Rush Enterprises, Inc. (RUSHA)
Q1 2010 Earnings Call
April 21, 2010 11:00 am ET
Marvin Rush - Chairman
Rusty Rush - President & CEO
Marty Naegelin - EVP
Steve Keller - VP & CFO
Jay Hazelwood - Controller
Derrek Weaver - VP & General Counsel
Chaz Jones - Morgan Keegan
Tim Denoyer - Wolfe Trahan
Jamie Cook - Credit Suisse
John Barnes - RBC Capital Market
Bill Armstrong - CL King and Associates
Brian Sponheimer - Gabelli & Co
Basili Alukos - Morningstar
Robert Kosowsky - Sidoti & Co
Jack Waldo - Stephens Inc.
Gregory Macosko - Lord Abbett
Previous Statements by RUSHA
» Rush Enterprises, Inc., Q4 2008 Earnings Call Transcript
» Rush Enterprises, Inc. Q3 2008 Earnings Call Transcript
» Rush Enterprises, Inc. Q2 2008 Earnings Call Transcript
Good day and welcome to the Rush Enterprises, Inc. first quarter earnings release conference call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder this conference call is being recorded.
I would now like to introduce your host for today’s conference Marvin Rush, Chairman of the Board.
Welcome to our first quarter earnings release conference call. On the call with me today are Rusty Rush, President and CEO; Marty Naegelin, Executive Vice President; Steve Keller, Vice President and CFO; Jay Hazelwood, Controller of Rush Enterprises; Derrek Weaver, Vice President and General Counsel.
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, 2009 and in our other filings with the Securities and Exchange Commission.
Let’s talk about our first quarter update. We believe 2010 will be another difficult year for truck sales, but we do see encouraging signs of recovery in general economy and specifically in our industry. Increased freight tonnage couple with diminishing excess truck capacity has resulted in a 10% in our truck centers part services and body shop revenues in the first quarter of 2010 compared to the fourth quarter 2009.
This combined with continued expenses management resulted in our absorption rate increasing from 92.4% to 97% for the same period. We are optimistic of this increase in our part of services business in an early indicator that is sustainable recovery has begun and should accelerate throughout the year.
The construction equipment market in the territory we serve in Southeast Texas continue to decline, industry wide unit was decreased 41% from the first quarter of 2010 from the same quarter year ago. As a result our new used construction equipment sale revenue decline $7 million in the first quarter of 2009 to $5.6 million in 2010.
Let’s look at our outlook for 2010. While we believe we will continue to see improvement in the back ends of our business we also believe the 2010 will be another difficult year for truck sales. A majority of new trucks for pre-emission engine have been sold and the trucks with 2010 emission complaining engines are now beginning to reach the dealership loss.
This new technology comes with a significant prices increase which will limit demand. As a result, we believe that the new heavy-duty and medium-duty truck sales remain sluggish in the second and third quarters of this year. In the meantime, we expect truck sales with pre-2010 engines to be in high demand.
Looking forward, we expect strongly Freightliner truck sales in 2011, ’12 and ’13. The general economy, we believe that when the Class 8 truck market recovers, it will come back fast and strong due to the pent-up demand created by four consecutive years of below-normal replacement cycles.
We’ve recently entered into an agreement to acquire certain assets of Lake City International, a dealer group for 11 locations in the Utah, Idaho and Oregon. This will provide us with significant entry into three Western states and expand our network up to 60 truck center. More importantly, it provides us an excellent platform will rush to build, it’s Navistar Division. We have had the pleasure of meeting with many of the employees of Lake City International and we look forward to welcoming them to our organization.
Finally, our balance sheet is strong and company is well positioned to take advantage of acquisition opportunities. We are confident in our strategy and our ability to execute. Thanks to our employees, we’ve remain a financially strong and profitable company.
We’re now prepared to answer any questions you may have.
(Operator Instructions) Your first question comes from Chaz Jones, Morgan Keegan.
Chaz Jones - Morgan Keegan
Talking about the second and third quarters, you guys have said her for a couple of quarters that you expected that to probably weaker in the first quarter. Has that changed I guess and then two, are you talking more from a truck delivery standpoint, and we could see parts and service get better in the second quarter?
Hi, Chaz, you’re pretty much right and we do expect that truck group sales will be down than the second quarter slightly, although but parts and services I’ve said the last on our last call, that I expect it started rebounding around this time and it is showing, the first quarter shows those signs and we believe that to continue in the second quarter as we’ve said as capacity and tonnages reached an equilibrium out there and I believe that to be the case, truck sales will be down, but parts and service should remain stable and growing.