Rush Enterprises, Inc. (RUSHA)

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Rush Enterprises, Inc. (RUSHA)

Q1 2013 Results Earnings Call

April 24, 2013 11:00 AM ET


Marvin Rush - Chairman

Rusty Rush - President and CEO

Marty Naegelin - Executive Vice President

Steve Keller - Senior Vice President and CFO

Jay Hazelwood - Vice President and Controller

Derrek Weaver - Senior Vice President, General Counsel and Secretary


Tim Denoyer - Wolfe Trahan

Neil Frohnapple - Northcoast Research

Brad Delco - Stephens

Jamie Cook - Credit Suisse

John Barnes - RBC Capital Markets

Andrew Obin - Bank of America Merrill Lynch

Chaz Jones - Wunderlich Securities

Brian Sponheimer - Gabelli & Company

Joel Tiss - BMO Capital Markets

Martin Falk - MD Falk & Company

Art Hatfield - Raymond James



Good day, ladies and gentlemen. And welcome to the Rush Enterprises First Quarter 2013 Earnings Results Conference Call. At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Chairman, Marvin Rush. Please go ahead.

Marvin Rush

Welcome to our first quarter earnings release conference call. On the call today are Rusty Rush, President and Chief Executive Officer; Marty Naegelin, Executive Vice President; Steve Keller, Senior Vice President and CFO; Jay Hazelwood, Vice President and Controller, Derrek Weaver, Senior Vice President, General Counsel and Secretary.

Now, Steve Tailor, Steve Keller, excuse me, will say a few words regarding forward-looking statements.

Steve Keller

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, 2012, and in our other filings with the Securities and Exchange Commission.

Marvin Rush

Now let's give you an update on the first quarter. We are pleased to announce that company’s gross revenues totaled $757 million in the first quarter of 2013. Net income for the quarter was $13.5 million and are 34% -- $0.34 per diluted share. We ended the quarter in a strong financial position including a cash balance of $205 million.

Our parts, service and body shop revenues reached a new quarterly record high and they accounted for 64% of the company's total gross profits this quarter. This is a result of increased maintenance of aged vehicles, incremental revenue from our Ohio acquisition and our wide range of aftermarket solutions.

Despite higher expenses related to taxes and employee benefits and the effects of the acquisition and declines in the energy section we still achieved the 111.9% absorption rate during the first quarter.

Rush's Class 8 new truck deliveries accounted for 5.2% of the total U.S. Class 8 new truck sales, which is well below normal replacement levels this quarter. As expected our Class 8 truck deliveries also decreased due to decline in energy section -- sector.

Our Class 4-7 deliveries increased about 26% over the first quarter of last year and accounted for 5% of the U.S. Class 4-7 market. This growth is a result of good performance by our medium-duty franchises across the country including our Navistar Division. Our light-duty and used truck sales also increased compared to the first quarter of 2012.

Industry outlook, industry experts forecasted Class 8 retail sales will be flat with 2012 or about 198,000 units. Class 4-7 retail sales are expected to increase about 11% to approximately 182,000 units.

New truck quoting activity remain strong, we expect this will lead to increased retail sales later this year. We’re encouraged by the successes of [Navistar][ph] gain in implementing their engine strategy this quarter and we believe we have a positive -- this will have positive impact on our Navistar Division truck sales moving forward.

We believe our aftermarket parts and business will also continue to remain strong throughout 2013. We are very pleased with the financial performance this quarter and are grateful to all our employees for their contributions to the company’s success.

Now we are prepared to answer questions you may have.

Question-and-Answer Session


(Operator Instructions) Our first question comes from Tim Denoyer from Wolfe Trahan. Your line is open.

Tim Denoyer - Wolfe Trahan

Hi. Good morning, guys.

Rusty Rush

Hi. Good morning, Tim.

Tim Denoyer - Wolfe Trahan

Just to start with a couple of questions on the order environment, my favorite topic, the increase in, yeah, is the increase in quoting activity over the past several months translating into orders as it has in the past or is it - if the weakness in the March, April truck load trend we’re kind of seeing muting that a bit this year?

Rusty Rush

It’s because, good question, Tim, when I had - last call we had was about 10 weeks ago I guess, I said order, as far quoting activity was, strong, and up quite a bit and to be honest with you it’s still the same. Is it muted somewhat in actual orders? I see things lead, tending to, people tending to take longer to make decisions, to your point. We don’t see missing deals. We don’t appear to be deals going away, people are just putting off decisions a little longer then they have in the past.

Let me give you one quick (inaudible) I found out by the other day, I was talking to guys back, and it go back to 2011, and I said, the orders that we are taking in 2011 for example, 15% of the orders taken, say, 90 day timeframe were build not in that quarter, more extended out.

Currently, the orders that are taken in most of them 35% to 40% are built within 90 days. So I think that shows some change in buying habits of some customers, we all know, it had been very hard to get trucks for the last few years, even wrapped up at 198,000 units retail last year. So I think customers are not necessarily purchasing, looking out 12 to 18 to 24 months out with their orders, but actually ordering for more immediate type delivery because that, that’s part of negotiation process I guess from a customers perspective.

Tim Denoyer - Wolfe Trahan

Yeah. And so I guess following up on that, and getting into a margin question, is the fact that truckers are just kind of sitting back a little bit, does that mean that the OEM or your pricing for new truck is being de-limited I guess, is how Packard said it yesterday? And can you talk about what drove the strength in the new truck margin in the quarter or the new end-use truck margin by (inaudible)?

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