Rush Enterprises, Inc. (RUSHA)
Q4 2008 Earnings Call
February 11, 2009, 11:00 am ET
Marvin Rush - Chairman
Steve Keller - VP, CFO
Rusty Rush - President, CEO
Marty Naegelin - EVP
Jamie Cook - Credit Suisse
Chaz Jones - Morgan Keegan
Joe Gagan - Atlantic Equity Research
Bill Armstrong - CL King and Associates
Gary Lenhoff - Ironmark
Tom Fogarty - Silverstone Capital
Joel Tiss - Buckingham
Rhem Wood - Stephens, Inc.
Previous Statements by RUSHA
» Rush Enterprises, Inc. Q3 2008 Earnings Call Transcript
» Rush Enterprises, Inc. Q2 2008 Earnings Call Transcript
» Rush Enterprises Inc. Q1 2008 Earnings Call Transcript
Good morning and welcome to our fourth quarter 2008 earnings release conference call. On the call today are Rusty Rush, President and Chief Executive Officer; Marty Naegelin, Executive Vice President; Steve Keller, Vice President and CFO; Jay Hazelwood, Controller of Rush Enterprises and Derrek Weaver, our Chief Compliance Officer.
Now, Steve Keller will say a few words regarding forward-looking statements.
Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important 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 our annual report on Form 10-K for the year ended December 31, 2007 and in our other filings with the Securities and Exchange Commission.
Now, we would like to give you an update on our 2008 performance. 2008 proved to be a tough year for the trucking industry and the overall economy. Class 8, retail truck sales in the US were down more than 50% from 2006.
For the first time in more than a decade, parts and services sales decreased also. Fewer freight miles allowed many fleets to continue operating using excess truck capacity rather than repair replace out of service vehicles.
Despite an unprecedented and difficult truck market, it was a productive year for the company. We achieved fourth highest annual net income in the company's history and a record absorption rate of a 106%, up 1% over last year. This was accomplished through significant reductions and consistent expense management throughout the year.
Since November 2007, we decreased our non-technical workforce by more than 15% on a same-store basis and consolidated dealerships in Arizona and Florida, reducing overhead expense, but maintaining coverage and service to those markets.
We continued growth in new regions and the new product areas. We completed two acquisitions expanding our footprint in North Carolina and added an international brand to the Rush product line for the first time.
Continuing on our strategy to leverage off our asset base, we added a school and commercial bus network, which offers the Blue Bird, Elkhart and Diamond brands to a large part to the state of Texas. 14 of our existing Rush truck centers in this state are now parts, service and body shop locations for our new Rush Bus Centers network.
Additionally, we have completed an $18 million stock repurchase which provides us greater flexibility and how we finance future growth.
Our balance sheet remains strong. The company currently has a $146 million in cash and we expect continued positive cash flow for the operations in 2009.
Let's talk about 2009 a little. Tough times for the truck market will continue into 2009. We expect the first quarter of 2009 to be the weakest quarter since the truck downturn began in 2007.
Looking to the remainder of the year, industry analysts forecast US Class 8 retail truck sales to be about 132,000 units, which is down 6% over last year. We believe Class 8 truck sales could be as low as 110,000 units to 120,000 units. Medium-duty retail sales for the US could be off as much as 15% compared to last year. And the Houston construction equipment market is also expected to be down about 30% from 2008.
Demand for Class 8 trucks should begin to increase due to the age of vehicles in operation and impending 2010 diesel emissions regulations.
However, tightening credit for used truck buyers continues to reduce sales of those trucks lowering the used truck values. Lower trading values have made new truck deals less affordable.
Although credit is made available to used truck buyers on reasonable terms; we believe that Class 8 truck sales will continue to lag. Though we are not in a position to predict the future of the credit market, we are hopeful credit will ease and lending to a wider range of customers will begin in the second half of this year.
Much of our performance this year was due to our people's ability to manage effectively through challenging market conditions. We've made significant changes to our business model in response to the last industry downturn that began in 2001.
Our model has proven successful in 2007, 2008 down markets and I am confident that it will prove to be effective in 2009 as well. The lessons we have learned during the downturn have made our people better operators and will make Rush Enterprises a stronger company.
Historically, market downturns create growth opportunities which we have used to expand our footprint.
We are confident in our strategy and our ability to execute it. We remain a financially strong profitable company and if needed we are prepared to withstand an extended market downturn.