Rush Enterprises, Inc. (NASDAQ:RUSHA) (NASDAQ:RUSHB) announced that second-quarter net income was $19.6 million, or $0.48 per diluted share, compared with net income of $19.8 million, or $0.49 per diluted share, for the same quarter a year ago.
"Moderate freight growth driven by general economic improvement contributed to our strong financial performance this quarter, and we outpaced the industry in Class 8 truck sales again, despite the decline in activity in the energy sector,” said W. M. "Rusty" Rush, Chairman, CEO and President of Rush Enterprises, Inc.
“We also increased parts, service and body shop revenues compared to the second quarter of 2014. In addition, we expanded our Rush Truck Centers network from 112 locations to 120 locations and we continue to add to our aftermarket solutions offerings.”
Aftermarket services accounted for approximately 63% of the company's total gross profits with parts, service and body shop revenue up 6.7% as compared to the second quarter of 2014. The company achieved a quarterly absorption ratio of 118.9% in the second quarter of 2015.
"Continued demand for repair and maintenance of vehicles in operation, pre-delivery inspection for new and used trucks sales and mobile services contributed to aftermarket revenues this quarter," said Rush. "Our RushCare Rapid Parts call centers improved customer service levels and an expanding parts sales organization also contributed to improved aftermarket revenues."
"Mobile service activity in the energy sector remained stable this quarter, however, we have begun to see some negative impact on revenues from vehicle modifications because of the decline in new truck sales to the energy sector. We expect this trend will continue throughout the remainder of the year, and we will continue to closely monitor any further impact decreased activity in this sector could have on our business," Rush explained.
"Our efforts to integrate and execute across all our operations with emphasis on sales strategy, improved procurement practices, asset management, and improved efficiency also contributed to our strong aftermarket performance this quarter," added Rush.
U.S. Class 8 retail sales were 68,744 units in the second quarter, up 22% over the same time period last year. Rush's Class 8 sales increased 29% over the same time period, outpacing the industry and accounting for 6.8% of the U.S. Class 8 truck market.
"Our Class 8 new truck sales this quarter were primarily the result of deliveries to large over-the-road fleets benefitting from a healthy economy. New and used stock truck sales also increased this quarter as a result of our large inventory of vehicles throughout the country, " said Rush. "Our ability to meet the needs of large fleets, combined with the geographic diversity of our dealership network, has helped us to offset the significant decline in new truck sales to the energy sector."
Rush's Class 4-7 new truck sales accounted for 5.4% of the total U.S. market. U.S. Class 4-7 truck sales in the second quarter were 53,437 units, up 3% over the same time period in 2014. "As lead times from several medium-duty OEMs continue to lengthen, our Class 4-7 truck sales continue to benefit from our ability to offer a large inventory of Class 4-7 trucks and ready-to-roll equipment across the country."
ACT Research forecasts U.S. retail sales for Class 8 vehicles to reach 267,000 units in 2015, a 19.2% increase over 2014. ACT Research also forecasts U.S. retail sales for Class 4-7 vehicles to reach 209,700 units in 2015, a 4.4% increase over 2014.
"Having outpaced the industry for two consecutive quarters in Class 8 new truck sales, and with order intake slowing in the first half of 2015, our Class 8 truck sales may remain flat, to down slightly, in the third quarter. However, we are actively pursuing incremental business from our current customers, which include many of the industry's Top 100 for hire carriers, and we are always seeking to expand our new customer base. We believe that these efforts will help offset declines in our energy sector new truck sales. We are encouraged that both of our Class 8 manufacturers continue to have production build slots to help meet shorter-lead time vehicle requirements. We expect both Class 4-7 and used truck sales to remain steady through the third quarter."
The Company officially launched its Momentum Fuel Technologies natural gas fuel system business in May, unveiling its product offering and capabilities at the Alternative Clean Transportation Expo in Dallas, Texas. "Momentum Fuel Technologies offers the industry's first complete fuel system solution, including the lightweight, innovative design of a compressed natural gas fuel system for Class 6-8 trucks, state-of-the art manufacturing, installation capabilities and an established support network," explained Rush. "We are encouraged by the high level of interest we are seeing from a wide range of operators, and plans remain on target for a production ramp-up at the end of the summer."
"We completed the rollout of our network of regional RushCare Rapid Parts call centers this quarter, adding centers in Florida, East Texas, Colorado and Tennessee. We are already seeing a positive impact from these 21 regional centers, which allow customers to easily reach dedicated specialists, who through advanced and optimized communication technology, provide access to a wide range of parts inventory and expedited delivery. All outlying truck centers are also being integrated into a regional hub to ensure consistent service throughout our network," said Rush.
The company also expanded its Rush Truck Centers dealership network during the second quarter to include a total of 120 locations in 20 states. In May, the Company acquired eight full service International truck dealerships in central and southern Georgia and an Idealease commercial lease and rental operation in Albany, Georgia. This month, the Company plans to open a new Peterbilt truck sales, parts and service location in Brownsville, Texas and Rig Tough Used Truck sales outlet in Dallas, Texas. Service capability expansion also continued with new facility construction, renovation and expansions progressing at locations in California, Colorado, Ohio and Texas.
"We also continue to augment our aftermarket portfolio with solutions that not only help keep our customers up and running, but also offer incremental revenue opportunities. Progress continues in introducing our telematics product offering. Our open architecture platform combines leading vehicle diagnostic technology with our ability to offer custom enhancements, as well as monitor vehicle performance and productivity through our RushCare customer service center. In addition, we are also in the process of completing the rollout of an advanced service management system throughout our network that will lead to real-time and transparent communication for customers with vehicles in our shops," Rush said.