Rush Enterprises Inc (RUSHB) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Rush Enterprises third-quarter earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

At this time, I would like to introduce your host for today's conference, Chairman, CEO, and President, Rusty Rush. Sir, you may begin.

Good morning, everyone, and welcome to our third-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; and Jay Hazelwood, Vice President and Controller.

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 risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2014, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved revenues of $1.294 billion and net income of $19.9 million, or $0.48 per diluted share. In the aftermarket, our parts, service and body shop revenues were $360.7 million, up 5.9% compared to the third quarter of 2014. Our quarterly absorption rate was 116.2%. Demand for repair and maintenance of vehicles in operation, particularly strong on the East and West Coast, vehicle upfitting for fleet and natural gas trucks, and mobile services, drove aftermarket revenues this quarter.

In the meantime, in an effort to improve aftermarket revenues and customer service, we continue to expand our aftermarket solutions portfolio in areas of mobile services, RushCare Rapid Parts call centers, and other service capabilities. We also remain focused on increasing our aftermarket sales presence and executing our procurement, asset management, and process improvement initiatives.

Turning to truck sales, having outpaced the industry earlier this year, our Class 8 new truck sales remained flat compared to the third quarter of last year, and accounted for 6.6% of the US Class 8 market. Deliveries to large, over-the-road fleets have allowed us to replace the majority of lost energy-related Class 8 truck sales. Our Class 4 through 7 new truck sales were up 12% over the third quarter of 2014, and accounted for 5.1% of the total US market, as we continue to stock ready-to-roll work trucks across the country, allowing us to meet the needs of medium duty customers benefiting from a healthier economy.

In 2015, ACT Research forecasted US Class 8 retail sales will reach 269,000 units. The US Class 4 through 7 retail sales will end the year in the 205,950 units. We expect our truck sales will remain stable through the remainder of the year.

For 2016, ACT Research forecasts US Class 8 retail sales will be 248,000 units, down 7.8% compared to 2015. Given the decrease in the average age of Class 8 vehicles, and the anticipated softening of used truck values, we believe Class 8 truck sales could decrease even further next year than forecasted. ACT Research also forecast US Class 4 through 7 retail sales to be 212,850 or up 3.4% over 2015.

In the area of growth, we began production and sales of our Momentum Fuel Technologies compressed natural gas fuel systems, and are making progress in introducing our unique telematics offering to the market. We acquired a full-service Peterbilt dealership and PacLease rental and leasing location in Las Vegas, Nevada, and opened up a new truck center in Brownsville, Texas, and a Rig Tough used truck outlet in Dallas, Texas. We also completed two major construction projects, and have relocated to new state-of-the-art facilities in Cincinnati, Ohio, and San Antonio, Texas, while other capacity expansion projects continue around the country.

Finally, I would like to welcome the employees of our new locations in Nevada and Texas, 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) Jamie Cook.

This is actually Ben on for Jamie. So, my first question is, Rusty, you talked about 2016 retail sales, and expecting them to be down more than ACT forecasts. I guess, can you provide any sort of order of magnitude? I mean, do you expect retail sales down 10%, 20%? Just what's the number you are thinking about?

Oh, well, I am not calling for a cliff. Let's get that straight to begin with, okay? What I would tell you -- it is an evolving process right now, you know? We are right in the middle of what's typically one of the strongest part in the selling seasons, as people order trucks for 2016.

So, I mean, I purposely did not put a number there as I get my arms around it. So, I'm not going to -- but, again, I am not calling for a cliff. But we're -- their forecast is in, like I said, almost 8%. You'd maybe double that, but not -- no cliff. There's no cliff initiative. But it's really a little bit early for me to give you a hard definitive -- my hard definitive thoughts on it. When we talk in February, I am sure I will have some very strong feelings on it at that time.

Okay, got it. And maybe just a question on the fourth-quarter specifically. I mean, you are talking about stable truck sales for the rest of the year. Just trying to quantify that a little bit. Does that mean flat deliveries quarter-on-quarter in terms of Class 8 and medium duty?

Yes, I would say yes. I mean, stable, to me, means fairly flat, right? It's not going to be an exact science because of the timing that goes on with deliveries a lot of time. Right? But we do expect stable deliveries through the fourth quarter.

Okay. Got it. Thank you.

John Barnes, RBC Capital.

Rusty, just going back to that -- the same kind of outlook question. If it's -- if the decline in ACT's forecast is more as a result of fleet age coming down, do you foresee less fleet buying and more continued purchasing by the smaller truckers? And if so, does that mean your model is a bit more resilient, even if the Class 8 market is trending a bit lower?

Well, I don't know -- I see it pretty much across the board, John. I don't see this as just large fleets or just the medium size or the small carriers pulling off. I think everyone will be a little more muted across the board, from my perspective.

I do -- I mean, you won't have -- the visibility folks have is really truly only to the large fleets, right? The large public carriers. We don't have as clear a visibility to the other sectors. But I believe that it's just going to be fairly a little more muted across the board.

I personally believe that used truck values are going to have a big thing to say, a large thing to say as to what -- as to the replacement, it continues to go on. Right? I normally -- used truck questions, so I guess I'll just wait until I got the questions, but I will give you my thoughts on that and how it plays into everything a little bit.

All right. Well, that was my next question. So, Ryder has already come out and said --

(laughter) I sort of figured that.

-- that they were beginning to experience a bit of weaker demand on used truck demand. I think in Warner's announcement today, they indicated less proceeds from truck sales, used truck sales. Can you just talk about what you are seeing there and what you expect?

Sure. No, I mean -- and I don't look at it strictly as a demand issue. Remember, used trucks -- those are big supplies, which is always very easy to predict. Right? I mean, if you go back, if you take a look at a typical four-year cycle, we sold 97,000 US retail in 2009; 110,000 in 2010; I think it was 173,000 in 2011. Well, let's take 2012 -- we sold I think around 194,000 US retail. Well, guess what? That is the four-year market we are going to be entering into.

So you can look at the supply side, and it's just like everything else in this country, supply and demand will drive the price. Right? So it will be as much supply side-driven as it will be demand side-driven, from my perspective.

So, I don't think there's any way that we don't have softening. And we are already seeing some softening in used truck values as we speak. Now, again, I am not calling for a cliff. Just like on new; I don't look at this as a cliff. I just look at it as a normal market adjustment that we'll deal with, but it will inhibit the sale of some new trucks. Right? Because they will be -- the equity inside, it won't be as easy to trade your truck if the values are growing more depressed.

So, I'm not sure as to -- I am not ready to give you a percentage exactly on that either, so before anybody asks. But I would tell you we are pushing towards, year-over-year, from my perspective, right now we might be off in this fourth quarter 5% from values or so. But it is hard for me to predict where we are next year. But I do know that there will be used truck value pressure next year. There's no question about that.

Okay. And then lastly, just offsets on the Class 8 side, I mean, if Class 8 is a little weaker and the medium duty has continued to perform pretty well, I mean, can you just talk about maybe the medium duty outlook, or even from a vocational or a municipality perspective? I mean, are there offsets that you anticipate that maybe can overcome some of the fleet weakness?

Yes, well, the fleet -- and remember, in the United States, from our perspective, it's not just all the fleet. Right? We did a great job this year. I'm going to talk about Class 8, and then I will get over to your medium duty question.

We did a great job. We -- I had replaced -- I think everybody has forgotten; I think I told everybody -- about 1,800 units from the best we could -- the best information we could gather from the oil and gas we lost this year, because of the tentacles that I talked about that go into the Texas, Oklahoma and other areas. And the organization did just what I wanted to do, what it was built to do, and that's geographically the coastlines helped pick up a weakness in the center of the country. Right? So we are having a pretty decent year. And I'm very proud of the organization for that.

So -- but I do not anticipate right now getting the oil and gas back in 2016, either. From the best I can tell, oh, there will be some spotty stuff here and there. But really and truly, it's not going to come back in 2016 like I might have hoped, if you had talked to me six months ago. I don't foresee that right now.

Now we will continue to monitor that, but we would love for that sector to come back. But it doesn't appear that that's going to be the case, at least for the first half of 2016. I'm not going to give up on the back half yet. But at least for the first half of 2016, we are not going to get that back.

Now, back to your medium duty point, yes, I am excited about medium duty. I think there's no question the medium duty tends to be tied more to the smaller -- besides the leasing companies, when you've got construction and growth going on. And I know the there's some differing opinions on construction and things like that, and where we are seeing it. But we saw a nice medium duty growth in the quarter.

Saw decent -- probably the best medium duty margins we've had. And so, no, we are pretty solid on medium duty maintaining next year. I don't look for medium duty to go backwards. I look for medium duty to grow next year. So, yes, if you're looking for a bright spot, there is one I'll give you right there.

Very good. Thanks for your time. Nice quarter.

You bet. Thank you.

Neil Frohnapple, Longbow Research.

Congrats on a nice quarter. Rusty, can you just provide some higher-level thoughts on the parts and service business revenue growth potential for 2016? You know, I believe a portion of these businesses are tied to new truck sales such as upfitting and pre-delivery inspections. So my question is, can you still put up mid- to high-single-digit same-store sales growth for aftermarket in 2016, if Class 8 down -- Class 8 is down meaningfully? Just in light of a lot of the growth initiatives you guys are putting in place, such as service bay expansion.

That's the plan, my friend. Trust me, that's the plan. We've got a lot of initiatives. I'm not going to sit here and go over every one of them on this call right now. But we have an extreme -- extremely focused effort going on right now to continue to drive into markets probably we haven't touched from a parts and service perspective.

We are making huge investments, whether it is our rapid call parts centers, or our -- and our telematics solution that we have just been rolling out for the last four or five months, continuing to try to keep customers up and running and giving them a reason to do business with Rush Truck Centers, above and beyond any of the competition. And I've got some other things going on that we are very excited about in markets that we are going to go after, we probably haven't approached -- that we haven't approached in the past from a parts and service perspective.

So, yes, the answer is yes to your question about growth.

And then this just as a quick follow-up, I mean, are you able to quantify the growth in the number of service bays you are expecting over, say, the next 12 months and --?

Yes, let me speak to that one second real quick. Yes, I can quantify that, but I can also tell you the flip side to it. You know me -- I will tell you both sides of the coin. All right? We are going to grow over 200 service bays. If you look -- here is what we've done this year. We opened up Cleveland earlier in the year. We have opened up San Antonio this week, where we took it -- and these stores were tripled.

We opened up Cincinnati, we tripled the size of it. Coming online right now are Denver, Odessa -- Denver, Odessa, I'm missing one here. Which one am I missing here? Columbus. Oh, yes, Columbus is going up from 30,000 square feet to 90,000 square feet in Ohio. Those will all open in the next six months.

Now, what should drive 200 additional bays into the dealership, whether it be service or body. Okay. At the same time, when you do that, remember this from an absorption perspective, you are probably going to take a little bit of a hit in those stores to begin with. Right? Expenses start day one. Revenue growth comes over a 6 or a 12 month time frame. Right? You don't immediately do the staffing with people and everything else that it takes to drive that.

But at the end of the day, you pay me for absolute dollars. And I don't think we've ever failed in any new dealership we put in, in the history of this organization. So at the same time, you've got a little bit of a bubble there.

We have never had this many new stores coming online with this much added capacity at the -- say, in an eight month period. But we do. But trust me, it is the right thing to do. It is the best thing to do from a long-term growth perspective. Okay. And at the same time, we continue to look to drive our mobile service solutions. I mean, we've got very aggressive goals over the next 18 months in the organization to even add 50% more when it comes from that perspective. Okay.

And like I said, we have many, many initiatives from a parts and service growth perspective out there on the table. We just actually just finished up our senior management conference here three weeks ago. And it was quite exciting to really get with all our key managers and lay out the plans for the next five years for the organization. So that's all I can tell you right there.

No, that's helpful color. And then just one final one for me, maybe for Steve. Just what was the used gross margins in the quarter by class? Particularly just curious on the used truck side.

You say used by class -- you want used only? Or did you want heavy duty, medium duty, light-duty, and used?

You can provide all of them. Yes.

Heavy is [6.4], medium is [6.2], light is [4.7], and used is [10.4].

Okay. All right, thanks a lot, guys. Appreciate it.

You bet.

Brad Delco, Stephens.

Rusty, you answered all the good questions but I did have one for you that maybe is a decent question. Can you give us kind of your view of how you expect Momentum Fuel to ramp? What kind of contribution you think that could have, maybe more specifically to your 2016?

Yes. I would tell you that, look, I am still not making money there. Okay? I got my first dollar of revenue in August, so that was kind of neat. At the same time, the excitement in that market that we are seeing, and the interest we are saying in the product that we are bringing to market, gets me a little bit excited.

I would -- if it's going to be a contributor, it would be in the back half of the year. Okay. We are continuing to -- our quoting is active, very actively quoting. We are continuing to come online with new -- remember, there's many different configurations here. Okay. It's not for different types of trucks.

So we continue to evolve in the breadth of our product, and we will continue that as we go forward, with more breadth of product so we can touch the whole natural gas market. We are not there by any stretch right now. But I would tell you I really don't want to give you any color on numbers at this time. I might be able to give you a little better color in February.

But I am as confident as I've ever been in the investments that we've made and expensed over the last year and a half, and what it will do for the organization long-term. I truly am. And you just have to trust me on that one, that we will be a player in that marketplace, given our customer touch and the way we go to market, which is different than any of the competition. Remember, no one can provide the service we can and the uptime for natural gas customers that we will be able to across the world -- across the US.

So, I am not giving you any financial color. I hear that. But I hope it will be a contributor in the back half of 2016. And I'll probably give you a little better color on that in February when we go over the fourth-quarter results. How is that?

Sounds great. And then, Rusty, just a follow-up on one of Neil's questions, I know he asked longer-term about parts and services. And I think everyone understands that's a key focus for you. But looking in the fourth quarter, I mean, I guess seasonally because of holidays, I mean, you typically see down sequentially.

Correct.

Is that anything that would change that?

No, I don't see anything that's really going to change it. We continually monitor. Right? The fourth quarter is always the toughest quarter -- well, the fourth and first, obviously, are always the toughest, and especially in the fourth. We usually do a pretty decent job of managing our expenses in the fourth quarter. So I am looking for that to happen again.

I don't see anything outside of normal seasonality where you have a little bit -- we will have fewer working days, right? And so people taking holidays. And especially look at how Christmas and New Year's falls, people will take weeks off and things like that. So obviously when you're working with less technicians, you are billing less hours, because you are turning less benches. Right?

So those times -- but that's the norm. We are used to dealing with it. So I don't see anything really truly that's going to -- outside of the normal seasonal stuff. I mean, we are monitoring it closely. Trust me, this week we had conference calls the guys did with all of the stores. We saw a little bit, maybe in October, a little bit. But everybody seems fairly confident in how they are going to end up in this month up.

So October is a big month in the fourth quarter, because then you get into the holidays in November and December. But like I said, just reverting back, nothing really outside of the normal seasonal.

And maybe final question for you, Rusty. Taking a step back, I mean, you have a lot of good insight into different verticals. It seems like there is still hopefully some room to run on the construction side, housing in particular. Anything that you see that is very concerning to you just in terms of sort of overall economic cycle, or anything that you are trying to prepare your business for, looking forward?

Well, I don't think there's any question that we -- we're going in an election year, okay? There'll probably be some uneasiness in the country. When you speak about directly, I had hoped to pick up some oil and gas, right, next year. But that doesn't appear that that's going to be the case. I mean, we will be watching interest rates to see how -- what happens with the Feds as we go forward.

Right now, I would tell you the last three or four weeks I was talking to some of the guys, and our quoting on mixer trucks was pretty strong. It was a little soft about two months ago, but it appears to have picked up. So we will see if how that all comes to fruition.

We've been pretty active. We'll restock -- you've got to remember, we will stock 150 to 200 mixing trucks in inventory at all times. And we do, right, and have in the last year or so. So when you hear there's activity going on, and you're still seeing activity at the medium duty level, that bodes fairly well from my perspective, that we will be -- you know, we will get through next year. I don't -- next year is not going -- obviously, with the truck market coming off, we're having other initiatives going on, and we hope to help offset.

Look, I go back to the first of this year. Right? I told you guys the first of the year, $0.50 off right before we started the year. Right? So we took it down $0.50, and this organization is going to do a pretty good job of making the majority of all that back through the diversity in how we go to market, and then the geographic diversity we have, and the new initiatives that we continue to put forward.

But I don't see anything that's cliff. Again, I will say I don't see a cliff out there. I just see some softening. But you will be watching rates and we'll continue to watch everything. Right? Just continue to keep your thumbs on -- your fingers on the pulse on everything.

No, I appreciate that color. I'm just curious to know if you thought lighting up inventories or anything of that was sort of in your future plan in the near-term?

Well, we will continue to watch. I mean, we will watch -- yes, we will manage our stock sales. I will be honest, the last 30 days, our stock sales were softer than they were -- had been in the prior few months. So, don't think we're not managing that; but that's just part of running a business. Okay. It's not like they were a cliff, again, but they might be softer by 15%, right? 10% to 15%. So it's just indicative of what I'm seeing. Right?

But there's some good things and there's some bad stuff, and then we've got some great initiatives going that we hope to offset some of these things. As I always tell it to you guys like it is. There's the good and the bad, but you've got to listen to all of it, and then you can form an equation and watch the results of the organization next year, and I think you will be happy.

Great. Well, thanks for the time, Rusty.

You bet you.

Rhem Wood, BB&T Capital Markets.

Rusty, can you talk about the service technician shortage? What are you doing to attract technicians? And one of your competitors mentioned that they had outsourced service in the quarter because they didn't have enough technicians. Did you guys benefit from that?

No, but tell them I -- give them my -- you want my number?

(laughter)

We can handle it. We can go 48 states, and we will even go out of country if they need help. That's why -- you've got to understand, still over 20% of my technicians are mobile, and Peterbilt was about a 32%. And we were growing on the Navistar side. So somehow we're able to recruit technicians.

Now probably one of the major focuses of the organization is retention with technicians, not just recruitment but retention. Right? So there's two sides to that coin. Right? If you can -- if your retention rates get better, then you don't have to recruit as much, you hope. So we have some initiatives going on. We are able to fill the needs.

We would probably, if I could, could probably handle 10% more technicians, especially with -- we'll find -- we are going to test it a little bit here with these new shops opening up. Right? There will be certain areas of the country that technicians get tested pretty good with all these new shops.

But I was talking to the ones -- they were talking to the one in San Antonio, yesterday, and right now they feel pretty confident that they can fill it. So, I mean, we like to believe that if you look at our benefit package, if you look at the other things we do from a recognition perspective and management perspective of handling technicians, we do a pretty doggone good job of keeping them.

Just think about with retention. I'm going to dive into something here real quick. What we've done for the last few years, if you go in -- go up in Ohio, all those new stores we built? They are all heated floors and everything else. Do you think anybody else has got shops like that up there, you're wrong.

Going to Texas, everything we built has got air-conditioned shops. Okay. So it's a multifaceted approach. There's not one answer to recruiting technicians and there's not one answer to technician retention. But there's many facets to it, and I don't have time to go into all of them here today.

I just wanted to give you what we've done from a facility perspective. When it cost me $0.5 million or $1 million, so have $1 million to air condition a shop, not everybody is going to do that. But our view is long-term enough in understanding that we will get return on that investment when it's 105 degrees in Laredo, Texas, or someplace or in San Antonio, and you've got the only air conditioned shop in town, where would you rather work? Right? So, that's just one anecdote of many things we do.

And don't worry, we work with the tech schools. We do all these things. I mean, I don't have time to go into of them all right now. But there are many, many things we do to give ourselves the best technician work force out there in the country.

Thanks, that's good color. And then as the Class 8 market turns, I mean, does this give you the opportunity to get more acquisitive? How many big opportunities remain? And then what areas are you targeting now?

Why would I tell you that? (laughter) Okay. That's for me to know, and I'll tell you about it when I do it. Of course, we are always -- look, I am always looking at possible acquisitions. Okay. And if you take a map and set it out, and look where we're at, it shouldn't be that difficult to figure out where I want to go.

But it takes not just a willing buyer, it takes a willing seller. Right? And we did a couple of acquisitions this year that were what I would call tuck-ins. Nice acquisition up in Illinois and a nice acquisition -- really pretty much gives us coverage all throughout Georgia, throughout southern Georgia this year. But they need to fit. And with the growth of the organization and the areas that you can go into continue to shrink.

And the market has been good. Right? So it was very difficult for someone to -- most people were making money. So we are going to continue to be opportunistic and look where opportunities arise. And sometimes when the markets do go down a little bit, we have shown the ability to have -- the opportunity to do more acquisitions.

Okay. Fair enough. How many -- can you give me how many units the oil and gas business was off in the third quarter? I think you said 1,800 for the year. But the third quarter. And then, was the Navistar business a drag for you in the quarter?

No. It made money. Okay. It has never done anything but make money.

Unit-wise, was it down?

I'm sorry?

Unit-wise, was it down?

I think it was 1,300, Steve, and some units?

1,400 -- 1,399.

Was it 1,400? 1,399. Okay. We had 1,399 Class 8 units. I believe if you look back to Q3 last year, that was probably -- gave us about 1,400 last year. So it was fairly flat with Q3 of last year. Okay. So it seems to have stabilized in that area when you look at where we are at. So there's no drag. There's only growth on that side of the house, given where they are coming from.

I look at that as one of the largest upside opportunities in the organization. Right? You're coming off the issues that we dealt with three years ago with the product that was out there. And from my perspective, regardless of what other people may think, there's only upside. Right? And if we continue to make investments in facilities, and upgrade all that also from a Rush perspective, is how well we represent that brand, like we have always done with the PACCAR and Peterbilt brand, we are going to have more opportunities to sell more Navistar product as we go forward in the markets we're in.

Because the further away we get -- as I always say, from -- the further it gets in the rearview mirror from the MaxxForce engine technology, and with the Cummins engine and the N13 with the Cummins SCR on it, that's performing fine in the field. So we are getting nothing but good reports on it. So I think the upside in that organization is one of the most exciting things over the next couple of years for the Company.

Okay. That's good. And then you talked about medium-duty, but light-duty was off a little bit. How should we think about that next year?

Light-duty doesn't really matter that much. We are talking about 300-something -- I don't know -- 300-something to 300-something else. It's not enough to worry about. Okay. We own a couple of stores, a couple of our Ford stores, and it is very inconsequential when it comes to the overall. It's just sort of a -- it is a -- just a little piece of what we do. The medium-duty business and the Class 8 business is what you should focus on.

Right. But is that an opportunity for you guys, I guess, is the question --?

Not necessarily. Only a couple of our Ford franchises, there is different commercial franchises have that. And we have like three different kinds -- and I don't mean to get into all that of the commercial franchises -- but they have about -- oh, I don't remember, 60-some-odd in the country. And we own about six of them right now. And some of them go all the way down to 150s and edges, and there is only a couple, three of those we have. The other we have maybe 250 and up.

And in those areas where we have it, we always have -- typically, we have a Peterbilt store or an international store. And it almost becomes a service to customers. Because a lot of customers that have medium-duty and heavy-duty trucks run light-duty trucks. Right? We are not going out and competing with the auto retailers, if that's what you are insinuating. That is not the focus of our business. It is more compatible, good to have, and a service to a lot of our other customers in the medium-duty and heavy-duty markets.

Okay. And then last one, Steve, can we tell the same store absorption ratio?

The same-store absorption ratio? Yes. For the quarter?

Yes.

Same-store was 116.6.

Okay. Thanks for the time.

Joel Tiss, BMO Capital Markets.

It's actually Richard Carlson in for Joel.

Well, tell Joel I miss him.

Will do, for sure. Hey, I was hoping that I could get you to quantify a few things or maybe just more granularity around the energy impact there. You guys are pretty flat year-over-year. So to someone who doesn't know the story well, it kind of looks like you are just keeping up with everything. But you've improved an awful lot in other areas of the business. So I was wondering if you could quantify what the impact has been so far, and where some of the biggest pieces that you are seeing out of that catch-up?

Well, when I went into the year -- I think someone asked a question a minute ago, I'll probably get around to it straight enough -- I said Q2 through Q4, we were probably going to lose 1,800 units. And, look, these aren't exacts. Okay. I mean, you are dealing with the tentacles. Right? It's not just the oil service companies you are talking about. We are talking about Class 8 and I'm going to talk about parts and servicing. I am going to separate the two.

So it was probably 500 units in Q2, 600 in Q3, and probably 700 in Q4, to the best of our -- the best we could analyze at all and come up with. So we probably lost 600 Class A units. I really can't quantify what we lost in medium-duty in the Texas and Oklahoma areas that was tied to oil and gas, but it wasn't as dramatic but there was some.

We made that up, as I said, with other types of sales. Right? I mean, with more fleet business. And so we made that up, which sort of kept it flat. As I go forward, we are going to -- at least next year, I don't have to -- I don't have oil and gas in there this year, so the comps will not -- I won't have to overcome the oil and gas losses at 2014 and 2015; we won't have to overcome that in 2016. A little bit in the first quarter. But then once we get into Q2, there won't be any from a truck perspective.

From a parts and service perspective, there's no question that we are starting -- we are feeling it. Our mobile service is still pretty strong. But the overall in-shop business is still difficult, because there's so many less rigs working, and so much less activity going on. But it hasn't just fallen to zero, okay, which -- if you'd have talked to me in February, I might have been a little concerned about where it was headed. Right?

But it seems to have taken -- it softened. And fortunately for the organization, the coastlines have picked that up. Right? What we have lost in parts and service business in Texas and Oklahoma, and somewhat New Mexico and some Colorado, we picked it up from the coastlines and then other parts of the Company. So we feel good about that.

It is fairly flat, parts and service, same-store -- I will be honest with you. But it could have been a whole lot worse if we hadn't have picked it up in other parts of the country. Because we are feeling the effects, there's no question, in the oil and gas areas. But again, they're still very profitable; just not as profitable as they were. Right? So --.

Well, yes, I guess, that's -- yes, I guess more the question is that -- so your loss are pretty profitable, as those 1,800 trucks are more profitable. So are you seeing maybe some of the better mix than in the truck, because --?

We don't have the upfits to go on, right? So my margin is off. If you're looking for -- if you look at last -- the biggest difference, and you say, well, you are flat. But you made less, right? Well, the biggest difference is the margin perspective, because I don't have all the upfitting that goes into them, right? So I lost all that, and that's the biggest difference year-to-year. You want [to know Q3] and we're going to go year-over-year, not sequential. But year-over-year it's going to be from a margin perspective on Class 8.

Our [medium] may do marginally better, but our Class 8 margins were off, because we don't have upfitting and selling into those smaller guys that we do a lot of work for. When you do an over-the-road truck, you don't add as much stuff to it, right? So that changes the margin mix.

Got you. And then, as far as the SG&A, is there an SG&A impact in there as well? Because I guess a little surprised to see that being up 50 basis points this year on a year-over-year basis.

Well, you got to separate this. And you separate G&A. We don't look at it -- it's two separate pieces, because the S piece is a variable piece. And then you've also got acquisitions in there too. So from a same-store perspective, what -- we were up 3%, 3.5% on G&A. So that's pretty decent, to be honest with you, with you with all the investments we're making right now.

Got you. And then further out, if the acquisitions slow down -- you guys did an awful lot in the past couple years. Can we see some potential share buybacks coming?

I wouldn't rule anything out. I'm finishing up right now this $100 million-something-plus of facility investment, thank goodness, over the next four or five months. And by that time, I -- we've been paying cash for all of it. So we'll be done.

And, by the way, that should take care of most -- other than some refurbs and stuff like that, that should take care of the organization, is the way it sits right now, from a facility perspective for a while. These were just necessary expansions and re-bidding on new stores that needed to be built. So don't rule anything out.

Got you. Then just last question on pricing -- both on new and used. I've heard a lot about a lot of your competitors across the country worrying about -- they have too many new rigs sitting on lots right now, and trying to reduce that, and wondering if that's going to be some pricing there. And then same thing on the use side -- if we are starting to get into that point in the cycle where we are going to start seeing some downward pressure?

I wouldn't -- the new side doesn't bother me as much. We feel fairly comfortable with our inventories. We manage them pretty hard all the time. Okay?

You'll see our new inventories -- if stock sales start to slow down, then we'll adjust and slow down our inventory levels. But I don't feel we are out of line for where we are at right now. Our turns are about where they have been. Our turns haven't changed a lot. And that's what you're monitoring all the time, is what your turns are.

I would tell you that on the used side, I would be watching this fourth quarter. There may be a lot of used product being dumped out there, which could affect values. That wouldn't surprise me at all.

But we're always on top of ours, and making adjustments, and marking to market all the time. So we'll try to manage our inventory like we always have in the past -- pretty good. But I would imagine there are some people that might be way over inventoried right now. So you could see some folks dumping inventory, which will affect values as we go over the next 90 days.

Thanks, guys. Best of luck.

Andrew Obin, BofA Merrill Lynch.

Good morning. Thanks for fitting me in, guys.

Andrew -- it wouldn't be a call without having you here.

There you go. Great execution. Congratulations. I know it's not easy in this environment.

Just a question in terms of what you are hearing from your energy customers, because I think one of the concerns we have is that a lot of activity in shale has been aided by access to credit. And the view is that some of this credit might go away in the second half of the year. Is that a concern with your customer base -- that working capital might get pulled?

Well, I think you better believe it is. Given -- you know, you can read all the banks and the financial institutions and what their exposure is to O&G. So you better believe that's a concern. That's probably why my concern -- you know, like I said six months ago, I was looking forward to getting the oil and gas coming back up a little bit in 2016. And I can tell you for sure it's not going to happen in the first half of the year.

And even for the customers that don't need that much credit -- your large service companies -- I don't think anybody's Cap numbers -- CapEx expenditure numbers are going to come back. I just don't see it. For sure the first half, and I don't -- it would take some type of event to even get it back in the second half, from my perspective.

And I think it's going to have to be stable. It can't be like it was earlier this year, where all of a sudden you get a bounce-back in oil up to $60, and everybody starts getting a little bit excited, and then the drop comes. It's going to have to stabilize for some period of time. And I'm not sure what that period of time is, because I don't own an oil company, but -- before they would start making investments again. But it will have to be stable for a fair amount of time, I can tell you, before people will start making investments again. So we'll just sit back and watch and monitor very, very closely, like we have been for the last 12 months.

Let me ask you sort of a two-part question. So, first, you didn't want to talk about it in a lot of detail about 2016, but I'm going to ask you a question about 2017. (laughter) So do you think, given where we are relative to normalized demand for trucks -- do you think we could see another year of decline in 2017? And part two of the question: if we are faced with a two-year decline in new truck sales, can you still grow your parts and service revenue in this environment?

Yes and yes. I would expect 2017 -- again, it's not a cliff, okay? Look, if we go down to 220,000 -- I'm just throwing a number out there for 2016 -- that's a good year, okay? Folks lose sight of the fact that that's a good year.

Everybody wants peak all the time. Well, the world doesn't work that way.

So if you go to 220,000 and you go to 205,000 -- I'm throwing numbers out at you. I'm not here to get -- 2017 is way -- I don't get paid to come up with that number yet. So -- but I don't see any cliff out there. And by the way, if the average is 200,000 and you do an average year, is that terrible? From my perspective, no.

Do I see parts and service growth opportunities? You better believe it. We have initiatives going on, and we're going to grow that business. I'm going after nontraditional competition, and I'm not going to take it any further than that. Just let us execute.

We do have runway, and we do have room for growth, and we're going to do it in the parts and service side. I've got this huge asset base, which -- I believe we've got a larger asset base than anybody does from a dealership perspective, or just facility perspective. And we're going to leverage off of it.

Thank you so much, Rusty.

Bill Armstrong, CL King & Associates.

Good morning, gentlemen. Rusty, about -- the leasing margins were about 10.7%. I think on the last call you were talking about rightsizing the fleet. I was wondering if you could update us on that progress?

I just had that talk with these folks yesterday. We're getting there. Again, it had a lot to do with one area of the country. And we have that fixed. By the end of this month, we'll have -- anyway, by the end of this month we'll have that area fixed and headed in the right direction.

Leasing margins are going to come up. So we just had one area of the country, which -- I will be honest with you -- it was Texas, right, that we get hit on earlier in the year. And we had to rightsize our fleet. We've done that. We had to trade out a couple customers and update their product. And we have, and we are finishing that up right now this month.

And I was talking with them yesterday -- the rest of the portfolio, this is the best year we've had with Idealease. So I feel really good. They know we know where we've got to get to. And we're not pleased about what we dealt with, but it was the hand we were dealt. And we've got it fixed and headed in the right direction. I think we've done a nice job over the years, the last few years, of growing our lease fleet, maintaining our margins. And we'll get back in line, I promise you, in 2016.

Okay. That sounds good. And then one other question on your new San Antonio Rush Truck Center that you've opened -- is that a replacement for an older facility, could you remind us? Or is that new capacity?

How about if we added it, okay? Different than some of the other ones. We had bought -- I don't know, we had 12, 14 acres next door that we purchased a long time ago, back when I was young. So we took that and built another 90,000 square feet, I believe, right next to it. So we're going to utilize both facilities.

So we'll have -- but we also as, as I mentioned, I think, in the press release -- we also -- that's where we headquartered our Rush Crane and our Rush Refuse to folks. And all those folks -- and our Rush Towing folks -- they are all headquartered there, Rush Mixer folks also. So it will give us more space for our leasing Company up there, and also for those divisions.

Plus, we'll add a whole lot more base, too. We'll give up some of the old facility to them, and then we'll keep some of it. Plus we'll have the 90,000 square feet. And that one wasn't 45,000 square feet, if it was that. So you can tell the size of it is going to be huge. But we're very confident that we'll be able to continue to grow our business.

As I said, on these new stores, we'll take some absorption hits in those areas immediately, because expenses start day one. But then you've got to ramp up. But as I said, I don't think we've ever had a failure yet. And come June it will be 20 years we've been public, so anyhow.

Got it. Okay. Thanks for the update.

Jonathan Chin, Private Management Group.

So kind of delving back into the international dealerships, I know flat units year on year; I was wondering if you can just talk about units within class, foot traffic, and order book? I know you have touched on it in the past. I just wanted to get an update there.

Sure. I would say activity -- I was just talking with (inaudible) conference calls -- activity is the best it's been. Okay? And when I say that, it's not just the huge fleets, but it's the 5, the 10, the 15, the 20 -- you know, those are the things (technical difficulty).

That took a long time to get some traction going. Now, of course, the biggest problem if it's not a new Conquest customer is we're having to deal with the old MaxxForce engines, right? So we have to continue to try to work our way through it.

But the new product that we are selling is good. Our backlog is -- I won't say it's as strong as it has been or better; it continues to improve. Our backlog on the Navistar side continues to improve. So we feel good about where we're going there.

At the same time, we're having to -- you've got to remember, it was very difficult. From a personnel perspective we took in lot of hits, because it was hard to keep salespeople back three or four years ago, when you were dealing with MaxxForce engines and everything else. So we're making a lot of investments in personnel and things like that. It's a multipronged approach to do that; you've got to get your people back -- you know, better. You lose some of your good people during times like that, because it was difficult.

So we feel good that our backlog on the international side, given the depressed levels it's been at, unlike probably on the Peterbilt side, our backlog will continue to grow. So hopefully help offset some of the overall market-driven hits that we'll probably be, from a backlog perspective, taking on the other side of the house.

All right. Thanks, guys.

Brian Sponheimer, Gabelli & Co.

So if you are dealing with some pain on the Peterbilt side, just given your footprint in the oil and gas side -- Navistar obviously has its own issues. I guess if you can provide some perspective on the international side of the house, going to market now versus where you were a year ago. Based on used truck values, based on maybe the product assortment that you are able to go to market with, and I guess why you have got that confidence?

Well, I've got -- you know, I know sometimes it's difficult when you look at where they are at to have that confidence. But I believe that the marketplace demands a Force manufacturer. I've always felt that way. That's why our investment is there. Unfortunately, we ran into the MaxxForce issues we had to deal with.

Our confidence level is as good as it's been. We are finally getting some breadth in product. I think we're probably going to be able to get back into the construction market. We've been out of the construction market for a while. They've got a new launch going on right now, where I know at some time -- I don't know the exact time -- that we'll be able to get, say, into the more heavy-haul, the mixer business.

But we couldn't. We couldn't even go after those -- you know, even though they're -- you might say, they are not the big markets. But they are very important markets to us. And we haven't had that ability to do that. So the breadth of product will continue -- it continues to increase.

When it comes to dealing with the MaxxForce used engines, it's -- it continues to -- you know, we're just going to have to deal with it. Values -- it's not going to help given the overall state of the used market. It's not going to help MaxxForce values. But nobody's values are going to be up.

So the only good thing is it depreciates another $1 every day on someone's balance sheet. So hopefully the values can -- you know, in my own simple way, I always say, well, every day that goes by, hopefully it depreciates $2 on someone's balance sheet and only $1 in value, and you continue to close that gap, right?

So it can't get worse than what it was, okay, Brian? It may look bad, but it can't be any worse when you looked at the values on folks' balance sheets continue to go down on a daily basis. So we'll continue to try to clear that hurdle.

We've had great feedback. We've got, I think, 15 or 18 -- something like that -- 18 demos that we've been -- had running for the last four or five months that we've rolled out with both Cummins and the N13 in them. And we've had great response to it. And we're starting to pick up orders off of that.

It's not a flood; the floodgates didn't open. But it's moving in the right direction and continues to improve. So I guess when you see these little -- you know, it's hard to -- yes, I wish I could open the floodgates and get this wonderful -- feel like -- but I see antidotes, right? You have to look at those, and put them all together, and look at it from a cumulative perspective, and realize that it is going in the right direction from that.

And the last couple of months, their order intake was better. Regardless of what people say, their last two months were two of their better -- more intake months in the life of the year. So we'll see where it goes this month. And we were able to participate in some of that. So that's the best I can tell you.

That's terrific color. Then just on the Peterbilt side of the house, is the weakness that you expect just really on the markets that are exposed to the oil and gas side?

It's that, and with the normal -- what I think normal -- I don't know if there will be as many -- there won't be as many over-the-road trucks sold next year, either. So you're going to think -- I don't think we're going to take anything outside. We're just going to be with the market when it comes to over-the-road side, right?

We've got some nice new Conquest customers -- and I'm not going to go into -- that we had this year that I think are going to continue to purchase with us next year. Whatever their plans are, we are going to participate in them, okay, on the Peterbilt side.

I don't see oil and gas coming back. Our refuse business looks extremely good, okay? And I'm hoping one of this activity I talked about earlier from a construction perspective, that -- because this is the time of year where you really get that activity going on, because people -- you know, as spring springs, people like to -- you know, when they are building houses and moving stuff around, that's typically where you are delivering most of your mix for a lot of your Class 8 construction folks around that time frame.

So as I said, I haven't -- it's not all booked by any stretch, but there's activity. That's always a good thing. So we feel fairly confident. I just don't think we're going to get oil and gas back, and I think we'll be just inside the market on the over-the-road stuff.

And if we're doing our job, maybe we'll make some of that up by going out there, by doing a couple of more Conquest accounts -- because trust me, we're working on them. But I don't want to promise something that I don't have in the bank for you at this moment.

But the world is not going to fall apart next year. We just had a peak year. Let's realize that -- let's look back. 2006 was 290,000. We're going to 267,000. That's different than 290,000. That's less than 10% difference.

So as I told you all early in the year, I would rather have this year at 230,000 or 240,000. But I can't help what the market did. So I'd rather have -- but it was what it was. I think there's plenty of capacity out there. I'm sure a lot of folks were at ATA this week. Truckload capacities weren't -- they are not hurting for that right now.

Always appreciate the color, Rusty. I'll see you in about 10 days.

I was going to tell you, Brian, look forward to seeing you. And tell Mario I look forward to seeing him also.

Will do.

Art Hatfield, Raymond James.

Thanks. Rusty, you are probably wondering if I actually have any good questions.

Artie, you've always got a good question.

Pretty much all the good stuff has been taken. But I'm just want to clarify a couple of things: so on your energy exposure, you can't get worse on the new truck side than you are today. Do you see further downside on the parts and service? Is there a lot at risk there, or how should we think about that going forward?

Good question, Artie. I monitor it closely. Yes, there is risk there. I can't lie to you. There's risk there.

But you know, I still don't believe it will be a cliff. There's still things going on, okay? I think what we have seen -- I don't want to -- I mean, knock on wood here -- but what we have seen is, yes, some of the upfitting and all that, no question that's going away.

But from a -- as companies have had layoffs and things like that, they may be outsourcing some stuff. And we may be participating in some of that outsourcing, right? So it's not on their payroll, but we can be used as-needed kind of basis. So I think that has brought some stability to it.

But you know, you are always at risk in the oil and gas business. Because we've all seen it go from the peak of the mountain to the bottom of the valley, as long as I've been around, since I was born and raised in Texas. So you are always a little fearful.

But right now I think that business model we have going to market will help those areas that are maintaining. We actually -- if you go to the first of the year on a mobile perspective, we're pretty flat, if I'm not mistaken. Right now we actually got up a little -- just maybe a smidge down. But I mean, given where I was in February when I was talking to you, I'm pleased with that, and monitoring it daily and hoping it maintains.

Great. Going to the Class 8 trucks, and -- the average revenue per tractor that you sold in the quarter is kind of lowest level it's been. I know so much of that is mix-related. Is the mix kind of getting stabilized, or could there be further mix drift downward on price?

No, I think the mix is getting stabilized. Once we got through all the oil and gas that had all the upfitting, and we put on $25,000, $30,000 of upfits, that's over with. Sometimes -- no, I would say it should be fairly stable from here on out, okay?

And then finally, Rusty, as you mentioned, you've grown up with these oil and gas cycles. Can you -- and I think everybody misses this point a lot with your Company, where it is today versus cycles maybe 20, 25 years ago -- can you address how different the Company is today than back then, and how much better you are performing now than you would have if you hadn't (technical difficulty)

Artie, it's not even comparable. Okay? I mean, I take folks back -- and you've heard me give this when I met with investors and folks. I take folks back to 1999, only 16 years ago, right?

We were at 79% absorption. 79%. I always say, oh -- so we run close to 120% now. It's parts and services other than 2009 and even then it was more stable than truck sales. It allowed us to still maintain profitability, but then hopefully, as old as I am, I won't ever see one of those. The quality of earnings of the organization is not even comparable.

And then when you look at the markets and we focus on that we go to, and where our investments are, it brings stability inside of all these -- everybody is worried about this up, and this down, this down, this down. The stability that's brought by where we focus our investments on and the markets that we focus on, compared to where we were back in those days, is not even -- you know, a perfect example: in those days, 65% of our gross profit -- roughly 65%, give or take 2 points here; I didn't look at where it is this quarter -- came from the sale of trucks, right? So it's 35% in parts and service.

Now flip that around, and that's where you are right now. There's nothing for compelling or telling about the change in the Company than that. And that's like -- whether it was last quarter or the quarter before, it may move a couple of points here, a couple of points there, but it's always in the 60s from parts and service and always in the 30s from trucks.

Well, we know which one is more volatile, don't we? I'd like to think we do. And that's obviously the sale of trucks. So that's not -- you know, you are not totally insulated from it. Of course not. But it sure does perform a -- you know, at least I've got -- I'm in subzero clothes instead of running around in a bathing suit. So I can weather the storm a whole lot better.

I don't want to see you running around in a bathing suit, either, so --. (laughter) Two quick questions on that. I can go back and run the math, but I hadn't done it. But do you or Steve, by chance, know what the earnings this year would be if you were only running in the 79%, 80% absorption ratio?

No, but I don't want to look. (laughter) I do not off the top of my head. I'm sure we could get you that number, but I would be afraid to pull the covers up and look.

Well, theoretically, hopefully you are never going back there. So it shouldn't be that scary.

No. Look -- do you remember in 2009, I didn't think it could ever happen? Let's talk about it. We took a 25% hit in parts and service. I've never seen that in my life.

But we only took a 10% hit in absorption and went to 106 to 96, because we made up 15% of it in expense cuts, right? So we managed to stay profitable in spite of everything. We didn't make much money, but I always promised you folks we would make money. And we did every quarter. It may have been only a couple cents, but we made money every quarter.

So now you look -- go fast-forward. We're up another 10 to 15 points from where we were at that time. So we've further insulated ourselves from where we were then.

It had to be ugly. One last one, Rusty, and then I'll let you go. Is there any reason -- or how should we think about 2016? We can all make our own assessments on what we think Class 8 market does, but what are your thoughts on what your market share should do in 2016?

Our market share should stabilize in the 7% range. And possibly -- you know, I don't see any reason -- we were 6.6% this quarter. But that was -- you know, we've got a numerator and a denominator. I don't see our sales going -- if the market goes down 15, 20 points, our sales better not go down 15, 20 points. I can tell you that right now.

Okay. So you think you are set up to outperform what the market does?

Yes, I do. Because like I said, there is a numerator and a denominator. And a lot of this was big stuff that was blown out there. And we always tend to -- plus, remember, I think as we've continued to get further down the trials and tribulations of Navistar, that side should grow for us. So you add that in -- I think we'll be further insulated on the other side of the house, given our go-to-market segments' diversity and our geographic diversity, that we'll be in pretty good shape.

One last question that came up when you mentioned Navistar -- they've got the JV with Volkswagen on engines. Does the troubles at Volkswagen concern you at all?

Do you mean General Motors, or --?

Oh, I thought they had a JV with Volkswagen -- Navistar?

No. That was with GM.

Oh, I'm sorry. My bad.

No worries, Artie. Go reread your article.

All right. Well, I'm good. Thanks for the time.

Barry Haimes, Sage Asset Management.

Hi, guys. Thanks so much. Rusty, I had a quick follow-up on the used pricing softening. And you mentioned the supply side, but my question relates to the demand side.

If you look at truckload rates, the place where you are really seeing the softening isn't the contract rates, but it's the spot rates, where the small/medium guys tend to drive. And then you look at who buys used -- typically it would be the small/medium sized guy. And, of course, Peterbilt maybe has a little bit more exposure to the small/medium versus the big fleet.

So I'm wondering if any of that rings true to you, if you seeing anything like that on the demand side of the used as opposed to the supply side? And then one last question on it is: to the extent that the used prices have come down over the last month or two, when you look at Peterbilt versus Navistar, would you say that the magnitude of decline has been similar? Or is there a difference between the two brands? Thanks.

Okay. Well, obviously, when I said that -- you know, to me the supply side was going to be the biggest driver. Is there a demand side? Of course there is. And I understand that a lot of those smaller contractors that buy used typically go in, have more spot-type stuff.

But through September -- and I don't have October's results yet -- our demand was still steady. We have not seen it. If it's going to hit me in the next month or two or three, call me and I'll tell you. But right now I have not seen the demand side -- it may not be -- you know, it's not, maybe -- it's fine, it's steady. Let's just call it steady.

We haven't seen a 25% falloff in demand in used. When you look at our deliveries, they are in line with where they have been running. So, now -- and I expect to maintain that. Now, I might get some margin pressure to make that happen. You might not see 10% margins. I might have to take a couple of points of margin hit. But we'll make the adjustments we need to to keep our demand moving.

Remember, I have to sell used trucks, because I need to sell new trucks. That's the engine that drives the plane. If I have to take a little less margin to sell the used truck, I will. Or I'll -- we'll drive our people to do that. So always keep that in mind, that we're not just a stand-alone used truck organization. I have to sell used trucks, because I need to trade trucks and sell new trucks.

So I'll move the margins around. We'll push the margins around as we need to with the sales force. So I wouldn't look for the total number of units to just drop through. Margin might be hit, but you are not going to see our units drop off 25% or something like that.

As far as value -- it's pretty across the board the same. It's hard to compare anything with what we've had to deal with on the MaxxForce side, because that's just been -- but if I compare Peterbilt with the other brands, it's going to be a market adjustment for everyone. Not one brand right now I don't see taking more of a hit than another brand, to be honest with you.

Got it. Thanks. Great color. Thanks, Rusty. Thanks, guys.

Ted Wheeler, Wheeler Capital.

I wanted to circle back on a point you made. You didn't want to be specific, but on the parts and service initiatives going after nontraditional markets, what kind of an expansion in the served market that you are looking at when you talk about that? If you could just kind of give a parameter of how much more market you are going to be addressing when you do this?

I can't tell you all my secrets. But, no -- we're going after -- you know, look at the truck. Let's step back a minute and look at the truck. A truck is still more than 50% nonproprietary parts, so what you would call all makes business, right?

So the opportunity obviously persists from a parts perspective on that side. If you want to look at the market, let's take the parts market. Do you realize that of the whole parts market, we are 4% of the parts market? 4%. You are talking about a $26 billion deal, and we're $1 billion of it. $1.1 billion. So I'm 4%.

What if I can make that 4.6%? That's a huge jump, right? So that's what I'm talking about when I look at it. And so I'm not going to sit here and dictate where, and how, and how we're going to go about it, and what we're going to do. But obviously that's an opportunity, right?

I was just really interested in the magnitude of the pursuit, yes.

Well, the magnitude of the pursuit is just like I just said -- I think I gave you a little flavor right there. And the parts market will continue to grow over time, and there will be inflation. And you can look at everybody's studies that tells you how large the parts market will be. Then it's just a matter of timing, right?

That was my next question. Are you going to be doing this gradually? Fairly soon?

Well, the initiatives will start, and we'll see the success rate as we go forward. It's not going to be like something that happens in one year or two years. But over a time frame in the single digits, I would hope. I really don't want to get into the exacts of it all right now. We're still -- you know, but we're going after it.

We're going to grow our parts share. Just like we focused on growing our truck share, we'll probably start to calculate our percentage and communicate that to the Street -- where we're at from a parts perspective. Communicate those numbers and keep you informed as to where we are at percentage-wise in the overall parts market.

I'll look forward to that. Thanks so much.

Bryan Lee, Private Management Group.

Last question on the Navistar side -- and I do appreciate all the previous color. Obviously you knew it wasn't going to be a straight line and immediate market share recovery, but compared to your expectations a year ago for the brand, how is international performing? And just on your expectations?

Well, there's two ways to look at it. And I have got an all-Company call I've got to get on here in a minute myself. So there's two ways -- if I've got any voice left to give color to my whole organization of what's going on.

There's two ways to look at it: market share and how do I feel about the product from my perspective? Market share wise, I was hoping it would be a little better. A point or so better than where they are at. The only good thing -- as I said, you can see the last couple of months, they have -- their order intake has gotten better.

So I hope -- I'm not ready to call it a trimline yet, but I would hope that that would continue as we go forward, that that would continue. From a product perspective it's probably better than I would have expected. Now that we've had longer time to run the Cummins power and the N13 power in the product, and some improvements they are making -- now that they are able not to spend 90% of their money on engines anymore, they can start spending money on products from an R&D perspective. Going to make some headway, as I said, coming out with a construction product here right now. And others in the pipeline and coming.

So I'm pleased with that piece of it a little bit. But you know, the headwinds continue to be -- from a market share perspective --- continue to be the hangover of the used. That's the biggest thing you deal with. That's not going away.

But hopefully it continues to lessen; hopefully we are halfway through, or something along those lines, is what I'm thinking, of dealing with this. So the light at the end of the tunnel is sunshine, I'm hoping, when we get there. So we'll continue to work it. We're still profitable in that business; don't ever doubt that.

But the upside for the Company is a lot larger profitability, as they try to regain share and get back and build confidence in the marketplace, which they are doing. I would have liked it a little bit more quicker. But sometimes it's hard to sell what those 100-mile-an-hour hurricane winds are like. And that's what trying to deal with the old MaxxForce engines has been like. But we're dealing with it, and they are dealing with it.

Great. Thanks for the color.

Okay.

Mr. Rush, I'm showing no further questions.

Okay. Well, that's great. I appreciate everyone's involvement this morning. And we look forward to talking to you -- I guess it will be February when we do Q4 release. Thank you all very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.