Rush Enterprises, Inc.
Q3 2020 Earnings Call Transcript

Published: 22 Oct 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to Rush Enterprises Incorporated Results Third Quarter 2020 Earnings Results Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host today, Mr. Rusty Rush; Chairman, CEO, and President. Sir, the floor is yours.

[Rusty Rush:]

Good morning and welcome to our third quarter 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 quarterly revenues of $1.18 billion and net income of $34 million or $0.60 per diluted share. We delivered a cash dividend of $0.14 per common share. And as previously announced, we declared a three for two stock split over in the quarter. The COVID-19 pandemic along with the previous anticipated industry downturn continued to have a direct result in our financial results in the third quarter. However, when compared to the second quarter 2020, we experienced a notable increase in revenues, primarily from increase in truck sales and increased profitability with our previously implemented expense reduction measures. We remain focused on monitoring COVID-19 and its effect on the economy and our industry. And we are cautiously optimistic that we are not only rightsized to support our customers but that the economic recovery, though gradual, will continue. Turning to our operations. In the aftermarket, our annual parts, service, and body shop revenues were $400 million. Our absorption ratio was 119.4%, while our revenues declined year-over-year they did improve 6% when compared to the second quarter of 2020. This was due to increased aftermarket activity in August and September, especially from refuse, construction, and over-the-road customers. Looking ahead, uncertainties remain about the pandemic and overall strength of the economy, and the energy sector is still much slower than normal. And likely, will not improve significantly for some time. That said though, we expect some typical seasonal decline through the winter, we believe that the gradual recovery of the aftermarket business will continue. In truck sales, we sold 2,584 Class 8 new trucks, which accounted for 5% of the total US Class 8 market. During the pandemic and an industrywide downturn and slowdown in Class 8 truck sales, our results were down significantly year-over-year as we expected. However, our new Class 8 truck sales did improve 38% when compared to the second quarter of 2020, and our used truck sales increased 16% compared to the same time period. Government stimulus payments issued earlier this year combined with state reopenings, bolstered consumer spending in the third quarter which strengthened freight and spot market rates throughout the country. As a result, we experienced an improvement in quoting and sales activity for new trucks, primarily from over-the-road customers. Further, the availability of new trucks of the production line was limited due to manufacturing shutdowns earlier in the year. This resulted in an increased demand for stock truck and used truck sales, and improved used truck values which is consistent with what the industry experienced. ACT Research adjusted its Class 8 retail sales forecast to 186,300 units in 2020, a significant increase from earlier estimates. We are encouraged by our third quarter truck sales results, but we expect COVID-19 and uncertainties about our economic recovery to continue to impact Class 8 new truck sales for the foreseeable future. We believe our Class 8 new truck sales for the fourth quarter will be consistent though with our third-quarter results, and our used commercial vehicle sales will also remain solid. Our Class 4 through 7 new truck sales were 2,941 units, accounting for 4.8% of the US market. These results were up 26% over the second quarter, primarily due to increased activity from landscaping, residential construction, and other small businesses. ACT Research is forecasting US Class 4 through 7 retail sales to be 216,100 units in 2020. Another significant increase from earlier estimates. Although, we expect medium-duty truck sales will continue to be directly impacted by the uncertainties around the pandemic and the economy in general. We believe our Class 4 through 7 truck sales in the fourth quarter will remain on pace with our third-quarter results. I am truly grateful to our dedicated employees for focusing on what's important, protecting the health and safety of themselves and those around them while serving our customers, and helping our country recover from these challenging times. With that, I'll take your questions.

[Operator:]

[Operator Instructions] We have our first question is from the line of Mr. Justin Long from Stephens. Your line is open.

[Operator:]

We have our next question from the line of Jamie Cook from Credit Suisse. Your line is open.

[Operator:]

And we have our next question from Andrew Obin from Bank of America. Your line is open.

[Operator:]

[Operator Instructions] Your next question comes from the line of Joel Tiss from BMO. Your line is open.

[Operator:]

Mr. Joel continue, your line is open. I think we have to move on. We have two more questions. We have a question from the line of Shawn Kim from Gabelli Funds. Your line is open.

[Operator:]

Thank you. I think we have the line of Joel Tiss from BMO. Your line is open.

[Operator:]

[Operator Instructions] Speakers, I'm not showing any further questions at this time. I would like to turn the conference back to Mr. Rusty Rush; Chairman, CEO, and President.

[Rusty Rush:]

Well, this will be the last time I speak with everyone once we get through the election, and then the holidays and everything else. And I'm not going to worry about the first week of the election, but from a holiday perspective, I wish each and every one of you all, all the best and with your families, it's been a long year for everyone. So please make sure to enjoy and savor the moments with your families throughout the holidays. Other than that, we will see you and talk to you again in February. Thank you very much.

[Operator:]

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