Rush Enterprises, Inc.
Q4 2020 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing-by and welcome to Rush Enterprises Incorporated Results Fourth Quarter’s Earnings Call. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, the CEO of Rush Enterprises, Mr. Rusty Rush. Go ahead sir, have a wonderful conference.

[Rusty Rush:]

Thank you. Good morning and welcome to our fourth quarter and year end 2020 earnings release conference call. On the call, today, are Mike McRoberts; Chief Operating Officer, Steve Keller; Chief Financial Officer, Derrek Weaver; Executive Vice President, Jay Hazelwood; Vice President and Controller, and Michael Goldstone; Vice President, General Counsel and Corporate Secretary. Now, Steve will say a few words regarding forward-looking statements.

[Steve Keller:]

Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2019, and our other filings with the Securities and Exchange Commission.

[Rusty Rush:]

As indicated in our news release, we achieved annual revenues of $4.7 billion and net income of $114.9 million or $2.04 per diluted share. In the fourth quarter, net income was $41 million or $0.72 per diluted share and revenues of $1.3 billion. We also declared a cash dividend of $0.18 per common share an increase of 29% over the last quarter. We are proud of the team for their hard work this year given the tremendous challenges they faced. Even though demand was negatively impacted by the expected downturn in the industry, as well as the effects of the COVID-19 pandemic, our disciplined approach to expense management, previous investments and strategic initiatives and gradual economic recovery in the second half of the year enable us to achieve strong financial results. Rush truck centers have been fully operational across the country throughout the pandemic. While we will continue to monitor the impact of the pandemic on our industry, including supply chain issues that may affect trucks and parts availability, we will continue to carefully manage expenses and take a disciplined approach to continued investments in our long-term growth strategy. As we look ahead, and we expect the economy to continue to improve demand will increase throughout the market segments we support, and we believe our financial results will significantly improve in 2021. And the aftermarket, our annual parts and service and body shop revenues were $1.6 billion, and our annual absorption rate was 118.7%. Our annual aftermarket revenues decreased by 9.2% compared to 2019. This decline was driven primarily by weak demand from the energy sector and COVID-19 pandemic related issues, including production shutdowns and supply chain interruption. Our previous strategic investments in technologies including RushCare, Service Connect and Parts Connect enable us to continue to serve customers safely throughout the year. Looking ahead, we believe the nationwide economic recovery will drive healthy activity for a wide variety of customer segments. We expect parts and service revenues to grow gradually throughout the year and approach our 2019 levels. Turning in truck sales, in 2020, we sold 10,670 new Class 8 trucks down 28.8% over the previous year, accounting for 5.5% of the total U.S. Class 8 market. Our truck sales aligned with the market which was impacted not only by the expected industry downturn, but also pandemic related production constraints and supply chain issues. In the fourth quarter, new truck demand increased due to healthy customer spending -- consumer spending, excuse me, strong construction activity and strong freight rates throughout the country. ACT Research currently forecast U.S. Class 8 retail sales were 243,000 units in 2021. While the overall economy continues to grow, particularly in housing, automotive and consumer spending, we are cautiously monitoring component manufacturers supply chain issues, which may limit current manufacturers’ ability to meet demand through the year. We believe our Class 8 new truck sales in 2021 will be consistent with the industry. Our Class 4-7 new truck sales reached 11,311 units in 2020, down 21.8% from 2019 and accounting for 4.9% of the U.S. market. Our decline can largely be attributed to the impact the COVID-19, particularly on leasing and rental and commercial foodservice customers, as well as production shutdowns from some of the manufacturers we represent. Our fourth quarter results were further negatively impacted by the timing of fleet deliveries. ACT Research forecasts U.S. Class 4-7 retail sales reached 249,500 in 2021, up 7.5% from 2020. Looking ahead, while positively impacted by the overall economy, some challenges will remain for medium-duty truck sales particularly production lead times. However, with our nationwide inventory ready-to-roll trucks supporting a wide variety of customers, we believe our Class 4-7 new truck sales will achieve healthy growth in 2021 consistent with the industry. Our U.S. trucks sales reach 7,400 units in 2020, down 4.4% from 2019. Due to [Indiscernible] of new trucks used trucks were in high demand in the second half of 2020, which helps strengthen used truck values approximately 15% higher than their lowest point earlier in the year. In 2021, we expect demand values of used trucks to remain strong. It should be noted that due to normal seasonal increases in employment benefits and payroll taxes, we expect general administrative expenses to be sequentially higher in the fourth quarter of 2021. Our employees face some tremendous obstacles like this year, and I'm truly grateful to them for their unending dedication to our company, while protecting the health and safety of our customers, co-workers and communities. With that, I'll take your questions.

[Operator:]

[Operator Instructions] We will pause for a moment to compile the Q&A roster. Our first question comes from the line of Justin Long. Go ahead sir. Your line is open.

[Operator:]

Our next question comes from the line of Jamie Cook. Go ahead, your line is open.

[Operator:]

Thank you. Our next question comes from the line of Andrew Obin. Go ahead sir.

[Operator:]

Thank you, sir. The next question comes from the line of Joel Tiss. Go ahead, please.

[Operator:]

Thank you. We do have a one more question left from Brian Schwartz, Oppenheimer. Go ahead, please.

[Operator:]

Thank you, sir. And we do have another one from Joel Tiss.

[Operator:]

There are no further questions, sir. You may proceed.

[Rusty Rush:]

Well, great. Well, since it's been a while since we talked to you last time since was a Q4 release. We will talk to you in couple of months in April it looks like. So, thank you very much for your participation this morning. We appreciate it.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.