rusha20230331

rusha20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	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 0-20797

RUSH ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Texas
(State or other jurisdiction of

incorporation or organization)

74-1733016

(I.R.S. Employer Identification No.)

555 I.H. 35 South, Suite 500

New Braunfels, Texas 78130

(Address of principal executive offices)

(Zip Code)

(830) 302-5200

(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.

Yes ☑ No ☐

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).

Yes ☑ No ☐

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.

Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting company ☐

			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 ☐ No ☑

Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of May 2, 2023.

Title of Class

Number of Shares

Outstanding

Class A Common Stock, $.01 Par Value

42,020,101

Class B Common Stock, $.01 Par Value

12,264,252

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	RUSHA	NASDAQ Global Select Market
Class B Common Stock, $0.01 par value	RUSHB	NASDAQ Global Select Market

PART I. FINANCIAL INFORMATION			Page

	Item 1.	Financial Statements	3

		Consolidated Balance Sheets - March 31, 2023 (unaudited) and December 31, 2022	3

		Consolidated Statements of Income - For the Three Months Ended March 31, 2023 and 2022 (unaudited)	4

		Consolidated Statements of Comprehensive Income - For the Three Months Ended March 31, 2023 and 2022 (unaudited)	5

		Consolidated Statements of Shareholders’ Equity – For the Three Months Ended March 31, 2023 and 2022 (unaudited)	6

		Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2023 and 2022 (unaudited)	7

		Notes to Consolidated Financial Statements (unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Mine Safety Disclosures	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	26

SIGNATURES			27

	March 31,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	226,292		$	201,044
Accounts receivable, net		229,684			220,651
Inventories, net		1,498,948			1,429,429
Prepaid expenses and other		19,028			16,619
Total current assets		1,973,952			1,867,743
Property and equipment, net		1,404,566			1,368,594
Operating lease right-of-use assets, net		99,753			102,685
Goodwill, net		416,481			416,363
Other assets, net		74,800			65,681
Total assets	$	3,969,552		$	3,821,066

Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable	$	1,015,971		$	933,203
Current maturities of finance lease obligations		31,894			29,209
Current maturities of operating lease obligations		14,948			15,003
Trade accounts payable		200,412			171,717
Customer deposits		100,397			116,240
Accrued expenses		149,455			163,302
Total current liabilities		1,513,077			1,428,674
Long-term debt, net of current maturities		262,467			275,433
Finance lease obligations, net of current maturities		100,240			93,483
Operating lease obligations, net of current maturities		86,188			89,029
Other long-term liabilities		22,920			19,455
Deferred income taxes, net		155,124			151,970
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2023 and 2022		–			−
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 42,149,927 Class A shares and 12,307,852 Class B shares outstanding in 2023; and 42,345,361 Class A shares and 12,083,085 Class B shares outstanding in 2022		577			572
Additional paid-in capital		512,998			500,642
Treasury stock, at cost: 2,041,809 Class A shares and 1,168,432 Class B shares in 2023; and 1,626,777 Class A shares and 1,112,446 Class B shares in 2022		(156,210	)		(130,930	)
Retained earnings		1,457,203			1,378,337
Accumulated other comprehensive loss		(3,898	)		(4,130	)
Total Rush Enterprises, Inc. shareholders’ equity		1,810,670			1,744,491
Noncontrolling interest		18,866			18,531
Total shareholders’ equity		1,829,536			1,763,022
Total liabilities and shareholders’ equity	$	3,969,552		$	3,821,066

	Three Months Ended March 31,
	2023			2022
Revenues
New and used commercial vehicle sales	$	1,161,725		$	935,719
Aftermarket products and services sales		648,226			543,263
Lease and rental		86,666			71,335
Finance and insurance		6,571			7,525
Other		8,579			5,360
Total revenue		1,911,767			1,563,202
Cost of products sold
New and used commercial vehicle sales		1,050,365			834,993
Aftermarket products and services sales		402,155			334,208
Lease and rental		60,478			48,561
Total cost of products sold		1,512,998			1,217,762
Gross profit		398,769			345,440
Selling, general and administrative expense		256,808			224,447
Depreciation and amortization expense		14,314			13,674
Gain on sale of assets		129			180
Operating income		127,776			107,499
Other income		2,347			14,064
Interest expense, net		10,983			1,219
Income before taxes		119,140			120,344
Income tax provision		28,350			27,891
Net income	$	90,790		$	92,453
Less: Net income attributable to noncontrolling interest		(335	)		–
Net income attributable to Rush Enterprises, Inc.	$	90,455		$	92,453

Net income attributable to Rush Enterprises, Inc. per share of common stock:
Basic	$	1.65		$	1.65
Diluted	$	1.60		$	1.60

Weighted average shares outstanding:
Basic		54,767			55,938
Diluted		56,564			57,912

Dividends declared per common share	$	0.21		$	0.19

																					Total
																					Rush
	Common Stock																	Accumulated			Enterprises,
	Shares						$0.01		Additional									Other			Inc.					Total
	Outstanding						Par		Paid -In			Treasury			Retained			Comprehensive			Shareholders’			Noncontrolling		Shareholders’
	Class A			Class B			Value		Capital			Stock			Earnings			Income (Loss)			Equity			Interest		Equity
Balance, December 31, 2022		42,345			12,083		$	572	$	500,642		$	(130,930	)	$	1,378,337		$	(4,130	)	$	1,744,491		$	18,531	$	1,763,022
Stock options exercised and stock awards		152			–			2		3,412			–			–			–			3,414			–		3,414
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			–		13,080			–			–			–			13,080			–		13,080
Vesting of restricted share awards		–			281			3		(6,964	)		–			–			–			(6,961	)		–		(6,961	)
Issuance of common stock under employee stock purchase plan		68			–			–		2,828			–			–			–			2,828			–		2,828
Common stock repurchases		(415	)		(56	)		–		–			(25,280	)		–			–			(25,280	)		–		(25,280	)
Cash dividends declared on Class A common stock		–			–			–		–			–			(8,897	)		–			(8,897	)		–		(8,897	)
Cash dividends declared on Class B common stock		–			–			–		–			–			(2,692	)		–			(2,692	)		–		(2,692	)
Foreign currency translation adjustment		–			–			–		–			–			–			232			232			–		232
Net income		–			–			–		–			–			90,455			–			90,455			335		90,790
Balance, March 31, 2023		42,150			12,308		$	577	$	512,998		$	(156,210	)	$	1,457,203		$	(3,898	)	$	1,810,670		$	18,866	$	1,829,536

	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	90,790		$	92,453
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		53,896			45,809
Gain on sale of property and equipment, net		(129	)		(179	)
Gain on joint venture transaction		−			(12,500	)
Stock-based compensation expense related to employee stock options and employee stock purchases		13,080			13,793
Provision for deferred income tax expense		3,165			1,019
Change in accounts receivable, net		(8,972	)		(58,810	)
Change in inventories		(52,845	)		(98,292	)
Change in prepaid expenses and other, net		(2,408	)		(578	)
Change in trade accounts payable		27,130			49,656
Change in customer deposits		(15,892	)		(8,715	)
Change in accrued expenses		(14,699	)		14,574
Other, net		(650	)		(3,645	)
Net cash provided by operating activities		92,466			34,585
Cash flows from investing activities:
Acquisition of property and equipment		(90,446	)		(45,689	)
Proceeds from the sale of property and equipment		122			2,635
Business disposition		−			27,500
Other		(5,190	)		(736	)
Net cash used in investing activities		(95,514	)		(16,290	)
Cash flows from financing activities:
Draws on floor plan notes payable – non-trade, net		82,642			71,478
Proceeds from long-term debt		257,705			207,500
Principal payments on long-term debt		(270,793	)		(204,000	)
Principal payments on finance lease obligations		(4,471	)		(3,997	)
Proceeds from issuance of shares relating to equity awards		6,245			4,823
Taxes paid related to net share settlement of equity awards		(6,964	)		(7,215	)
Payments of cash dividends		(12,062	)		(11,083	)
Common stock repurchased		(24,008	)		(14,421	)
Net cash provided by financing activities		28,294			43,085
Net increase in cash and cash equivalents		25,246			61,380
Effect of exchange rate on cash		204			–
Cash and cash equivalents, beginning of period		200,842			148,146
Cash and cash equivalents, end of period	$	226,292		$	209,526
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	11,712		$	2,244
Income taxes paid (refund), net	$	374		$	(14	)
Noncash investing and financing activities:
Assets acquired under finance leases	$	16,178		$	2,672

	Three Months Ended March 31,
	2023		2022
Numerator:
Numerator for basic and diluted earnings per share – Net income available to common shareholders	$	90,455	$	92,453
Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		54,767		55,938
Effect of dilutive securities– Employee stock options and restricted share awards		1,797		1,974
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions		56,564		57,912
Basic earnings per common share	$	1.65	$	1.65
Diluted earnings per common share and common share equivalents	$	1.60	$	1.60

	Truck Segment		All Other		Totals

As of and for the three months ended March 31, 2023
Revenues from external customers	$	1,907,941	$	3,826	$	1,911,767
Segment operating income		127,563		213		127,776
Segment income before taxes		118,927		213		119,140
Segment assets		3,913,928		55,624		3,969,552

As of and for the three months ended March 31, 2022
Revenues from external customers	$	1,559,051	$	4,151	$	1,563,202
Segment operating income		107,320		179		107,499
Segment income before taxes		120,259		85		120,344
Segment assets		3,266,895		54,653		3,321,548

	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Commercial vehicle sales revenue	$	1,161,725	$	935,719
Parts revenue		384,418		330,743
Commercial vehicle repair service revenue		263,808		212,520
Finance revenue		3,508		4,489
Insurance revenue		3,063		3,036
Other revenue		8,579		5,360
Total	$	1,825,101	$	1,491,867

	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Minimum rental payments	$	75,160	$	61,998
Nonlease payments		11,506		9,337
Total	$	86,666	$	71,335

Balance as of December 31, 2022	$	(4,130	)
Foreign currency translation adjustment		232
Balance as of March 31, 2023	$	(3,898	)

Cash	$	4,310
Accounts receivable		19,072
Inventory		56,255
Property and equipment, including real estate		80,337
Floor plan notes payable		(30,501	)
Trade payables		(19,978	)
Customer deposits		(1,980	)
Accrued liabilities		(7,875	)
Notes payable		(69,545	)
Goodwill		44,033
Franchise rights		3,906
Other		3,422
Equity investment in RTC Canada		(37,309	)
Noncontrolling interest		(17,828	)
Gain on equity method investment		(6,958	)

Total	$	19,361

	Three Months Ended March 31,
	2023			2022			% Change
Vehicle unit sales:
New heavy-duty vehicles		4,365			3,528			23.7	%
New medium-duty vehicles		3,038			2,141			41.9	%
New light-duty vehicles		504			481			4.8	%
Total new vehicle unit sales		7,907			6,150			28.6	%

Used vehicles		1,684			2,395			(29.7%	)

Vehicle revenues:
New heavy-duty vehicles	$	736.7		$	546.1			34.9	%
New medium-duty vehicles		286.9			178.0			61.2	%
New light-duty vehicles		28.0			23.8			17.6	%
Total new vehicle revenue	$	1,051.6		$	747.9			40.6	%

Used vehicle revenue	$	102.7		$	185.7			(44.7%	)

Other vehicle revenues:⁽¹⁾	$	7.4		$	2.1			252.4	%

Dealership absorption ratio:		136.5	%		136.3	%		0.1	%
(1) Includes sales of truck bodies, trailers and other new equipment.

Period	Total Number of Shares Purchased (1)(2)(3)		Average Price Paid Per Share (1)			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
January 1 – January 31, 2023		133,505	$	52.02	(4)		133,505	$	137,251,054
February 1 – February 28, 2023		49,843		56.78	(5)		49,843		134,419,285
March 1 – March 31, 2023		287,670		53.85	(6)		287,670		118,920,133
Total		471,018					471,018

	RUSH ENTERPRISES, INC.



Date: May 10, 2023	By:	/S/ W.M. “RUSTY” RUSH
		W.M. “Rusty” Rush
		President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)


Date: May 10, 2023	By:	/S/ STEVEN L. KELLER
		Steven L. Keller
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

	Balance December 31, 2022		Provision for the Three Months Ended March 31, 2023			Write offs Against Allowance, net of Recoveries			Balance March 31, 2023
Commercial vehicle receivables	$	160	$	(78	)	$	−		$	82
Manufacturers’ receivables		573		353			(241	)		685
Leasing, parts and service receivables		1,589		1,023			(761	)		1,851
Other receivables		−		−			22			22
Total	$	2,322	$	1,298		$	(980	)	$	2,640

	Three Months Ended March 31,
	2023			2022
Gross Profit:
New and used commercial vehicle sales		27.9	%		29.2	%
Parts and service sales		61.7			60.5
Lease and rental		6.6			6.6
Finance and insurance		1.7			2.2
Other		2.1			1.5
Total gross profit		100.0	%		100.0	%

	Three Months Ended March 31,
	2023			2022
Net cash provided by (used in):
Operating activities	$	92,466		$	34,585
Investing activities		(95,514	)		(16,290	)
Financing activities		28,294			43,085
Net increase (decrease) in cash	$	25,246		$	61,380

Exhibit Number	Exhibit Title
3.1	Restated Articles of Incorporation of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q (File No. 000-20797) for the quarter ended June 30, 2008)
3.2	Rush Enterprises, Inc. Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 21, 2013)
3.3	First Amendment to Amended and Restated Bylaws of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 24, 2021)
31.1*	Certification of CEO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of CFO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SEC Form 10-Q filed by Rush Enterprises Inc.