Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Rusty Rush - President and CEO

Analysts

Neil Frohnapple - Longbow Research

Brad Delco - Stephens

Bill Armstrong - CL King & Associates

Art Hatfield - Raymond James

Andrew O'Brien - Bank of America

Joe Bliss - BMO

Kristine Kubacki - Avondale Partners

Brian Sponheimer - Gabelli & Company

Rush Enterprises, Inc. (RUSHA) Q4 2013 Earnings Conference Call February 12, 2014 11:00 AM ET

Operator

Good day ladies and gentlemen, and welcome to the Rush Enterprises Inc. Fourth Quarter And Yearend 2013 Earnings Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Mr. Rusty Rush, Chairman, CEO and President. Please, go ahead.

Rusty Rush

Welcome to our fourth quarter and yearend earnings release conference call. On the call today are Marty Naegelin, Executive Vice President; Steve Keller, Senior Vice President and Chief Financial Officer; Jay Hazelwood, Vice President and Controller; and Derrek Weaver, Senior Vice President, General Counsel and Secretary.

Now Steve will say a few words regarding forward-looking statements.

Steven Keller

Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. 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, 2012 and our other filings with the Securities and Exchange Commission.

Rusty Rush

As you have read in the news release our net income for the year was $49.2 million or a $1.22 per share, on gross revenues of $3.4 million. These results are a net of a reduction of $6.6 million in net income or $0.16 per diluted share related to the retirement and transition agreement with W. Marvin Rush. For the fourth quarter net income was $14.9 million or $0.37 per diluted share, on gross revenues of $925.2 million. We are proud of our accomplishments this year. We achieved record annual revenues, record sales of medium duty, light duty and used trucks, enhanced our aftermarket solutions portfolio and expanded our leasing business. Our significant growth was accomplished in two ways, by investing in our well established Peterbilt network and growing our Navistar footprint through acquisition. Within our Peterbilt business we expanded three facilities in Texas, opened a new location in Corpus Christi, added natural gas service bays and initiated plans for the new construction and further expansion. In our Navistar division we completed acquisitions with five dealer groups, increasing our Rush Truck Center network to 107 locations in 20 states. Our growth strategy has been to create and unrivalled network across the country allowing us to service customers when and where they need us.

Our first phase started with Peterbilt, our core business, as we built a coast to coast network across the southern United States where Peterbilt has market share strength. In the last several years we accomplished on that network with our Navistar division, more recently going across the Midwest and Mid-Atlantic regions of the country where Navistar has had a historically strong market share. With our accelerated pace of acquisitions, the majority of our footprint is in place. Our focus now is to integrate and execute, our culture, standardized processes, business systems and performance metrics to create one seamless network of Rush Truck Centers operating with consistency across the country. Moving to truck sales, in 2013 US Class A retail sales decreased 6% over 2012. Our Class A retail sales accounted for 5.1% of the U.S. market, but as expected energy sector and large fleet customers delayed some truck purchases this year.

In 2013 U.S. Class 427 retail sales increased 9% over 2012. Our Class 427 sales were up 18% and accounted for 4.7% of the U.S. market share. Improvements in housing and construction, growth in vocational fleet segment and sales from newly acquired locations grow this increase. ACT Research currently forecasts U.S Class A retail sales in 2014 to be 213,500 units, up 14 %, and US Class 427 retail sales 303,500 [ph], units up 8% from last year. With signs of economic improvement order intake rising and increased activity in automotive, housing, construction and energy we believe retail sales should begin to improve in the second half of 2014. In the aftermarket, demand remains strong for repair and maintenance of aged vehicles. Our aftermarket revenues reached a record $988 million this year, contributing to an annual absorption rate of 114%.

Our growing portfolio of aftermarket solutions will continue to drive our strong aftermarket business and we continue to evaluate all opportunities to add innovative products or services to our aftermarket offering. While we expect strong demand for maintenance and repair will continue in 2014, our parts and service operations have been negatively impacted by adverse weather conditions in the first quarter. Furthermore we expect G&A expenses to be sequentially higher in the first quarter of 2014 due to increases in employee equity compensation and benefits, payroll taxes and acquisition costs. We have also increased investments in human resources, training and technology to prepare for the accelerated roll out of our SAP business system and to support our larger organization. Finally, I would like to thank all of our employees for their efforts this year, especially given our rapid pace of growth. We are happy to welcome 1,300 new employees to Rush family.

With that I'll take any questions you might have.

Question-and-Answer Session

Operator

[Operator Instruction] Our first question comes from the line of Jamie Cook from Credit Suisse. Your question, please?

Lynda Yuan - Credit Suisse

This is actually Lynda Yuan in for Jamie. So I actually wanted ask about, ACT reported very strong generate truck orders. Do you think that's indicative of a trend for the year or was there some sort of pull forward or large orders that might have impacted the quarter?

Rusty Rush

It was surprisingly strong to me also. I mean I expected to be good, not quite as good as it was. I'm still trying to figure it out. December and January were obviously stronger I think than what of us anticipated. So that bodes well in my mind as we look forward and that's why I think as I look at back, I talk about the back half of '14. As you know retail sales, I expect them to continue because obviously we're on the end of that train, getting to the end user, getting them delivered. But I would expect retail sales to start accelerating in the second quarter and continue based on what we are seeing. Is it sustainable? I'm hoping so, I believe it is. Of course the market's fooled me before, I can't give you any specifics as to exactly where it is. We see our backlog -- if I relate it to our backlog, our backlog continues to steadily grow. I don't know what -- we're on lot of transactions right now but we have booked all that we expect to book obviously but it does look well for us as we look out into the back half of the year.

Lynda Yuan - Credit Suisse

Got it. And I think last quarter you'd mentioned that sort of you were thinking first half would be like 45%, back half would 55%. Is that something that you're still thinking.

Rusty Rush

You bet. Obviously, just because you take orders in does not mean they're immediately built, right? So, a lot of -- has got to be some large transactions that even I'm not -- full of large fleet deals, leasing deals inside of the numbers we've seen in the last two months. So, I would anticipate those to be spread throughout the year. So, as that builds and it continues to build, that is going to make it look, come out on those number in that range as I said are 45%, 55%, give or take a point or two here and there. But in that range that's how I would break the year out. The total number I'm using is ACTs number. While I have confidence in ACT to meet that number that they have out here, the strong order intake months have to continue though. Okay, it cannot fall off back down to 20,000 a month against for three or four months and make that number.

Operator

Thank you. Our next question comes from the line of Neil Frohnapple from Longbow Research. Your question please.

Neil Frohnapple - Longbow Research

Congrats on nice year.

Rusty Rush

Thanks Neil. It was building year, let me tell you. It was a year more of growth than anything else. But we're really proud of the year, especially when you look at it you really break it into its parts basis, when you look at the hit we took from an oilfield perspective and deliveries. I could take you through some major stores that you'd be amazed that we performed as well as we did but that just shows the diversity that we have within the organization when it comes to the markets that we hit.

Neil Frohnapple - Longbow Research

And you guys are certainly busy from the acquisition standpoint? Things for the color on parts and service and G&A for the first quarter. As a follow up to last question, is there any way to provide the expectations for truck deliveries for the first quarter, particularly when Chicago and India acquisitions, that were layered in, in January?

Rusty Rush

I'd really don't want -- we've just got Chicago deal done in the middle of January. So it is going to be -- I could speak on a same store basis maybe a little to it. I would expect it to be up slightly maybe from the fourth quarter but flat to u[ slight. Flat, somewhere in that 5% no more than that from a same store. Getting my arms around, just getting my arms around in Chicago, India acquisitions, you got to understand, they're not even finished for the full month. That will be Friday before we have the first four months onboard. So, it's really hard to put those numbers in there.

Neil Frohnapple - Longbow Research

Great thanks. And then you mentioned in the press release that you're developing new business models to take advantage of the used track market potential. Just to clarify are these new initiatives that you're launching and anyway to elaborate on these Rusty?

Rusty Rush

Well, there are initiatives, yes. We see the distribution of used trucks being key part or key element to our future success. We're not going into all the details obviously. We're going to look at different ways to expand our used truck sales as we go forward across the company.

Operator

Thank you. Our next question comes from the line of Brad Delco from Stephens. Your question please.

Brad Delco - Stephens

Clearly it's been a busy year and kind of want to go along with the same lines as the last question on the acquisitions. In the release you mentioned the slew of acquisitions you made over the last half of the year and then I guess in the Chicago closing here in the first quarter, you said it will generate about $1 billion of revenue.

Rusty Rush

That is correct. That includes the Ohio acquisition that was done on December 31, 2012 also. Keep that in mind.

Brad Delco - Stephens

Okay and that's kind of where I was going with this question. How much of that was already in 2013?

Rusty Rush

Oh boy, you got to remember, we did these like every two months. Okay, so extrapolating -- are you looking for a...

Brad Delco - Stephens

Well I'm just trying to understand, for the street it is really hard to kind of keep track as to how much of same-store versus how much is from acquisition and kind of getting an understanding of what's incremental to '14 from '13 based on all that you've acquired would be helpful.

Rusty Rush

Right, based upon market -- a lot of this has to do with the market, right? You want to call 2014 the same as 2013?

Brad Delco - Stephens

You got it as a base, if that makes...

Rusty Rush

Right. We'll just call them identical years. Oh I would tell you, you're going to get rusty number right here. I would tell you somewhere in the -- this probably, there was $350 million or so in '13. It should be up $500,000 or $600,000, something like that, at it or better.

If we add the same year, just put $4 billion on it. And that was Chicago and Indiana there okay? And a lot of it has to do with some transactions and have to take place still. So I'm not going to let you hold me to it, but obviously we see stuff in the pipeline, somewhere north of that we would hold them from a revenue perspective, if the market share was flat. But we hope that it is up, okay. So you can take it from there. Okay I'm just going to give you the $4 billion number and you can take it from there.

Brad Delco - Stephens

That's helpful I mean, Rush this one is for you or for Steve -- but, you made comments about SG&A in the first quarter and I think the last quarter you talked about $0.14 or $0.15 headwind from the rollout of the ERP system or accelerating the rollout of the system. Can you help kind of put maybe more specific parameters around expectations on SG&A in the first quarter and how that should trend through the year based on seasonality and other factors in the business?

Rusty Rush

Obviously you guys, Chicago and Indiana again there. So if you pull that out, you look historically, Brian I think if you take Q4 of ‘12 and look at Q1 of '13, you're going to see usually typically, given all the things I listed a 10% to 12% -- 10% type bump in G&A because as soon as G&A -- directly correlated to the sale of trucks, okay. It's on truck sales. So from a G&A -- I'm talking about the G&A perspective, you're looking at that number and as I mentioned on the SAP rollout, we have accelerated that, so that we can finish roughly five quarters earlier, 15 to 18 months earlier then what the current plan was and to do that; because I think it's highly critical to the long-term objectives we have inside the organization while still maintaining obviously -- these are results at the interim but that's cost about an extra $0.10 from an EPS perspective over '13 and '14.

I've stated that in the past and that's what it's going to be. We have actually already hired most of the people because we're training these people up, they had to go out and accelerate this rollout, at a higher faster pace than what we have done because we had so many acquisitions, as I said last time on the call, I might be retired or dead by that time. So I had to accelerate it. Now from pure business perspective, I think you folks know me well enough. It's the right thing to do. It gets us where we need to do, so we can continue -- continue to do what we have historically done, the 17.5 years since we went public and that is to execute -- perform at the level we expect.

Brad Delco - Stephens

I mean actually, clearly you built it out and now it seems like it's time to sort of harvest what you have. It'll take time for that to play out.

Rusty Rush

Look this is the year, there two words that you folks are going to hear from me a lot, it's integrate and execute, okay? I'm going to be batting down -- half the time my COO hat, even it's not my title and we're going to work and we're going to get this thing integrated and we're going to execute like we have, and I think our track record speaks for itself for the last almost -- not two decades but close -- getting closer to it every day that ticks by. So we will do what we have always done in the truck business and execute. It's just, I did not expect to go in as I said, go in last year and do six acquisitions, five if you include the December 31 acquisition of Ohio; six acquisitions in 12.5 months. It was extremely hard on the organization. The organization performed admirably, but the potential as we look out -- I'm not interested in the '14 but in the '15 and '16 with, 107 locations is unrivalled, from a service perspective.

Now we have to go out and do that. And to do that we have got to integrate all these stores, get them all working together, get them on the same business system, do all these things, just all that blocking and tackling that you have to do to run your business. While at the same time don't worry, I also should be looking for things. But right now the main thing is to integrate and execute. As I have told people, I said I sometimes wondered, [indiscernible] to whine boss you created a lot of work for a lot of people for the next 18 months, since we have to all this done. But it's good, it's exciting stuff though. It's really exciting stuff and we are very happy with where we're at. We just got a lot of work ahead to get it all put together. So it's running like it should.

Operator

Thank you. Our next question comes from the line of Bill Armstrong from CL King & Associates. Your question please.

Bill Armstrong - CL King & Associates

So on products and service margins they were down again in the fourth quarter on a year-over-year basis. Is that due to the higher mix of mobile service revenue or was there anything else going on in there?

Rusty Rush

I think it is. Some of that has a lot to do with sum [ph] of mobile there is no question. And we are taking a -- going to really be taking a hard approach on all mix-parts business as we go forward which is not proprietary its non-proprietary. So the mix of our all-mix business in there might increase somewhat, shifted over and we're going to continue down on that. As I've said I know guys are modeling and -- but that 37 number right in there is where I think we're going to be at because of the mix of business we're doing. And that's what's allowed us to get to the absorption levels. I mean look we were down two points in absorption from '12 to '13 but given all the acquisitions and all the expense and everything, I was very proud of that I was very proud of that. Now it's up to us to get back on track and turn that thing around, get it integrated and raise that absorption level. I hear you on the gross margin mix number but I we're right where we're going to be in that number right now going forward.

Bill Armstrong - CL King & Associates

Okay. And you mentioned in parts and service so far really this year has been hurt by weather. Is that something that you'll get back when the weather turns nice in these truckers come in to get their servicing needs or is that just something as you [indiscernible]?

Rusty Rush

That's 90% lost on the brand. There will be some things to do but you got to remember we only have -- it's like, if I was like my general council sitting here and I bill by hours and I say look here, you don't get those back, you don't get those hours back, so bill again. Once they pass by, they're gone. It's like today, and you goes on I mean it's like today we're shut down in Atlanta. I've got five stores iced over in Atlanta again, it's unbelievable. But it's okay. It is what you deal with. I'm not whining, I'm not complaining. It's just way of the world. It's ice there. Again I believe it's probably moving up to North Carolina they told me this morning. We'll be shut there tomorrow. So I mean you see -- I'm not used, it's funny we've always been in the south, right, we're on Peterbilt network. Now we've grown up to the Midwest. I guess I'm learning what it's like to live in cold-weather country, even though I'm not up there. I'm the only operating it and I can tell you that. So it's a different environment but I'm sure that we'll adapt just fine to it.

Bill Armstrong - CL King & Associates

I'm sure, you will. And just one last question, getting back to SG&A. From Q4 the SG&A dollars are basically flat with Q3 even though you did have more stores open. Is that just because there is holidays and there is less going on or what's on process -- some extent it may be pushed into Q1?

Rusty Rush

No. Some may be pushed a little bit in but we were actually, remember I keep telling you, there is and there is G&A, right?

Bill Armstrong - CL King & Associates

Yes, right.

Rusty Rush

But you got to look at it we -- when I run the business that way I'll talk to you'll any way you want but that's out on the on the business. We were actually off about 2.6% sequentially in G&A same-store. What was that Steve? I'm sorry we're up 5% in G&A. I apologize I've grabbed the wrong number. I've got Steve correcting me. I grabbed the wrong number on the sheet here. We're up about 5% G&A sequentially but as I said that will come back into the first quarter. The fourth quarter is historically -- you can look at our - because even the first year it's been like that. It's typically like that about every year. But the fourth quarter was a tough, it was a tough quarter also. You have more holidays which is obviously expensive, you have less working days. Actually the first quarter of the year has less working days than it historically does. It's the same amount of work if I say -- we work on weekends obviously but we count Mondays through Fridays and there is 63 days in the fourth quarter or 63 in the first quarter, which typical [indiscernible] will be more in the back half of the year or the back three quarters of the year as we go forward. So anyway. That's for SG&A.

Operator

Thank you. Our next question comes from the line of Art Hatfield from Raymond James. Your question please.

Art Hatfield - Raymond James

Good morning everyone. Rusty I want to go back to this parts and service thing in the first quarter. I understand the lost hours as your stores are shut. But opposite thought of that is though that with bad weather creates more demand for parts and service, that happens and you're cause, where does these guys go in those markets to get that work or those parts?

Rusty Rush

We could I don't want to say we don't get it, okay but it is harder to get on -- you don't have the hours to target. You don't get as many hours. Look [indiscernible]

Art Hatfield - Raymond James

I understand, okay.

Rusty Rush

They have -- they'll get it fixed later but it may not be -- you only can do so much, you follow me?

Art Hatfield - Raymond James

I understood.

Rusty Rush

So many hours to work with then. So some of that goes away. I'm not going to say but majority of it goes away. I mean it doesn't go away but you may not capture it all, okay.

Art Hatfield - Raymond James

You're just limited in your ability to incrementally add capacity?

Rusty Rush

Right, you're limited with your stores, especially when you look at where these shutdowns are, okay. Then are up in these new acquisitions. like in Ohio I've got $30 million-$40 million of real estate investments coming in over the next two or three years. Why? I've got customers that we're not servicing properly. I‘ve got customers that were underutilized, we're going to build a 70,000 square foot store in Cincinnati and we got 35,000. We need 70,000. I just closed real estate in Columbus. I just closed real estate Columbus and I've got to build a store over the next year and a half there, a 30,000 square foot facility and they need 70,000 to 80,000 square feet. So I only have so much room to work with, you cannot do everything mobile, trust me.

And the other thing you've got with is you work there is added cost to it to do. You try to push more than you've got, you got to add overtime, you've got all that type of stuff to deal with. But it is what it is. I will say this. We had a descent January. January, our per day average picked up some, picked up 4% to 5% from December. So it's not totally lost. In some of the stores that weren't hit by the shutdown days, okay. But they can -- some of those get offset, right by the ones that were hit by the shutdown days. So, if I didn't have all the shutdown days, we've been up [indiscernible] January. It's just I'm going to -- even though we were up and the stores were open the whole time, some of the stores weren't. So just got to deal with it.

Art Hatfield - Raymond James

That is helpful. And this is a very kind of long term question and I don't expect you to have an easy answer for the near term, but as I think about the business mix, is it feasible or logical to think of the parts and service business being as big as the truck sales business, or both in the future?

Rusty Rush

If you will do that for me, I'm hiring you right now. Given where the trucks go and I don't mean to be -- the answer is, it would be - now I will tell you this, you're looking at it wrong, okay. And how we've always told you folks to look at? Look at the gross profits. We already turned those around years ago. Have we gone -- remember when we were 35% to 40% back in and it was 60% to 65% was gross profits came from truck sales. We have turned that around. To look at differently you would say can you get to 75% of your gross profit, okay coming from parts and service. You better believe you can. The revenue is tough line when you're selling product for $120,000 to $140,000 a copy and bodies onto it everything else -- the price goes way up depending on what market segments you're just selling into. So looking at it from a gross profit perspective that's a great goal to have.

Art Hatfield - Raymond James

That is helpful and then thanks for straightening me out on that. I should've remembered that. Finally, and I don't think you mentioned this on the call but I know this year is you mentioned the year of integration and execution, but as think at maybe 2015 and beyond, with all the acquisitions that you've made, and I cannot remember if you commented on this, but how should we think about what your range of market share should be by truck class going forward as you get all the acquisitions?

Rusty Rush

Let's look out. We will say that Navistar gets -- continuous to work their way through the issues with the EGR engines and gets back to say a historical 20%, okay. They're not there yet, they're not going to get there, I don't in 2014. But they're not starting off that way. So let's say 2015, they get back to a 20% market share number, and Peterbilt runs typically between let's about 14% to 15%. And we get our piece, let's just say we're basing this on historicals, not on -- manufacturing want to do better. I get that. Let's just base another store because that's where do you it. You're north of six in Class 8 and I'm not going push it any further. You'll can take it where you want but in medium you north of five, solid, okay, solid. So that would be my answer.

Operator

Thank you. Our next question comes from the line of Andrew O'Brien from Bank of America. Your question please?

Andrew O'Brien - Bank of America

So the question I have - so as you think about the investment in parts and services, what you are trying to do with the Navistar network, what should we think is the structural growth rate? Well, two questions. First, for parts and services in 2014, if you could put into buckets organic versus how much you're going to get from the new dealership. So if you could just -- and the second one just structurally right? Now that you are going to make all these investments, what do you think the new growth rate for parts and services will be? And how much of it will be just utilization in the field? And how much of it is you capturing the business you would have never captured without the investments?

Rusty Rush

Okay, good question, Andrew. Obviously at same-store, we have a goal. We didn't get to it this year. I mean, if you look at same-store parts and services, last year is slightly disappointing around 5%. But you got to understand, I don't mind [indiscernible] but you got to understand that we lost a lot of oil and gas business, okay? I can extrapolate that into details if someone wants to know. That's why I'm really proud of 2013 performance when you look at -- really dive down into it. But in 2014 our goal on a same-store basis is just to be in 8% or so range, okay, from a same-store perspective and I think that's why you're asking about and that's what we would be looking at on 8%.

Now going forward, if I can get these other new stores open, just how fast I can get that done but if we go out -- let's say go out 18 months and I'm thinking that -- I'm about six to eight stores that we've going to have to build new ones, but already existing markets mind you, but we're going to maybe double the size of them, right. I would hope you could take that maybe up to 10%, 10% to 12% number, obviously. And as you know we consistently try to be in that 8% but again -- range 8% to 10%, but I would hope we could get it up to 12% to 14% on a same store basis, when all that's rolled out, right and those have an effect on the organization. That's as long as I don't bring in other underperforming acquisitions along the way, which we're not going to do right now. As I've said it's integrated nicely this year but it's outside a couple of little points. So I would hope we could push that up into the lower mid -- maybe low teens, 12% or 13%, 14% with the investments totally handled, with doubling the size of say like I said in Cincinnati and Columbus to San Antonio, we got underway, Denver, all those things I talked about in the press release that we have going on right now. So there you go.

Andrew O'Brien - Bank of America

And can I just ask a follow up question. I missed the couple of minutes of your call but, in your comment on vocational and oil and gas and are we're seeing things get any better because -- these are important because these are high profit new sales and they do generate a lot of aftermarket.

Rusty Rush

Right, they generate sale of aftermarket stuff. That's all about it. I don't know. Truck sales are never great from a profit perspective. We just, we want to service customers. We want to keep customers up and running. Let's look at this way; we had a huge hit from an oil and gas perspective. You take three of my largest stores and I won't be getting into too much detail here for you but take three big stores that had a lot of oil and gas influence, Oklahoma City, Dallas, Houston. They sold almost right under 2000 less units in 2013. That's huge okay. Yet we were able to overcome that, because of what we've done in the organization.

Now looking forward, because of the diversity of the markets that we serve in the parts and service business, even in like 10 years we could never overcome that. This organization would never overcome that and perform as well as it did in 2013. That's what I always talking about last year, , it's about the change that we are a service company. And we're always talking about trucks but we're a service organization because that's what customers need. That's what customers want, that's what we are.

Looking forward on oil and gas, you asked me that, we're starting to see trickles, okay? We're starting to pick up some trickles. We're not a -- I know one organization that typically biased. Buy anything, it may have already added a 100 and something units for this year, and looking at possibly more. Not to the levels of '11 and '12 but getting back in line with more historical levels, okay.

This is okay if everybody ever bought in '11 and '12. Once we learned how to frac it was quite rammed down the road, probably over bought -- but a lot of that, has been eaten up over the last year or so. We're still a little bit of excess capacity for some folks, but a lot of that has been started to get swallowed up. So we're seeing people that are making, going to be making more capital investments. So I think most other, would be having, it's not our first quarter mind you. These just happened, I'm starting to see it in the last 30 days. So from a Rush Truck Center perspective or Rush Enterprises, we'll be upgrading and everything. You got so spring that out in the second and the third quarter. But yes, it's starting to come back, not to the numbers that it was but if I could give back half of those 2000 units, I'd be kind of happy. I don't have them yet, mind you, but I'm starting to see a little push in that direction.

Operator

Thank you, our next question comes from the line of Joe Bliss from BMO, your question please.

Joe Bliss - BMO

All right. I missed a little bit of the beginning too and I don't know if you, but basically the two things I want to ask about is to whatever extent you can give us kind of the flow of the restructuring costs and more of like a list of what you need to do, and then the real crux of the question is to try to figure out when we get past this period, when we look at 2015 and I'm not asking for exact numbers, I'm just asking for a frame. In 2015 like what is sort of normalized operating margins, gross profits, whatever ways you want to look at your business; like what do we look like when we get all this done.

Rusty Rush

Wow Joe, you sure ask a lot of questions in one.

Joe Bliss - BMO

There're really only two questions.

Rusty Rush

You think. Operating margins, gross margins, this that, the structured costs.

Joe Bliss - BMO

You know what I'm trying to figure out. Once we get the noise out of the way what does this look like?

Rusty Rush

You need to schedule a 30 minute meeting in one of these conferences. I would tell you Joe, as I went through earlier we've accelerated one thing for sure. There's going to be $0.10 related to the roll out business system. It's going to be in '14, it should not be in '15. We talked about that [indiscernible] historical performance, I don't, operating margins, I think they're going to be in line with typically where we're running. I don't see that really changing. It's the volume that we want. If you look in the 10-K, I think that you'll be able to pick on those a little better than with your files here. Those will be out by the end of the month I think. So, that will get deeper in all those details. I think it's just important to understand we're, we didn't plan about what we're doing it but giving you all these numbers on the phone right now I really don't, especially out into '15, I'm really not intuited to doing it. You're more welcome to call us, call Steve and myself afterwards and we'll try to give you a little more color but hey the margins and they'll be close to historical. I mean I don't other than because of our going mobile and our products and service stuff, that's come down a little bit some of the stuff we've spent money on. What's raising that capacity levels, what we're trying to do with some of these newly acquired stores so that we're able to push more into it we're going to continuing to try to add more services and products. I've got some great stuff going on. I'm not going to talk, nothing bad, good stuff. I'm not going to talk about it on the call. You don't give away all your secret sauce.

Joe Bliss - BMO

And then any new -- can you talk about some of the capabilities that you've acquired or is this just been more kind of a volume and real estate grab?

Rusty Rush

No, that will work hard. I think that's a little less -- since I'm looking at it, because the customer grab is what it is. So right now after these acquisitions, over 60% of the truck -- the country [ph] were registered inside territories that we have, okay? So those are opportunities. Those are where we -- when I talk about integrate and execute, that's what we have to do. We have to execute to our historicals. Look let's say where we've been well established in the Peterbilt business per se -- over the last three years we typically, if you take us out of their market share, we typically performed 40% to 50% better than the national market share average, okay? So that's what I expect to do long term in all these areas. Whatever anybody performs that represent and nationally I expect to perform better but we got to get ourselves in place and I'm not giving you numbers but I'm not here to give you numbers. I'm going to let the track record of numbers speak for itself and look at what we put together and look at how it appeals to the customer. If we can get this all integrated, tie together servicing people, keeping people up and running.

And I'm not going to get in the hard numbers, about '15 and '16 and things like that right now. I'm going to tell you the track record speaks for what we're going to do and we're just going to, we got our nose [ph] down. As I said, I have to put my COO hat on this year and we're going to get after and get this thing integrated and executed. It's all good stuff but I'm not going to give hard numbers. I'm going to tell you, look at the back. It would be very hard [indiscernible] delivered up to the northeast right now unless you went through West Virginia without driving by one of our stores and you couldn't have said that a few years ago. So, and there is a lot there -- as customers continue to consolidate and get larger we can provide a more consistent, more geographically broad answer, a solution and we're going to be a solution company and that's what we are and we'll sell trucks along the way. But we're going to drive solutions. People come -- people, my dream was always that when people come to Rush Truck Centers to buy trucks, we might talk about trucks few minutes. We're going to talk about where are your pressure points, where are your pain points, what can I do to help you.

I mean you can see give and take our -- if we hit a $4 billion number, look at what we did with the return. in this year right because of mix -- Navistar business is going through a tough time right now. I've been questioned many times over the last couple of years, what are you doing, why are you doing. Now long term is the right thing for the organization but right now it's struggle. We've got EGR issues our old engines, products are great. Product is fine right out. Obviously in fact our products always great. The Navistar products are good right now but we have to overcome the issues for the last couple or three years and we're in the middle of that. Once we get -- that's as important as anything, is getting some of the issues of 2010, '11, '12 -- you talk about calendar years '10, '11, '12 some of '13 that was created with the EGR engines that we've had issues with. Now they are up and running. We've fixed -- remember it was just a bad start. We've done up the campaigns and they've done that on the product, has got it turned around. It's just working through it all.

There is nothing wrong with the engines on the trucks once their campaigned properly in the running. It's just created some customer problem effort. So that has to continue to get fixed too. So that's the net -- for me that bodes well as we work our way through all that. So we still -- we're still working through that. We're going to make the investments in that division from many perspectives. They need to invest, they need to be made. They haven't been made from some of, -- the Chicago Indy acquisition, those would need those kind of investments. So that is a period in these it will run. Shelby Howard has stayed on and taken over that part of our division and also running [indiscernible] required St. Louis stuff. So that area of the country we look forward to. St. Louis needs a lot of investment. We're going to continue -- if I had time I'd walk you through all the investments I've got to make.

Operator

Thank you. Our next question comes from the line of Kristine Kubacki from Avondale Partners. Your question please. You might have your phone on mute, hello, Kristine?

Kristine Kubacki - Avondale Partners

You just gave a lot of information on Navistar but I do have a question. Looking back about 12 months ago they've introduced the ISX and the retail sales market share has continued to fall off. I guess you gave a little bit of color but digging a little bit deeper, I mean even with the ISX introduction, are you at all worried and I guess in terms of what your thought is the market share would've come back with that introduction? What's it really going to take for customers to start to take, you know despite the EGR woes, what's it going to take for those customers to really come back in terms of both timing and what other incentives that they have to do?

Rusty Rush

Well, the incentives, I don't have to speak to the incentives. I'm not going to really speak to that but I can tell you just today we're working it. It's very -- look we have to give you'll -- we're just finishing up getting the EGR product up and running the way it should, okay? All the campaigns, you're still looking at other warranty lines and still going to be extremely high, right. We're not totally done with that but once we do, the product is running well. And we have to do that. We have to bring confidence back in the used truck market. That's what we're doing. My team right now is working very hard and very good and get in front of customers and build confidence with them and the product and over the secondary market. It's extremely important. If you can't, you got to be able to handle that secondary market. So you can sell in the first market. Because everybody -- unless you are in a 15 year old truck, somebody is trading your truck, unless it is just growth opportunities and growth opportunities are not enough.

So you have to be able to -- building that confidence is probably the most critical thing there is in those EGR engines that are out there. I think we're well on our way getting that done with what's been done so far but it's not add water and stir of thing. It's something that takes time. I know people though that market share is going bounce right back. Well that's not the case. The most important thing I would tell you is every day, everybody goes get little further in the rear-view mirror and it deprecates another day. And we are just continuing to work though that and we are. We are actively working with customers and training them up and working actively in the used truck market to find homes and we have found homes with engines that have been campaigned and they are performing admirably. That's the most important thing we can do right now. That's what they're working on and focused on.

Kristine Kubacki - Avondale Partners

And then just one last bigger picture question on kind of your topic of the December and January orders being a little bit higher. We've been hearing that finally some of the midsize and smaller fleets have been coming back into the market, especially given how fuel efficient and no EPA emission changes are pulling these fleets back in. Can you comment to that, what are you guys seeing?

Rusty Rush

Yes, we're seeing that in our business, okay. I have trouble tying it to the numbers I saw. I have trouble making that the sole reason and the big driver typically when see those kind of numbers we've seen in the last two months is using some large fleet deals in it but speaking from last year's perspective there's a lot of those big-big fleets. We're only doing business with a few of them historically. Now we'll probably end up doing some more with our Navistar division and we'll continue do with our Peterbilt division also.

We do - obviously we're in a fleet business in the Peterbilt side. There is no question about that. But we will continue to work towards that, but I think there is a more stable business environment out there. And from our perspective, we are seeing both in 20 to 30 unit sales right now. So I don't think that's the biggest driver behind those extremely large numbers especially January. But you are right on about it's going on there right now. There is no question about that.

Operator

Thank you. [Operator Instructions] Our next comes from the line of Brian Sponheimer from Gabelli & Company. Your question please?

Brian Sponheimer - Gabelli & Company

Just want to spend couple of minutes on used truck pricing. You mentioned that Navistar is not where it needs to be. What is the disconnect as far as the used trucks that are coming back that have been fixed and getting them into customers hands. How do you see this evolving as the year goes on?

Rusty Rush

First off, we have been -- typically the winter time is the toughest used truck time to begin with, okay. The used truck selling season really starts here once spring here. That's the right best time of year when used truck sales usually pick up more and more active, okay. And you remember all those campaigns mainly were done just this last year. We were packed through the third and fourth quarters. So our timing to start trading and moving and building confidence is right now.

We're right in the middle of it right now. That's what -- there is big focus going on there and there is a big focus in our organization and the Navistar division to get out and build that confidence. And so Brian, I don't if there is lag. Everybody up here expects things to just be snap and happen but that's not the way it works in the truck business and we got to get them out, get people's comments. We're going to be working warranty program and things like that on the used truck market. Those are the kind of things that we're working on to build people's confidence. And once that starts ones, that ball starts rolling that should allow the values obviously to stabilized and then hopefully start to rise back to where they are and that's the biggest key I think going forward for them getting market share. It really -- it's that piece.

We just to get that used truck coming back. That is the most important thing I've said from a Navistar perspective going forward to get new truck sales. And I think the whole network, they better initiate going right now to get that done and I know my guys who are on that division are going to be deeply involved with them and again getting out there and outward and hopefully start falling out here in few weeks. And get out there and push this out continue to push it harder even, I don't know, my guys were telling me about some initiates they had this morning. So it's just blocking and tackling that. It's getting down to improving it, then that's what's got to be done.

Brian Sponheimer - Gabelli & Company

And along those lines what kind of benefit I guess dollars wise did you guys get on the part and service sides from this campaigns and with the understanding that doesn’t necessarily happen again in 2014.

Rusty Rush

Right, right then we have some benefit from it but at the same time we are probably turned some customers off because I couldn't work on anything yet. So we hope liabilities to grab and acquire business -- we are not looking for our absorption level to go down. If that is the question, that's about the way to answer you, how is that? We are not looking for our absorption level to go down. We're actually -- our goals are for it to rise this year. So Indianapolis, star division okay. That would probably tell you the best. Whatever it was we will handle it.

Operator

Thank you. This does conclude the question-and-session of today's program I'd like to hand the program back to management for any further remarks.

Rusty Rush

Very good, well we appreciate everybody's time this morning and we look forward to speaking to you in April with the first quarter results. Thank you very much.

Operator

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Rush Enterprises' CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts