Rush Enterprises Inc (RUSHB) 2013 Q4 法說會逐字稿

Ladies and gentlemen welcome to Rush Enterprises fourth quarter and year-end 2013 earnings results.

(Operator instructions)

Today's call 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.

Welcome to our fourth-quarter and year-end earnings release conference call.

On the call today are Marty Naegelin, Executive Vice President; Steve Keller, Senior Vice President and Chief Financial Officer; Jay Haselwood, Vice President and controller; and Derrek Weaver, Senior Vice President and General Counsel and Secretary. Now Steve will say a few words regarding forward-looking statements.

Certain statements we will make today will be considered forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Some of the statements include risk and uncertainties.

OUr actual results may differ materially from those expressed or implied by such forward-looking statements. 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 in our other filings with the Securities and Exchange Commission.

As you have read in the news release our net income for the year was $49.2 million or $1.22 per share on gross revenues of $3.4 billion. These results are 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 revenue 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 after-market 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 new construction and further expansion. In our Navistar division we completed acquisitions with 5 dealer groups, increasing our Rush Truck Center network to 107 locations in 20 states. Our growth strategy has been to create an unrivaled 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 growing across the Midwest and mid-Atlantic regions of the country, where Navistar has had historically strong markets per 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 country.

Moving to truck sales, in 2013 US Class 8 retail sales decreased 6% over 2012. Our Class 8 retail sales accounted for 5.1% of the US market. But as expected energy sector and large fleet customers delayed some truck purchases this year.

In 2013 US Class 4-7 retail sales increased 9% over 2012. Our Class 4-7 sales were up 18% and accounted for 4.7% US market share. Improvements in housing and construction, growth in vocational fleet segment, and sales from newly acquired locations drove this increase.

ACT Research currently forecast US class 8 retail sales in 2014 to be 213,500 units, up 14%, and US Class 4-7 retail sales, 393,500 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 the 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 services 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 rollout of our SAP business systems 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 1300 new employees to the Rush family. With that I will take any questions you might have.

(Operator instructions)

Jamie Cook, Credit Suisse

This is Linda Yon in for Jamie. I actually wanted to ask about ACT reported very strong generated January truck orders. Do you think that is indicative of a trend for the year, or was there some sort of pull forward, or large orders that might have impacted of the quarter?

You know it was surprisingly strong to me also. I mean, I expected it 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, that what all of us anticipated. So that bodes well in my mind as we look forward. And that is why I think as I look back, I talked about the back half of 2014, as you know retail sales--I expect them to continue, because obviously we are on the end of that train. You know 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're seeing. Is that sustainable? I am hoping so, I believe it is.

Of course the market has fooled me before. But I cannot give you any specifics as to exactly where it is at.

We see our backlog, you know if I relate it to our backlog, our backlog continues to steadily grow. I do not know--we are on a 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 at the back half of the year.

Right. I think last quarter you mentioned that you were thinking first half would be like 45%, back half would be 55%. Is that something that you are still thinking?

You bet, you bet. Obviously, just because you take orders in does not mean they are immediately built, right? So a lot of them has got to be some large transactions and I'm not a fully 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.

As that builds and as it continues to build that is going to make it look about in those numbers, in that range, as I said 45-55, give or take a point or two here or there. But in that range, that is how I would break the year out.

The total number I'm using is ACT's 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. They cannot fall off back to 20,000 a month again for 3 or 4 months and make that number.

Great. Thanks.

Neil Frohnapple, Humboldt Research.

Congratulations on the nice year.

Thanks Neil, it was a building year, let me tell you. It was a year more of growth than anything else. But we are very proud of the year, especially when you look at it you break it into its parts and pieces, and you look at the year we took from an oil-field perspective and deliveries. I can take you through some major stores that you would be amazed that we performed as well as we did, but that shows the diversity that we have within the organization when it comes to the markets that we hit.

You guys are certainly busy from the acquisition standpoint. Thanks for the color on parts and service and G&A for the first quarter. As a follow-up to the last question, is there any way to provide expectations for truck deliveries for the first quarter? Particularly with Chicago/Indy acquisitions that were layered in in mid January.

I really -- you know we just got Chicago deal in the middle of January. So Indy is going to be -- I could become a same-store basis maybe a little too it.

I would expect it to be up slightly maybe from the fourth quarter, you know. But flat to up just slightly, okay? Somewhere in that 5%, no more than that on the same-store.

Giving my arms around -- just getting my arms around the Chicago/Indy acquisitions, you have to understand, they are not even finished with the full month. That will be Friday before we have the first full month on board, so it's really hard to put those numbers in there.

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

Well, there are initiatives, yes. We see the distribution of used trucks being key part -- key element to our future success. Without going into all of the details, obviously, we are going to look at it different ways to expand our used truck sales as we go forward across the country. Okay?

Okay, thank you very much for the time.

Brad Delco, Stephens, Inc.

Rusty, clearly it is been a busy year, and I kind of want to go along the same line 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 with Indy and Chicago closing here in the first quarter you said it would generate about $1 billion of revenue.

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

That is where I was going with this question. How much of that was already in 2013?

Oh boy, you have to remember we did these like every two months. So extrapolating -- are you looking for --

I'm just try to understand. For the street it is really hard to keep track of how much is same store versus how much is from acquisition, and kind of getting an understanding of what is incremental to 2014 from 2013 based on all that you have acquired would be helpful.

Right. Based upon market--a lot of it has to do with market, right? Do you want to call 2014 the same as 2013?

Yes, use that as a base, if that makes it easier.

Yes, we will just call them identical years. I would tell you--you are going to get a Rusty (inaudible) here. I will tell you somewhere.

There is probably 350 million or so in 2013, should be up 500 or 600, something like that added, or better, if you like. If we had the same year just put $4 billion on it. That is with Chicago and Indy in there, okay. And a lot of that has to do with, there are some transactions that have to take place still.

So I am not going to let you hold me to it, but obviously we see stuff in the pipeline. Somewhere north of from a revenue perspective, if the market share was flat, which we hope that it is up, okay, so you can take it from there. I'm just going to give you the forward number and you can take it from there.

That is helpful and then Rusty I don't know 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 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?

Obviously, you know, you have Chicago and Indy going in there. But if you pull that out-- if you look historically Brad and I think you have Q4 of 12 and look at Q1 of 2013 you are going to see usually typically, given all the things that I listed, a 10% to 12%,10% type bump in G&A.

Remember, there is S and there's G&A. S is directly correlated to sale of trucks okay, on truck sales. On G&A, I'm talking about G&A perspective, you are looking at that number. And as I mentioned on the SAP rollout, we have accelerated that so that we can finish roughly 5 quarters earlier, or 15 to 18 months earlier than what the current plan was. And to do that, it is highly critical to the long-term objectives we have inside the organization, while still maintaining, obviously, decent results at the interim. But that will cost about an extra $0.10 from an EPS perspective over 2013 and 2014.

I stated that in the past and that is where is going to be. We actually already hired most of the people because we are training these people up that have 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. From a pure business perspective, I mean you folks know me well enough, it is 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 and perform at the level we expect.

I think actually clearly you will build that out and now it seems like it is time to sort of harvest what you have.

Right.

It will take time for that to play out.

This is the year--there are two words that you folks are going to hear from me a lot. It's integrate and execute. I'm going to be battening down my COO hat, even though it is not my title, and we are 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 it's getting closer to it every day that ticks by. We'll do what we've always done in the truck business and execute.

I did not expect to go in to last year and do six acquisitions, five which included the December 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 in just 2014 but in the 2015 and 2016 with 107 locations is unrivaled from a service perspective. Now we have to go out and do that. And to do that we have to integrate all these stores and get them all working together and get them all on the same business system. Do all these things, just all the blocking and tackling that you have to do to run your business.

While at the same time do not worry, I will still be looking for things. But right now the main thing is to integrate and execute. As I've told people I sometimes wonder why -- I sure created a lot of work for a lot of people in the next 18 months to get all this done, but it gets exciting stuff, it is really exciting stuff. We're very happy with where we are at. We just have a lot of work ahead of us to get it together so it is running like it should.

Understood and congratulations Rusty, appreciate the time.

Bill Armstrong, CL King & Associates

Good morning gentlemen, on parts 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 revenues or was there anything else going on in there?

I think it is and some of it has a lot to do -- some with mobile, there is no question. And you know 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, it's non proprietary. So the mix of our all-mix business in there might have increased somewhat, shifted over. We're going to continue doing that.

Look, as I said I know you guys are modeling, but that 37 number right in there is where I think we are going to be at because of the mix of business we are doing. That is what has allowed us to get to the absorption levels. I mean look, we were down two points in absorption in 2012 and 2013, but given all the acquisitions and all the expense and everything that, I was very proud of that.

I was very proud of that. Now it is up to us to get back on track and turn that thing around and get it integrated and raise that absorption level. But I hear you on the gross margin mix number, but I think you are right where we are going to be in that number right now going forward.

Okay and you mentioned parts and service so far early this year has been hurt by weather. Is that something you will get back when the weather turns nice and these new truckers come into get there servicing needs, or is that something that you lose?

That is 90% loss my friend. A lot of things to do but it is like-- if I was like my General Counsel sitting here and I billed my hours. You do not get those back, right?

You do not get those hours back to bill again, you know, once they pass by they are gone. It is like today, we are shut down in Atlanta. I have five stores and iced over in Atlanta again, it is unbelievable. But that is okay. It is what you have to deal with, I am not whining I am not complaining. It is just the way of the world, you know. I said I can't believe it is probably moving up to North Carolina they tell me this morning and we will be shut down there tomorrow.

It is funny, we have always been in the South right, with our Peterbilt network. Now we are going to the Midwest. I guess I'm learning what it is like to live in cold-weather country, even though I am not up there. I'm learning what it is like to operate in it, I can tell you that. It is a different environment, but I'm sure we will adapt just fine to it.

I'm sure you will, and just one last question getting back to SG& A. From Q4 the SG&A dollars were basically flat with Q3, even though you did have more stores open. Is that just because the holidays and what is going on or were some expenses pushed into Q1?

No, some may be pushed a little, bit in but we would actually--remember I keep telling you there's S and there's G& A. When I run the business that way I'll talk to you any way you want, but that is how I run the business. We were actually off about 2.6% sequentially in G&A same store.

What was that, Steve? I'm sorry, we were off 5% in G&A. I apologize, I grabbed the wrong number, I'm glad Steve corrected me, I grabbed the wrong number on the sheet here. We were off about 5% G&A sequentially, but as I have said that will come back in the first quarter.

The fourth quarter is historically. You can look at our -- this isn't the first year it's been like that. It's typically like that about every year. The fourth quarter was a tough quarter also, you know you have holidays, which, obviously, are expensive. You have less working days.

Actually the first quarter of the year has less working days then historically does. It's the same amount of work. I say we work on the weekends, obviously, but we count Monday through Friday. And there are 63 days in the fourth quarter and 63 in the first quarter, which should bode well. That means that would be more half in the back half of the year-- in the back three quarters of the year as we go forward. Anyway that is where we are at on SG&A.

Great, thank you very much.

Art Hatfield, Raymond James & Associates.

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

I do not want to say we do not get it. But it is harder to get it. You do not have the hours -- you don't get as many hours.

I understand. Okay. (multiple voices)

They will get it fixed later but it may not be -- you can only do so much. You follow me? Just so many hours to work within. So some of that goes away. I am not going to say -- the majority of it goes away. It doesn't go away, but you may not capture it all.

You're just to incrementally add capacity.

Right, you are limited with your stores. Especially when you look at where the shut downs are, okay. They are up in these new acquisitions. Like in Ohio I have $30 million, $40 million in real estate investments coming in the next two or three years.

Why? I have customers that we are not servicing properly. I have customers that we are underutilized. We're going to build a 75,000 square foot store in Cincinnati and we have 35. We need 70.

I just closed real estate in Columbus and I've got to build a store over the next year and a half. They are a 30,000 square foot facility and they need 70,000 and 80,000 square feet. So, I only have so much room to work with, you cannot do everything mobile, trust me.

The other thing you've got with it is you work on it, there's added cost to it. You try to push more, you have to go through there, but you have to add in overtime. I added over time. You've got all that type of stuff to deal with.

But hey, it is what it is and I will say this. We had a decent January. In January our per day average picked up some. Picked up 4% or 5% from December. So it is not totally lost.

And some of the stores were not hit by the shutdown days. But some of those get offset by those that were hit by the shutdown days. If I did not have all the shutdown days we would've been a lot better January. Even though we were up in the stores that were open the whole time, some of the stores were not. So we just have to deal with it.

That is helpful. And this is a very long-term question and I do not 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?

If you will do that for me, I am hiring you right now. Given what the trucks go, and I do not mean to be -- no, the answer is -- now I tell you this, you are looking at it wrong. What have we 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 when he was 60%,65% was growth profits gained from truck sales? We have turned that around.

To looking at it differently you would say can you get the 75% of your gross profit, okay, coming from parts and service? You better believe you can.

The revenue is a tough line when you are selling product for $120,000 to $145,000 copy. You add bodies onto it and everything else and the price goes way up. So, depending on what market segments you're selling into so, looking at it from a gross profit perspective that is at great goal to have.

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

Let us look out. We will say Navistar continues to work their way through the issues with the EGR engines and gets back to, say, a historical 20%. Okay? They are not there yet they are not going to get there I think in 2014. They might, but they are not starting off that way.

So excuse me, in 2015 they get back to a 20% market share number, and Peterbilt runs typically between let's say 14% to15%, and we get our piece, let's say we are basing this on historicals. I know both manufacturers want to do better I get that, but let's just base it on historicals. That's the best way to do it. You're north of you're six, obviously. You're north of six in Class 8, and I am not going to push it any further. You all can take it where you want. But in medium you are north of five solid. So that would be my answer.

Okay, that is very helpful. Thanks for the time, Rusty.

Andrew O'Brien, Bank of America.

How are you, sir?

I've very good, Andrew, how are you this morning?

I'm doing okay. I guess I'm slowly getting more and more Irish. (laughter)

Touche Andrew, I was going to beat you to it but--Mr. O'Brien, go ahead. (laughter)

As you think about the investment in parts and services what you are trying to do with the Navistar network, you know but 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 are 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 those investments, what are you saying 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've never captured without the investments?

Okay good question, Andrew. Obviously same store we have a goal. We did not get to it this year.

I mean if you look at same-store parts and services last year, slightly disappointing around 5%. But you've got to understand, I do not mind -- I'm telling everything -- but you have 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 is why I'm really proud of the 2013 performance when you look at it-- really dive down into it.

But in 2014 our goal on the same-store basis is to be in the 8% or so range. From the same-store perspective, and I think that is what you are asking about, and that we would be looking at, an 8%.

Now going forward, if I can get these other new stores open and just how fast I can get the stuff, say going out 18 months and I am taking stores that, I'm thinking but 6-8 stores that we're going to have to build new ones, that are ready existing markets, mind you, but we are going to maybe double the size of them, right? I would hope you could take that maybe up to a 10% to 12% number, obviously.

We consistently try to be in that 8% percent, but again range 8% to 10%, but I would hope that we could get it up to 12% to 14% on a same-store basis. When all that is rolled out, right, and those have an effect on the organization. That's as long as I do not bring in other underperforming acquisitions along the way, which we are not going to do right now. As I said, it's integrate and execute this year outside of a couple of little things.

So, I would hope we could push that up into the low -mid maybe low teens. You know 12% or 13% or 14%. With the investments totally handled with doubling the size of say, like I said in Cincinnati or Columbus or San Antonio we get underway -- Denver. All those things I talked about in the press release that we have going on right now, so there you go.

Can I just ask a follow-up question and I missed the first couple of minutes of your call, but your comment on vocational and oil and gas, and are we seeing things getting better? Because these are important because these are high-profit, new sales and they do generate a lot of aftermarket.

Right, they generate, as I said aftermarket stuff. Truck sales are never great from a profit perspective. We just want to service customers. We want to keep customers up and running.

Let's look at it this way. We had a huge hit from an oil and gas perspective. You take three of my largest stores, and I will not get into too much detail for you here, but take three big stores that were had a lot of oil and gas influence: Oklahoma City, Dallas, Houston. They sold almost right under 2000 less units in 2013. That is huge. Yet we were able to overcome that because of what we have done in the organization.

Now looking forward, because of the diversity of the of the markets that we serve on our parts and service business, you go back 10 years, we could not have never of overcome that. This organization would never have overcome that and perform as well as it did in 2013. That is what I have always been talking about for the last two years, about the change. That we are a service company. We are always talking about trucks, but we are a service organization because that is what customers need, that is what customers want and that is what we are.

Looking forward in oil and gas, you asked me that, we are starting to see trickles. We are starting to pick up some trickles. I know one organization that is typically biased. They didn't buy anything last year. We already added 100 and something units for this year and looking at possibly more. Not to the levels of 2011 and 2012, but getting back in line with more historical levels, okay.

That's okay, everybody over bought in 2011 and 2012. Once we learned how to frac everybody ran down the road probably over bought. A lot of that has been eaten up over the last year or so. There is still a little bit of excess capacity for some folks, but a lot of that has been, you know, starting to get swallowed up. So we are seeing people that are making going to be make more capital investments.

So I think most of it will be happening. It's not the first quarter mind you, these just happened. I'm starting to see in the last 30 days. So from a Rush Truck Center perspective, or Rush Enterprises, we will be up fitting and you have to string that out in the second and third quarter.

But yes, it's starting to come back, not for the numbers that it was, but you know if I could get back half of those 2000 units I would be kind of happy. I do not have them yet, mind you, but I'm starting to see a little push in the direction.

Thank you so much.

Joe Tiss, from BMO.

I missed the little bit of the beginning too, and I do not know if you -- basically the two things I want to ask about is to whatever extent you can give us 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 am not asking for exact numbers I'm just asking for a frame, in 2015 like what is sort of normalized operating margins, gross profit, whatever ways you want to look at your business? Like what do we look like when we get all this done?

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

There are really only two questions.

You think? Operating margins, gross margins, and this and that and the other structure cost.

Well you know what I'm trying to figure out, once we get the noise out of the way what does this look like. (multiple voices)

You need to schedule a 30 minute meeting in one of these conferences. I would tell you, Joel, as I went through earlier, we have accelerated -- for one thing for sure there's going to be $0.10 related to the rollout of business systems. It's going to be in 2014 and it should not be in 2015. I talked about that historic before.

Operating margins I think they're going to be in line with what -- typically with the way we are running. I do not see that really changing. It is the volume that we want, and if you look in the 10K I think that you will be able to pick on those a little better as we get filed here. It will be out by the end of the month here I think. So that will get deeper into all those details.

So I think it is important to understand we've been planning about what we're doing, John. And we're doing -- but getting into all these numbers on the phone right now, especially out into 2015 I am really not in tune to do it. You're more than welcome to call us and talk to Steve or myself afterwards and we will try to give you a little more color.

But hey, the margins are going to be close to historical. I mean, other than because of our going mobile and our parts and service that has come down a little bit and some of the stuff we have spent money on. It is raising the capacity level is what we're trying to do with these newly acquired stores, so that we are able to push more to it.

We're going to continue to try to add more services and products. I have some great stuff going on, but I'm not going to talk -- nothing bad. Good good stuff, I'm not going to talk about it on the call. You do not give away all your secret sauce all the time.

Right, and can you talk about some of the capabilities that you have acquired, or has this been more of a volume and real estate grab?

Well no, I do not want to call it that. I think that is a little -- if that is how you looking at it, it is a customer grab, is what it is. Right now after these acquisitions over 60% of the trucks in this country are registered inside territories that we have, right? So, those are opportunities.

When I talk about integrating and execute that is what we have to do. We have to execute to our historicals.

Look, that is they we have 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 perform 40% to 50% better than their national market share average okay? So that is what I expect to do long term in all these areas. Whatever anybody performs that I represent nationally I expect to perform better.

But we have got to get our stuff in place, and I am not giving you numbers, but I am not here to give you numbers. I'm going to let our track record of numbers speak for itself and look at what we have put together and look at how it feels to the customer. If we can get all this integrated and tied together, servicing people, keeping people up and running.

And I'm not going to get into the hard numbers about 2015 and 2016 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've got our nose down and as I said, I half putting my COO hat on this year and we are going to get this thing integrated and executed. It is all good stuff, but I am not going to get hard numbers, I'm going to take a look at the back.

Would be very hard to get a freight delivery up to the Northeast right now unless you went through West Virginia without driving by one of our stores, and you could not have said that a few years ago. As customers continue to consolidate and get larger we can provide a more consistent, more geographically broad answer for solutions.

And we are going to be a solution company and that is what we are, and we will sell trucks along the way. But providing solutions people come -- people -- my dream has always when people come to Rush Truck Center to buy trucks we might talk about trucks for a few minutes. We are going to talk about where are your pressure points, where are your playing points. What can I do to help you?

You can see -- take out -- if we hit a $4 billion number, look at what we typically return. Because of mix -- listen, my Navistar division 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 it. Long term it's the right thing for the organization, and but right now it is a struggle, you know. We have got an EGR issue of old engines and products. The product's fine right now.

Obviously. In fact our product is always great. Our Navistar product is running good right now. But we have to go recall the issues for the last couple of three years, and we're in the middle of that. Once we get -- that is as important as anything. It's getting through the issues of 2010, 2011, 2012. You talk about calendar years, 2010, 2011, 2012 and some of 2013, that was created with the EGR engines that we have had issues with.

They are up and running I remember it was just a bad start. We done -- the campaigns they have done now with the product is got it turned around. It is just working through it all.

There is nothing wrong with the engines on the trucks once they have been campaigned properly and are running. It has just created some customer problem out there. So that has to continue to get fixed too. So, that bodes well as we work our way through all that.

So we are still working through that, and will make investment to that division from many perspectives investment in that need to be made. That have not been made from some of the -- the Chicago/Indy acquisition, those that need those kind of investments.

Does not appear to need that. It is very well-run. Shelby Howard stayed on and is taking over that part of our division and also running some Illinois stuff that we acquired, the St. Louis stuff. So that area of the country we look forward to. Like St. Louis needs a lot of investments. If I had time I would walk you through all of the investments I have got to make.

I appreciate all the time.

You just get me going.

Kristine Kubacki, Avondale Partners.

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

Well, Bill will have to speak to the incentives, I'm not going to speak to that. But I can tell you just continually working it.

We had to get there and just finishing up getting the EGR product up and running the way it should. All the campaigns you are still looking at the warranties and still extremely high. I mean we are not totally done with that.

But once we do, the product is running well. And we have to get that we have to bring confidence back in the used truck market. That is what we are doing.

My team right now is working very hard and very diligently to get in front of customers and build confidence with them in the product on the secondary market. It's extremely important.

You've got to be able to handle that secondary market so you can sell 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 -- and building that confidence is probably the most there is in those EGR engines that are out there.

I think we're well on our way to getting that done with what's been done so far, but it is not an add water and stir kind of thing. It is something that takes time. I know people thought that market shares were just going to bounce right back well, that is not the case.

Now, the most important thing I can tell you is that every day that goes by a gets a little further in the rear-view mirror and depreciates another day. We just have to continue to work through that and we are.

We are actively working with customers and trading them out and working actively in the used truck market to find homes, and we have been at homes with engines that have been campaigned and they are performing admirably. That is the most important thing we can do right now, and that is what they are working on and focused on.

Just one last bigger picture question on 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 fleet as they come 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 you are seeing?

Yes we are seeing that in our business. I have trouble tying it to the numbers I saw. I'm have trouble making that the sole reason that the big driver -- typically when you see those kinds of numbers we have seen on the last two months there is usually some large fleet deals in there. But speaking from Rush's perspective and a lot of those big, big fleets we do not know, we only do business with a few of them historically.

We are probably going to end up doing some more with our Navistar division, and will continue to do more with our Peterbilt division also. Obviously we are in the fleet business on the Peterbilt side, 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 more 10, 20, 30 unit sales right now. So, I do not think that is the biggest driver behind those extremely large numbers, especially January. But you are right on about what is going on right there right now. There is no question about that.

Thank you very much.

(Operator instructions)

Brian Sponheimer, Capelli and 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 truck's 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?

We have been typically the winter time is the toughest used truck time to begin with. The used truck selling season really starts once spring here. That's the best time of year when used truck sales usually pick up more and more active.

Remember all those campaigns are mainly 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 are right in the middle of it right now.

There's a big focus going on there and there's a big focus in our organization and Navistar division to get out and build that confidence. So, I don't know Brian, I do not know if there's a lag. Everybody up there expects things to snap and happen, but that is not the way it works in the truck business. You have got to get them out. Get people's confidence, possibly work them into the warranty programs and things like that on the used truck market. So those are the kinds of things we are working on to build people's confidence.

Once that starts, once that ball starts rolling, that should allow the values obviously to stabilize and then hopefully start to rise back to where they are, and that is the biggest key, I think, going forward for them getting market share. It really is. It is that piece to get that used truck piece 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 have got an issue of going right now to get that done. And I know my guys that run that division and are going to be deeply involved with them and getting out get out there now. Of course maybe things will hopefully start thawing out here in a few weeks, and get out there and push this out -- and push it harder, even, with the customers. My guys were telling me about some initiatives they have this morning. It is just blocking and tackling. It is getting out there and proving it and that is what has to be done.

Along those lines, what benefit dollars wise did you guys get on the parts and service from these campaigns, with the understanding that that does not necessarily happen again in 2014?

Right, right, we have some benefit from it. But at the same time would probably turn some customers off because I couldn't work on anything else but that. We hope our abilities to go out and acquire business -- we are not looking for our absorption level to go down, if that is the question -- that is probably the best way to answer, how about that?

We are not looking for our absorption levels to go down. We are actually--our goal if for it to rise this year in the Navistar division. That would probably tell you the best. Wherever it was we will handle it.

Thanks very much.

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

We appreciate everybody's time this morning and we look forward to speaking to you in April with first-quarter results. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect.