Rush Enterprises, Inc. Q2 2010 Earnings Call Transcript
Let's update you on 2010. We were pleased to report that the company has continued to perform, delivering another quarter of widening profits. Our truck dealerships parts, service and body shop revenues increased 21% compared to the second quarter of 2009. This results in our absorption rate increasing from 95.2 to 104.3 for the same time period.
We expect that back-end business to remain strong throughout the year as more trucks are being put into operation with improving freight conditions. However, retail sales of new heavy and medium-duty trucks remain sluggish throughout the second quarter. New truck purchases continued to remain at least less than normal replacement cycles due to the general economic conditions and the transition to the 2010 emissions-compliant engines in new trucks.
General hesitancy by truck buyers to purchase new trucks did have a positive impact on used truck values. Company's used truck sales revenue was up 19% and used truck gross margin more than doubled compared to the second quarter of 2009. We expect used truck values to stabilize in the third quarter and our used truck margins to return to their historical levels.Despite continuing new truck sales conditions, we remain profitable and continue to invest in our future. We formed the new Navistar division and completed the acquisition of Lake City Trucks. We also opened our new flagship truck dealership in Oklahoma City and acquired a Ford Commercial franchise. As we look further into 2010, the industry experts currently estimate U.S. Class 8 truck retail sales for 2010 to be 108,000 units, up from 97,000 units in 2009. Current industry projections are for U.S. Class 4 through 7 vehicle retail sales in 2010 to be 115,000 units, up slight from the [114,000] units in 2009. The average age of truck fleet remains one of the oldest on record, and we believe truck capacity is now in balance with freight movement. As a result, trucks are entering back into service and will need maintenance, indicating that parts, service and body shop revenues should remain at the improved levels seen in the second quarter.
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