Revenues of $1.287 billion, net income of $23.1 million
Earnings per diluted share of $0.62Absorption ratio 114.3%Board declares cash dividend of $0.13 per share of Class A and Class B common stockManagement suspends share repurchase programOutlook for remainder of year is uncertain due to impact of the COVID-19 pandemicSAN ANTONIO, April 22, 2020 (GLOBE NEWSWIRE) — Rush Enterprises, Inc. (NASDAQ: RUSHA & RUSHB), which operates the largest network of commercial vehicle dealerships in North America, today announced that for the quarter ended March 31, 2020, the Company achieved revenues of $1.287 billion and net income of $23.1 million, or $0.62 per diluted share, compared with revenues of $1.348 billion and net income of $37.1 million, or $0.98 per diluted share, in the quarter ended March 31, 2019. Additionally, the Company’s Board of Directors declared a cash dividend of $0.13 per share of Class A and Class B Common Stock, approximately $4.7 million in total, to be paid on June 10, 2020 to all shareholders of record as of May 7, 2020.“Given the industry-wide slowdown in new Class 8 truck sales, which began in the fourth quarter of 2019, our first quarter 2020 performance was solid,” said W.M. “Rusty” Rush, Chairman, Chief Executive Officer and President of Rush Enterprises, Inc. “However, the effects of the COVID-19 pandemic on our Company began late in the first quarter – impacting only the last few weeks of March – and are not indicative of its future impact on the Company. These are unprecedented times, and we are focused on monitoring the impacts of the pandemic on our business and throughout our industry, while taking appropriate action to preserve the financial stability of Rush Enterprises.”Our Response to the COVID-19 Pandemic and Its Impact on Our Business and Outlook“Though the effects of the COVID-19 pandemic on our revenues were limited in the first quarter of 2020, we expect that the negative impact on our revenues, and business in general, will be substantial for the foreseeable future. We are following best practices to protect the health of our employees, customers, and the public, while responding to changing customer demand, making adjustments based on our manufacturers’ plant closures and remaining focused on maximizing the strength of our balance sheet to ensure the long-term financial strength of Rush Enterprises,” Rush said.Supporting Essential Functions While Protecting the Health and Safety of Employees, Customers and Communities
Rush Truck Centers are classified as “essential businesses” and have remained fully operational across the Company’s dealership network, though some hours of operation have been modified and in-person truck sales have been curtailed. “We are monitoring and complying with CDC guidelines for limiting the spread of COVID-19 and complying with all applicable federal, state and local executive orders. We also provided employees who are unable to work as a direct result of COVID-19 with up to two weeks of additional sick leave. In accordance with CDC guidelines, we have mandated that all employees stay at least 6 feet away from each other and our customers. In addition, we are requiring employees throughout the Company to wear facemasks when required to do so by applicable orders or whenever they cannot maintain safe social distancing from customers or other employees, and we are thoroughly cleaning and disinfecting our facilities on a regular basis. We are also providing curbside parts pick-up, online parts ordering and web-based vehicle service communication to reduce in-person interactions. With 2,400 service bays and 500 mobile service vehicles operating, our service teams are minimizing contact with customers and taking extra precautions to keep high-touch areas on customer vehicles clean and disinfected,” said Rush. Aftermarket Products and Services
“With only a few minor exceptions, our parts supply chain has remained uninterrupted to-date. However, we increased our parts inventories at all our stores to support an estimated extra 30 days of demand in case of any temporary supplier-related warehousing or logistics challenges,” he said.“We believe that the investments we have made over the years in our aftermarket strategic initiatives will serve us especially well while social distancing is required. We recently expanded our RushCare Rapid Parts Call Centers and are now even better equipped to handle incoming calls. Our online ordering platforms are another convenient and contactless way that customers can order parts for shipping, delivery or pick-up. Additionally, our Xpress services help expedite vehicle diagnosis and maintenance to ensure customers receive same-day service. Our online communications platform, RushCare Service Connect, is another way we are leveraging technology to maintain continuous remote communication with our customers. We believe these offerings, many of which are the direct result of the successful implementation of our strategic initiatives in recent years, will help us capture additional sales in a tough operating environment,” Rush added.“We have prohibited our aftermarket sales representatives from visiting customers in-person, unless they are specifically asked to do so, but they are regularly reaching out to customers and prospective customers to understand their business needs and to offer support in every way we can. Obviously, many of our customers have significantly reduced their operations and at this time nobody knows when the national economy, or society in general, will reopen in any meaningful way. As a result, as we look ahead to the second quarter, we anticipate our aftermarket products and services revenues will be negatively impacted by the COVID-19 pandemic,” he said.Commercial Vehicle Sales
Peterbilt suspended global production of trucks and engines from March 24 until April 27. Navistar shut down its plant in Ohio from March 23 through early May. Although Navistar also suspended manufacturing operations at its plants in Alabama and Mexico, production resumed at both locations on April 13. Additionally, Hino, Isuzu and Ford have each suspended manufacturing operations at their respective plants.
As a result of the COVID-19 pandemic, ACT Research is currently forecasting new U.S. Class 8 retail sales to be 127,500 units in 2020, which would represent a 54.7% decrease compared to 2019. “Our truck sales representatives are in regular communication with our customers to understand the impact the COVID-19 pandemic is having on their businesses. Currently, we are not experiencing a significant number of cancelled truck orders, but that can quickly change. However, many customers are delaying purchases due to the tremendous uncertainty right now about the economy and the impact of the pandemic. We expect that the pandemic will have a significant negative impact on new Class 8 truck sales in the second quarter, but it is not clear just how significant the impact will be,” Rush said. With respect to new U.S. Class 4-7 retail sales, ACT Research is currently forecasting retail sales to be 147,400 units in 2020, which would represent a 44.8% decrease compared to 2019. “We also expect that our medium-duty truck sales will be negatively impacted by the pandemic in the second quarter, as medium-duty commercial vehicle sales usually track closely to the general economy,” Rush added.“We are approaching write-downs of new and used commercial vehicle inventories more aggressively than in the past, and we believe our inventories are appropriately valued to meet the needs of the market,” he said.Liquidity and Expense Reduction
In the first quarter, the Company repurchased $19.9 million in stock. However, once the magnitude of the COVID-19 pandemic became apparent, the Company suspended its stock repurchase program. “Our cash position remains strong at $138 million. In March, we renewed a $100 million line of credit for another two years. We currently have no outstanding draws on the line of credit, but believe it is prudent to maintain this credit line in these uncertain times. Our balance sheet is healthy, and we believe the Company is well positioned to navigate the economic and industry challenges that lie ahead,” Rush said.Notwithstanding the strength of the Company’s balance sheet, the Company is taking steps to reduce expenses. W.M. “Rusty” Rush, Chairman, Chief Executive Officer and President of the Company, has reduced his salary by 25 percent, other members of his senior executive team also reduced their salaries by 10 percent, and the members of the Board of Directors voted to reduce the amount of their annual cash retainer by 10 percent. “We are currently taking steps to reduce expenses and delaying capital expenditures where appropriate to navigate the tough economic conditions and industry specific challenges that most certainly lie ahead,” Rush added. “On a positive note, I have repeatedly emphasized to our employees that our business is essential to our country’s response to this pandemic, and they have wholeheartedly embraced their role in ensuring food, medical supplies and other essentials continue to move where they are needed. We are all honored to be able to support our employees, customers, our communities and our country during this challenging time,” Rush stated.First Quarter Results – OperationsAftermarket Products and ServicesAftermarket products and services accounted for approximately 67% of the Company’s total gross profit in the first quarter of 2020, with parts, service and collision center revenues reaching $428.0 million, down 2.4% compared to the first quarter of 2019. The Company achieved a quarterly absorption ratio of 114.3% in the first quarter of 2020, compared to 121.5% in the first quarter of 2019. New U.S. Class 8 retail truck sales were 48,659 units in the first quarter of 2020, down 24.4% over the same time period last year, according to ACT Research. The Company sold 3,078 new Class 8 trucks in the first quarter, a decrease of 13.5% compared to the first quarter of 2019, and accounted for 6.3% of the new U.S. Class 8 truck market. New U.S. Class 4 through 7 retail commercial vehicle sales were 54,702 units in the first quarter of 2020, down 11.5% over the same time period last year, according to ACT Research. The Company sold 3,264 Class 4-7 medium-duty commercial vehicles in the first quarter, an increase of 24.9% compared to the first quarter of 2019, and accounted for 6.0% of the U.S. Class 4 through 7 commercial vehicle market. “Our Class 4-7 new commercial vehicle sales results were strong in the first quarter, and similar to our new Class 8 truck results, minimally impacted by the COVID-19 pandemic. Our strong medium-duty results were primarily driven by solid activity from our grocery and food service customers, as well as strong stock truck sales throughout our dealership network,” said Rush.Used truck sales were down slightly through the first two months of the quarter compared to 2019 due to the overall industry downturn. We experienced significant decline in used truck sales in March, which we attribute to the COVID-19 pandemic.Financial HighlightsIn the first quarter of 2020, the Company’s gross revenues totaled $1.287 billion, a 4.6% decrease from $1.348 billion in the first quarter of 2019. Net income for the quarter was $23.1 million, or $0.62 per diluted share, compared to net income of $37.1 million, or $0.98 per diluted share, in the quarter ended March 31, 2019. Aftermarket products and services revenues were $428.0 million in the first quarter of 2020, compared to $438.4 million in the first quarter of 2019. The Company delivered 3,078 new heavy-duty trucks, 3,264 new medium-duty commercial vehicles, 267 new light-duty commercial vehicles and 1,558 used commercial vehicles during the first quarter of 2020, compared to 3,558 new heavy-duty trucks, 2,614 new medium-duty commercial vehicles, 539 new light-duty commercial vehicles and 1,840 used commercial vehicles during the first quarter of 2019.The Company increased its lease and rental revenues by 2.3% in the first quarter of 2020, compared to the first quarter of 2019, but experienced a decrease in gross profit margins in the first quarter of 2020, primarily due to decreased rental fleet demand and utilization and decreased variable revenue. Rush Truck Leasing operates 45 PacLease and Idealease franchises with more than 8,100 trucks in its lease and rental fleet and more than 1,100 trucks under contract maintenance agreements.Selling, general and administrative expenses increased in the first quarter compared to the fourth quarter of 2019, as is expected in the first quarter of every year, primarily due to employee benefits and payroll taxes. During the first quarter of 2020, the Company repurchased $19.9 million of its common stock pursuant to its stock repurchase plan, which has been suspended as discussed above. In addition, the Company paid a cash dividend of $4.7 million during the first quarter. “We believe that we have taken appropriate actions to solidify the strength of our balance sheet to ensure that the Company can withstand the economic issues that are certainly headed our way,” said Rush.Conference Call InformationRush Enterprises will host its quarterly conference call to discuss earnings for the first quarter on Thursday, April 23, 2020, at 10 a.m. Eastern/9 a.m. Central. The call can be heard live by dialing 877-638-4557 (U.S.) or 914-495-8522 (International) or via the Internet at http://investor.rushenterprises.com/events.cfm. For those who cannot listen to the live broadcast, the webcast will be available on our website at the above link until July 10, 2020. Listen to the audio replay until April 30, 2020 by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering the Conference ID 8584951.About Rush Enterprises, Inc.
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