<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
( ) 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 74-1733016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8810 I.H. 10 East
San Antonio, Texas 78219
(Address of principal executive offices)
(Zip Code)
(210) 661-4511
(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 X No
--- ---
===========
Indicated below is the number of shares outstanding of the registrant's
only class of common stock, as of August 8, 1997.
Number of
Shares
Title of Class Outstanding
-------------- -----------
Common Stock, $.01 Par Value 6,643,730
<PAGE> 2
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1997 (unaudited) and
December 31, 1996 (audited) . . . . . . . . . . . . . . . . . . . . . ..3
Consolidated Statements of Income - For the Three and Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . ..4
Consolidated Statements of Cash Flows - For the Nine Months Ended
September 30, 1997 and 1996 (unaudited). . . . . . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . ..6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . .8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
</TABLE>
2
<PAGE> 3
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (UNAUDITED) (AUDITED)
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,221 $ 21,507
Accounts receivable, net 20,029 23,064
Inventories 36,156 36,688
Prepaid expenses and other 381 1,503
-------- --------
Total current assets 71,787 82,762
PROPERTY AND EQUIPMENT, net 27,799 23,222
OTHER ASSETS, net 8,896 3,233
-------- --------
Total assets $108,482 $109,217
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floorplan notes payable $ 34,650 $ 42,228
Current maturities of long-term debt 7,452 2,115
Advances outstanding under lines of credit 20 20
Trade accounts payable 4,113 5,157
Accrued expenses 9,332 8,566
-------- --------
Total current liabilities 55,567 58,086
DEFERRED INCOME TAX LIABILITY, net 1,269 1,027
LONG-TERM DEBT, net of current maturities 11,515 13,412
SHAREHOLDERS' EQUITY
Rush Enterprises, Inc., common stock, par value $.01 per share;
25,000,000 shares authorized; 6,643,730 outstanding at September 30,
1997 and December 31, 1996 66 66
Additional paid-in-capital 33,342 33,342
Retained earnings 6,723 3,284
-------- --------
Total shareholders' equity 40,131 36,692
-------- --------
Total liabilities and shareholders' equity $108,482 $109,217
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE - UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
New and used truck sales $ 75,545 65,427 $209,181 $186,751
Parts and service 20,934 16,414 56,280 48,359
Lease and rental 3,605 3,490 10,262 10,056
Finance and insurance 1,732 1,513 3,812 4,371
Other 329 288 1,294 986
-------- -------- -------- --------
Total revenues 102,145 87,132 280,829 250,523
COST OF PRODUCTS SOLD 85,473 72,926 236,521 209,870
-------- -------- -------- --------
GROSS PROFIT 16,672 14,206 44,308 40,653
SELLING, GENERAL AND ADMINISTRATIVE 12,732 10,595 35,229 30,283
DEPRECIATION AND AMORTIZATION 730 610 2,071 1,789
-------- -------- -------- --------
OPERATING INCOME 3,210 3,001 7,008 8,581
INTEREST EXPENSE 537 554 1,462 2,676
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 2,673 2,447 5,546 5,905
PROVISION FOR INCOME TAXES 1,015 910 2,107 1,310
-------- -------- -------- --------
NET INCOME $ 1,658 $ 1,537 $ 3,439 $ 4,595
======== ======== ======== ========
EARNINGS PER SHARE $ 0.25 $ 0.23 $ 0.52
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 6,645 6,640 6,645
======== ======== ========
UNAUDITED PRO FORMA DATA:
Income before income taxes $ 5,905
Pro forma adjustments to reflect federal and state income taxes 2,244
--------
Pro forma income after provision for income taxes $ 3,661
========
Pro forma income per share $ 0.70
========
Weighted average shares outstanding used in the pro forma net income
per share calculation 5,237
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,439 $ 4,595
Adjustments to reconcile net income to cash provided
by (used in) operations
Depreciation and amortization 2,071 1,789
Gain on sale of property and equipment (266) --
Provision for deferred income tax expense 242 583
Change in accounts receivable 3,035 (138)
Change in inventories 2,672 (5,576)
Change in prepaid expenses and other current
assets 1,122 (171)
Change in accounts payable (1,044) 1,524
Change in accrued expenses 687 (3,090)
-------- --------
Net cash provided by (used in) operating activities 11,958 (484)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (7,548) (6,200)
Proceeds from the sale of property and equipment 426 503
Acquisition of dealership (7,915) --
Changes in other assets (130) (233)
-------- --------
Net cash used in investing activities (15,167) (5,930)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock -- 31,364
Proceeds from notes payable 6,063 2,984
Principal payments on notes payable (1,562) (3,617)
Draws (payments) on floor plan financing, net (7,578) 5,370
Draws on line of credit, net -- 10
Dividends paid -- (10,175)
-------- --------
Net cash (used in) provided by financing activities (3,077) 25,936
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (6,286) 19,522
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 21,507 2,149
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 15,221 $ 21,671
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during year for interest $ 1,469 $ 1,925
======== ========
Cash paid during year for taxes $ 1,523 $ --
======== ========
Non-cash assignment of debt $ 1,061 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 - PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim consolidated financial statements included herein have been
prepared by Rush Enterprises, Inc. and subsidiaries (collectively referred to as
the "Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). All adjustments have been made to
the accompanying interim consolidated financial statements which are, in the
opinion of the Company's management, necessary for a fair presentation of the
Company's operating results. All adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
recommended that these interim consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's form 10-K for the year ended December 31, 1996.
Certain prior period amounts have been reclassified for comparative purposes.
2 - CORPORATE REORGANIZATION AND COMMON STOCK OFFERING
The Company successfully completed an initial public offering (the
Offering) of 2,875,000 common shares on June 12, 1996. As part of this
transaction, the Company terminated its S corporation federal tax election and
was subject to federal and certain state income taxes from that date forward. On
June 12, 1996 the Company paid the S Corporation shareholder approximately $6
million representing the undistributed accumulated earnings of the S Corporation
prior to June 12, 1996.
Following the Offering there were 6,625,000 common shares outstanding,
including 3,750,000 owned by the shareholder of the predecessor S Corporation.
As part of the reorganization, the Company acquired a managing general
agent (the "MGA"), as a wholly-owned subsidiary, to manage all of the operations
of Associated Acceptance, Inc. ("AA"). The MGA is responsible for funding the
operations of AA, directing the use of AA's assets, and incurring liabilities on
AA's behalf in exchange for the MGA receiving any and all net income of AA. W.
Marvin Rush, the sole shareholder of AA, is prohibited from the sale or transfer
of the capital stock of AA under the MGA agreement, except as designated by the
Company. Therefore, the financial position and operations of AA have been
included as part of the Company's consolidated financial position and results of
operations.
3 - PRO FORMA INFORMATION (UNAUDITED)
Pro forma income from continuing operations and pro forma income
per share for the nine month period ended September 30, 1996, have been
determined assuming that the Company had been taxed as a C corporation for
federal and certain state income tax purposes for such period.
Pro forma income per share had been computed using the weighted average
number of common shares outstanding of Rush Enterprises, Inc. Weighted average
common shares for all periods presented prior to the Offering have been
increased by 547,400 shares to reflect the number of shares that would have to
have been sold at the offering price per share to repay an approximate
$6,000,000 distribution of undistributed S corporation earnings.
4 - COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to finance contracts for the notes
sold to such finance companies related to the sale of trucks. The Company's
recourse liability related to sold finance contracts is limited to 15 to 25
percent of the outstanding amount of each note sold to the finance company with
the aggregate recourse liability for 1997 being limited to $600,000. The Company
provides an allowance for repossession losses and early repayment penalties.
6
<PAGE> 7
The Company is involved in various claims and legal actions arising in
the ordinary course of business. The Company believes it is unlikely that the
final outcome of any of the claims or proceedings to which the Company is a
party would have a material adverse effect on the Company's financial position
or results of operations, however, due to the inherent uncertainty of
litigation, there can be no assurance that the resolution of any particular
claim or proceeding would not have a material adverse effect on the Company's
results of operations for the fiscal period in which such resolution occurred.
The Company has consulting agreements with individuals for an aggregate
monthly payment of $15,725. The agreements expire in 1999 through 2001.
5 - SUBSEQUENT EVENTS
On October 6, 1997, the Company acquired from C. Jim Stewart &
Stevenson, Inc. the assets of its John Deere dealership in the Houston, Texas
area. The transaction was valued at $25.1 million with the purchase price paid
in a combination of cash and notes payable.
7
<PAGE> 8
1. PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this quarterly report on Form 10-Q,
including statements regarding the anticipated development and expansion of the
Company's business, expenditures, the intent, belief or current expectations of
the Company, its directors or its officers, primarily with respect to the future
operating performance of the Company and other statements contained herein
regarding matters that are not historical facts, are "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995). Because such statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, those discussed in other filings made by the
Company with the Securities and Exchange Commission, including the factors set
forth in the Company's registration statement on Form S-1 (registration
statement #333-03346).
The following comments should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
quarterly report on Form 10-Q.
GENERAL
Rush Enterprises operates a regional network of truck centers that
provide an integrated one-stop source for the trucking needs of its customers,
including retail sales of new Peterbilt and used heavy-duty trucks; parts,
service and body shop facilities; and a wide array of financial services,
including the financing of new and used truck purchases, insurance products and
truck leasing and rentals.
In March 1997, the Company acquired the assets of Denver Peterbilt,
Inc., which consisted of full service Peterbilt dealerships in Denver and
Greeley, Colorado.
8
<PAGE> 9
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company's historical
results of operations for the three months and nine months ended September 30,
1997 and 1996.
The following table sets forth for the periods indicated certain financial data
as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1997 1996 1997 1996
------ ----- ------ -----
<S> <C> <C> <C> <C>
New and used truck sales 74.0% 75.1% 74.5% 74.6%
Parts and service 20.5 18.9 20.0 19.3
Lease and rental 3.5 4.0 3.7 4.0
Finance and insurance 1.7 1.7 1.4 1.7
Other 0.3 0.3 0.4 0.4
------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0
Cost of products sold 83.7 83.7 84.2 83.8
------ ------ ------ ------
Gross profit 16.3 16.3 15.8 16.2
Selling, general and administrative
expenses 12.5 12.2 12.5 12.1
Depreciation and amortization 0.7 0.7 0.7 0.7
------ ------ ------ ------
Operating income 3.1 3.4 2.6 3.4
Interest expense 0.5 0.6 0.5 1.1
------ ------ ------ ------
Income before income taxes 2.6 2.8 2.1 2.3
Provision for income taxes (1) 1.0 1.0 0.8 0.9
------ ------ ------ ------
Net income (1) 1.6% 1.8% 1.3% 1.4%
------ ------ ------ ------
</TABLE>
(1) Pro forma income assuming the Company had been taxed as a C corporation
during 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues
Revenues increased by approximately $15.0 million, or 17.2%, from $87.1
million to $102.1 million from the third quarter of 1996 to the third quarter of
1997. Sales of new and used trucks increased by approximately $10.1 million, or
15.5%, from $65.4 million to $75.5 million from the third quarter of 1996 to the
third quarter of 1997. Unit sales of new and used trucks increased by 5.0% and
42.0%, respectively, from the third quarter of 1996 to the third quarter of
1997, while new truck average revenue per unit increased by 1.5% and used truck
average revenue per unit increased by 3.7%. Average used truck prices increased
due to a change in product mix..
Parts and service sales increased by approximately $4.5 million, or
27.5%, from $16.4 million to $20.9 million. The increase was due to the
acquisition of the Colorado parts and service operations in March of 1997, and
internal growth rates in existing locations of 16%.
9
<PAGE> 10
Lease and rental revenues increased by approximately $100,000 or 3%
from $3.5 million to $3.6 million from the third quarter of 1996 to the third
quarter of 1997. The increase was due to growth of 9.9% and 5.8% at the
Company's California and Texas locations, respectively, offset by a decrease of
5.0% at the Oklahoma location.
Finance and insurance revenues increased by approximately $219,000, or
14.5%, from $1.5 million to $1.7 million from the third quarter of 1996 to the
third quarter of 1997. The majority of the increase resulted from increased
sales of new and used trucks. Finance and insurance revenues have limited direct
costs and, therefore, contribute a disproportionate share of operating profits.
Gross Profit
Gross profit increased by approximately $2.5 million, or 17.4%, from
$14.2 million to $16.7 million from the third quarter of 1996 to the third
quarter of 1997. Gross profit as a percentage of sales remained flat at 16.3%
for both the third quarter of 1996 and 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by approximately
$2.1 million, from $10.6 million to $12.7 million, or 20.1%, from the third
quarter of 1996 to the third quarter of 1997. The majority of the increase, or
$1.1 million, was attributable to the inclusion of the Colorado locations. The
remaining increase resulted from an increase in truck sales commissions, and
infrastructure costs associated with the opening of the Pharr facility. Selling,
general and administrative expenses as a percent of revenue were 12.1% for the
third quarter of 1996 and 12.5% for the same quarter of 1997.
Interest Expense
Interest expense decreased by approximately $17,000 from $554,000 to
$537,000, or 3.1%, from the third quarter of 1996 to the third quarter of 1997,
primarily as the result of decreased levels of indebtedness.
Income before Income Taxes
Income before income taxes increased by $226,000, or 9.2% from $2.45
million to $2.67 million from the third quarter of 1996 to the third quarter of
1997, as a result of the factors described above.
Income Taxes
As a result of the Company's initial public offering and termination of
its subchapter S tax status, the Company incurred $1,015,000 of income taxes
during the third quarter of 1997. The Company has provided for taxes at a 38%
effective rate.
10
<PAGE> 11
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenues
Revenues increased by approximately $30.3 million, or 12.1%, from
$250.5 million to $280.8 million from the first nine months of 1996 to the first
nine months of 1997. Sales of new and used trucks increased by approximately
$22.4 million, or 12.0%, from $186.8 million to $209.2 million from the first
nine months of 1996 to the first nine months of 1997. Unit sales of new and used
trucks increased by 6.7% and 36.0%, respectively, from the first nine months of
1996 to the first nine months of 1997, while new and used truck average revenue
per unit decreased by .75% and .15%. respectively. Average new truck prices and
used truck prices decreased due to a change in product mix.
Parts and service sales increased by approximately $7.9 million, or
16.4%, from $48.4 million to $56.3 million. The increase was due to the
acquisition of the Colorado parts and service operations in March of 1997, and
internal growth rates in existing locations of 5.0%.
Lease and rental revenues increased by approximately $206,000, or 2.1%
from $10.1 million to $10.3 million. The increase was due to growth of 12.1% at
the Company's California operations, offset by a decreases of 2.5% and 5.7% at
the Texas locations and the Oklahoma locations, respectively.
Finance and insurance revenues decreased by approximately $559,000, or
12.8%, from $4.4 million to $3.8 million from the first nine months of 1996 to
the first nine months of 1997. The majority of the decrease resulted from
increased competition coupled with higher borrowing costs. Finance and insurance
revenues have limited direct costs and, therefore, contribute a disproportionate
share of operating profits.
Gross Profit
Gross profit increased by approximately $3.7 million, or 9.0%, from
$40.6 million to $44.3 million from the first nine months of 1996 to the first
nine months of 1997. Gross profit as a percentage of sales decreased from 16.2%
to 15.8% from the first nine months of 1996 to the first nine months of 1997.
The net decrease in gross profit as a percentage of sales resulted from the
decrease in finance and insurance revenues coupled with slight decreases in used
truck, parts and service margins in the California operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by approximately
$4.9 million, from $30.3 million to $35.2 million, or 16.3%, from the first nine
months of 1996 to the first nine months of 1997. The increase includes $2.4
million, that is attributable to the Colorado locations. The remaining increase
resulted from an increase in truck sales commissions, increases in salaries, and
infrastructure costs associated with the opening of the Pharr facility. Selling,
general and administrative expenses as a percent of revenue were 12.1% for the
first nine months of 1996 and 12.5% for the first nine months of 1997.
Interest Expense
Interest expense decreased by approximately $1.2 million from $2.7
million to $1.5 million, or 45.4%, from the first nine months of 1996 to the
first nine months of 1997, primarily as the result of decreased levels of
indebtedness due to the Company's initial public offering on June 7, 1996.
11
<PAGE> 12
Income before Income Taxes
Income before income taxes decreased by $359,000, or 6.1% from $5.9
million to $5.5 million from the first nine months of 1996 to the first nine
months of 1997, as a result of the factors described above.
Income Taxes
As a result of the Company's initial public offering and termination of
its subchapter S tax status, the Company incurred $2.1 million of income taxes
during the first nine months of 1997. The Company has provided for taxes at a
38% effective rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital,
including inventory requirements, expansion of existing facilities and
acquisitions of new facilities. These short-term cash needs have historically
been financed with retention of profits and borrowings under credit facilities
available to the Company.
In June 1996, the Company completed the initial public offering of
2,875,000 shares of common stock and received net proceeds of approximately
$32.1 million.
As a result of the initial public offering, working capital levels have
generally increased. At September 30, 1997, the Company had working capital of
approximately $16.1 million, including, among other things, $15.2 million in
cash and cash equivalents, $20.0 million in accounts receivable, $36.2 million
in inventories, and $381,000 in prepaid expenses and other current assets, less
$13.5 million of accounts payable and accrued expenses, $7.5 million of current
maturities on long-term debt and $34.7 million outstanding under floor plan
financing. The aggregate maximum borrowing limits under working capital lines of
credit with various financial institutions are approximately $8.0 million. The
Company's floor plan agreements with its primary lender limit the aggregate
amount of borrowings based on the number of new and used trucks.
For the first nine months of 1996, operating activities used $484,000
of cash. Net income of $4.6 million, an increase in accounts payable of $1.5
million and provisions for provisions for depreciation, amortization, and
deferred taxes totaling $2.4 million more than offset increases in inventories
of $5.6 million and a reduction in accrued liabilities of $3.1 million.
For the first nine months of 1997, operating activities provided $12.0
million of cash. Net income of $3.4 million, decreases in accounts receivable,
inventories and other assets of $3.0 million, $2.7 million, and $1.1
respectively, and increases in depreciation and amortization and accrued
expenses of $2.1 million and $687,000, respectively, more than offset a decrease
in accounts payable of $1.1 million.
During the first nine months of 1996, the Company used $5.9 million for
investing activities, primarily acquisitions of real estate related to the
Oklahoma operations.
During the first nine months of 1997, the Company used $15.2 million
for investing activities, primarily due to the acquisition of Denver Peterbilt,
Inc., property and equipment additions related to the construction of the Pharr
Peterbilt facility, and renovations of several existing facilities.
12
<PAGE> 13
For the nine months of 1996, net cash provided by financing activities
amounted to $25.9 million. Net proceeds from the initial public offering of
$31.3 million, after direct expenses of the initial public offering of $781,000,
draws on floorplan financing, and proceeds from other notes were partially
offset by an increase of $10.2 million in dividends paid to the S corporation
shareholder.
For the nine months of 1997, net cash used in financing activities
amounted to $3.1 million. Payments on floor plan financing and notes payable of
$7.6 million and $1.6 million, respectively, more than offset borrowings on
notes payable of $6.1 million.
Substantially all of the Company's truck purchases from PACCAR are made
on terms requiring payment within 15 days or less form the date of shipment of
the trucks from the factory. The Company finances all, or substantially all, of
the purchase price of its new truck inventory, and 75% of the loan value of its
used truck inventory, under a floor plan arrangement with GMAC under which GMAC
pays PACCAR directly with respect to new trucks. The company makes monthly
interest payments on the amount financed but is not required to commence loan
principal repayments prior to sale of new vehicles to GMAC for a period of 12
months and for used vehicles for a period of three months. At September 30,
1997, the Company had $34.7 million outstanding under its floor plan financing
arrangement with GMAC. GMAC permits the Company to earn, for up to 75% of the
amount borrowed under its floor plan financing arrangement with GMAC, interest
at the prime rate on overnight funds deposited by the Company with GMAC.
Backlogs
The Company enters firm orders into its backlog at the time the order
is received. Customer orders are typically filled in 75 to 90 days and customers
normally place orders on that basis. However, certain customers, including
fleets and governmental entities, typically place orders six months to one year
in advance of their desired delivery date. The Company in the past has typically
allowed customers to cancel orders at any time prior to delivery, and the
Company's level of cancellations is affected by general economic conditions, and
customer business cycles. As a percentage of orders, cancellations historically
have ranged from 5% to 12% of annual order volume. The Company's backlogs as of
September 30, 1996 and 1997, were approximately $49.0 million and $125 million,
respectively. Backlogs increased due to increased order volume.
Seasonality
The Company's business is moderately seasonal. Seasonal effects on new
truck sales related to the seasonal purchasing patterns of any single customer
type are mitigated by the Company's diverse customer base, including small and
large fleets, governmental entities, corporations and owner operators. However,
truck, parts and service operations historically have experienced higher volumes
of sales in the second and third quarters. The Company has historically received
benefits from volume purchases and meeting vendor sales targets in the form of
cash rebates, which are typically recognized when received. Approximately 50% of
such rebates are typically received in the fourth quarter, resulting in a
seasonal increase in gross profit.
Cyclicality
The Company's business, as well as the entire retail heavy-duty truck
industry, is dependent on a number of factors relating to general economic
conditions, including fuel prices, interest rate fluctuations, economic
recessions and customer business cycles. In addition, unit sales of new trucks
have historically been subject to substantial cyclical variation based on such
general economic conditions. Although the Company believes that its geographic
expansion and diversification into truck-related services, including financial
services, leasing, rentals and service and parts, will reduce the overall impact
to the Company resulting from general economic conditions affecting heavy-duty
truck sales, the Company's operations may be materially and adversely affected
by any continuation or renewal of general downward economic pressures or adverse
cyclical trends.
Effects of Inflation
The Company believes that the relatively moderate inflation over the
last few years has not had a significant impact on the Company's revenue or
profitability. The company does not expect inflation to have any near-term
material effect on the sales of its products, although there can be no assurance
that such an effect will not occur in the future
13
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
11.1 Computation of pro forma earnings per share (filed herewith)
27.1 Financial data schedule (filed herewith)
</TABLE>
b) Reports on Form 8-K
None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
RUSH ENTERPRISES, INC.
Date: November 14, 1997 By: /s/ W. Marvin Rush
---------------------------
Name: W. Marvin Rush
Title: Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1997 By: /s/ Martin A. Naegelin, Jr.
---------------------------
Name: Martin A. Naegelin, Jr.
Title: Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
11.1 Computation of pro forma earnings per share (filed herewith)
27.1 Financial data schedule (filed herewith)
<PAGE> 1
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND PRO FORMA EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION
Net Income $1,658 $1,537 $3,349 $4,595
Weighted average number of common shares outstanding 6,644 6,640 6,644 4,909
Common stock equivalents 1 -- 1 --
------ ------ ------ ------
Weighted average number of common shares and
common stock equivalents outstanding 6,645 6,640 6,645 4,909
====== ====== ====== ======
Earnings per share - Primary $ 0.25 0.23 $ 0.52 $ 0.94
====== ====== ====== ======
FULLY-DILUTED EARNINGS PER SHARE CALCULATION
Net Income $1,658 $1,537 $3,349 $4,595
Weighted average number of common shares outstanding 6,644 6,640 6,644 4,909
Common stock equivalents 13 -- 13 --
------ ------ ------ -----
Weighted average number of common shares and
common stock equivalents outstanding 6,657 6,640 6,657 4,909
====== ====== ====== ======
Earnings per share - Fully diluted (1) $ 0.25 $ 0.23 $ 0.52 $ 0.94
====== ====== ====== ======
</TABLE>
(1) This calculation is submitted in accordance with item 601(b)11 of
regulation S-K although it is not required by APB Opinion No. 15
because it results in dilution of less than 3%.
PRO FORMA EARNINGS PER SHARE
<TABLE>
<S> <C>
Pro forma income after provision for income taxes $3,661
Weighted average shares of common stock outstanding 4,909
Pro forma shares issued at offering price to pay undistributed S corporation
earnings
328
------
Pro forma weighted average shares outstanding 5,237
------
Pro forma income per share $ 0.70
======
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSH ENTERPRISES, INC FOR THE SIX MONTHS ENDED JUNE 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,221
<SECURITIES> 0
<RECEIVABLES> 20,029
<ALLOWANCES> 0
<INVENTORY> 36,156
<CURRENT-ASSETS> 71,787
<PP&E> 34,570
<DEPRECIATION> (6,771)
<TOTAL-ASSETS> 108,482
<CURRENT-LIABILITIES> 55,567
<BONDS> 11,515
0
0
<COMMON> 66
<OTHER-SE> 40,065
<TOTAL-LIABILITY-AND-EQUITY> 108,482
<SALES> 0
<TOTAL-REVENUES> 280,829
<CGS> 236,521
<TOTAL-COSTS> 273,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,462
<INCOME-PRETAX> 5,546
<INCOME-TAX> 2,107
<INCOME-CONTINUING> 3,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,439
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
