Rush Enterprises Reports Lower Q1 Net Income, Revenue
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Truck dealership Rush Enterprises Inc. reported first-quarter declines in net income and revenue, citing unprecedented times.
Net income for the period ended March 31 dropped to $23.1 million, or 62 cents per diluted share, compared with $37.1 million, or 98 cents, in the 2019 period.
Revenue slipped to $1.28 billion compared with $1.34 billion a year earlier.
“Given the industrywide slowdown in new Class 8 truck sales, which began in the fourth quarter of 2019, our first-quarter 2020 performance was solid,” CEO W.M. “Rusty” Rush said in a release. “However, the effects of the COVID-19 pandemic on our company began late in the first quarter, impacting only the last few weeks of March, and are not indicative of its future impact on the company.
Rush
“These are unprecedented times, and we are focused on monitoring the impacts of the pandemic on our business and throughout our industry while taking appropriate action to preserve the financial stability of Rush Enterprises.”
Revenue from heavy-duty trucks fell to $470.7 million compared with $530.9 million a year earlier.
Revenue for new medium-duty vehicles, including buses, rose to $243 million compared with $199.6 million in the 2019 period, according to the San Antonio-based business.
The company delivered 3,078 new heavy-duty trucks, 3,264 new medium-duty commercial vehicles, 267 new light-duty commercial vehicles and 1,558 used commercial vehicles during the first quarter of 2020. That compared with 3,558 new heavy-duty trucks, 2,614 new medium-duty commercial vehicles, 539 new light-duty commercial vehicles and 1,840 used commercial vehicles during the first quarter of 2019.
“Our Classes 4-7 new commercial vehicle sales results were strong in the first quarter, and similar to our new Class 8 truck results, minimally impacted by the COVID-19 pandemic. Our strong medium-duty results were primarily driven by solid activity from our grocery and food service customers, as well as strong stock truck sales throughout our dealership network,” Rush said.
Aftermarket products and services accounted for 67% of the company’s total gross profit in the first quarter of 2020, with parts, service and collision center revenues reaching $428 million, down 2.4% compared with the first quarter of 2019.
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The company achieved a quarterly absorption ratio of 114.3% in the first quarter of 2020, compared with 121.5% in the first quarter last year.
Absorption ratio is calculated by dividing the gross profit from the parts, service and collision center departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory. When 100% absorption is achieved, then gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit.
Rush expects the negative impact on company revenues, and business in general, will be substantial for the foreseeable future.
In the meantime, the company is making adjustments based on its manufacturers’ plant closures and remains focused on maximizing the strength of its balance sheet to ensure long-term financial strength, Rush said.
Paccar Inc., which makes the Peterbilt Motors Co. brand, suspended global production of trucks and engines from March 24 until April 27, according to Rush. Navistar Inc. shut down its medium-duty plant in Ohio from March 23 through early May. Although Navistar also suspended manufacturing operations at plants in Alabama and Mexico, production resumed at both locations April 13. Additionally, Hino, Isuzu and Ford have suspended manufacturing operations at their respective plants. Rush Enterprises sells those brands. It operates more than 100 dealership locations in 22 states.
“Our truck sales representatives are in regular communication with our customers to understand the impact the COVID-19 pandemic is having on their businesses. Currently, we are not experiencing a significant number of canceled truck orders, but that can quickly change,” Rush said.
“However, many customers are delaying purchases due to the tremendous uncertainty right now about the economy and the impact of the pandemic,” he added. “We expect that the pandemic will have a significant negative impact on new Class 8 truck sales in the second quarter, but it is not clear just how significant the impact will be.”
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