RUSH ENTERPRISES INC \TX\ SEC 10-K Report

Rush Enterprises Inc., a leading operator of commercial vehicle dealerships under the name "Rush Truck Centers," has released its 2024 10-K report. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges and risks it faces. The company operates a network of dealerships offering new and used commercial vehicle sales, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.

Financial Highlights

Rush Enterprises Inc. reported the following key financial metrics for 2024:

• Total Revenue: $7,804.7 million, a 1.5% decrease from $7,925.0 million in 2023, primarily due to weak demand for Class 8 trucks and high interest rates.
• Gross Profit: $1,531.4 million, a decrease of $61.7 million or 3.9% compared to 2023, with gross profit as a percentage of sales decreasing to 19.6% from 20.1% in 2023.
• Operating Income: $468.1 million, a decrease from $512.4 million in 2023, reflecting reduced gross profit and increased depreciation and amortization expenses.
• Net Income: $304.2 million, a decrease from $347.1 million in 2023, influenced by higher net interest expenses and lower operating income.
• Net Income Per Share: Basic $3.85, Diluted $3.72, compared to Basic $4.28 and Diluted $4.15 in 2023, reflecting the overall decrease in net income.

Business Highlights

Key operational highlights for Rush Enterprises Inc. in 2024 include:

• Revenue Segments: The Truck Segment operates a network of commercial vehicle dealerships under the name "Rush Truck Centers," offering new and used commercial vehicle sales, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.
• Geographical Performance: Rush Truck Centers are located in high traffic areas throughout the United States and Ontario, Canada, with a total of 143 franchised locations in 23 states and 12 International dealership locations in Ontario.
• Sales Units: In 2024, the company sold 15,465 new Class 8 trucks, 13,935 new medium-duty commercial vehicles, and 2,105 new light-duty vehicles. Used commercial vehicle sales totaled 7,110 units.
• New Product Launches: The company continues to expand its product lines by adding complementary product categories and service capabilities, including vehicle telematics products and CNG fuel systems through a joint venture with Cummins.
• New Production Launches: The company acquired new dealership locations, including a Peterbilt commercial vehicle franchise in Nebraska and a Ford commercial vehicle franchise in Illinois, expanding its geographical footprint.
• Future Outlook: The company expects to sell between 14,500 to 16,000 new Class 8 trucks in the U.S. and approximately 500 additional new Class 8 trucks in Canada in 2025. It also anticipates selling 14,500 to 15,500 new Class 4 through 7 commercial vehicles in the U.S. and approximately 550 additional new Class 5 through 7 commercial vehicles in Canada. Lease and rental revenue is expected to increase by approximately 6.0% during 2025, and the company anticipates aftermarket revenue growth as demand picks up throughout the year.

Strategic Initiatives

Rush Enterprises Inc. has outlined several strategic initiatives and capital management activities:

• Strategic Initiatives: The company is focused on expanding its network of Rush Truck Centers and enhancing its portfolio of Aftermarket Products and Services. This includes broadening the diversity of commercial vehicle product offerings and investing in innovative solutions to meet customer needs. The company also aims to grow its national account customer base and pursue other aftermarket strategic initiatives to drive revenue growth.
• Capital Management: The company declared a 3-for-2 stock split in 2023, which was effected in the form of a stock dividend. It also announced a new stock repurchase program authorizing up to $150 million in share repurchases, replacing the previous program. The company paid cash dividends totaling $55.5 million in 2024 and plans to continue quarterly dividend payments. Additionally, the company has a line of credit with a maximum borrowing of $25 million and maintains compliance with all debt covenants.
• Future Outlook: In 2025, the company expects to increase lease and rental revenue by approximately 6.0% and anticipates a gradual improvement in demand for Aftermarket Products and Services as the year progresses. The company plans to purchase or lease commercial vehicles worth $200 million to $250 million for its leasing operations and make capital expenditures of $35 million to $40 million for recurring items. The company remains optimistic about achieving aftermarket revenue growth through strategic initiatives and market recovery.

Challenges and Risks

Rush Enterprises Inc. faces several challenges and risks, including:

• Operational Risks: Dependence on PACCAR and International Motors for truck and parts supply, which could be disrupted by changes in control or negative changes in these relationships. The company's dealership agreements are non-exclusive and have relatively short terms, posing a risk of nonrenewal or less favorable terms upon renewal.
• Regulatory Risks: Compliance with evolving emissions regulations, such as the EPA 2027 Low NOx and CARB's HD Omnibus rules, which could impact vehicle sales and operations.
• Market Risks: Technological advances in the commercial vehicle industry, such as drivetrain electrification and autonomous vehicles, could reduce demand for traditional parts and services.
• Financial Risks: The need for additional financing to maintain inventory levels and the impact of interest rate fluctuations on profitability.
• Economic Risks: Potential cancellations in the backlog of vehicle orders due to economic uncertainties and proposed tariffs.
• Cybersecurity Risks: Vulnerability to cyberattacks and data breaches, despite existing security measures.
• Environmental Risks: Exposure to natural disasters and severe weather events that could disrupt operations.

Management is focused on mitigating these risks by maintaining strong relationships with manufacturers, investing in technology and personnel, and expanding product and service offerings. The company is also exploring growth through strategic acquisitions and opening new locations to enhance its market presence.

SEC Filing: RUSH ENTERPRISES INC \TX\ [ RUSHA ] - 10-K - Feb. 21, 2025