Rush Enterprises, Inc. (Nasdaq:RUSHA) (Nasdaq:RUSHB) reported the highest quarterly pre-tax income in the company's history—with income from continuing operations at $16 million, or $0.41 per diluted share, compared with income from continuing operations of $8 million, or $0.21 per diluted share, in the quarter ending September 30, 2010.
"We believe these record results validate our efforts to build an organization with a diversified earnings base that is less dependent on the highly cyclical Class 8 truck sales market. For 15 years, we have worked to position the company as the premier service solutions provider to the commercial vehicle industry – not simply a retailer of Class 8 trucks," said W. M. "Rusty" Rush, President and Chief Executive Officer of Rush Enterprises, Inc. "The company's third quarter results are evidence that our efforts are paying off. These efforts include focusing on expanding our capabilities in less cyclical aftermarket operations, broadening the depth of our commercial vehicle product offerings and expanding our network of Rush Truck Centers."
The company's aftermarket capabilities now include a wide range of services and products such as a fleet of mobile service units, mobile technicians who staff customers' facilities, a proprietary line of parts and accessories, new diagnostic and analysis capabilities, factory certified service for alternative fuel vehicles and assembly service for specialized bodies and equipment.
"As a result of our efforts to expand aftermarket capabilities, aftermarket operations currently account for more than 60 percent of our total gross profits," Rush said.
Once primarily focused on Class 8 truck sales, the company has now expanded its commercial vehicle product line to include medium-duty and light-duty trucks, buses and vocational specialty vehicles such as refuse trucks, tow trucks and truck-mounted cranes.
"We have developed relationships with a more diverse customer base across a wide range of market segments, resulting in our ability to offer a complete range of solutions from sales of new vehicles to aftermarket support for vehicles in operation," Rush said.
The company considers absorption rate to be of critical importance in evaluating the performance of its Rush Truck Centers. For the second consecutive quarter, the company achieved record high revenues in parts, service and body shop operations. This contributed to the company achieving an absorption rate of 116% for the third quarter of 2011.
"This is the third quarter in the last year that we have achieved a record absorption rate. This increase in parts and service activity is largely the result of continued aging of commercial vehicles in operation and strong activity in the energy sector. We expect this level of activity to continue and are actively hiring technicians to serve this growing area of our business," Rush said.
Class 8 truck sales continued to improve, sustaining the increase that took place during the second quarter. The company expects U.S. Class 8 retail sales will remain on pace to reach approximately 165,000 to 170,000 units by year end in 2011, which remains below historical replacement levels. Medium-duty commercial vehicle sales continued to be negatively impacted by supply issues faced by several medium-duty truck manufacturers, but the company expects medium-duty commercial vehicle sales to increase before the end of the year as these supply issues are resolved.
"By acquiring new dealerships and remaining focused on sales at our existing dealerships, we have been able to increase our share of Class 8 U.S. retail sales by nearly 30% since 2009. Likewise, our Class 4 through 7 medium-duty market share has expanded by nearly 45% during this same time period. Industry experts currently forecast Class 8 U.S. retail sales to be 214,000 units for 2012. We believe that we are in the beginning of a multi-year improving truck market as current sales levels of both Class 8 and medium-duty trucks have been below historical replacement levels for the last five years. At our current absorption rate, the company is well positioned for increased profits as truck demand returns to more normalized levels," he said.