Marvin RushLet'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.
Both higher used truck values and increased back-end revenues are strong indicators that an industry recovery is underway. However, we do not anticipate a significant increase in retail truck sales during the third quarter.Recently, most truck manufacturers have reported increases in new truck orders, indicating that confidence is returning, which we believe will lead to a strong truck sales market in 2011, 2012 and 2013. Our balance sheet remains strong and the company has been able to generate positive cash flow despite market conditions. We are confident in our strategy and our ability to execute it. Thanks to our employees we remain financially strong and a profitable company. We're now prepared to answer any questions you may have. Question-and-Answer Session Operator (Operator Instructions) Our first question comes from John Barnes with RBC Capital Markets. John Barnes - RBC Capital Markets Rusty, can you talk a little bit about just the used market and the firming of used truck price? We're seeing it a little bit on both sides. The truckers are awarding used truck sales, but lower gains on sale of that equipment. Seeing from your standpoint that used prices are firming up. So can you just talk about the pricing environment there? Rusty Rush There is no question, John, that used truck values since January have firmed up since the end of last year and beginning of this year. Values have obviously firmed and increased. And at least our margins being somewhat higher than what they have been historically is the fact that you got to remember we traded for these trucks roughly in the last quarter or last half of last year. So as you sell out of that inventory in the first and second quarter of this year, as market values go up, you experienced obviously higher margins and higher return on the used truck sales. But we expect our inventory to get more in line with current valuations and margins to go down to where they were in the last two quarter and be more in line with our historical averages. Read the rest of this transcript for free on seekingalpha.com