Rush Enterprises(RUSHA) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2024 Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4,506.5 | $4,364.2 | | Total current assets | $2,377.7 | $2,260.3 | | Inventories, net | $1,894.2 | $1,801.4 | | Total Liabilities | $2,483.6 | $2,473.8 | | Floor plan notes payable | $1,226.7 | $1,139.7 | | Total Shareholders' Equity | $2,022.9 | $1,890.4 | Consolidated Statements of Income Consolidated Income Statement Summary (in millions, except per share amounts) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,027.0 | $2,003.1 | $3,899.0 | $3,914.8 | | Gross Profit | $392.4 | $413.8 | $782.3 | $812.6 | | Operating Income | $124.5 | $142.9 | $235.1 | $270.6 | | Net Income | $78.8 | $98.5 | $150.3 | $189.3 | | Diluted EPS | $0.97 | $1.17 | $1.84 | $2.23 | - Dividends declared per common share increased to $0.17 in Q2 2024 from $0.14 in Q2 2023, and to $0.34 for H1 2024 from $0.28 for H1 2023[10] Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $115.5 | $114.0 | | Net cash used in investing activities | ($161.1) | ($188.9) | | Net cash provided by financing activities | $29.2 | $65.7 | | Net decrease in cash | ($16.4) | ($9.2) | Notes to Consolidated Financial Statements - The company operates under a single reportable business segment, the Truck Segment, which includes a network of commercial vehicle dealerships providing sales, aftermarket parts, service, and financial services[28] Disaggregated Revenue by Source (in millions) | Revenue Source | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Commercial vehicle sales | $1,300.3 | $1,250.8 | $2,423.6 | $2,412.5 | | Parts revenue | $365.0 | $379.4 | $738.5 | $764.9 | | Commercial vehicle repair service | $262.4 | $271.7 | $538.2 | $534.5 | - The company completed two recent acquisitions: certain assets of Freeway Ford Truck Sales, Inc. in December 2023 for approximately $16.3 million, and certain assets of Nebraska Peterbilt in July 2024 for approximately $16.5 million[42] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reports Q2 2024 revenue growth, gross profit decline, and reduced vehicle backlog, while maintaining strong liquidity Outlook - A.C.T. Research forecasts new U.S. Class 8 retail truck sales to decrease by 15.8% in 2024, with the company expecting lower sales in the second half[49] - New U.S. Class 4-7 commercial vehicle sales are forecasted to increase by 3.7% in 2024[50] - Aftermarket Products and Services revenues are expected to be flat to slightly down in 2024 compared to 2023, impacted by a sluggish freight market and high interest rates[51] Results of Operations - The company's key performance indicator, the absorption ratio, decreased to 134.0% in Q2 2024 from 139.7% in Q2 2023, indicating that gross profit from aftermarket services covered a smaller portion of dealership overhead[58] Q2 2024 vs Q2 2023 Performance | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $2.03B | $2.00B | +1.2% | | Aftermarket Revenues | $627.4M | $651.1M | -3.6% | | New & Used Vehicle Revenues | $1.30B | $1.25B | +4.0% | | Gross Profit | $392.4M | $413.8M | -5.2% | | Gross Margin | 19.4% | 20.7% | -1.3 p.p. | Vehicle Unit Sales - Q2 2024 vs Q2 2023 | Vehicle Class | Q2 2024 Units | Q2 2023 Units | % Change | | :--- | :--- | :--- | :--- | | New heavy-duty (Class 8) | 4,128 | 4,300 | -4.0% | | New medium-duty (Class 4-7) | 3,691 | 3,477 | +6.2% | | Used vehicles | 1,723 | 1,869 | -7.8% | Liquidity and Capital Resources - As of June 30, 2024, the company had working capital of approximately $673.0 million, including $167.3 million in cash, deemed sufficient for operating requirements for at least the next twelve months[79] - The Board of Directors declared a cash dividend of $0.18 per share for Q2 2024, a 5.6% increase compared to the Q1 2024 dividend[83] - Under a $150.0 million stock repurchase program authorized in December 2023, the company had repurchased $77.2 million of its common stock as of June 30, 2024[85] Backlog - The backlog of commercial vehicle orders was approximately $1.81 billion as of June 30, 2024, a significant decrease from $4.04 billion on June 30, 2023, primarily reflecting decreased demand for new Class 8 trucks[100] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $1.39 billion variable-rate debt - The company is exposed to interest rate risk on $1.39 billion of variable-rate debt, where a hypothetical 100 basis point increase or decrease would change annual interest expense by approximately $13.8 million[111] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2024, with no material Q2 changes to internal controls - The principal executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[113] - No changes in internal control over financial reporting occurred during Q2 2024 that materially affected, or are reasonably likely to materially affect, the company's internal control[114] PART II. OTHER INFORMATION Legal Proceedings The company is involved in routine litigation, but no pending cases are expected to materially affect its financial condition - The company is involved in routine litigation but does not expect any pending cases to have a material adverse effect on its financial condition[115] Risk Factors No material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There has been no material change in the company's risk factors as disclosed in its 2023 Annual Report on Form 10-K[116] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales in Q2 2024; 105,418 shares repurchased, with $72.8 million remaining for future repurchases Stock Repurchase Activity - Q2 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2024 | 867 | $43.32 | | May 2024 | 10,432 | $42.52 | | June 2024 | 81,953 | $42.34 | | Total | 105,418 | | - As of June 30, 2024, approximately $72.8 million remained available for repurchase under the company's stock repurchase program, which expires on December 31, 2024[118] Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q2 2024 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[119] Exhibits This section lists Form 10-Q exhibits, including corporate governance documents, credit amendments, and CEO/CFO certifications