Rush Enterprises(RUSHB) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited consolidated balance sheets, income statements, and cash flow statements for the period ended June 30, 2023 Consolidated Balance Sheet Highlights | Metric | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $2.09 billion | $1.87 billion | | Total Assets | $4.13 billion | $3.82 billion | | Total Current Liabilities | $1.62 billion | $1.43 billion | | Total Shareholders' Equity | $1.89 billion | $1.76 billion | Consolidated Statements of Income Highlights | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue ($ in billions) | $2.00 | $1.79 | $3.91 | $3.35 | | Gross Profit ($ in millions) | $413.8 | $374.2 | $812.6 | $719.7 | | Operating Income ($ in millions) | $142.9 | $135.0 | $270.6 | $242.5 | | Net Income Attributable to Rush ($ in millions) | $98.3 | $110.2 | $188.7 | $202.7 | | Diluted EPS | $1.75 | $1.92 | $3.35 | $3.52 | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2023 ($ in millions) | 2022 ($ in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $114.0 | $58.2 | | Net cash used in investing activities | ($188.9) | ($94.2) | | Net cash provided by financing activities | $65.7 | $104.6 | | Net (decrease) increase in cash | ($9.2) | $68.5 | - The Board of Directors declared a three-for-two stock split for both Class A and Class B common stock in July 2023[56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, highlighting strong vehicle demand, aftermarket growth, and future sales forecasts Outlook The company provides sales forecasts for various truck classes and projects growth in its lease and rental business for 2023 - A.C.T. Research forecasts U.S. Class 8 retail truck sales to be 272,600 units in 2023, a 5.2% increase from 2022, with Rush expecting a market share between 6.1% and 6.6%[64] - U.S. Class 4-7 retail commercial vehicle sales are forecasted at 248,150 units in 2023, a 6.2% increase from 2022, with Rush expecting a market share between 4.6% and 5.2%[65] - Lease and rental revenue is projected to increase by 10% to 15% in 2023 compared to 2022, driven by strong demand and the consolidation of RTC Canada[66] - The company notes that demand for Aftermarket Products and Services is beginning to soften, particularly from over-the-road customers[67] Results of Operations Details financial performance for Q2 and H1 2023, showing revenue growth alongside a decrease in pre-tax income Q2 2023 vs Q2 2022 Performance | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $2.00B | $1.79B | +11.8% | | Gross Profit | $413.8M | $374.2M | +10.6% | | Income Before Taxes | $130.5M | $140.2M | -6.9% | Vehicle Unit Sales (Q2 2023 vs Q2 2022) | Vehicle Class | Q2 2023 Units | Q2 2022 Units | % Change | | :--- | :--- | :--- | :--- | | New heavy-duty (Class 8) | 4,300 | 4,168 | +3.2% | | New medium-duty (Class 4-7) | 3,477 | 2,815 | +23.5% | | Used vehicles | 1,869 | 1,629 | +14.7% | - The dealership absorption ratio, a key performance indicator, improved to 139.7% in Q2 2023 from 136.4% in Q2 2022[74] - For the six months ended June 30, 2023, total revenues increased 16.7% YoY to $3.9 billion, while income before taxes decreased 4.2% to $249.7 million[97][108] Liquidity and Capital Resources The company details its working capital, credit facilities, capital expenditure plans, and stock repurchase program - As of June 30, 2023, the company had working capital of approximately $467.0 million, including $191.9 million in cash[110] - The company expects to spend $170.0 million to $180.0 million on vehicles for its leasing operations and $35.0 million to $40.0 million on other capital expenditures in 2023[114] - A stock repurchase program authorizing up to $150.0 million was approved in December 2022; as of June 30, 2023, $71.4 million of shares had been repurchased[116] - The backlog of commercial vehicle orders increased to approximately $4.04 billion on June 30, 2023, from $3.68 billion on June 30, 2022[132] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure stems from interest rate fluctuations on its variable-rate debt - The company is exposed to interest rate risk on $1.37 billion of variable-rate debt as of June 30, 2023, tied to SOFR, CDOR, and the prime rate[143] - A hypothetical 100 basis point (1%) change in interest rates would impact annual interest expense by approximately $13.7 million[143] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[144] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, internal controls[145] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course litigation, which is not expected to have a material adverse effect - The company is involved in litigation arising from its operations in the ordinary course of business and maintains liability insurance[146] - As of June 30, 2023, management believes that there are no pending claims or litigation that are reasonably likely to have a material adverse effect on its financial position or results of operations[146] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the 2022 Annual Report on Form 10-K - There has been no material change in the company's risk factors as disclosed in the 2022 Annual Report on Form 10-K[148] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details stock repurchase activity for Q2 2023, with no unregistered sales of equity securities during the period - The Company did not make any unregistered sales of equity securities during the second quarter of 2023[149] Stock Repurchase Activity Q2 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | 196,525 | $54.62 | | May 2023 | 306,752 | $53.00 | | June 2023 | 218,704 | $60.77 | | Total | 721,981 | | - As of June 30, 2023, approximately $78.6 million remained available for repurchase under the current program, which expires on December 31, 2023[116][150] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not Applicable[152] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not Applicable[152] Item 5. Other Information No directors or officers engaged in the modification of Rule 10b5-1 trading arrangements during the quarter - During the three months ended June 30, 2023, none of the Company's directors or officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement[152] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including credit agreements and required officer certifications - Filed exhibits include a Certificate of Amendment to the Restated Articles of Incorporation, amendments to credit agreements, and amended long-term incentive and employee stock purchase plans[153][155] - Required certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906 are included as exhibits[155]