"We are proud of the company's solid financial performance this quarter," said W. M. "Rusty" Rush, Chairman, Chief Executive Officer and President of Rush Enterprises, Inc. "Our truck sales performance outpaced the U. S. Class 8 retail sales market and parts, service and body shop revenues topped $300 million, setting a new quarterly record, despite harsh weather conditions and multiple shutdown days at our dealerships in Georgia, Illinois, Indiana, North Carolina, Texas and Virginia during the quarter. We believe these shutdown days represent approximately $3.5-4 million in lost revenue potential, and equate to approximately $.02 of earnings per share."
Aftermarket solutions accounted for approximately 66% of the company's total gross profit and we achieved an absorption ratio of 111.2% in the first quarter of 2014. First-quarter parts, service and body shop revenues reached a new record quarterly high, increasing by 33% as compared to first quarter 2013.
"Continued strong demand for repair and maintenance of aged vehicles, service support in the energy sector and incremental business from our range of aftermarket solutions continues to drive strong performance in our aftermarket business," said Rush.
"Our mobile business has grown to 280 service units across the country, with an additional 125 technicians working in our customers' shops. We introduced RushCare Rapid Parts, a state-of-the-art parts call center, in several key markets and plan to expand this service across our network. We continue to expand our ability to support natural gas vehicles with dedicated service operations in Arizona, Georgia and Texas. We also added natural gas fueling capabilities at our Custom Vehicle Solutions operation in Denton, Texas," explained Rush.
"We continue to evaluate all opportunities to add innovative services to our aftermarket solutions capabilities and expect that parts, service and body shop operations will remain strong throughout 2014."
U.S. Class 8 retail sales were 45,291 units in the first quarter, up 15% over the same time period last year. Rush's Class 8 sales increased 30% over the same time period, significantly outpacing the industry and accounting for 5.9% of the U.S. Class 8 truck market.
"With improving general economic conditions, including activity in housing and construction, we began to see Class 8 truck sales improve last month across a range of market segments and throughout most regions of the country. We saw particular strength in energy and vocational segments operating in the South Central United States," said Rush.
Rush's Class 4-7 medium-duty sales increased 1% over the first quarter of 2013, accounting for 4.6% of the total U.S. market. "Our first quarter Class 4-7 truck sales continued at 2013 levels, with strong activity in the medium-duty fleet, construction, utility and beverage segments of the market," explained Rush.
ACT Research forecasts U. S. retail sales for Class 8 vehicles to reach 217,000 units in 2014, a 16% increase over 2013. ACT Research also forecast U. S. retail sales for Class 4-7 vehicles to reach 193,500 units in 2014, an 8% increase over 2013.
"Consistent with industry forecasts, our Class 8 order intake has improved as well," said Rush. "We began to see our backlog increase at the end of last year and the increase continued in the first quarter. We expect our higher rate of order intake to continue throughout 2014 as on-highway and vocational fleets replace aged vehicles and add some capacity."
In January, the company completed the acquisition of certain assets of Chicago International Trucks and Indy Truck Sales, which operated International commercial truck dealerships and Idealease commercial lease and rental operations. "This acquisition added 10 dealership locations to our Rush Truck Centers network and expanded our leasing capabilities in major leasing markets," said Rusty Rush.
"Within 13 months, we added 37 dealerships to our network footprint, supplementing our existing Peterbilt network by growing our Navistar Division in the Midwest and Mid-Atlantic regions of the country," said Rush. Rush Truck Centers now has 106 locations in 20 states, allowing us to serve customers operating in markets where our dealerships are located as well as those whose operations route them through our market areas.
"We continue to invest significantly in our Peterbilt Division, with new construction and remodel projects underway that will enhance capabilities and increase capacity at locations in Arizona, California, Colorado, Florida and Texas in 2014," Rush said. "We have also begun facility improvements to existing Navistar dealerships in Ohio, Idaho and Missouri."
"With significant growth in the size of our network, one of our priorities will be to integrate our customer-focused culture into newly acquired operations and standardize our processes, business systems and performance metrics. Moving forward, our focus will be to create a seamless network of Rush Truck Centers operating with consistency across the country," said Rush.
"We also opened a new Rig Tough Used Truck sales location in Knoxville, Tennessee. This sales operation allows us to offer dependable used trucks to buyers in markets we currently do not serve. We have plans to add Rig Tough Used Truck sales locations which will enable us to expand our capability in the used truck segment," explained Rush.
In the first quarter, the company's gross revenues totaled $958.7 million, a 26.7% increase from gross revenues of $756.8 million reported for the first quarter of 2013.
Parts, service and body shop sales revenue was $309 million in the first quarter of 2014, compared to $231.5 million in the first quarter of 2013. The company delivered 2,688 new heavy-duty trucks, 1,966 new medium-duty commercial vehicles, 486 new light-duty commercial vehicles and 1,703 used commercial vehicles during the first quarter of 2014, compared to 2,065 new heavy-duty trucks, 1,954 new medium-duty commercial vehicles, 395 new light-duty commercial vehicles and 1,414 used trucks during the first quarter of 2013.
"As expected, expenses for the first quarter increased due to employee benefits and payroll taxes, acquisitions and costs related to the accelerated rollout of our business operating system. Business system implementation will be complete in our Peterbilt Division by May with implementation of Navistar dealerships expected to be complete during the second quarter of 2015," Rush added.
"We ended the quarter with a cash position of $94 million, reduced mainly by cash paid for acquisition costs, bonuses and taxes in the first quarter. We expect to generate positive free cash flow and to see our cash position steadily increase throughout 2014."