dividend paid on August 28, 2023, to shareholders of record as of August 7, 2023. Holders of the Company’s common stock received an additional one-half share for each share of common stock held as of the record date. All share and per share data in this Form 10-Q have been adjusted to reflect the stock split as if it occurred on the first day of the earliest period presented.
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, through self-insurance and third-party excess 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 June 30, 2024, 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 amounts):
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2024 |
2023 |
2024 |
2023 |
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Numerator: |
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Numerator for basic and diluted earnings per share – Net income available to common shareholders |
$ | $ | $ | $ | ||||||||||||
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Denominator: |
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Denominator for basic earnings per share – weighted average shares outstanding |
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Effect of dilutive securities– Employee stock options and restricted stock 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 |
$ | $ | $ | $ | ||||||||||||
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Diluted earnings per common share and common share equivalents |
$ | $ | $ | $ | ||||||||||||
Options to purchase shares of common stock that were outstanding for the three months and six months ended June 30, 2024, and 2023, 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):
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2024 |
2023 |
2024 |
2023 |
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Weighted average anti-dilutive stock 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 June 30, 2024, 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 June 30, 2024, and December 31, 2023. 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 rates, 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 its 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 June 30, 2024 and 2023 (in thousands):
|
Truck Segment |
All Other |
Total |
||||||||||
|
As of and for the three months ended June 30, 2024 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
(72 | ) | ||||||||||
|
Segment income before taxes |
( |
) | ||||||||||
|
Segment assets |
||||||||||||
|
For the six months ended June 30, 2024 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
( |
) | ||||||||||
|
Segment income before taxes |
( |
) | ||||||||||
|
As of and for the three months ended June 30, 2023 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
( |
) | ||||||||||
|
Segment income before taxes |
( |
) | ||||||||||
|
Segment assets |
||||||||||||
|
For the six months ended June 30, 2023 |
||||||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Segment operating income |
||||||||||||
|
Segment income before taxes |
||||||||||||
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 June 30, 2024, the tax years ended December 31, through 2023 remained subject to audit by federal tax authorities, and the tax years ended December 31, through 2023, 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 revenues from such sales are 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, 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 six months ended June 30, 2024 and 2023 (in thousands):
|
Three Months Ended |
Six Months Ended |
|||||||||||||||
|
June 30, 2024 |
June 30, 2023 |
June 30, 2024 |
June 30, 2023 |
|||||||||||||
|
Commercial vehicle sales revenue |
$ | $ | $ | $ | ||||||||||||
|
Parts revenue |
||||||||||||||||
|
Commercial vehicle repair service revenue |
||||||||||||||||
|
Finance revenue |
||||||||||||||||
|
Insurance revenue |
||||||||||||||||
|
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 have any material contract assets or contract liabilities on the balance sheet as of June 30, 2024. 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 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 six months ended June 30, 2024 and June 30, 2023 consisted of the following (in thousands):
|
Three Months Ended |
Six Months Ended |
|||||||||||||||
|
June 30, 2024 |
June 30, 2023 |
June 30, 2024 |
June 30, 2023 |
|||||||||||||
|
Minimum rental payments |
$ | $ | $ | $ | ||||||||||||
|
Nonlease payments |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
10 – Accumulated Other Comprehensive Income
The following table shows the components of accumulated other comprehensive income (loss) (in thousands):
|
Balance as of December 31, 2023 |
$ | ( |
) | |
|
Foreign currency translation adjustment |
( |
) | ||
|
Balance as of March 31, 2024 |
$ | ( |
) | |
|
Foreign currency translation adjustment |
( |
) | ||
|
Balance as of June 30, 2024 |
$ | ( |
) |
The functional currency of the Company’s foreign subsidiary, RTC Canada, is its local currency. Results of operations of RTC Canada are translated into USD using the monthly average exchange rates during the year. The assets and liabilities of RTC Canada are translated into USD using the exchange rates in effect on the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss and the statement of comprehensive income.
11 – Accounts Receivable and Allowance for Credit Losses
The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. Under Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company is required to remeasure expected credit losses for financial instruments held on the reporting date based on historical experience, current conditions and reasonable forecasts.
Accounts receivable consists primarily of commercial vehicle sales receivables, manufacturers’ receivables and leasing, parts and service sales receivables and other trade receivables. The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic conditions. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.
The following table summarizes the changes in the allowance for credit losses (in thousands):
|
Balance December 31, 2023 |
Provision for the Six Months Ended June 30, 2024 |
Write offs Against Allowance, net of Recoveries |
Balance June 30, 2024 |
|||||||||||||
|
Commercial vehicle receivables |
$ | $ | $ | − | $ | |||||||||||
|
Manufacturers’ receivables |
( |
) | ||||||||||||||
|
Leasing, parts and service receivables |
( |
) | ||||||||||||||
|
Other receivables |
( |
) | ||||||||||||||
|
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
12 – Acquisitions
The following acquisitions, unless otherwise noted, were considered business combinations accounted for under ASC 805 “Business Combinations.” Pro forma information was not included in accordance with ASC 805 because the acquisitions were not considered material.
On December 4, 2023, the Company acquired certain assets of Freeway Ford Truck Sales, Inc., which included real estate and a Ford commercial vehicle franchise in Chicago, Illinois, along with commercial vehicle and parts inventory. The transaction was valued at approximately $
On July 15, 2024, the Company acquired certain assets of Nebraska Peterbilt, which included real estate and a Peterbilt commercial vehicle franchise in Grand Island and North Platte, Nebraska, along with commercial vehicle and parts inventory. The transaction was valued at approximately $
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements contained in this Form 10-Q (or otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, website postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”), notwithstanding that such statements are not specifically identified. Forward-looking statements include statements about the Company’s financial position, business strategy and plans and objectives of management of the Company for future operations. These forward-looking statements reflect the best judgments of the Company about the future events and trends based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements reflect our current view of the Company with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Please read Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of certain of those risks. Other unknown or unpredictable factors could also have a material adverse effect on future results. Although the Company believes that its expectations are reasonable as of the date of this Form 10-Q, it can give no assurance that such expectations will prove to be correct. The Company does not intend to update or revise any forward-looking statements unless securities laws require it to do so, and the Company undertakes no obligation to publicly release any revisions to forward-looking statements, whether because of new information, future events or otherwise.
The following comments should be read in conjunction with the Company’s consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.
Note Regarding Trademarks Commonly Used in the Company’s Filings
Peterbilt® is a registered trademark of Peterbilt Motors Company. PACCAR® is a registered trademark of PACCAR, Inc. PacLease® is a registered trademark of PACCAR Leasing Corporation. Navistar® is a registered trademark of Navistar International, Inc. International® is a registered trademark of Navistar, Inc. Idealease is a registered trademark of Idealease, Inc. aka Idealease of North America, Inc. Blue Bird® is a registered trademark of Blue Bird Investment Corporation. IC Bus® is a registered trademark of IC Bus, LLC. Hino® is a registered trademark of Hino Motors, Ltd. Isuzu® is a registered trademark of Isuzu Motors Limited. Ford® is a registered trademark of Ford Motor Company. Dennis Eagle® is a registered trademark of Dennis Eagle Limited. Cummins® is a registered trademark of Cummins, Inc. This report contains additional trade names or trademarks of other companies. Our use of such trade names or trademarks should not imply any endorsement or relationship with such companies.
General
Rush Enterprises, Inc. was incorporated in Texas in 1965 and consists of one reportable segment, the Truck Segment, and conducts business through its subsidiaries. Our principal offices are located at 555 IH 35 South, Suite 500, New Braunfels, Texas 78130.
We are a full-service, integrated retailer of commercial vehicles and related services. The Truck Segment includes our operation of a network of commercial vehicle dealerships under the name “Rush Truck Centers.” Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, Dennis Eagle, IC Bus and Blue Bird. Through our strategically located network of Rush Truck Centers, we provide one-stop service for the needs of our commercial vehicle customers, including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.
Our Rush Truck Centers are principally located in high traffic areas throughout the United States and Ontario, Canada. Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 125 franchised Rush Truck Centers in 23 states. In 2019, we purchased a 50% equity interest in an entity in Canada, Rush Truck Centres of Canada Limited (“RTC Canada”) and on May 2, 2022, we purchased an additional 30% equity interest in RTC Canada that increased our equity interest to 80%. RTC Canada currently owns and operates 15 International dealership locations in Ontario. Prior to acquiring the additional 30%, we accounted for the equity interest in RTC Canada using the equity method of accounting. Now, the operating results of RTC Canada are consolidated in the Consolidated Statements of Operations, the Statements of Comprehensive Income, the Consolidated Balance Sheets and commercial vehicle unit sales data as of May 2, 2022.
Our business strategy consists of providing solutions to the commercial vehicle industry through our network of commercial vehicle dealerships. We offer an integrated approach to meeting customer needs by providing service, parts and collision repairs in addition to new and used commercial vehicle sales and leasing, plus financial services, vehicle upfitting, CNG fuel systems through our joint venture with Cummins and vehicle telematics products. We intend to continue to implement our business strategy, reinforce customer loyalty and remain a market leader by continuing to develop our Rush Truck Centers as we expand our product offerings and extend our dealership network through strategic acquisitions of new locations and opening new dealerships in our existing areas of operation to enable us to better serve our customers.
Outlook
A.C.T. Research Co., LLC (“A.C.T. Research”), a commercial vehicle industry data and forecasting service provider, currently forecasts new U.S. Class 8 retail truck sales to be 228,700 units in 2024, which would represent a 15.8% decrease compared to 2023. As anticipated, we experienced healthy sales growth in the second quarter, compared to the first quarter, due primarily to the timing of deliveries to certain large customers and continued strong demand from vocational fleets. We expect vocational sales to remain strong in the third quarter. However, we also expect that new U.S. Class 8 retail truck sales in the second half of 2024 will be less than in the first half of the year. We expect our U.S. market share of new Class 8 truck sales to range between 5.7% and 6.1% in 2024. This market share percentage would result in the sale of approximately 13,000 to 14,000 new Class 8 trucks in 2024. Additionally, we expect to sell approximately 450 new Class 8 trucks in Canada in 2024.
With respect to new U.S. Class 4 through 7 retail commercial vehicle sales, A.C.T. Research currently forecasts sales to be 262,000 units in 2024, which would represent a 3.7% increase compared to 2023. As we look forward, production continues to increase and delivery lead times have improved. However, we continue to monitor delays at body manufacturers that could impact deliveries to customers. Currently, we believe Class 4 through 7 commercial vehicle sales in third quarter will be consistent with our second quarter results. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between 4.9% and 5.3% in 2024. This market share percentage would result in the sale of approximately 13,000 to 14,000 new Class 4 through 7 commercial vehicles in 2024. Additionally, we expect to sell approximately 500 new Class 5 through 7 commercial vehicles in Canada in 2024.
We expect to sell approximately 1,800 to 2,000 light-duty vehicles and approximately 6,500 to 7,500 used commercial vehicles in 2024. In addition, we expect lease and rental revenues to remain flat during 2024.
With respect to our parts, service, and collision center (collectively referred to herein as “Aftermarket Products and Services”) operations, we expect that the sluggish freight market and persistent high interest rates will continue to negatively impact our over-the-road customers, including both small carriers and larger fleets. Despite the challenging operating environment that is impacting the industry, we believe that the strategic decisions we made several years ago to diversify our customer base and focus on supporting large national fleets, along with the operating expense reduction measures we undertook at the beginning of the second quarter, will allow us to successfully navigate this difficult market cycle. We also believe that our Aftermarket Products and Services revenues will remain flat to slightly down in 2024, compared to 2023.
Critical Accounting Policies and Estimates
The preparation of our interim unaudited consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities in our interim unaudited consolidated financial statements and accompanying notes. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates, judgments, and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions are reasonable, they are based upon information available at the time. Actual results might differ from these estimates under different assumptions or conditions.
Our significant accounting policies are discussed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Critical Accounting Policies and Estimates" in our Form 10-K. There were no material changes to our significant accounting policies.
Results of Operations
The following discussion and analysis includes our historical results of operations for the three months and six months periods ended June 30, 2024 and 2023.
The following table sets forth certain financial data as a percentage of total revenues for the periods indicated:
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Revenue |
||||||||||||||||
|
New and used commercial vehicle sales |
64.1 | % | 62.5 | % | 62.2 | % | 61.6 | % | ||||||||
|
Aftermarket products and services sales |
31.0 | 32.5 | 32.7 | 33.2 | ||||||||||||
|
Lease and rental sales |
4.3 | 4.4 | 4.5 | 4.5 | ||||||||||||
|
Finance and insurance |
0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||
|
Other |
0.3 | 0.3 | 0.3 | 0.4 | ||||||||||||
|
Total revenues |
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
|
Cost of products sold |
80.6 | 79.3 | 79.9 | 79.2 | ||||||||||||
|
Gross profit |
19.4 |
20.7 |
20.1 |
20.8 |
||||||||||||
|
Selling, general and administrative |
12.4 | 12.8 | 13.2 | 13.1 | ||||||||||||
|
Depreciation and amortization |
0.8 | 0.8 | 0.8 | 0.8 | ||||||||||||
|
Gain (loss) on sale of assets |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
|
Operating income |
6.2 | 7.1 | 6.0 | 6.9 | ||||||||||||
|
Other income |
0.0 | 0.0 | 0.0 | |||||||||||||