Rush Enterprises Inc. reported record annual revenues of $3.4 billion compared to $3.1 billion in 2012 and net income of $49.2 million, or $1.22 per diluted share. In 2013, the company recognized a pre-tax charge of $10.8 million in its selling, general and administrative expense related to the Retirement and Transition Agreement with W. Marvin Rush, chairman emeritus. The charge results in a reduction of $6.6 million in net income, or $0.16 per diluted share.

“2013 was a year of continued investment, growth and solid financial performance, for our company,” said W. M. “Rusty” Rush, chairman, chief executive officer and president of Rush Enterprises Inc. “We achieved record annual revenues, increased medium-duty, light-duty and used truck sales, and expanded our leasing business and revenues. We also augmented our solutions capabilities, completed expansion projects on existing facilities and acquired five dealer groups, adding 29 dealership locations to our Rush Truck Centers network,” said Rush.

“We welcomed more than 1,300 new employees to the company in 2013 and look forward to serving new and existing customers across the country with excellence,” added Rush.

Continued growth

“2013 was a year of growth. We expanded the Rush Truck Centers network to 107 locations in 20 states across the country. Our goal to keep our customers up and running drives our growth strategy. We want to consistently service customers when and where they operate – locally, regionally and nationally. We made substantial progress towards our growth strategy in two ways – by investing in our core Peterbilt Division and expanding our Navistar footprint,” said Rush.

“We continue to strengthen our Peterbilt Division by investing in facility expansions, construction of new dealerships and aftermarket services that provide our long-standing customers more solutions to help drive efficiencies into their businesses. In 2013, the company opened a new Peterbilt, Hino and Paclease dealership and leasing operation in Corpus Christi, Texas and renovated existing facilities in Laredo, Houston and Dallas, Texas to increase square footage and capabilities. The company also has projects underway to construct new facilities in San Antonio, Texas and Denver, Colorado and increase capacity in Abilene, Texas and Whittier, Calif. in 2014. We also installed dedicated natural gas service bays at certain dealerships in Oklahoma and Texas and have plans underway for similar investments in Arizona, Colorado, Florida, Tennessee and Texas. When completed, these projects will result in a direct investment of more than $40 million in our Peterbilt Division,” Rush added.

In 2013, the company also significantly expanded its dealership network. “We acquired certain assets of Prairie International in Central Illinois in Oct. 2013, and Chicago International Trucks and Indy Truck Sales in Jan. 2014, both of which operate International commercial truck dealerships and Idealease commercial lease and rental operations. With these newly acquired locations and others previously acquired in Ohio, North Carolina, Kansas, Missouri and Virginia since Dec. 31, 2012, we have more than doubled the size of our Navistar Division locations. We believe these acquired stores will cumulatively produce approximately $1 billion in annual revenue in 2014,” Rush explained.

“Our focus in 2014 turns to integration and execution,” said Rush. “We can now build on the strength of our entire footprint by integrating our service culture and performance metrics into all our operations. That combined with standardized processes and best practices will help drive a consistent, excellent experience for all of our customers, no matter where they are in the country,” Rush added.

Operations

Aftermarket solutions

Aftermarket services accounted for 64.4% of the company’s total gross profits in 2013 with parts, service and body shop revenues reaching a new record of $988.3 million, up 20.9% over 2012. We achieved an annual absorption rate of 114%.

“Continued strong demand for maintenance and repair of aged vehicles combined with our expanding portfolio of aftermarket solutions continued to drive strong parts, service and body shop revenues throughout the year, ” Rush commented.

“Keeping our customers up and running, when and where they need it, is a top priority for our parts and service network. We continue to invest in technology, human resources, training and facilities to enhance our capabilities in mobile service, custom vehicle modifications, alternate fuel service, repair diagnostics, rapid parts delivery, customer communication and preventive care,” he explained. “We continue to evaluate all opportunities to add innovative products or services to expand our solutions capabilities.”

Truck sales

In 2013, Rush’s Class 8 retail sales of 9,545 units accounted for 5.1% of the total U.S. Class 8 retail truck sales market. U.S. Class 8 retail sales in 2013 decreased 6%, to 187,610 units from 198,715 units in 2012.

“As anticipated, energy sector customers delayed truck purchases in 2013 as they worked through excess capacity purchased in 2011 and 2012, and large fleets experienced continued driver shortages. Incremental truck sales from our newly acquired Navistar locations did help offset the decline in our Class 8 truck sales,” said Rush.

“Peterbilt continues to be a strong player in the fleet, owner-operator and vocational segments and its next generation product line has gained market acceptance. In addition, our sales of Peterbilt’s natural gas-powered Class 8 trucks continue to rise, having sold more than 800 trucks in 2013. We expect natural gas will continue to gain momentum as the fueling infrastructure is put in place across the country,” Rush continued.

“Navistar continues to gradually regain market share. We believe truck sales from our Navistar Division will continue to improve in 2014 as customers continue to gain confidence in their truck and engine combinations,” said Rush.

Rush’s U.S. Class 4-7 medium-duty truck sales reached 8,441 units in 2013, up 18% over 2012, and accounted for 4.7% of the U.S. Class 4-7 market. Light-duty truck sales also increased 41% over last year. “Continued improvement in housing and construction, growth in the vocational fleet market and incremental truck sales from newly acquired locations drove improvement in medium-duty truck sales this year. In light-duty, we are seeing the benefits of synergies with our existing customer base and our ability to offer a diverse product line-up that meets a range of vehicle needs. Our Ford franchises, particularly the ones in Florida and Texas, have performed extremely well,” Rush commented.

Used truck sales were also up 35% in 2013. “We expect demand for used trucks will continue as fewer new trucks built from 2008 to 2010 come into the secondary market. We are developing new business models to take advantage of the used truck market potential,” said Rush.

Industry experts forecast U.S. retail sales for Class 8 vehicles to reach 213,500 units in 2014, a 14% increase over 2013. Industry experts also forecast U.S. retail sales for Class 4-7 vehicles to reach 193,500 units in 2014, an 8% increase over 2013.

“With the economy gaining momentum, order intake climbing in the past few months, and improved activity in automotive, housing, construction and energy sectors, we believe retail sales could improve in the second half of 2014,” explained Rush.

“We also believe the incremental business resulting from recent acquisitions, and our ability to offer innovative aftermarket solutions to customers will positively impact Rush’s heavy- and medium-duty truck sales in 2014,” Rush said.

Financial highlights

In the fourth quarter of 2013, the company’s gross revenues totaled $925.2 million, a 26.3% increase from gross revenues of $732.3 million reported for the fourth quarter of 2012. Net income for the quarter was $14.9 million, or $0.37 per diluted share, compared to $14.2 million, or $0.36 per diluted share, in the quarter ended Dec. 31, 2012.

For the year ended Dec. 31, 2013, the company’s gross revenues totaled $3.4 billion, a 9.5% increase from gross revenues of $3.1 billion reported in 2012. The company reported net income for the year of $49.2 million, or $1.22 per diluted share, compared with a net income of $62.5 million, or $1.57 per diluted share in 2012. In 2013, the company recognized a pre-tax charge of $10.8 million in its selling, general and administrative expense related to the Retirement and Transition Agreement with W. Marvin Rush, Chairman Emeritus. The charge results in a reduction of $6.6 million in net income, or $0.16 per diluted share.

Parts, service and body shop revenue was $256.4 million in the fourth quarter of 2013, compared to $201.6 million in the fourth quarter of 2012. The company delivered 2,787 new heavy-duty trucks, 2,040 new medium-duty commercial vehicles, 526 new light-duty commercial vehicles and 1,838 used commercial vehicles during the fourth quarter of 2013, compared to 2,102 new heavy-duty trucks, 1,801 new medium-duty commercial vehicles, 393 new light-duty commercial vehicles and 1,039 used commercial vehicles in the fourth quarter of 2012.

Parts, service and body shop revenue was $988.3 million in the year ended 2013, compared to $817.3 million in the year ended 2012. The company sold 26,336 new and used commercial vehicles in 2013, a 13.7% increase compared to 23,171 new and used commercial vehicles in 2012. The company delivered 9,545 new heavy-duty trucks, 8,441 new medium-duty commercial vehicles, 1,945 new light-duty commercial vehicles and 6,405 used commercial vehicles during 2013, compared to 9,925 new heavy-duty trucks, 7,126 new medium-duty commercial vehicles, 1,376 new light-duty commercial vehicles and 4,744 used commercial vehicles during 2012.

The company’s Rush Truck Leasing operations increased revenues by 29% as compared to 2012, primarily the result of acquisitions and a successful service model that maximizes uptime for contracted customers. Including newly acquired franchises, Rush Truck Leasing now operates 39 Paclease and 23 Idealease franchises in markets across the country with more than 5,300 trucks in its lease and rental fleet and an additional 936 trucks under contract maintenance agreements.