Rush Enterprises, Inc. (Nasdaq:RUSHA) (Nasdaq:RUSHB) announced that net income increased 2% in the third quarter to $15.2 million, or $0.37 per diluted share, compared with net income of $14.9 million, or $0.38 per diluted share, a year ago.
"While we are pleased with our revenue growth this quarter, we continue to make substantial investments in acquisitions, technology and human resources that are necessary to support the growth of the organization and our long-term strategy. I would like to extend my congratulations to all of our employees for their contributions to our successful performance this quarter," said W.M. "Rusty" Rush, Chairman, CEO and President of Rush Enterprises, Inc.
Operations
Aftermarket Solutions
Aftermarket services remained strong and accounted for more than 64% of the company's total gross profits for the third quarter of 2013. Third quarter parts, service and body shop revenues increased by 22.2% compared to the third quarter of 2012. This contributed to a quarterly absorption ratio of 114.6%.
"On-going demand for maintenance and repair of aged vehicles combined with our focus on aftermarket solutions continued to drive our strong parts, service and body shop revenues and absorption performance," said Rush. "Our primary service goal is to always help keep our customers up and running. We remain committed to expanding our portfolio of parts and service solutions, investing in technology to improve diagnostics and customer communication and replicating best practices and exceptional customer care across our network."
The company expects parts, service and body shop revenues to remain strong throughout the remainder of the year and into 2014.
Truck Sales
In the third quarter Rush's Class 8 retail sales, which accounted for 5.2% of the U.S. market, increased 15% over the same time period in 2012. Rush's Class 4-7 medium-duty sales, which accounted for 5.4% of the total U.S. market, increased 47% over the third quarter of 2012. Light-duty truck sales increased 42%, up 152 units over the third quarter of 2012.
"We are encouraged by Navistar's progress over the past several months in regaining customer confidence in their truck and engine combinations. This was evidenced by their increase in order intake in September, the highest since December of 2011. We believe there is strong marketplace acceptance of the Cummins ISX 15-liter engine and Cummins SCR technology on the MaxxForce 13-liter engine in Navistar's Class 8 products. We expect similar acceptance of the Cummins ISB 6.7-liter engine for medium-duty trucks and school buses. This progress has contributed to our increased heavy- and medium-duty truck sales this quarter."
"Industry experts forecast 2013 U. S. Class 8 retail sales of 188,000 units, down 5.4% compared to last year. Industry experts forecast U. S. Class 4-7 retail sales of 183,500 units in 2013, up 11.7% compared to 2012," said Rush. "We expect truck sales to continue at their current pace for the remainder of the year."
For 2014, industry experts estimate U. S. Class 8 retail sales to reach 215,000 units, a 14.4% increase over this year, but down from previous estimates. U. S. Class 4-7 retail sales are estimated to reach 193,500 units, up 5.5% over 2013. "Based on current economic indicators, we expect truck deliveries will accelerate in 2014, resulting in increased truck sales."
Growth
The company completed acquisitions in Kansas, Missouri and Virginia this quarter and entered into purchase agreements with two dealer groups to acquire locations in Illinois and Indiana.
On July 29, the company acquired certain assets of Midwest Truck Sales and now operates from locations in St. Louis and St. Peters, Missouri and Olathe, Kansas. The Missouri dealerships offer truck sales, parts and service for International trucks and the Kansas location provides truck sales, parts and service capabilities for Hino and Isuzu trucks and parts and service support for Mitsubishi Fuso trucks. In September, the company also acquired certain assets of TransAuthority and now operates full service International dealerships in Richmond and Suffolk, Virginia and parts and service locations in Fredericksburg and Chester, Virginia. The two acquisitions also expanded Rush Truck Leasing's capabilities with Idealease franchises in St. Peters, Missouri and Richmond and Norfolk, Virginia.
The company signed a letter of intent to acquire certain assets of Prairie International, which operates International commercial truck dealerships in Champaign, Decatur, Bloomington, Quincy and Springfield, Illinois; a collision center in Champaign, Illinois and Idealease commercial lease and rental operations at the dealerships in Champaign, Decatur, Quincy and Springfield, Illinois. The acquisition is expected to close this month.
The company also entered into agreements to purchase certain assets of CIT, Inc., which does business as Chicago International Trucks, Mcgrenho L.L.C., which does business as Indy Truck Sales, and Indiana Mack Leasing, LLC; and the membership interests of Idealease of Chicago, LLC. The acquisition includes International commercial truck dealerships and Idealease commercial vehicle leasing and rental operations in Carol Stream, Chicago, Grayslake, Huntley, Joliet, Kankakee and Ottawa, Illinois, and Brazil, Gary and Indianapolis, Indiana. This proposed acquisition is expected to close in January.
When complete, the acquisitions will expand the company's contiguous network of Rush Truck Centers to 106 locations in 20 states. "These acquisitions provide us with significant presence in the Midwestern United States and Virginia markets, where we had not previously operated. More importantly, they will expand our service network to provide coverage along highways that run from the Midwestern to the eastern United States, allowing us to serve trucking companies operating in these specific regions as well as those whose operations route through these states to other destinations. "We are excited to have the employees of Midwest Truck Sales and Transauthority join the Rush family and we look forward to welcoming the employees of Prairie International, Chicago International Trucks and Indy Truck Sales into our organization.
“The company continues to invest in facilities and expand in existing markets. We opened a new International parts and service facility in Springfield, Ohio this quarter and will open a new full service Peterbilt dealership and Paclease commercial vehicle leasing and rental operation in Corpus Christi, Texas in December.
Financial Highlights
In the third quarter, the company's gross revenues totaled $913.1 million, a 22.5% increase from gross revenues of $745.1 million reported for the third quarter ended September 30, 2012.
Parts, service and body shop sales revenue was $257.5 million in the third quarter of 2013, compared to $210.7 million in the third quarter of 2012. The Company delivered 2,605 new heavy-duty trucks, 2,421 new medium-duty commercial vehicles, 515 new light-duty commercial vehicles and 1,635 used commercial vehicles during the third quarter of 2013, compared to 2,272 new heavy-duty trucks, 1,650 new medium-duty commercial vehicles, 363 new light-duty commercial vehicles and 1,211 used commercial vehicles during the third quarter of 2012.
The company now plans to complete implementation of its new business system during the first quarter of 2015, nearly 18 months ahead of its previous implementation schedule. "While the accelerated pace of implementation will increase expenses, we believe it will expedite the integration of our newly acquired locations and provide better business information throughout the organization, allowing us to communicate more effectively and better meet our customer's need for increased vehicle uptime," said Rush.