<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 MARCH 31, 2000
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.)
555 I.H. 35 South, Suite 500
New Braunfels, Texas 78130
(Address of principal executive offices)
(Zip Code)
(830) 626-5200
(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 X No
--- ---
---------------
Indicated below is the number of shares outstanding of the
registrant's only class of common stock, as of May 7, 2000.
Number of
Shares
Title of Class Outstanding
-------------- -----------
Common Stock, $.01 Par Value 7,002,044
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999. . . . . . . . . . . . . 3
Consolidated Statements of Income - For the Three Months
Ended March 31, 2000 and 1999 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows - For the Three Months Ended
March 31, 2000 and 1999 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5
Notes to Consolidated Financial Statements (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . .. 14
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16
</TABLE>
2
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
----------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,888 $ 20,004
Accounts receivable, net 24,270 29,767
Inventories 193,325 173,565
Prepaid expenses and other 948 736
-------- --------
Total current assets 228,431 224,072
PROPERTY AND EQUIPMENT, net 111,364 103,426
OTHER ASSETS, net 37,923 38,198
-------- --------
Total assets $377,718 $365,696
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $162,036 $150,862
Current maturities of long-term debt 8,051 8,463
Advances outstanding under lines of credit 6,519 10,953
Trade accounts payable 8,787 9,710
Accrued expenses 16,049 20,516
Note payable to shareholder 20,850 20,725
-------- --------
Total current liabilities 222,292 221,229
-------- --------
LONG-TERM DEBT, net of current maturities 74,717 65,414
DEFERRED INCOME TAXES, net 4,781 4,201
COMMITMENTS AND CONTINGENCIES (Note 2)
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares
outstanding in 2000 and 1999 -- --
Common stock, par value $.01 per share; 25,000,000 shares authorized; 7,002,044 shares
outstanding in 2000 and 1999 70 70
Additional paid-in capital 39,155 39,155
Retained earnings 36,703 35,627
-------- --------
Total shareholders' equity 75,928 74,852
-------- --------
Total liabilities and shareholders' equity $377,718 $365,696
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
REVENUES:
New and used truck sales $133,645 $121,684
Parts and service 41,586 30,141
Construction equipment sales 18,167 11,792
Lease and rental 6,894 5,058
Finance and insurance 3,395 3,628
Retail sales 4,880 4,612
Other 1,385 928
-------- --------
Total revenues 209,952 177,843
COST OF PRODUCTS SOLD 173,207 146,608
-------- --------
GROSS PROFIT 36,745 31,235
SELLING, GENERAL AND ADMINISTRATIVE 29,466 22,889
DEPRECIATION AND AMORTIZATION 2,068 1,330
-------- --------
OPERATING INCOME 5,211 7,016
INTEREST EXPENSE, NET 3,418 1,484
-------- --------
INCOME BEFORE INCOME TAXES 1,793 5,532
PROVISION FOR INCOME TAXES 717 2,213
-------- --------
NET INCOME $ 1,076 $ 3,319
======== ========
BASIC AND DILUTED INCOME PER SHARE $ .15 $ .50
======== ========
Weighted average shares outstanding:
Basic 7,002 6,646
======== ========
Diluted 7,036 6,706
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,076 $ 3,319
Adjustments to reconcile net income to net cash used in operating
activities
Depreciation and amortization 2,983 1,678
Gain on sale of property and equipment (136) (33)
Provision for deferred income tax expense 580 487
Change in accounts receivable, net 5,497 (4,638)
Change in inventories (19,760) (16,760)
Change in prepaid expenses and other, net (212) 41
Change in trade accounts payable (923) 1,018
Change in accrued expenses (4,467) 843
-------- --------
Net cash used in operating activities (15,362) (14,045)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (11,304) (11,077)
Proceeds from the sale of property and equipment 902 323
Change in other assets (108) (1,607)
-------- --------
Net cash used in investing activities (10,510) (12,361)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 9,607 7,076
Principal payments on debt (591) (4,246)
Payments on lines of credit, net (4,434) --
Draws on floor plan notes payable, net 11,174 16,601
-------- --------
Net cash provided by financing activities 15,756 19,431
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,116) (6,975)
CASH AND CASH EQUIVALENTS, beginning of period 20,004 22,516
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 9,888 $ 15,541
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 4,523 $ 598
======== ========
Income taxes $ 960 $ 35
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
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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 its 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 Annual Report on Form 10-K for
the year ended December 31, 1999.
2 - COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to certain finance companies for
certain promissory notes and finance contracts, related to the sale of trucks
and construction equipment, sold to such finance companies. The Company's
recourse liability related to sold finance contracts is limited to 15 to 25
percent of the outstanding balance of each note sold to a finance company, with
the aggregate recourse liability for 2000 limited to $700,000.
The Company provides an allowance for repossession losses and early
repayment penalties.
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 certain individuals for an
aggregate monthly payment of $37,786. The agreements expire in 2000 through
2001.
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3 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
Numerator:
Net income- numerator for basic and diluted earnings per share $1,076,000 $3,319,000
Denominator:
Denominator for basic earnings per share-adjusted weighted average 7,002,044 6,646,488
shares outstanding
Effect of dilutive securities:
Employee and Director stock options 34,109 59,175
---------- ----------
Denominator for diluted earnings per share-adjusted weighted average
shares outstanding 7,036,153 6,705,663
========== ==========
Basic earnings per share $ .15 $ .50
========== ==========
Diluted earnings per share $ .15 $ .50
========== ==========
</TABLE>
4 - SEGMENT INFORMATION
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). This statement requires that public business
enterprises report certain information about operating segments in complete
sets of financial statements of the enterprise and in condensed financial
statements of interim periods issued to shareholders. It also requires that
public business enterprises report certain information about their products and
services, the geographic areas in which they operate, and their major
customers.
The Company has two reportable segments: the Heavy-Duty Truck segment
and the Construction Equipment segment. The Heavy-duty Truck segment 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, after-market 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.
The Construction Equipment segment, formed during 1997, operates full-service
John Deere dealerships that serve the Houston, Texas Metropolitan and
surrounding areas and a majority of the counties in Michigan. Dealership
operations include the retail sale of new and used equipment, after-market
parts and service facilities, equipment rentals, and the financing of new and
used equipment.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on income before income taxes not including
extraordinary items.
The Company accounts for intersegment sales and transfers as if the
sales or transfers were to third parties, that is, at current market prices.
There were no material intersegment sales during the quarters ended March 31,
2000 and 1999.
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The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately because each
business requires different technology and marketing strategies. Business units
were maintained through expansion and acquisitions. The following table
contains summarized information about reportable segment profit or loss and
segment assets, for the quarters ended March 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
HEAVY-DUTY CONSTRUCTION
TRUCK EQUIPMENT
SEGMENT SEGMENT ALL OTHER TOTALS
---------- ------------ --------- ------
<S> <C> <C> <C> <C>
Three months ended March 31, 2000
Revenues from external customers $ 177,188 $ 25,919 $ 6,845 $ 209,952
Segment income (loss) before taxes 1,489 366 (62) 1,793
Segment assets 277,335 73,097 27,286 377,718
Three months ended March 31, 1999
Revenues from external customers $ 153,469 $ 17,405 $ 6,969 $ 177,843
Segment income before taxes 4,902 220 410 5,532
Segment assets 161,968 67,617 16,213 245,798
</TABLE>
Revenues from segments below the reportable quantitative thresholds are
attributable to four operating segments of the Company. Those segments include
a tire company, a farm and ranch retail center, an insurance company, and a
hunting lease operation. None of these segments have ever met any of the
quantitative thresholds for determining reportable segments.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Form 10-Q are "forward-looking
statements" within the meaning of the Section 27 A of the Securities Act of
1933 and Section 21E of the Exchange Act. Specifically, all statements other
than statements of historical fact included in this Form 10-Q regarding the
Company's financial position, business strategy and plans and objectives of
management of the Company for future operations are forward-looking statements.
These forward-looking statements are based on the beliefs of the Company's
management, as well as assumptions made by and information currently available
to the Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and words or phrases of similar
import, as they relate to the Company or its subsidiaries or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current view of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions related
to certain factors including, without limitation, competitive factors, general
economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision,
seasonality, distribution networks, product introductions and acceptance,
technological change, changes in industry practices, onetime events and other
factors described herein and in the Company's Registration Statement on Form
S-1 (File No. 333-03346) and in the Company's annual, quarterly and other
reports filed with the Securities and Exchange Commission (collectively,
"cautionary statements"). Although the Company believes that its expectations
are reasonable, it can give no assurance that such expectations will prove to
be correct. Based upon changing conditions, should any one or more of these
risks or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected, or intended. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the
applicable cautionary statements. The Company does not intend to update these
forward-looking statements.
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, Inc. was incorporated in Texas in 1965 and
currently consists of two reportable segments: the Heavy Duty Truck segment,
and the Construction Equipment segment.
The Heavy Duty Truck segment 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; after-market 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. The Company's truck centers
are strategically located in high truck traffic areas on or near major highways
in Texas, California, Oklahoma, Colorado, Louisiana, Arizona and New Mexico.
The Company is the largest Peterbilt truck dealer in the United States,
representing approximately 16.0% of all new Peterbilt truck sales in 1999, and
is the sole authorized vendor for new Peterbilt trucks and replacement parts in
its market areas. The Company was named Peterbilt Dealer of the Year for North
America for the 1993-1994 year. The criteria used to determine the recipients
of this award include, among others, image, customer satisfaction, sales
activity and profitability.
Since commencing operations as a John Deere dealer in 1997, the Company has
grown to operate seven Rush Equipment Centers located in Texas and Michigan.
The Company provides a full line of construction equipment for light to medium
sized applications, with the primary products including John Deere backhoe
loaders, hydraulic excavators, crawler dozers and four wheel drive loaders.
Dealership operations include the retail sale of new and used construction
equipment, after-market parts and service facilities, equipment rentals, and
the financing of new and used construction equipment. The Company believes the
construction equipment industry is highly-fragmented and offers opportunities
for consolidation. As a result, the
9
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Company's growth strategy is to realize economies of scale, favorable
purchasing power, and cost savings by developing a network of John Deere
dealerships through acquisitions and growth inside existing territories. There
can be no assurance that, as the Company continues to develop a network of
construction equipment dealerships, that it will realize economies of scale,
favorable purchasing power or cost savings.
In December 1999, the Company purchased substantially all the assets
of Norm Pressley's Truck Center, ("Pressley"), which consisted of three
dealership locations in San Diego, Escondido and El Centro, California. The
transaction was valued at approximately $4.5 million with the purchase price
paid in cash. An additional $700,000 consideration may be paid based on a
performance based objective.
In October 1999, the Company purchased substantially all the assets of
Southwest Peterbilt, Inc., Southwest Truck Center, Inc., and New Mexico
Peterbilt, Inc., ("Southwest") a Peterbilt truck dealer, which consisted of
five dealership locations in Arizona and New Mexico. The transaction was valued
at $23.9 million with the purchase price paid in a combination of cash and the
Company's common stock. An additional $4.0 million may be paid based on a
performance based objective.
In September 1999, the Company acquired substantially all the assets of
Calvert Sales, Inc., (Calvert), a John Deere construction equipment dealership.
The acquisition encompasses 13 counties in eastern Michigan, including two
full-service dealerships located in the Detroit and Flint areas. The transaction
was valued at $11.1 million with the purchase price paid in a combination of
cash and notes payable.
In March 1998, the Company acquired all of the issued and outstanding
capital stock of D & D Farm and Ranch Supermarket, Inc. ("D & D"), for
consideration of approximately $10.5 million. D & D operates a retail farm and
ranch superstore in the Greater San Antonio, Texas area and has recently opened
a second store in the Greater Houston, Texas area.
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company's
historical results of operations for the three months ended March 31, 2000 and
1999.
The following table sets forth for the periods indicated certain
financial data as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
----- -----
<S> <C> <C>
New and used truck sales 63.7 % 68.4 %
Parts and service 19.8 17.0
Construction equipment sales 8.6 6.6
Lease and rental 3.3 2.9
Finance and insurance 1.6 2.0
Retail sales 2.3 2.6
Other 0.7 0.5
----- -----
Total revenues 100.0 100.0
Cost of products sold 82.5 82.4
----- -----
Gross profit 17.5 17.6
Selling, general and administrative 14.0 12.9
Depreciation and amortization 1.0 0.7
----- -----
Operating income 2.5 4.0
Interest expense, net 1.6 0.8
----- -----
Income before income taxes 0.9% 3.2%
===== =====
</TABLE>
10
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THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues
Revenues increased by approximately $32.1 million, or 18.0%, from
$177.9 million to $210.0 million from the first quarter of 1999 to the first
quarter of 2000. Approximately $28.1 million in sales is attributable to the
Southwest, Pressley and Calvert acquisitions, while the remaining increase of
$4.0 million or 2.3%, is attributable to same store growth. Sales of new and
used trucks increased by approximately $12.0 million, or 9.9%, from $121.7
million to $133.7 million from the first quarter of 1999 to the first quarter
of 2000. Unit sales of new trucks increased by 9.0% and the new truck average
revenue per unit increased by 6.9%. Unit sales of used trucks decreased 1.5%,
and used truck average revenue per unit decreased by 18.3%. Average used truck
prices decreased due to an excess supply of used inventory in the market. As a
result, the Company recognized a $1.5 million loss provision during the first
quarter of 2000 to increase the Company's reserve for used truck valuation and
repossession losses.
Parts and service sales increased by approximately $11.4 million, or
37.9%, from $30.1 million to $41.6 million. The increase was due to same store
growth of approximately 9.0% and parts and service sales associated with
Southwest, Pressley and Calvert acquisitions.
Sales of new and used construction equipment increased approximately
$6.4 million or 54.2%, from $11.8 million to $18.2 million from the first
quarter of 1999 to the first quarter of 2000. The increase was due to same
store growth of approximately $3.0 million or 25.4% and new and used equipment
sales associated with Calvert acquisition.
Lease and rental revenues increased by approximately $1.8 million, or
35.3% from $5.1 million to $6.9 million. Approximately $1.0 million or 55.6% of
the increase was due to the Pressley and Calvert acquisitions with the
remainder attributable to same store growth.
Finance and insurance revenues decreased by approximately $0.2
million, or 5.6%, from $3.6 million to $3.4 million from the first quarter of
1999 to the first quarter of 2000. The majority of the decrease resulted from
the decrease in used truck deliveries. Finance and insurance revenues have
limited direct costs and, therefore, contribute a disproportionate share of
operating profits.
Retail sales increased $0.3 million or 6.5% from $4.6 million to $4.9
million from the first quarter of 1999 to the first quarter of 2000.
Gross Profit
Gross profit increased by approximately $5.5 million, or 17.6%, from
$31.2 million to $36.7 million from the first quarter of 1999 to the first
quarter of 2000. Gross profit as a percentage of sales slightly decreased from
17.6% in the first quarter of 1999 to 17.5% in the first quarter of 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by
approximately $6.6 million, from $22.9 million to $29.5 million, or 28.8%, from
the first quarter of 1999 to the first quarter of 2000. The increase resulted
from approximately $5.9 million or 25.8% of selling, general and administrative
expense related to the Southwest, Pressley and Calvert acquisitions with the
remaining attributable to same store increases. Selling, general and
administrative expenses as a percentage of sales increased from 12.9% to 14.0%
from the first quarter of 1999 to the first quarter of 2000.
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<PAGE> 12
Interest Expense
Interest expense increased by approximately $1.9 million or 126.7%,
from $1.5 million to $3.4 million, from the first quarter of 1999 to the first
quarter of 2000, primarily as the result of increased levels of indebtedness
due to the financing of dealership properties and higher floor plan liability
levels.
Income before Income Taxes
Income before income taxes decreased by $3.7 million, or 67.3%, from
$5.5 million to $1.8 million from the first quarter of 1999 to the first
quarter of 2000, as a result of the factors described above.
Income Taxes
The Company has provided for taxes at a 40% effective rate.
Earnings Per Share
Earnings per share for the first quarter of 2000, were adversely effected
compared to the first quarter of 1999, by the issuance of 355,556 shares of the
Company's common stock in connection with the Southwest acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital,
including inventory requirements, expansion of existing facilities and the
acquisition of new facilities. These short-term cash needs have historically
been financed with retained earnings and borrowings under credit facilities
available to the Company.
At March 31, 2000, the Company had working capital of approximately
$6.1 million, including $9.9 million in cash and cash equivalents, $24.3
million in accounts receivable, $193.3 million in inventories, and $0.9 million
in prepaid expenses, less $24.8 million of accounts payable and accrued
expenses, $14.6 million of current maturities on long-term debt and advances
outstanding under lines of credit, $ 20.9 million in a note payable to a
shareholder, and $162.0 million outstanding under floor plan financing. The
aggregate maximum borrowing limits under working capital lines of credit with
various commercial banks 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 and the book value of
construction equipment inventory.
For the first three months of 2000, operating activities resulted in
net cash used in operations of approximately $15.4 million. Net income of $1.1
million, decreases in accounts receivable of $5.5 million, coupled with
provisions for depreciation, amortization and deferred taxes totaling $3.5
million was more than offset by increases in inventories and other current
assets totaling $20.0 million, decreases in accounts payable and accrued
expenses totaling $5.4 million and a gain on the sale of property and equipment
of $ 0.1 million.
For the first three months of 1999, operating activities resulted in
net cash used in operations of approximately $14.0 million. Net income of $3.3
million, increases in accounts payable of $1.0 million, and accrued liabilities
of $0.8 million, coupled with provisions for depreciation, amortization and
deferred taxes totaling $2.1 million was more than offset by increases in
accounts receivable and inventories totaling $21.4 million.
During the first three months of 2000, the Company used $10.5 million
in investing activities, including purchases of property, plant and equipment
of $11.3 million and an increase in other assets of $0.1 million, offset by
proceeds from the sale of property, plant and equipment totaling $0.9 million.
During the first three months of 1999, the Company used $12.4 million
in investing activities, including purchases of property, plant and equipment
of $11.1 million and an increase in other assets of $1.6 million, offset by
proceeds from the sale of property, plant and equipment totaling $0.3 million.
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<PAGE> 13
Net cash generated from financing activities in the first three months
of 2000 amounted to $15.8 million. Proceeds from additional floor plan
financing and increased notes payable of $20.8 million more than offset
principal payments on notes payable and lines of credit of $5.0 million.
Net cash generated from financing activities in the first three months
of 1999 amounted to $19.4 million. Proceeds from additional floor plan
financing and increased notes payable of $23.7 million more than offset
principal payments on notes payable of $4.3 million.
Substantially all of the Company's truck purchases from PACCAR are
made on terms requiring payment within 15 days or less from the date of
shipment 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 to GMAC prior to the sale of new vehicles for a period of
12 months and for used vehicles for a period of three months. At March 31,
2000, the Company had approximately $118.9 million outstanding under its floor
plan financing arrangement with GMAC. GMAC permits the Company to earn, for up
to 50% of the amount borrowed under its floor plan financing arrangement with
GMAC, interest at the prime rate less three-quarters of one percent on
overnight funds deposited by the Company with GMAC.
Substantially all of the Company's new equipment purchases are
financed by either John Deere or Associates Commercial Corporation. The Company
finances all, or substantially all, of the purchase price of its new equipment
inventory, under its floor plan facilities. The agreement with John Deere
provides interest free financing for four months after which time the amount
financed is required to be paid in full, or an immediate 2.25% discount with
payment due in 30 days. When the equipment is sold prior to the expiration of
the four month period, the Company is required to repay the principal within
approximately 10 days of the sale. Should the equipment financed by John Deere
not be sold within the four month period, it is transferred to the Associates
Commercial Corporation floor plan arrangement. The Company makes principal
payments to Associates Commercial Corporation, for sold inventory, on the 15th
day of each month. Used and rental equipment, to a maximum of book value, is
financed under a floor plan arrangement with Associates Commercial Corporation.
The Company makes monthly interest payments on the amount financed and is
required to commence loan principal repayments on rental equipment as book
value reduces. Principal payments, for sold used equipment, are made the 15th
day of each month following the sale. The loans are collateralized by a lien on
the equipment. The Company's floor plan agreements limit the aggregate amount
of borrowings based on the book value of new and used equipment units. As of
March 31, 2000, the Company's floor plan arrangement with Associates Commercial
Corporation permits the financing of up to $25 million in construction
equipment. At March 31, 2000, the Company had $34.4 million and $8.7 million
outstanding under its floor plan financing arrangements with John Deere and
Associates Commercial Corporation, respectively.
Backlogs
The Company enters firm orders into its backlog at the time the order
is received. Currently, customer orders are being filled in approximately six
to nine months and customers have historically placed orders expecting delivery
within three to six months. However, certain customers, including fleets and
governments, typically place orders up 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, economic recessions
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 March 31, 2000 and 1999, were approximately $150 million and
$185 million, respectively. Backlogs decreased principally due to the above
noted weaker demand for trucks.
13
<PAGE> 14
Seasonality
The Company's heavy-duty truck 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, which includes small and large fleets, governments, 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 40% of such rebates are typically
received in the fourth quarter, resulting in a seasonal increase in gross
profit.
Seasonal effects in the construction equipment business are primarily
driven by the weather. Seasonal effects on construction equipment sales related
to the seasonal purchasing patterns of any single customer type are mitigated
by the Company's diverse customer base that includes contractors, for both
residential and commercial construction, utility companies, federal, state and
local government agencies, and various petrochemical, industrial and material
supply type businesses that require construction equipment in their daily
operations.
Cyclicality
The Company's business, as well as the entire retail heavy-duty truck
and construction equipment industries, are 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 and construction equipment 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 and construction equipment 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial
position, results of operations, or cash flows of the Company due to adverse
changes in financial market prices, including interest rate risk, and other
relevant market rate or price risks.
The Company is exposed to some market risk through interest rates,
related to its floor plan borrowing arrangements and discount rates related to
finance sales. Floor plan borrowings are based on the Prime Rate of interest
and are used to meet working capital needs. As of March 31, 2000, the Company
had floor plan borrowings of approximately $162,036,000. Assuming an increase
in the Prime Rate of interest of 100 basis points, future cash flows could be
effected up to $1,620,360. The interest rate variability on all other debt
would not have a material adverse effect on the Company's financial statements.
The Company provides all customer financing opportunities to various finance
providers. The Company receives all finance charges, in excess of a negotiated
discount rate, from the finance providers within 30 days. The negotiated
discount rate is variable, thus subject to interest rate fluctuations. This
interest rate risk is mitigated by the Company's ability to pass discount rate
increases to customers through higher financing rates.
14
<PAGE> 15
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
Exhibit
Number
27.1* Financial data schedule
* Filed herewith
b) Reports on Form 8-K
None
15
<PAGE> 16
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.
<TABLE>
<S> <C> <C>
Date: May 12, 2000 By: /s/ W. MARVIN RUSH
------------------------------
Name: W. Marvin Rush
Title: Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 2000 By: /s/ MARTIN A. NAEGELIN JR.
------------------------------
Name: Martin A. Naegelin, Jr.
Title: Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27.1* Financial data schedule
* Filed herewith
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF RUSH ENTERPRISES, INC. AND SUBSIDIARIES FOR
THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,888
<SECURITIES> 0
<RECEIVABLES> 24,270
<ALLOWANCES> 0
<INVENTORY> 193,325
<CURRENT-ASSETS> 228,431
<PP&E> 130,014
<DEPRECIATION> (18,650)
<TOTAL-ASSETS> 377,718
<CURRENT-LIABILITIES> 222,292
<BONDS> 74,717
0
0
<COMMON> 70
<OTHER-SE> 75,928
<TOTAL-LIABILITY-AND-EQUITY> 377,718
<SALES> 209,952
<TOTAL-REVENUES> 209,952
<CGS> 173,207
<TOTAL-COSTS> 204,741
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,418
<INCOME-PRETAX> 1,793
<INCOME-TAX> 717
<INCOME-CONTINUING> 1,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,076
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
</TABLE>
