Rush Enterprises, Inc. (RUSHA)

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Rush Enterprises, Inc. (RUSHA)

Q2 2013 Earnings Call

July 24, 2013 10:00 AM ET


Rusty Rush – Chairman, President and CEO

Steven Keller – SVP, CFO and Treasurer


Chaz Jones – Wunderlich

Brad Delco – Stephens

Jamie Cook – Credit Suisse

Neil Frohnapple – Northcoast Research

John Barnes – RBC Capital Markets

Art Hatfield – Raymond James

Andrew Obin – Bank of America Merrill Lynch

Bill Armstrong – C.L. King & Associates

Brian Sponheimer – Gabelli & Company

Kristine Kubacki – Avondale Partners

Tom Albrecht – BB&T Capital Markets



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

As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to your host, Mr. Rusty Rush, Chairman, CEO and President. Please begin.

Rusty Rush

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

Now, Steve will say a few words regarding forward-looking statements.

Steven 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.

Rusty Rush

Let me first start by saying this was a tough quarter. As you have read in the news release we are in $5.6 million or $0.14 per share this quarter or $0.30 per share when you consider the one-time expense charge for the Chairman’s retirement transition. Compounding this one-time charge as an increase in our G&A expenses over the first half of the year.

Given our accelerated phase of growth, we have made investments to put the resources and technology in place to leverage our growing network and keep us all interact to successfully reach our long-term strategic goals. Despite the timing and its impact on earnings, we believe these are necessary investments.

We expect the truck sales market to be challenging and it was activity in the energy sector remains slow. Some of our fleet customers are delaying truck purchases and we are still being impacted by Navistar’s engine transition. As a result, our Class 8 market share was only 4.4% versus our goal to maintain a 5% level.

On top of that our overall sales mix negatively impacted margins this quarter. Medium-duty truck sales rose or relatively flat compared to the first quarter. Looking forward we expect new Class 8 truck sales to be up only slightly in the third quarter, with truck purchases not accelerating as rapidly as we expected earlier this year.

We do believe that Navistar is on the right path with their engine transition. We expect this will produce additional truck sales for our Navistar dealerships later in the year. We also believe our medium-duty truck sales will remain healthy and are encouraged by the activity we’ve seen in some segments.

On a positive note, parts, service and body shop revenues remain strong, there are absorption rate is up from last quarter. We expect demand for maintenance and repair to continue and we believe our growing network on service points and portfolio of aftermarket solutions are in helping to drive success in this area.

Let’s talk about growth. We completed an acquisition with Piedmont International in North Carolina, we’ve added Ford and Mitsubishi Fuso franchises in Cincinnati, Ohio. We are announcing purchase agreements with two additional bigger groups, Midwest Truck Sales in Kansas and Missouri, and TransAuthority in Virginia.

Including the Ohio acquisitions we have acquired – we acquired in December of 2012, these acquisitions will add 18 service points to our network and expand our Navistar division. We are excited about the growth that represents the Cummins and we continue to evaluate opportunities with Navistar.

We are also investing in our existing markets. These new facilities remodels and renovations allows to add service capacity and expand our capabilities. Finally, I would like to thank all of our employees across the country for their efforts this quarter and take the opportunity to welcome the employees of Piedmont International, Midwest Truck Sales and TransAuthority to the Rush organization.

I would also like to congratulate my father Marvin Rush on his retirement after a 48-year career with the company as founder. He can certainly be proud of his accomplishments over the years. We wish him a long and happy retirement.

With that, I’ll take any questions.

Question-and-Answer Session


Thank you. (Operator Instructions). Our first question comes from Chaz Jones with Wunderlich. Please go ahead with your question.

Chaz Jones – Wunderlich

Thanks for taking my questions. First thing Rusty I heard you say you expect Navistar maybe to begin to normalize later in the year a bit, could you maybe just give us a sense for, where Navistar was in the quarter on the heavy-duty side?

Rusty Rush

As I mentioned last quarter, I think last quarter was a – it’s all of a 160 units and I’m going up a memory here, I’ll look it up, but I think the second quarter probably raised a 185 I believe, so obviously not much change from first to second quarter. Now we do expect that start accelerating some in the third quarter, and then continue to accelerate from there. As you know they introduced their 13 liter engine just got introduced in the second quarter. So it combined with the release of the 15 liter ISX in the first quarter, obviously it’s just beginning to take the attraction obviously and take all. So, that’s one of the upsides as I’ve said along, they we believe we’ll see as we go forward especially in the 14 and 15 as they get back to a more normalized historical market share.

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