Rush Enterprises, Inc. (Nasdaq:RUSHA) (Nasdaq:RUSHB) announced second-quarter net income of $5.6 million, compared with net income of $17.4 million in the same quarter of 2012, which prompted CEO W. M. "Rusty" Rush, Chairman to call it a “tough quarter.”
During the second quarter of 2013, the company recognized a pre-tax charge of $10.8 million in its selling, general and administrative expense related to the Retirement and Transition Agreement with W. Marvin Rush. This charge resulted in a reduction of $6.6 million in net income, or $0.16 per diluted share during the second quarter.
"A lackluster new truck sales environment and increased overhead related to substantial investments made to support the continued growth of our organization made this a tough quarter," Rush said. "I recognize the additional level of commitment extended by our employees as we continue to expand our network of Rush Truck Centers and implement new technologies to ensure we provide our customers with superior service. I believe the investments we have made are necessary to the successful achievement of our long-term strategic plan and would like to thank all of our employees for their contributions to our continued growth.
"Equally important, I would like to express sincere gratitude to my father Marvin Rush, for the leadership and mentorship he has provided to the entire organization and to me personally throughout his 48-year career as founder of Rush Enterprises. Marvin Rush will continue his involvement with the Company as a member of the Board of Directors. The entire organization would like to extend congratulations and wish him much happiness in his retirement."
Aftermarket services remained strong and accounted for more than 65% of the company's total gross profits for the second quarter of 2013. Second quarter parts, service and body shop revenues increased by 17% as compared to the second quarter of 2012. This contributed to a quarterly absorption ratio of 114.9%.
"Parts, service and body shop revenues continue to be driven by strong demand for maintenance and repair from our customers," said Rush. "We continually work to expand our network of service points throughout the country and our portfolio of aftermarket solutions, such as our RushCare call center, mobile service and mobile technicians, natural gas vehicle service, oil and coolant diagnostic services and vehicle up-fitting, among others. Additionally, we are investing in facility upgrades, diagnostic equipment and technology that will enhance our customer's service experience and increase customer uptime by providing service when and where our customers need it. We expect parts, service and body shop revenues to remain strong throughout 2013."
In the second quarter Rush's Class 8 retail sales, which accounted for 4.4% of the U.S. market, decreased by 26% over the same time period in 2012. Rush's Class 4-7 medium-duty sales, which accounted for 4.2% of the total U.S. market, decreased 7% over the second quarter of 2012. Light-duty truck sales increased 56%, up 191 units over the second quarter of 2012.
"As expected, both our heavy- and medium-duty new truck sales remained relatively flat compared to first quarter new truck sales," said Rush. "We expect only a slight increase in our Class 8 retail sales through the third quarter due to continued decreased activity in the energy sector and some of our large fleet customers delaying new truck purchases. Medium-duty retail truck sales are expected to remain healthy, with pockets of strength in the bus, residential construction and large fleet segments. We remain encouraged by Navistar's progress in their engine transition strategy and expect that it will translate into improving truck sales for our Navistar Division going forward."
Current industry forecasts predict U. S. Class 8 retail sales will reach 196,700 units in 2013. Industry experts also forecast U. S. Class 4-7 retail sales to be at 183,000 units in 2013. "Although some indicators show signs of improvement, we believe that Class 8 retail sales may fall short of current industry estimates," Rush said.
The company continued to implement its strategy to extend its geographic footprint this quarter, completing acquisitions in North Carolina and Ohio and entering purchase agreements with two dealer groups to acquire locations in Kansas, Missouri and Virginia.
The company signed a definitive asset purchase agreement with Midwest Truck Sales to acquire locations in St. Peters and St. Louis, Missouri and Olathe, Kansas. The Missouri operations offer truck sales, parts and service for International trucks and the Kansas location offers truck sales, parts and service capabilities for Hino and Isuzu trucks and parts and service support for Mitsubishi Fuso trucks. The company also signed a definitive asset purchase agreement with TransAuthority to acquire full service International dealerships in Richmond and Suffolk, Virginia and parts and service locations in Fredericksburg and Chester, Virginia.
The company plans to complete the Midwest Truck Sales acquisition by the end of July and the Virginia acquisition in the fall. "When we complete these acquisitions, our Rush Truck Centers network will consist of 88 locations in 18 states," said Rush. The new acquisitions will also expand the Company's Rush Truck Leasing capabilities with Idealease franchises in Missouri and Virginia. "These acquisitions are a key component of our growth strategy and represent significant entry into major truck markets, providing our customers with expanded service locations along the I-95 corridor and into the Midwestern United States. Importantly, these acquisitions also continue our growth plan with Navistar, expanding the Company's Navistar Division to 32 Rush Truck Centers and two collision centers in eight states."
On May 6th, the company acquired certain assets of Piedmont International Trucks and now operates International and Idealease locations in Asheville, Hickory and Statesville, North Carolina. Additionally, on July 1st the Company acquired Ford and Mitsubishi Fuso truck franchises in Cincinnati, Ohio, expanding the product offerings at Rush Truck Center – Cincinnati.
"We continue to expand our capabilities in existing markets. We relocated our full service dealership in Ardmore, Oklahoma to a newly constructed facility in April. This move doubled our service capacity in this market and expanded our natural gas and mobile service capabilities. Similarly, we are in various stages of construction on new facilities in California, Colorado, Florida, Ohio and Texas," said Rush.
In the second quarter, the company's gross revenues totaled $789.7 million, a 6% decrease from gross revenues of $835.8 million reported for the second quarter ended June 30, 2012.
Parts, service and body shop sales revenue was $242.9 million in the second quarter of 2013, compared to $208.3 million in the second quarter of 2012. The company delivered 2,088 new heavy-duty trucks, 2,001 new medium-duty commercial vehicles, 534 new light-duty commercial vehicles and 1,518 used commercial vehicles during the second quarter of 2013, compared to 2,813 new heavy-duty trucks, 2,141 new medium-duty commercial vehicles, 343 new light-duty commercial vehicles and 1,242 used commercial vehicles during the second quarter of 2012.