Cost-Cutting Efforts Raise Income at Rush Enterprises
Truck dealership Rush Enterprises Inc. saw first-quarter net income climb and revenues dip, as truck sales industrywide plummeted nearly 30% year-over-year amid challenging market conditions, according to the company.
Net income for the period ended March 31 rose to $14.5 million, or 36 cents per share, compared with $2.4 million, or 6 cents, as the company continued to manage costs aggressively throughout its organization, Rush said.
Also, aftermarket services accounted for about 67% of its total gross profit in the quarter, with parts, service and body shop revenues up 2.4%, compared with the first quarter of 2016, the company said.
Rush's quarterly absorption ratio was 113.4% in the first quarter of 2017. Experts say the absorption rate is the percentage that the parts, service and body shop operating gross covers of the total of its combined department operating expenses plus the total of fixed expenses and dealer salary.
Rush's net income in the year-earlier period was negatively impacted by a nonrecurring restructuring charge of $8.1 million related to its closing of certain dealerships and the disposition of excess real estate in the first quarter of 2016. The company reduced earnings by 12 cents in the first quarter last year.
Excluding the charge, net income increased by $7.2 million in the first quarter of 2017 compared with the first quarter of 2016, the San Antonio-based company said.
Revenue slid to $1.04 billion, down from $1.07 billion, a year earlier, but was buffered from further declines by modest increases in activity in both the energy and construction sectors, Rush said.
“Due to the timing of several large fleet deliveries in the first quarter of 2016, we showed a decline in our medium-duty sales this quarter, but we expect to remain on pace with the market throughout the rest of 2017,” Rush Chairman, CEO and President W.M. "Rusty" Rush said in a statement. “We continue to see demand for our ‘Ready-to-Roll' work-ready inventory, especially in the Southeast where construction is strong, as well as strong demand in our vehicle lease and rental markets.”
Meanwhile, total U.S. Class 8 retail sales were 38,023 units in the quarter, down 29% compared with the same time period last year, the company said.
However, Rush sold 2,706 Class 8 trucks in the first quarter, an increase of 1% compared with 2016, and that accounted for 7.1% of the U.S. Class 8 truck market, according to the company.
“Over-the-road fleet sales remain challenging, as they did throughout 2016, but we experienced moderate increases in stock truck, small fleet and vocational sales in the first quarter,” Rusty Rush said. “The number of used trucks for sale nationwide remains higher than normal causing continued low used truck values. However, we have positioned our used truck inventory to be as aggressive as possible in the current market.”
ACT Research Co. forecasts U.S. retail sales for Class 8 vehicles to be 168,000 units in 2017, a 15% decrease compared to 2016, the company said.
