Rush Enterprises announced that for the year ended Dec. 31, 2020, the company achieved revenues of $4.7 billion and net income of $114.9 million, or $2.04 per diluted share, compared with revenues of $5.8 billion and net income of $141.6 million, or $2.51 per diluted share, for the year ended Dec. 31, 2019.
“Given the uphill battles we faced in 2020, including the COVID-19 pandemic as well as the expected industry downturn resulting from record sales of new commercial vehicles in 2019, we are very proud of our strong financial results last year,” says W.M. “Rusty” Rush, Chairman, Chief Executive Officer and President of Rush Enterprises, Inc. “Due to state and local shutdowns beginning last March, the national economy slowed tremendously for several months, directly impacting truck and aftermarket sales. In the second half of 2020, consumer spending picked up, and we experienced increased activity throughout the markets we support, resulting in improved truck sales and aftermarket revenues, which continued to gradually improve from the second quarter lows. We diligently managed expenses and remained flexible to support the needs of the market,” he added.
“Despite industry-wide declines in new Class 8 trucks sales of 30.5 percent, new Class 4-7 trucks sales of 13.1 percent and an unexpected decline in demand for aftermarket parts & services, our net income decreased by only 18.9 percent compared to 2019. These financial results demonstrate that the strategic initiatives we identified and invested in over the last several years have improved our quality of earnings and further insulated our company from the historical swings associated with the truck cycle,” Rush says.
“Moreover, we believe that the success of our strategic initiatives is a major reason for our strong balance sheet and we are happy to announce that, in recognition of our strong cash position, our Board of Directors has declared a quarterly cash dividend of $0.18 per share, a 29 percent increase over the prior quarterly dividend. In addition, our Board of Directors also approved a $100 million share repurchase authorization in the fourth quarter. These actions further illustrate our commitment to our capital allocation strategy, which includes returning value to shareholders while continuing to invest in strategic initiatives that will help grow our business and make us more profitable,” Rush added.
“While there are uncertainties ahead, general economic and industry conditions have improved since the second quarter of 2020 and we believe that our financial performance in 2021 will improve significantly compared to 2020. We will continue to carefully monitor the pandemic and its impact on the economy and our industry, including supply chain issues that may affect truck and parts availability later in the year. Further, we remain focused on profitability and are continuing to implement our strategic initiatives while strictly managing our expenses as the market improves,” Rush says.
“It is important that I express my gratitude to our employees, who were faced with challenges unlike any other last year. I am always inspired by their hard work, but I was especially impressed by what they accomplished in 2020. They showed great resilience in the face of adversity while never losing focus on the health and safety of our customers, communities and each other,” Rush says.
Our Response to the COVID-19 Pandemic and Its Impact on Our Business and Outlook
“In the fourth quarter of 2020, as the number of COVID-19 cases increased throughout the country, we experienced our highest levels of pandemic-related employee absenteeism which directly impacted our ability to serve customers. Despite the rising number of COVID-19 cases, overall consumer spending remained strong, creating solid freight demand, and we were pleased that our fourth quarter revenues increased 7.6 percent compared to the third quarter. While many uncertainties remain regarding the pandemic, we are optimistic that our industry will build momentum as the COVID-19 vaccine is distributed throughout the country and state and local economies accelerate their recovery,” says Rush.
“Despite our optimism, we are maintaining the disciplined approach to expense management and are maintaining many of the widespread cost reduction measures that we implemented in the first half of 2020. While quarterly expense results may vary based on the pace of the recovery and seasonal timing of certain expenses, make no mistake, we are committed to disciplined expense management,” Rush explained.
During the fourth quarter, we reinstated all employee salaries that were previously reduced as an expense reduction measure, except for my own, and we also awarded all employees a $500 one-time bonus paid in recognition of their hard work in a challenging year,” he added. “Our employees are doing a remarkable job serving our customers while managing costs. We are confident in our abilities to grow our business, even with the challenges that may lie ahead,” Rush says.
Aftermarket Products and Services
Aftermarket products and services accounted for approximately 66.7 percent of the company’s total gross profits in 2020, with parts, service and collision center revenues reaching $1.6 billion, down 9.2 percent compared to 2019. The company achieved an annual absorption ratio of 118.7 percent in 2020, compared to 120.2 percent in 2019.
“Our parts and services revenues were down 9.2 percent in 2020 compared to 2019. This decline was largely attributable to weak demand from the energy sector and the COVID-19 pandemic, which caused demand issues, production shutdowns, supply chain issues and reductions in staffing, both for our company and our customers,” says Rush. “However, with the strategic investments and the RushCare offerings we put in place prior to 2020, such as Parts Connect for online parts ordering, Service Connect for our 24/7 communications with customers and our call centers for service and parts support nationwide, we were able to quickly pivot to safely serve our customers’ needs,” he added.
“In the fourth quarter, parts and service revenues were essentially flat compared to the third quarter. However, we are pleased with our performance, considering there are fewer working days in the fourth quarter and we were further impacted by employee absenteeism caused by COVID-19. Our fourth quarter revenues were positively impacted by healthy demand caused by the strong freight market, and the addition of service technicians throughout our network,” says Rush.
“Looking ahead, we believe the country’s economic recovery will contribute to healthy, widespread demand from most of the customer segments we support, particularly over-the-road, construction, refuse, municipalities, and leasing and rental businesses. We expect gradual growth in parts and service revenues throughout 2021, and we believe our aftermarket revenues in 2021 will approach the levels we achieved in 2019,” he says.
Commercial Vehicle Sales
New U.S. Class 8 retail truck sales totaled 195,687 units in 2020, down 30.5 percent over 2019, according to ACT Research. The company sold 10,670 new Class 8 trucks in 2020, a decrease of 28.8 percent compared to 2019, and accounted for 5.5 percent of the new U.S. Class 8 truck market. ACT Research forecasts U.S. retail sales of new Class 8 trucks to total 243,000 units in 2021, a 24.2 percent increase compared to 2020.
“Our Class 8 new truck sales results were consistent with the industry in 2020, down approximately 28.8 percent compared to 2019. As we entered the fourth quarter, solid consumer spending and strong freight rates led to increased demand for new trucks, especially from over-the-road customers. Additionally, there were fewer new trucks available during the third quarter due to production shutdowns earlier in the year, which further bolstered demand for new Class 8 trucks in the fourth quarter. As a result, our fourth quarter sales increased 22 percent over the third quarter, significantly outpacing the industry. Looking to 2021, truck manufacturers are increasing capacity, but component manufacturers’ supply chain issues may limit the industry’s ability to meet demand throughout the year. With housing, automotive and consumer spending expected to remain strong, we believe that our Class 8 new truck sales will generally align with the industry in 2021,” Rush says.
The company sold 11,311 new Class 4-7 medium-duty commercial vehicles in 2020, a decrease of 21.8 percent compared to 2019, accounting for 4.9 percent of the total U.S. market. New U.S. Class 4-7 medium-duty commercial vehicle sales were 232,042 units in 2020, down 13.1 percent over 2019. ACT Research forecasts U.S. retail sales for new Class 4-7 commercial vehicles to be approximately 249,500 units in 2021, a 7.5 percent increase compared to 2020.
“We experienced a larger than expected decline in Class 4-7 new commercial vehicle sales throughout 2020, primarily as a result of the effect that the COVID-19 pandemic had on demand from lease and rental equipment customers, and our commercial food service customers,” says Rush.
“Production shutdowns from some of the manufacturers we represent led to supply constraints, which further negatively impacted our results. In the fourth quarter, our Class 4-7 new commercial vehicle sales were down compared to the fourth quarter of 2019, due in large part to the timing of fleet deliveries. In 2021, while we expect the industry will face challenges related to manufacturers’ production lead times, our nationwide inventory of work-ready trucks is unparalleled and will help us support a wide variety of customers. We believe our Class 4-7 new commercial vehicle sales will be in line with the industry and experience healthy growth in 2021,” says Rush.
The company sold 7,400 used vehicles in 2020, a 4.4 percent decrease compared to 2019. “Used trucks were in high demand in the second half of 2020 due to limited production of new trucks, which helped strengthen used truck values. We estimate that used truck values have increased approximately 15 percent from their low point in the second quarter of 2020, which led to strong used truck margins in the fourth quarter. We expect used truck values and demand to remain strong during 2021,” Rush says.
In 2020, the company expanded its nationwide parts and service capabilities with the addition of Rush Truck Center – Miami, Rush Truck Center – Dallas South and Rush Truck Center – Arlington, which also includes Rush Bus Center and Rush Truck Leasing operations. “We remain committed to strengthening our nationwide network in strategic areas, which enables us to better support our customers no matter when or where they need us,” says Rush.
For the year ended Dec. 31, 2020, the company’s revenues totaled $4.7 billion, compared to revenues of $5.8 billion in 2019. The company reported net income for 2020 of $114.9 million, or $2.04 per diluted share, compared with net income of $141.6 million, or $2.51 per diluted share in 2019.
Aftermarket products and services revenues were $1.6 billion in the year ended 2020, compared to $1.8 billion in the year ended 2019. The company sold 30,513 new and used commercial vehicles in 2020, a 22.6 percent decrease compared to 39,416 new and used commercial vehicles in 2019. The company delivered 10,670 new heavy-duty trucks, 11,311 new medium-duty commercial vehicles, 1,132 new light-duty commercial vehicles and 7,400 used commercial vehicles during 2020, compared to 14,986 new heavy-duty trucks, 14,470 new medium-duty commercial vehicles, 2,219 new light-duty commercial vehicles and 7,741 used commercial vehicles during 2019.
In the fourth quarter of 2020, the company’s revenues totaled $1.3 billion, compared to revenues of $1.3 billion reported for the fourth quarter of 2019. Net income for the quarter ended Dec. 31, 2020 was $41.0 million, or $0.72 per diluted share, compared to $23.8 million, or $0.42 per diluted share, in the quarter ended Dec. 31, 2019.
Aftermarket products and services revenues were $394.7 million in the fourth quarter of 2020, compared to $421.2 million in the fourth quarter of 2019. The company’s absorption ratio was 132.9 percent in the fourth quarter of 2020, compared to 116.6 percent in the fourth quarter of 2019. The company delivered 3,142 new heavy-duty trucks, 2,773 new medium-duty commercial vehicles, 328 new light-duty commercial vehicles and 2,019 used commercial vehicles during the fourth quarter of 2020, compared to 2,991 new heavy-duty trucks, 3,424 new medium-duty commercial vehicles, 436 new light-duty commercial vehicles and 1,932 used commercial vehicles during the fourth quarter of 2019.
Rush Truck Leasing now operates 45 PacLease and Idealease franchises in markets across the country with more than 8,500 trucks in its lease and rental fleet and more than 1,000 trucks under contract maintenance agreements. Lease and rental revenue declined 5.2 percent compared to the fourth quarter of 2019, however, due to efficient management of the fleet, our gross profit increased 3.5 percent over the same time period.
During 2020, the company repurchased $24.8 million of its common stock. During the fourth quarter of 2020, the company repurchased $2.2 million of its common stock and adopted a stock repurchase plan that allows us to repurchase $100 million of stock through Dec. 31, 2021. As of Dec. 31, 2020, there is $98.2 million remaining to spend under the plan. Further, during the fourth quarter of 2020, we paid a cash dividend of $7.8 million, for a total of $22.5 million paid to shareholders during 2020, which is 22 percent more than we paid to shareholders in 2019.
“Our cash dividends and stock repurchase plan reflect our commitment to our capital allocation strategy and enhancing shareholder value. We also continued to invest in our long-term initiatives and ended the year with a record high $312.0 million in cash and cash equivalents,” says Rush.
On Sept. 15, 2020, the Board of Directors of the company declared a 3-for-2 stock split of the company’s Class A common stock and Class B common stock, to be effected in the form of a stock dividend. On October 12, 2020, the company distributed one additional share of stock for every two shares of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of September 28, 2020. All share and per share data in this earnings release have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period presented.
“Throughout 2020, by taking advantage of every possible sales opportunity and having a disciplined approach to expense management, we were able to remain nimble and profitable in a difficult environment. Our balance sheet and cash position strengthened in a tough economic environment and we are proud that we continue to return value to shareholders with our dividend and share repurchase programs. While we will remain focused on closely managing expenses, employee benefits and payroll taxes will negatively impact expenses in the first quarter of 2021 compared to the fourth quarter of 2020, as they do every year,” says Rush.
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