Rush Enterprises(RUSHA) - 2021 Q3 - Quarterly Report

Financial Performance - Total revenues increased by $88.0 million, or 7.5%, in Q3 2021 compared to Q3 2020[101] - Aftermarket Products and Services revenues totaled $463.0 million in Q3 2021, up 15.7% from Q3 2020[101] - Revenues from sales of new and used commercial vehicles increased by $17.6 million, or 2.5%, in Q3 2021 compared to Q3 2020[102] - Total revenues increased by $346.6 million, or 10.0%, in the first nine months of 2021 compared to the same period in 2020[122] - Gross profit increased by $158.6 million, or 24.8%, in the first nine months of 2021, with gross profit as a percentage of sales rising to 20.9% from 18.4%[127] Sales and Market Share - A.C.T. Research forecasts new U.S. Class 8 retail truck sales to be 228,500 units in 2021, representing a 16.8% increase compared to 2020[75] - The company expects to achieve a market share of new Class 8 truck sales between 5.0% and 5.2% in 2021, translating to approximately 11,400 to 11,900 units sold[76] - For new U.S. Class 4 through 7 retail commercial vehicle sales, A.C.T. Research forecasts 251,000 units in 2021, an 8.2% increase from 2020, with the company expecting a market share of 4.0% to 4.3%[77] - The company anticipates selling approximately 7,200 to 7,400 used commercial vehicles in 2021[78] Revenue Growth Projections - Lease and rental revenue is expected to increase by 5% to 7% in 2021 compared to 2020[78] - Aftermarket Products and Services revenues are projected to rise by 10% to 12% in 2021 compared to 2020[79] Acquisitions and Expansion - In October 2021, the company acquired an independent parts and service facility in Victorville, California, to be converted into a full-service Peterbilt dealership[80] - The company plans to acquire a full-service Hino and Isuzu dealership in Elk Grove, Illinois, in November 2021[80] - The company entered into an agreement to acquire full-service commercial vehicle dealerships and Idealease franchises in multiple states, with the transaction expected to close in December 2021[80] - The company entered into an Asset Purchase Agreement to acquire assets of Summit Truck Group for approximately $223.0 million, with $114.0 million expected to be financed at closing[143] Profitability and Margins - Gross profit increased by $69.8 million, or 32.9%, in Q3 2021 compared to Q3 2020, with gross profit as a percentage of sales rising to 22.3%[109] - Gross margins from Aftermarket Products and Services operations increased to 39.3% in Q3 2021, up from 35.4% in Q3 2020, with gross profit rising to $182.2 million from $141.9 million[110] - Gross margins on new Class 8 truck sales rose to 8.7% in Q3 2021, compared to 7.8% in Q3 2020, driven by strong demand[111] - Gross margins on new Class 4 through 7 commercial vehicle sales increased to 8.0% in Q3 2021, up from 5.9% in Q3 2020[112] - Gross margins on used commercial vehicle sales increased to 19.7% in Q3 2021, from 12.0% in Q3 2020, due to strong demand[113] - Gross margins from truck lease and rental sales increased to 25.1% in Q3 2021, up from 14.4% in Q3 2020, attributed to increased rental fleet utilization[114] Cash Flow and Financial Position - Cash flows from operating activities for the first nine months of 2021 provided net cash of $438.6 million, primarily from $172.8 million in net income and non-cash adjustments totaling $126.7 million[146] - As of September 30, 2021, the company had $259.7 million in cash, indicating strong liquidity[74] - Financing activities resulted in net cash used of $369.6 million in the first nine months of 2021, mainly due to $232.8 million for principal repayments of long-term debt[151] - The company has a Floor Plan Credit Agreement with an aggregate loan commitment of $1.0 billion, with approximately $333.7 million outstanding as of September 30, 2021[155] - The company expects to fund capital expenditures through operating cash flows and financing, with no other material commitments as of September 30, 2021[144] - The company anticipates using a new revolving credit agreement of up to $250.0 million for capital expenditures and working capital needs[153] Environmental and Regulatory Considerations - The California Air Resources Board adopted a rule to phase out diesel-powered commercial vehicles, requiring a percentage of new sales to be zero-emission vehicles starting in model year 2024[164] - A joint memorandum of understanding among fifteen U.S. states aims for 100% of new Class 3 through 8 commercial vehicles to be zero emission by 2030, with an interim target of 30% by 2030[164] - The company does not believe it currently has any material environmental liabilities that would adversely affect its financial condition or cash flows[165] - Soil and groundwater impacts are known to exist at some of the company's dealerships, which may lead to unforeseen environmental costs or liabilities[165] - Environmental laws and regulations are complex and subject to change, which could require additional expenditures that may adversely affect the company's operations[165] - The company does not anticipate that compliance with current environmental laws will have a material adverse effect on its results of operations[165] - Future legislation regarding greenhouse gas emissions may negatively impact the company's business operations[164] Interest Rate and Market Risks - The company is exposed to market risk through interest rates related to its financing agreements, primarily based on LIBOR[166] - An increase or decrease in LIBOR of 100 basis points could correspondingly increase or decrease annual interest expense by approximately $3.5 million[167]