Rush Enterprises Inc (RUSHB) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Rush Enterprises, Inc., second-quarter 2015 earnings release results conference call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Rusty Rush, Chairman, CEO, and President. You may begin.

Good morning, everyone, and welcome to our second-quarter 2015 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.

Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risk 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, 2014, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, our net income was $19.6 million, or $0.48 per diluted share, on gross revenues of $1.330 billion.

In the aftermarket, our parts, service, and body shop revenues were $353.3 million, a 6.7% increase over the second quarter of 2014. Demand continues for repair and maintenance of vehicles in operation and mobile services this quarter. Improved service from our RushCare Rapid Parts call centers and an expanding parts sales organization also contributed to aftermarket revenues. Our ability to integrate and execute across all our operations with a focus on continuous improvement has contributed to our strong aftermarket performance as well.

We have begun to see a negative impact on aftermarket vehicle modifications, given the significant decline in truck sales in the energy sector. We expect this trend will continue throughout the remainder of the year and we will continue to closely monitor any further impact this segment has on our business.

Turning to truck sales, Rush's Class 8 new truck deliveries outpaced the industry this quarter, up 29% over this time period last year and accounting for 6.8% of the US Class 8 market share. Deliveries to over-the-road fleets and increased new and used stock truck sales have allowed us to offset the decline in truck sales in the energy sector.

Our Class 4-7 new truck sales accounted for 5.4% of the total US market, the result of our ability to offer fast delivery of trucks and ready-to-roll equipment from our large inventory around the country.

ACT Research forecasts US Class 8 retail sales in 2015 to reach 267,000 units, up 19.2% over 2014, and US Class 4-7 retail sales to reach 209,700, up 4.4% over last year.

Having outpaced the industry for two consecutive quarters, we expect our Class 8 truck sales may remain flat to down slightly in the third quarter. However, we are actively pursuing incremental business from current customers in an effort to offset declines in our energy sector new truck sales. We expect Class 4-7 and used truck sales to remain steady through the third quarter.

In the area of growth, we launched our Momentum Fuel Technologies compressed natural gas fuel system to the industry in May, completed our rollout of regional RushCare Rapid Parts call centers, and are making progress in introducing our telematics product offering. We also acquired eight full-service international dealerships and an Idealease and rental operation in Georgia, expanding the Rush Truck Centers network to 120 locations in 20 states. Major new facility construction and renovation projects continue in California, Colorado, Ohio, and Texas.

Finally, I would like to welcome the employees of our newly acquired locations in Georgia and say thank you to all our employees for their contribution to the Company's performance this quarter.

With that, I will take your questions.

(Operator Instructions). Neil Frohnapple, Longbow Research.

This is actually Faheem on the line for Neil. Rusty, can you comment on the appetite of your customers at this point for truck purchases at this point in the cycle? Just trying to get to how underlying demand is and any initial thoughts you may have on 2016.

Right. We are still, obviously, still trying to get a pulse on 2016. While we are obviously actively and have booked some orders for 2016, we have not really seen the full flow of all the 2016 orders to come.

When I look at the pulse for the remaining part of the year, is it as strong as it was six months ago? Well, of course not, but is there still demand out there? Yes.

And I think one of the most important things to realize is the fact that we have availability of product very quickly with the two OEMs we represent. There are still bill slots left and we're still actively selling into the back half of this year, so I still -- I see it a little more steady. Those first -- when you go back to November, December, January, February, those were some pretty outrageous months from an order intake perspective and I think things have stabilized, but we still see demand there and feel confident that we will be able to sell into the back half of this year and also continue to sell into 2016.

Thank you, and have you seen any pickup in order cancellations from customers that is causing concern, particularly outside of energy markets?

No, we really haven't. To be honest with you, we didn't see any cancellations really in energy markets. We delivered everything that we had on order. It was just a stop in orders, right? It was a stop in the order intake side.

So, we felt real good about how the energy thing wound down that we didn't get -- have cancellations and get stuck with the trucks or things like that. None of that happened to us, so we are very pleased with that. Not pleased, obviously, with the stop in order intake, but that's just given where we are at in the oil and gas markets right now. So, no, we have not seen really any cancellations from our perspective.

Thank you and I will get back into the queue.

Brad Delco, Stephens Inc.

Steve, probably for you, could you give us what the same-store sales growth was for parts and service this quarter?

Yes. In the quarter, it was 4%.

Okay. And then, Rusty, I think in the most recent calls we have done, I think you expected mid-single digit parts and service revenue growth. Has anything changed there, because it doesn't look like you were as impacted as maybe you were fearing from the energy exposure in parts and service? Any update on your outlook on that business?

I think the biggest impact, as I mentioned in my notes, my comments earlier, was the fact there's a loss of incremental upfitting, right? All the upfitting that comes with that industry. So that has been probably the most significant loss.

We still see from a mobile service perspective it is holding in. Again, we continue to monitor if not on a weekly, but a daily, basis as to where we are at and have throughout this year, but it's still hanging in there and holding steady. So, we feel good about that piece.

I see nothing to say it's going to change right now, but we will continue to monitor that as we go forward. The biggest impact has been the lack of truck sales and the modifications that come with that, to be honest with you. That's what we have seen as the biggest impact, and also trucks are not moving as much. The water trucks aren't moving, your sand trucks are not moving as much, so we are probably not seeing as much parts and service work on those trucks that come in and out of our shops, but that's hard to quantify, but that would just be expected.

So, mid-single digit parts and service revenue growth doesn't seem to be out of the question for --

No, if we can -- is 4% where I wanted to be on the same-store basis? No, I would rather see 6% to 7%, but if you could give me the 4% right now the rest of the year, I'd probably take it, okay?

Yes.

Somewhere in that 4% to 6% range, you know, because we did have some large deliveries, like I have mentioned before.

From my perspective, we lost probably -- when you look at the tentacles off the oil and gas business, you can't just look at that. You have to look at all the smaller businesses that go with it. We probably lost 1,800 units in the last three quarters of the year from last year that we are not going to sell this year.

And again, that's why we -- the diversification, as I always talk about, the diversification of us and from market-segment perspective and also from a geographic perspective of what we believe we are going to continue to help us offset those losses as we go forward.

Got you, and then maybe one last one, if you don't mind. Lease and rental margins, I think, were about 10.4%.

Right.

Down a little bit. Can you just talk about maybe what put pressure on that? And then, also, why do you like the business and why you think it justifies the capital that you have allocated towards it?

First off, you are exactly right on the margin. It was probably our worst margin quarter ever.

To be honest with you, it was affected mainly by Texas with the downturn in the oil and gas sector. Texas represents about one-third of our leasing revenue, and we got caught with -- from a utilization perspective on the rental side, just to be honest with you, here about March or so. Probably could have defleeted a little sooner. We have defleeted now. We're in the process of finishing up defleeting, and we will get those margins up in right-sizing our fleet here in the Texas and Oklahoma area -- not so much Oklahoma, more Texas, and get our variable costs under control.

That was really the effect. We have actually doing much better in our Idealease side of the business. So we would expect those margins to start getting back more towards normalizing by year-end. Okay, they're going to get -- they will be better in the third quarter, and then they will -- they should be better in the fourth quarter, getting back to more normalized rates from the past.

Why do I like the business? I enjoy the leasing rental business. I realize we don't view that -- we are not in the rental business. Yes, we got caught a little bit here saying our rental fleet in Texas in a one-off deal, but it's nothing we can't -- haven't overcome and can't overcome.

The leasing and rental business is a major piece of what we do in being a full-service organization, okay? It's a part of everything we do, whether it comes to the RushCare systems, to the -- our CVS solutions, to the leasing and rental business, to finance, everything. We are the people to go to when it comes to being a full-service solutions provider, and that we are always going to maintain that piece because it makes sense.

And again, I am really in the leasing business. You got to understand over 80% of what we do are long-term leases, five, six years or longer, so we match that dollar for dollar from a debt perspective and run it conservatively and run it on down.

But I guess the question is there wasn't material write-down in the quarter in terms of the inventory of lease trucks.

No.

I also view it -- is it fair to say it is somewhat of a captive parts and service customer, as well as a way to --

Oh, no question. I guess I left that piece out. Obviously, it is a captive parts and service customer for the organization. There's no question about that.

And it also provides you inventory for your used truck sales?

Right, well, no, if you can go back historically, I don't care what cycle and since we have been public 19 years, there has never been a year that we lost money in gain on sales. We run it very conservatively to make the majority of our money coming out on -- a lot of money coming out on gain on sale, regardless of where we are at in the truck cycle.

Even when it was 2009, we broke even, but we didn't lose money, okay, and if you did that in that year on the used side, you would have done pretty good. And we do well, very well, when the used truck market is good and we have done very well the last few years in it, to be honest with you.

Great, got --

And also by doing that, it allows you when you do get in a moment like this when you get caught in Texas, it allows you to go ahead and defleet without taking big write-downs, okay? You are just -- you are underutilized and that's what causes the margin deterioration.

Got you. Rusty, Steve, thanks for the color.

Jamie Cook, Credit Suisse.

This is actually Ben Zhao on for Jamie. So my first question is actually a follow-up to the first one on 2016. I am asking just because the Street is forecasting pretty solid earnings growth and we did see a major OE come out and say North America truck is likely at peak.

So I know you don't want to guide specifically to 2016, but maybe you can talk a little bit more about the puts and takes that we should be mindful of. For example, maybe momentum spend slows down, SAP spend goes down, and you can gain share here and there.

I guess what I'm asking if the forecasts are true and retail sales are at maybe 240,000, do you think you can improve earnings in that down market?

First off, I never give EPS projections, okay? As we hone in on 2016, I will give you some macro numbers and you can take it from there with your business model. Or Jamie can.

But, yes, I am in line with ACT. I don't believe that we are going -- is 2015, excuse me, a peak from actual deliveries? Yes. But whether we are at 235,000 or 240,000, that's still the second-best year in 10 years, so if we can hold in at that number I am very comfortable and confident that we will have a very nice year.

I am not going to speak to whatever the analysts have us out there at next year. Am I comfortable that we can perform as well as we have this year? Probably so, because we do have some things that should be kicking in next year, whether it be on the telematics side, whether it be from -- there is many initiatives we have undertaken that people don't understand, whether it be on the procurement side, whether it be on the process side.

I think some of those -- if you really dive into it, look at our margins this quarter for parts and service were the best they've been in two years. And I think some of the investments we're making behind the scenes -- I'm not going to guarantee that right now, but looking at -- I want to see a trend go through in the next few quarters where you'll see our parts and service margins, I hope, maintain where we are at, which were the best we have had.

But again, you ask me about truck sales. I believe I am going to go with ACT's number. I am going to say maybe 230,000 to 240,000, okay? I may even be a little lower than the 240,000, but again that's the second-best year in 10 years and I think with the initiatives we have going on, we can have a real solid year.

All right, that's very helpful, and then my second question, maybe for Steve. I guess how should we think about capital allocation going forward? You guys are a much different organization today with a lot higher aftermarket exposure, for example, particularly if you can touch on share repo, just given how your stock has traded recently. Then I will get back in queue. Thank you.

That's something we're strategically looking at right now. The Company is still generating good free cash flow, and we are looking at our share repurchase program, continuing acquisitions, and actually more strategic investments to drive the back-end margins, what Rusty just spoke of.

So you will hear more coming from us on that, but we are definitely interested in taking a very strategic approach at that capital allocation, specifically where the stock is where it is at now.

Thank you.

Rhem Wood, BB&T Capital Markets.

Nice quarter. I want to touch on guidance for a second. Your third-quarter Class 8 guidance, just flat to slightly down. You said that in the second quarter, but it was up 15%. Even if it is flat to slightly down in the third quarter, it seems worst case you will still be above your annual unit target that you gave, so I guess the question is, how much visibility do you really have and do you think you're being overly conservative?

No, I would definitely believe we will be slightly down in Q3 over Q2. Sometimes there are timing issues where we are at, but we are still selling. As I said, we're still actively selling and could sell trucks and deliver them in the third quarter.

So, Rhem, for me to get exact on this, there is a lot of timing that goes on. When you are selling -- we are selling a lot of large fleets, and sometimes a couple hundred can fall right on the cusp of being booked in one quarter or the next quarter, right? It's all a matter of timing on those issues, right, which can make a swing where it falls.

I do believe, though, that we will be slightly down in Q3 on trucks deliveries. At the same time, I feel good about where we are at and I feel good we're going to close the year strong, as we still have build slots available to sell, which when you look at other OEMs, they don't have as many build slots. There are other OEMs in the marketplace that don't have as many build slots to sell into.

So we believe we're out there trying to create customer demand every day with our 300-plus salespeople on the ground. We believe we will be able to take advantage of that and close with like I started the year at. As I said, we would sell more trucks -- if you go back to the fourth-quarter conference call in February, I said we will sell more trucks this year than we did in 2014, I believe. It's not going to be up as much as the market, given the hits I am taking in energy, but given the diversity of our -- of the markets we go to, we will offset a lot of that and still sell more than we did in 2014.

Now, it's not going to be the same kind of year, where it is just a ramp up the whole year. It's going to be a flatter year, okay? Bobbling along. At the same time, what you have to keep in mind is without all the rig-ups and the smaller and sooner the businesses that we are selling to, we don't have as many in those sectors; not the big companies, but the smaller guys, the water guys, the smaller guys that we sold a lot to last year. We're going to take some margin deterioration. And I think you can see that in last quarter that we were down 1 point year over year, so that's reflective in the mix of business we are doing.

But we do believe we are nimble enough and have proved that -- are going to prove it -- that we can offset what we lost with other businesses and we feel good about where we are at to finish the year up 5% maybe in total deliveries. I am not ready to give you an exact number, again like we're actively selling currently, but will we be up over last year in deliveries? Yes, we will be.

Okay, good. And then on the medium-duty side, do you agree with ACT's forecast that that will continue to pick up slowly through 2020? Do you see that market continuing to gain steam?

Sure, I do believe that. I believe the medium-duty business will continue as you see dynamics change in freight, right? As things continue -- as the model for freight distribution continues to change, I believe medium duty will be consistently strong without as many bobbles in it -- or not a cyclical as the Class 8 business over the next few years. I totally do agree with that.

Okay, thanks. And then maybe for Steve, the interest expense was up a little bit in the second quarter. Will that come back down in the third quarter? What should we use there for a good run rate?

Yes, the inventory level was peaked at the beginning of the quarter. You saw it come down from Q1. It will probably settle down a little bit from Q2 levels, just because our inventory levels will be a little bit less from this point forward. But it will be in that same ballpark, maybe a little bit below what we saw in Q2.

Okay, and then just a couple of numbers. Can I get the same-store absorption ratio and then the margins for Class 8 medium duty, light, and used?

Same-store absorption ratio for the quarter is 119.1%, I think, Steve.

Yes.

It was 119.1% compared to 120% last year, so real close to about the same.

And what did you ask for margin, by truck segment?

Yes, Class 8 medium duty, light, and used.

Class 8 was 6.6, medium was 5.7, light duty was 5.3, and used was 10.6.

Okay, thank you.

John Barnes, RBC Capital Markets.

Rusty, recognizing what you see on the parts and service side and maybe that mid-single digit growth, are you having to make any changes to staffing there, anything from a cost perspective, or is that still robust enough that you actually maybe still need to add a little headcount? How do you view staffing and wages as part of that mix?

I would be honest with you. I think we are staffed about properly at the moment for the market where it's at.

As long as we can maintain that mid-single digit growth, you really are not looking to a downside. You can't. It doesn't make any sense because you're always balancing a level of service, right? You build a reputation on your quality of service, your level of service, the expectation is of the customers.

So, yes, that's a balance between 10% and 6%. Well, if I am off or whatever, if I am off 4% from the 10%, I still cannot -- I don't have that leeway if I'm going to provide that level of service. I just have to suck it up and do it, okay?

Now, you start talking about going flat to down, well, that's a different story, okay? But if you can maintain it -- at least that's the way I run the business, if you can maintain it in the inside of those numbers, then you really do just have to remain committed to your reputation of providing a service level above and beyond anyone else.

Okay, all right. And then, going back to the conversation about just the outlook on Class 8, obviously I think a lot of the discussion has been around oil and gas, but we have seen, I guess, among the larger carriers that average age of the fleet just keeps coming down rapidly. I think Knight reported today they're 1.7 years or something like that. I mean, it's not the youngest fleet I've seen.

Are you anxious at all, are you nervous at all that -- that's been such a driver for Class 8 demand and replacement demand is the age of the equipment. Is it coming down sufficiently enough that it puts some pressure on Class 8 demand or is that still just very isolated to the larger, maybe more well-capitalized, carriers and therefore the customer base you normally sell into is still dealing with an age problem?

I would be asleep at the wheel if I didn't say that I am not -- do I watch that? Do I monitor that? Am I pretty cognizant of where most of the major truckload guys are? Yes, I am.

Does that concern me? A little, but I don't believe that it has total filtered through the whole -- through the whole trucks, the freight [organizations] that is out there, through all the mid-sized carriers down to the smaller carriers, et cetera. I don't believe.

But, yes, of course that is probably one of the dampening effects when you look at why numbers will come down next year. Numbers have to come down, given that the larger carriers have -- but I will say this. We've booked some orders with larger carriers already for next year. So, I am hoping that that continues.

The upside to a lot of it is that the people that have not taken the age of their fleet down, like what numbers you were mentioning, which that is a low, low number, obviously, there is still much fuel economy to be gained by buying new equipment. And as long as the used truck market stays somewhat stable to where they are able to trade out and get to that better performing, more efficient performing vehicle, then you should continue to see replacement.

Now, but am I monitoring that? You better believe I am. But I don't think that it has filtered throughout the whole trucking industry, okay? So be it.

Okay, all right. And then, lastly, you brought up the question about used equipment, and we have seen prices -- I think a couple of the carriers have already shown much larger than expected gains on sale of used equipment in the quarter. Anecdotally, it is suggesting that market still is very robust, that there is still not enough used equipment to meet demand right now. What do you see in trend line on that side?

And then, if we're going to see a decline in just Class 8 orders and that kind of thing, does that scenario begin to reverse itself? Do you start to see some normalization on used equipment prices?

From our perspective, used equipment prices are pretty stable. I haven't even looked at the average price, but I know that our margins are about the same.

Actually, we were up a couple thousand, $1,500 in average price of used, but a lot of times that has to do with mix and other things.

But used truck prices have remained stable, which are good. When I say stable, that's not a bad term. You got to remember we have been in a pretty buoyant environment the last three years running, so as long as it maintains, the only thing -- look, I have been doing this a long time. What you do have to watch out for, though, is used is a pretty simple equation sometimes. There is really two things that go into that, and that's how the economy is doing from a demand perspective and your supply side is pretty easy to predict, okay? Just look back in history and see what was built.

So we are fixing to get into some larger years where there should be more supply, so it will be interesting to see if the economy -- and then the economy is good, they are not over-the-top years. We will be able to absorb them, but if we do start to see some slowdown, then you will probably see some negative impact, to be honest with you, maybe 12 months from now. I'm hoping not, but that's -- you just have to watch that carefully because the supply side is going to come up from a used perspective. It's really easy to figure out.

Yes, absolutely. All right. Nice quarter, Rusty. Thanks for your time.

Andrew Obin, Bank of America Merrill Lynch.

I have great news for you. Apparently Donald Trump is headed to Laredo, Texas, to inspect the border.

Well (laughter). Well, guess what? I've got plenty of folks that work in Laredo and Cotulla. If he happens to be driving down there, which I kind of doubt, I am sure they will be happy to say hello to them.

Question on the parts business. A, could you just go into more detail? The margin was just some of the strongest margin we have seen in a couple of years. And then, could you break out for us just in terms of growth rate into pieces, if we could look just into oil and gas, core truck, and then all the initiatives that you guys are putting into the business to make sure you outgrow the end market? Any way you can break out the growth to give us a better (multiple speakers)

That last one, that's a tough one, the last one. That's a tough one, to break it out by that. I can tell you oil and gas, the demand is down. That's an easy one. I sold a whole lot less parts and service into oil and gas this quarter than I did last quarter, than I did year over year. I can promise you that.

But let's talk about the parts business as a whole. I think I can do a better job answering that one for you. The management of our parts business, we look from a strategic perspective that the parts business is one of the biggest opportunities we have going forward as an organization. If you look out there, think about the parts business as a whole. We're actually only 4% of the total parts business that is out there, okay?

Now we don't have the ability to capture 100%, obviously, because you've got proprietary stuff and engine stuff that we don't represent. But we have well more than the opportunity to capture well more than half of that, okay? So, if you look at that from our perspective, at least that's the way we view it internally, we have a lot of opportunity there. We have been working very hard in the parts business and there is no more bigger, stronger initiative we have over the next couple of years than to improve our penetration into that market.

And it comes not just from a sales perspective. Yes, sales, when you hear me talk about our Rapid Parts call centers and things that we roll out to get better customer service, okay, those kind of things are important. But it also comes from procurement. It also comes from managing your parts business. It comes for managing your core business, from managing all these different initiatives that we have -- that sometimes folks don't understand -- we have spent a lot of money on and these are process improvements and things, and I like to believe -- it's a little early yet -- that some of these initiatives are contributing to the rise in our margin. Not necessarily from making more margin just at the point of sale, because there is so much more that goes into it than just the sale, okay?

And we have been working very hard and strategically on all these initiatives to help improve our margins not just on the sales side of it.

So I feel -- talk to me after the next couple quarters and it becomes a trend line, and I will feel really good about some of things that we have taken on.

So, yes, we are very focused on the parts business. Breaking it into what goes into over-the-road trucks and oil and gas and this and that, Andrew, I just don't have the systems to do that for you currently. I mean, I could probably spend some time and dive into the details of customer growth and break it all out, take the top 300 customers and go through all that, but I don't have that information in front of me right now.

Let me ask you another way. Let me ask you this question in another way. In a market where your deliveries are flat and in a market where oil and gas business is stable, what should the growth rate be for this business?

If oil and gas was back to (multiple speakers)

No, no, flat, flat. Oil and gas is flat and truck deliveries are flat.

Flat with where I am at right now, they should be where they are at right now. I would hope that we would be able to manage from a revenue perspective along the lines of that mid-single digit growth, given some of the sales initiatives we have taken on and hopefully continue on -- that the margin -- we have picked up some margin the last couple quarters and continue to pick up a little bit more margin in that through some of these other initiatives.

So I would -- given flat with where it is now, which is hardly anything, other than servicing some stuff -- there is not a lot of part sales that are going into the oil and gas industry right now that we had (multiple speakers). If we could manage to that mid-single digit stuff and then increase margins just a little bit, I would be satisfied.

And the margin expansion, as you have noted, is just your internal initiatives, right?

I believe so. It is a little early. Remember, I said twice it is a little early for me to totally pinpoint it, where it came from this quarter, but I like to believe that our better management, our better internal asset management, okay, is starting to show besides just on the sales side and our better go-to-market procurement from a procurement perspective is starting to show.

But let me watch it over the next couple quarters and I will have -- I will be able to give you a little more solid answer on that.

Thanks a lot, Rusty.

I want to see stability. I don't -- as I talk with my folks all the time, I am not a flash in the pan one-time kind of guy. I need to see it solid to make a trend line, so let's all get out there and let's continue to execute, and then I will be happy to talk more about it as we go forward.

Thanks a lot.

Brian Sponheimer, Gabelli & Co.

Question for you on the medium size. What were the medium-duty numbers on a same-store basis? It looks like it was down.

Let's see. It probably was. We had a -- we didn't have a real good bus quarter, I can tell you that. No big bus orders this quarter.

They were down 95 units.

Down 95 units, Steve said.

All right, if I'm thinking about that -- so you are saying it is mostly bus. How much of the medium-duty market is exposed in those energy markets as well?

Oh, not a lot of it, to be honest with you. There is, of course, some, but the majority -- Class 8 gets much more exposure than the medium-duty market does, at least from our customer base, okay?

All right.

Actually, I think the bus was down the majority of that 95 or more, as I think bus was down more than that. If I look year over year, what was bus last year, Steve? Because that's included in the medium duty. We haven't had any super large bus orders this year. We've got some stuff working.

Bus was 564 in Q2 last year, 183 (multiple speakers)

Yes, bus, if you look at that, bus was 564 last year; it was 183 this year, okay? So, you can obviously see this normalized medium-duty business was up, okay? When you start talking about all four units or so, and we're only off 95, so your more traditional Class 4-7 customers were up 300 units, okay?

All right, that makes sense. And bus is primarily through IC Bus or is there some -- there are some other (multiple speakers)

No, it is IC Bus, but it is also Blue Bird. We're a Blue Bird bus dealer in the state of Texas. So, it's both.

But we just -- the bus business has not been as robust so far the first half of the year. We do have some stuff working. I was just talking to the guys here about it earlier as I saw those numbers. I thought, hmm, and we looked at it. We do have some things working, but we had a couple large orders the last couple years, to be honest with you in some large areas that we have not had a large order -- a fairly large, significant, three-digit order from anybody this year in any of the districts that we sell to.

You got to remember, we enjoy the bus business. It leverages very nicely with our truck business, especially on the IC side, so we just haven't had -- the last couple years, we have had a couple of very large orders. We just haven't had any super large orders, just the normalized district stuff.

All right, and you spoke about pricing before on the used side, and obviously that's been a bigger issue for Navistar than anything -- than on the PACCAR side. Just talk directionally whether you are seeing any firming of prices on some of the EGR products and that as an ability to potentially help you sell more trucks down the road?

You bet. I talked a little bit about that before the last quarter. I hadn't had anybody ask me about it. But, no, we have continued to see stabilization because you have to remember before. You go back to a year ago, it was bad. Anything with the EGR side, it was basically we were selling 10 units a month, if that, and what we did outside of that was auction and it was terrible.

We have worked extremely hard to -- obviously, they have come up. First off, it talks about -- start with the product, okay? With the campaigns and when the product is properly handled and done and campaigned properly, the product will work in the market, okay? We are starting to get into the later-year model stuff, the 2012s, which were built in 2011, okay, and then into the 2013s, and that product was better than what was built prior to that, than the earlier model products, okay?

So, you add those two things together and you have got a better product to begin with. Then you have got to excite a sales force and you have to educate customers. So we have worked extremely hard to do that to where we have gone from retailing 10 a month to we're retailing 80 a month, okay, just in this last four or five months and we have done it consistently over the last three or four months.

So we believe that with that, that is going to help energize our retail sales of international Navistar product, and we're just at the cusp of that, but I do believe as we have proven -- and it has worked for the used buyers we have been selling to. The product is performing and executing. We are not having all these disaster stories or anything like that because we are doing -- making sure we hit all the right steps.

So, I feel good about what that will do for us going forward on the retail side on the Navistar side. We still -- you got to remember. The biggest growth that we have in this organization is the Navistar division, okay? That division has more upside. You can look at it and say, well, it's not performing like the Peterbilt division. Well, let me tell you, when you -- I look through a glass half -- when I look at a glass, well, usually it is overflowing, most people say, when Rusty looks at it. But at the same time, I look at that as opportunity. I don't -- and that's how we are viewing it and that's how we are approaching it, and that approach on the used truck side is already paying off for us. We hope that to fall over to helping us sell new trucks as we go forward.

So we are very excited about that as we go forward, because obviously they still have build slots available and lots of them, and we want to be a big participant in filling those build slots.

And you said, that's good, I appreciate that. Any sense on their customer base, there's just people you just can't go back to because they have been burnt and they will just never buy another International truck again?

There is some people that will say that. You better believe there are some like that. But we believe that given through even the hard times, even as tough as it was, there are people that understand what was dealt with and saw that everyone was doing the best they could to deal with a very, very difficult problem, okay?

And so, we believe we still have maintained some very large customers. Did we lose some? Of course we did, but have we maintained some? You better believe we have through the initiatives. I can remember two years ago when we were working 30 technicians in people's shops, helping them campaign through all the problems and everything that was going on. People remember that. This is a small industry and is an industry built on consistent relationships and consistent service. And we like to believe that what we did then helps us continue to maintain a lot of those relationships.

And at the same time, we're working very hard to go out, and the product -- now it boils down to what's the new product? Well, the new product is a good product, okay? There's nothing wrong with their 13-liter engine with the after treatment and the SCR system on it right now. I could take you to a couple customers I know who'll say it's as good a fuel mileage as anything in their -- and as reliable as anything they have in their fleets, and obviously the Cummins ISX inside of the Navistar product, inside of the ProStar, has performed and is continuing to perform in the field.

So it's just an evolving story. Everyone has always wanted to fix this with the light switch mentality here, the add water and stir mentality. And that doesn't work, okay? You don't change 70,000 problems on the highway like that, but you do service it. You don't run from it. You stay with it and you work with customers, and I do believe over time -- or I guess I won't look too good for all the stores we bought, but I do believe over time that they will come out of this and it's just a blocking and tackling thing, and I am confident that over time that they will regain market share and we will not -- they have their own internal initiatives. That's up to them to tell you, but they will gather some market share back over time.

I can't tell you exactly at what pace, but I do believe that all the boxes are checked to allow that to happen.

That's great color. Thanks, Rusty.

Art Hatfield, Raymond James.

Real quick, Rusty, can you -- off the top of your head, I don't even know if you have this number on you, but if I look back to 2012, do you know what percentage of your Class 8 sales were to energy customers and what that is in relationship to what it was in the first half of 2015?

Oh, gosh. Artie, I don't mind trying to get that number for you. I don't want to swing at that and miss.

Okay.

I don't want to swing and miss, man.

No, no, no, that's fine. I thought I would put you in that spot. I will follow up with you on that.

If I remember right, it was 2012 -- it was 2011 or 2012 was the down year? We had one, that was 2012? There was one year that -- I think I have got remember back. It was one of those two years that was a down year in energy, just like this year, but 2013 and 2014 were big. It was 2011 or 2012, I don't remember which one. I think it was 2012.

But Artie, I don't want to (multiple speakers)

I can follow up with Steve on some of that stuff.

Be happy to try to get that for you, though, buddy.

Okay. As I look at the second quarter, your 6.8% market share, very strong relative to where your long-term history has been. But yet, you are struggling on the energy side. How should we think about where you think your market share should be going forward, considering all things being equal? I know there is cycles in the different businesses, but --

The biggest variable, Artie, I'll be honest with you, is on the Navistar side, okay? The diversity inside of our -- I can't expect oil and gas to be as robust all the time is it was last (multiple speakers), but that's the nature of the oil and gas business.

I think 2014 and 2015 are what I have seen my entire career. Remember, I was born and raised in Texas, so I have been around the oil and gas business just a little while. So that is typical of the history of the oil and gas business where you can split it in the middle, I don't think they ever do, but it is either robust as can be or there is nothing there.

But the biggest thing we have from an upside is two things, and that is I think PACCAR's Peterbilts continue, more gain market share. I think Peterbilt still wants to maintain a stronger market share. They have shown that. That is the switch in their -- if you look at the customer base they sold to 12, 15 years ago -- 10, 15 years ago, to the customer base they sell to now, it is diabolically different, okay? It's just huge -- vastly different.

Now that continued improvement as they try to gain some market share. And then, Navistar, Navistar getting back to where it should be. That is so -- I'm going to give you a number here in a second, but those are the two biggest things, really the Navistar piece and then Peterbilt being a consistent 15% market share player, okay? And Navistar being an 18% market share player, let's say, pick a number, 17%, 18% market share player.

And we should be somewhere between 7% and 8%, okay? We should be -- I'm not going to give you that 8% number; I've never hit it before, but if those were there and we were doing our job properly, we should be there, okay?

So I guess thinking that way, then, in the short run, you are at the low end of where you should be and you have got theoretical tailwinds on your side, given those two things you talked about.

I would like to think so, Artie. What happens is we are probably -- you're going to see us -- our market share is going to be more difficult to maintain at a high rate in such a robust market, okay? When you get into these -- our market share will be stronger in the troughs and it's just because it becomes a lot easier to sell trucks for people, okay?

Right, right, okay.

You got to think about it like that. We're going to do good, but also other folks, it opens up the market, from my perspective. You'll see us -- and it makes it easier. When everybody's buying trucks, they don't travel as far. You don't have to work as hard to get it. When it becomes hard work, I like to believe we are a little better than everybody else.

Okay. On 4-7 sales in 2016, I can't remember what you have said about your thoughts on 2016, whether or not you agree with ACT.

Yes, I am going to agree that it is going to continue to just have small moderate increases.

Okay.

I believe that with the transformation and the dynamics and how distribution continues to evolve, that as you get to these larger cities and these hub and spoke and trucks not going, I believe you're going to see some very steady, nice growth in 4-7 for the next three, two years. I really do.

And no reason why you shouldn't be pretty close to where your market share is now in that space?

No reason why we shouldn't be there or be better.

Okay.

I am not --

No, fair enough.

I'm not going to -- I didn't get into this to go backwards.

No, I know. I know. I just thought I'd ask for clarification purposes.

Looking at the gross profit margin on new and used truck sales, it hung in in Q2 a little bit better than I thought, but if I go back to 2009, during the recession, it looks like the trough in that was around 6.5%. The mix of your business has changed a lot since then.

You better believe it.

Should we think about potential trough margins being below that 6.5%? And if so, could it break 6% and go much below that if the mix really goes against you?

I'm not going to say anything is impossible. Sure, it's possible. You have got to look at the mix -- I don't believe -- I am not believing it's going to do that, but is it possible? Yes. If it got to where -- you got to remember Navistar is a more fleet-based truck, right?

Right.

So that has affected the mix a lot, dramatically. So if we were to weigh heavily that direction in our business, and typically, that has been about -- historically, that has been a 25% to 30% piece of our business. It is not a 50% piece or anything like that.

If that was to shift that direction to the large truckload public carriers, you could see that margin come down some. I would hope that we would be able to continue to maintain what we had and it would be incremental sales and we would get to that 8% number, right? Okay?

Right.

Maybe I would take a little bit of deterioration, but at the same time, the absolute dollars flow at where you're looking for them, probably.

Right, right.

You got to balance -- you have to understand where you sell your trucks into and we try very hard to understand those market segments. So I could see it taking some hits if that shift moved from that 25% or 30% to a 40% piece of something of what we do.

Now, I don't know -- don't believe that's going to happen. I believe that as International gets -- the brand continues to come back, I believe that we're going to sell into the small and mid-sized carriers, which is the hardest -- which is the most difficult piece we're having right now, which I think is the most opportunity on the International side are the small and mid-sized, okay?

We're still selling to some large carriers. We are not selling as much to small and mid-sized, so I would hope that I will be able to raise the Navistar. That's my plan is to raise the Navistar margin over time by diversifying the customer base.

And can you also do that and does this enter the thought process in that regard where you say you take -- you are taking more market share, but you are getting a little bit of a hit on the new truck sales gross profit margin, but you're going to follow that up with parts and service and that maybe changes the return equation is how you think about that?

You know what, Artie, I like the way you think. Of course it does. You know we sell trucks just to service them at the end of the day. We want to be a service organization.

Everybody always gets caught up in the -- remember what I always tell you that the old adage in this industry was the sales department sold it the first time and then the service department sold it the second time, but we want to continue to allow our service to sell to more people the first time, not just the second time.

So yes, at the end of the day we are driven by service and parts on the sales side. We understand that. That's why all these other initiatives we have going on. You know exactly where we (multiple speakers)

Okay, that's very helpful.

You need a job, Artie? You are thinking right, okay?

Okay, well, I will keep that in mind because you never know when this will end (laughter). Real quick on G&A, and I hope my numbers are right on this, but my calculation is -- and I know I'm pretty right on this, but revenue in second quarter versus first quarter sequentially grew a little over 11%. I calculate that G&A probably grew a little over 5% in Q2 -- excuse me, in Q2 from Q1.

Is that the right relationship or was there something going on in Q2 that was either beneficial or detrimental to G&A?

Well, it grew, I think --

If you wanted same-store growth, it was 3.8, okay?

It was 3.8 same store. At the same time, is that more than what I want? Yes. Am I pleased with it? No. Am I hopefully pleased that some of the results we're going to see or are seeing with maybe some increasing -- as I mentioned earlier, we have got a lot of -- we have had a lot of corporate initiatives going on here.

And running 50 stores and running 120 stores is just a little bit different. And we're working very hard on the process side; we are working very hard in the asset management side. And we have added expense to that side. And I hope over time that maybe that will help expand some margins and allow us to run this thing a little better, and if it doesn't, we will make adjustments as we go (multiple speakers)

Well, is that just -- is it just a lot of blocking and tackling and, from a top end of the Company standpoint, just wrapping your mind around running all those incremental stores and finding out the best way to do so?

That's part of it, Artie, and it's doing a better job of it, right? It's doing a better job than you did when you ran 50. The end result is I want to run the 120 better than I ran the 50.

Now it may take -- it is the chicken and the egg sometimes, right? You make those decisions and you head down those paths. They are not one-quarter decisions. It is not a path that just started this quarter. It has been going on for like the last 12 months.

And I hope to be seeing the end of that expense side and I hope to continue to see on the other side coming out of the funnel on the margin side and on the net profit side. We believe we are getting -- it's just been -- at the same time, we just finished rolling out all our SAP stuff. We're hoping -- we had to keep trainers on through the summer, et cetera, more longer than we anticipated. I could go into -- I don't want to get into the myriad of things.

Yes.

I want that to come down, okay? But I also want to do a better job of running these locations.

Sure. And just one last one on that, real quick, and maybe you are in the process of figuring this out and this is part of what you're going through. But of the G&A, do you have a breakdown of what's fixed and what's variable or are you still trying to, with the increase in stores, wrap your mind about what that is and what it should be?

Well, it would be for me, I would look at it as a fixed and a semi-fixed, et cetera, perspective, not -- I wouldn't call it variable. Variable means a commission.

Okay.

When I look at G&A, I have already stripped those out. I don't have that number to give you right now, Artie, but trust me. We manage it to those numbers, okay?

Okay.

I don't have that number right in front of me right now.

Thanks for the time this morning, Rusty.

Always, Artie. Like I said, remember --

I will. I will.

Just Checking. (laughter)

Jonathan Chin, Private Manager Group.

I just had a couple questions regarding the telematics. Do you have -- I don't know if you guys ever disclose these figures, how many trucks are currently using telematics? How much time you can save on, maybe, average revenue per visit, that type of stuff?

I don't have those to give to you. You got to remember, that's a pretty new initiative of ours. We didn't start selling product until February or early March.

We're excited about the growth potential, we are excited about the people we have been in front of it, and I really don't want to give those numbers out of what I have got out right now already. I've got a lot of prototypes out with a lot of folks. I have got quite a few that we have already sold and installed. I put it on my own internal fleet.

You got to remember I have got 1,700 internal vehicles. When I say that, parts, service, and delivery trucks that are out there and mobile technician trucks that are out there that I have put on my own. I have got a lot going on, but I really don't want to talk about where I'm at and I just -- we are very, very excited about the long-term perspective of that, given our footprint, given the focus I'm going to look at on how to work on increasing that footprint, and how we can do things maybe a little different.

You know, you've got everybody. Telematics is nothing more than a highway. Let's understand. Telematics is a word that is a highway. It is the usage of that highway and what you do and how you integrate it and how you support it. Who can support it best, right? Is it the OEM? Is it -- who can do it?

We believe we are going to have the best mousetrap when it's over with, and I know I'm not giving you quantitative numbers that you are asking me about, but I'm not ready to do that. But, again, I have been into it four months, really. I have been putting stuff on for four to five months now and we are very excited just about where we are at. I could talk to you about a presentation they were telling me about in the elevator this morning, a guy with 2,500 trucks today, but I am not. We are in front of a lot of people and working really hard at it. We think we have got -- think we're going to have a very good mousetrap at the end of the day.

Okay, I appreciate it. Look forward to hearing more about it in the future (multiple speakers)

No, we will -- I will be much more informative when I have more to talk about, but trust me. We are clicking some revenue. Is it anything that is really meaningful right at the moment? No.

But are the possibilities and the excitement that I think, the way -- remember, it's all about -- the differentiator for us is keeping people up and running, and when we can do that, that allows us to go to market different than our competition. And we like to believe and we're going to focus on that, plus I have got a lot of other initiatives we have got as we strategically laid out some other things as we continue to look forward to continue to make sure our people understand we are a service company first. Yes, we sell trucks, but we are a service organization first. Anyway.

Maybe just ask it a slightly different way. Within your own fleet, do have any uptime metrics relative to (multiple speakers)

I do, but I don't have them on top -- yes, you better believe I do. But I don't have them on top of me. It's whether it's saving me -- it's the idle time. It's this -- it even boils into safety, right? Speeding, how I have governed all my internal vehicles back now.

When you find people running 90 miles an hour down the highway all of a sudden, you figure out you're going to govern back all your pickups, right?

Absolutely.

I could give you things like that that we have found that really sometimes it's hard to quantify, but you know if somebody has got a 75 mile an hour top end speed instead of a 90 something, you're going to be safer, right? And I can get you better metrics on fuel consumption and things like that, but I don't have them in front of me right now. But we would be happy to follow up with you on that type of stuff.

Thanks a lot, Rusty.

Kristine Kubacki, Avondale Partners.

Just a quick question on inventory levels, you mentioned earlier in the call about that it seemed like your inventory levels have peaked in the first quarter and have brought them down. It seems like you seem pretty comfortable with your inventory levels.

I was just wondering if you could comment on maybe the ACT numbers or maybe they are not even accurate, but it seems like they're reporting that inventory levels at the dealer levels across all OEMs is at a level we haven't seen since 2006. Does that worry you at all and how do you -- and I don't want to put words in your mouth in terms of your inventory levels, but it seems like you are pretty satisfied with where you brought your inventory levels down to.

Yes. Remember when you look at inventory, you got to split it in two pieces, right? Okay, there is true inventory that is being held for looking for a customer for sale. It is called stock inventory. And then, there is in process of delivery inventory.

You would expect inventory levels to be at a pretty high mark right now, given how much is being produced, right? Because that means it is flowing through those dealer networks, right?

So, they are in process. The delivery trucks is going to be up. If you really need to get into the part, that's what we -- I don't measure -- I don't look -- you all look at it as one lump number. We don't manage just to one lump number, trust me, okay? We truly understand what are our stock inventories and what are in process of delivery truck.

So, we are comfortable with where we are at right now. Heck, I wouldn't mind if it was a little higher if they were all in process of delivery, right? That means I'm going to get paid for them, okay? But my true stock inventory, I am comfortable with the levels we are at right now, okay?

That would not -- as I said, that's why it is hard when you're just looking at one aggregate number, unless you understand the breakout of it. So, I am not bothered by mine. I have not seen the numbers of other dealer inventory levels. I'm going to suspect that the majority of the increase are just trucks that are flowing through the system, okay?

So you have got more of them flowing through, so your aggregate total is going to be higher just naturally, because your delivery is going to be higher.

Okay, that's fair. I guess -- and maybe I'm making this too simple. Obviously, I would love to see the statistics between what those two buckets are, but it looks like production across the industry is running 31,000 units a month, but retail sales is running below that. And I am talking North America. So it would suggest that inventory levels are going up across the --

That would suggest it. You better believe it. You are right on with those numbers. That's not indicative of ours, though. I will be honest with you.

Okay.

Our inventory levels, I don't believe, are rising at the moment. When you say -- they are within a 5% variance, okay, so I don't look at that as rising. If they were up 25% or 30%, I might say it was, but they are going to ebb and flow within 5 points either way, and so we're inside of that range right now as an inventory, from our true stock inventory, my true stock inventory.

Okay, it sounds like you are in a much better situation than maybe some others, though. I appreciate it. Thank you very much for the time.

Yes, some people might get a little overzealous.

Joel Tiss, BMO Capital Markets.

This is Richard Carlson in for Joel. Thanks for squeezing me in real quick.

Sure. You don't sound like Joel.

I have been trying -- that accent is tough to get down. So most of the questions have been answered, and then Joel definitely told me if there are a lot of good questions to sneak in and add some bad ones, so just want to make sure that we are on the same page for the energy exposure. I think you have said in the past 20%, 25% impact just from that, so understand you guys have a lot of offsets in the works. But just so we're on the same page for where we are starting from, is that still the right level?

Yes, remember that's from an EPS perspective, okay?

Right, right. So that's from -- so it's from that $2 from last year, so that would be essentially (multiple speakers)

Right, but when you start the year, you look at it as, say, $1.50, between $1.50, $1.60, say $1.50, $1.55. That would be your baseline.

Yes.

What we do over that is we're making up for oil and gas losses with other initiatives that we have, correct.

Got you. And then, you said that 1,800-unit decline for the final three quarters of the year. Was 2Q -- are you in line with expectations and what's left for the back half as you guys are delivering a lot?

Q2 was probably the smaller of the three quarters, so -- I will be honest. Let's say it was 500, 600, 700, go like that. I'm just going to -- and remember, this isn't an exact science here because this is not just three customers we are talking about.

It's a long list of customers that get touched, like I talked about before. It's the guy that build the roads, the guy that holds the metal to build the building that is down over here, and we have worked very hard to be as scientifically exact as we can, but it's a little bit unscientific, too, at the same time, trying to understand the tentacles.

So, that would be -- these are just -- I'm a very open book with everyone and these are what we have done, the studies we have done, the time we have spent as to how we have managed trying to right-size and manage our business. That's what we saw.

And so, I would say look at it like a 500, 600, 700 type of answer to you. And that could be 500, 650, 650 in Q3, so more in Q3 and Q4 to offset than there was, say, in Q2. So that has somewhat to do with me saying deliveries will be down from Q2 and Q3, but I am still confident in my annual number that I gave you at the first of the year that we would be up over last year, just a different kind of year.

Right. And then the modifications that go onto those, does that hit the new and used commercial vehicle segment or is that parts and services?

It hits both, okay? It depends on how it is -- I don't mean that to be vague with you or anywhere else. It depends on how the customer wants it paid, when it's done. There is timing issues. So it could go -- it goes in both columns, I will be honest with you, and it is a by-customer perspective.

Got you.

That's just factual of how it's done.

The absorption looked really good. I guess down year over year, technically, but one of the best numbers you have had, historically. So can we look out, despite with some of the energy headwinds, and think that absorption can still stay in that -- the high one teens level?

I would say if you balance the next two quarters, you better believe it, okay?

I would hope that over the next two quarters that we could definitely manage to that, blended -- getting exact to 1% here or 1% there, sometimes there are some variables that go into each quarter, but over the next six months, yes. I would be comfortable and confident and, at the same time, very, very proud of my organization to being able to maintain that with the headwinds that we freighted like, okay, that everybody saw.

But that has to go back again to the diversification of our geography and the diversification and really the focus of our people to help try to offset this throughout the organization (multiple speakers)

Yes, and then just one last one, just following up on Navistar. I think you mentioned earlier that there is about a $1,500 bump in used rig prices this year that you guys saw. Is some of that mix from Navistar? Are they starting to finally get a little bit of a bump in the market for what those trucks are worth, especially as you mentioned some of the 2012s you are selling and so some of the older ones or the ones that are least wanted by the market are disappearing?

Yes, there is some of that in there, but remember, $1,500 was the overall average of what we had. That was everything. I don't have it bucketed for you for International trucks.

Are you seeing (multiple speakers)

I have to believe (multiple speakers) because instead of wholesaling them at auction, yes, I am getting more for my International product than I was a year ago. It just makes -- (inaudible) said yes. I don't have that number for you, but yes. The answer is yes.

No, we are just trying to figure out if that gap between the book values and the market values are starting to -- and if maybe -- and also with the market acceptance, we saw that big number come out yesterday that they sold, so it seems like there is some market acceptance going on. Just wonder if it is starting to trickle down through the used equipment market as well.

We believe it is. Remember earlier, I walked through all the reasons as to why we are able to get value because we are creating a more valuable product and we are focusing on it, and we're going out and we have to go out and sell it. It is not -- people are not going to show up on the yard to just to go in and buy an EGR product. You have to go prove it to people.

And we have taken initiatives with test trucks, et cetera, et cetera, doing a lot of different things to get to where we are at right now, so we hope that can -- in the future bodes well for our new truck sales that we are continuing.

Because remember, every day that goes by, the good thing is there was an end point when the engines were created, so every day that goes by, they depreciate a little bit on the balance sheet every day that goes by. So that gap continues to narrow between absolute street value and book value, and as that continues to narrow, the opportunities should continue to increase for new truck sales.

Appreciate the time, guys.

Thank you. I am showing no further questions at this time. I would like to hand the call back over to the Rusty Rush for any closing remarks.

No closing remarks. Look forward to speaking to everyone in October with our third-quarter earnings release. I appreciate everyone's time and thank you all very much.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day, everyone.