Q2 2020 Rush Enterprises Inc Earnings Call
[music].
Standby and welcome to the Rush Enterprises, Inc. second quarter earnings release Conference call.
At this time, all participants Oh listen only mode.
After the speakers presentation, there will be a question answer session.
Yes. Good question during the session you really depressed star one on your telephone.
Please be advised of today's call is being recorded.
You acquired additional systems, you refresh stores he won't reach an operator.
I'll now like to hand, the call over to Mr., Rusty Rush Chairman CEO and President. Please go ahead.
Hi, good morning, and wasn't burst second quarter 2020 earnings release conference call on the call today or Mike, Mike Roberts, Chief Operating Officer, Steve Killer, Chief Financial Officer, Derrek Weaver Executive Vice President, Jay Hazelwood, Vice President Controller, and Microsoft Vice President General Counsel and corporate 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 might to 95, because these statements include risks and uncertainties. Our actual results may differ materially from those expressed or implied by such forward looking statements.
Certain 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 discussion or annual report on form 10-K for the year ended December 31st 2019.
Other filings with Securities and Exchange Commission.
As indicated in our news release, we achieved quarterly revenues of $1 billion and net income was 16.8 million or 46 cents per diluted share.
Also declared a cash dividend or 14 cents per common share an increase of 7.7% over last quarter.
Since the Golden 19 pandemic began rush truck centers have remained fully operational across our dealership network. We're complying with all CDC guidelines federal state and local orders.
And turning policies to keep the health and safety of our employees customers and communities our top priority.
As expected the go over 19 pandemic.
And resulting economic shutdown combined with the industry shut down and continued severe decline in the energy sector had a significant negative impact on our financial results in the second quarter to address this Jones and help ensure our long term financial strength, we implemented immediate steps to reduce and manage expenses during the quarter.
We're continuously monitor drink overnight game and its effect on the economy and our industry and we're cautiously optimistic we will not see any further declines in our revenues and believe we are right size to meet the needs of the market.
Turning now to our operations in the aftermarket our annual parts service and body shop revenues were 378 million or down 15.8% compared to second quarter 2019 arm social ratio was 110.2%.
This was the result declines in virtually all market segments and consistent with the overall industry experienced this core.
However, the energy sector remains hardest hit new global pricing wars and reduced rig counts.
We don't expect due to improved substantially in the near term the investments we've made in our strategic initiatives, all including our own long part sorry web and web based communication system enabled us to capture sales in this tough environment. However, there are still great uncertainty in the market and we anticipate then they recovery will be Raj.
We believe that go with 19 pandemic will continue to negatively impact our aftermarket results in the third quarter.
Regarding truck sales, we sold 1800 66, new class a drugs down 50.5% from the second quarter 2019, our truck sales accounted for 5.2% of the total U S class eight market.
Our results were down significantly as we expected due to the code 90, Brendan and then industrywide shut down in class eight truck sales.
Oh, good several of them about manufactured we represent also experienced production closes in the early part of the <unk> War, which further impacted our class eight truck sales on a positive the mill HCP research recently adjusted at U. S class eight retail sales forecast 259000 units in 2020 well.
Differently for Macy's previous estimate.
We're seeing increased quoting activity Barcas, we're still remain somewhat hesitant due to uncertainty about the cobot 19, bundling and the upcoming elections.
Our used truck sales decreased 15.8.
8% year over year, we aggressively reduced our used truck prices and inventory levels in anticipation of the pandemic impact on used truck sales, we experienced a significant decline and used truck sales didn't go with 19 pandemic in April night, but we solved truck sales and values begin to stabilize can rise in June.
Are there new businesses are entering the market to take advantage of healthy spot rates and those new business is usually start by purchasing used trucks, which has an encouraging sign.
And medium duty our class four through seven truck sales.
Were 220, 331 units down 40% year over year and accounted for 4.6% of the U.S. market.
These results were primarily due to an overall decline in activity throughout the markets. We support our customers many of whom are small business owners are uncertain about the economy and delaying purchases accordingly that said cancellations of class four to seven new truck orders or not.
As a comp not as much as we had expected to be.
C. D research is forecasting U.S. retail sales to be 100, 676500 in 2020, 33.9% decrease compared to 2019.
We maintain our commitment to returning we maintained our commitment to returning value to our shareholders as well as doing the right thing for our employees. We've instituted the share repurchase program that was temporarily suspended in the first quarter and increased our quarterly dividends. We also lifted a wage freeze on our service technicians that was implemented earlier.
This year as an expense management measure and earlier. This month, we raised our company minimum wage to $15 per hour to encouraged employees to build long lasting careers with us.
While challenges remain ahead, our employees and I take pride in being assessed and essential business supporting our customers and helping our economy recover from this unprecedented time.
I'm incredibly thankful to them for their dedication to our company and to protecting the health and safety of those around.
With that I'll take your questions.
[noise] as a reminder to ask a question. Please press Star then one.
If you like to yourself in the queue you press the pound key please standby well become part of the Q and a roster.
Our first question comes from Jamie Cook of Credit Suisse. Your line is open.
Hi, good morning, a nice quarter.
I I guess it a couple questions. One you know somebody always have reported so far talked about when they thought about service or even order trends or sales. It was like April is the worst quarter and things improved into June and it sounds like July just wondering you know what you're seeing from the truck sales par as well is that the service part.
Whether service ended stronger relative to April.
And then I guess my second question, you know that they did Jean <unk> a was impressive in the quarter. How much you are able to sort of take out take costs out to help your E. P. S. I'm wondering how we should think about going forward and at that as we sort of go through you know covidien always in or is there an opportunity.
It is sort of structurally reduce your cost base. Thank you.
Good question, Jamie well as far as we look forward from a truck sales to start to let's start there.
And in the <unk> My comments earlier no question quoting has increased right. We are seeing you know some of that come to fruition, but we're continuing to hope the quoting activity continues to get better as you saw when you're on the net order intake for the month from June was more than was anticipated, obviously and we're still a.
Well I don't want to say I'm Super bullish on it now we're not talking about getting back to levels.
You know what we beforehand. This definitely increase Tonight, we expected to stay that way right I'm I'm I'm counting want to stay in that way unless we have some second wave as they talk about mix that type of stuff is out of my control from a business perspective.
Given where you know the freight businesses right now as you've seen all the reports from a lot of our customers large customers anyway, you know they've reported nice reports have come in and and spot rates are probably would be about getting about as good as they've been in a couple of years, so that usually bodes well for rate increases down the road.
For our over the road customer base was we know what about 70% of all the trucks sold so you know looking at those indicators you got a feel there's some legs on it there.
As we look forward right that would be my opinion on that from a parts and service perspective.
Was interesting as I mentioned in the release, we took up which is a little more hit service.
And you know and while we did see what we fall I would call out we can turn it might we were bottling on the bottom now if I looked at apart from a parts perspective, we did increase for sure as we move through April being the worst made about the same but it did increase somewhat in June the service side, we took some pretty good hits.
In the core and a lot of it has to do with the oil and gas business, even though its way lesser percentage in what we used to me I mean, it's not even what we were four five years ago. Its you know it was less than one day was maybe I told you in the first quarter I think it was 3% to 4% of our parts and service will now it's less than two okay and that is more heavily service way.
Did so service took a little tougher here in the quarter, but we do believe it's going to come back we are seeing backlogs in our shopping tickets, we write up increase so not I don't take a dramatic increases you know I'm looking you know I'm looking to pick up a couple of points a month as I said gradual I just want to start picking.
It up you know slowly, which we have bottom I haven't seen all I want to see what I'm seeing good indicators I believe out there that we will continue its not going to be any vishay, but that's fine. We just want to keep it going in the right direction and I think we will as I look at the backlogs what we called work in process I look at the amount of tickets for right.
Up on a daily basis. The problem, we took for a while was some of the absolute dollar values on the tickets and tickets in the coming back but the dollar values were less but I think they're starting to creep back a little too. So it's something we got our eye on not just a month to month or quarter to quarter per week to week day to day, our out right now, but what I do feel.
Yeah, I do feel that we will gradually come back on that side of the final that's out Allison for sure you know we build the parts business has bottomed and was gradually coming back also now.
[laughter] the expenses I've got to do one thing I've got to I can't go without complementing our team and that goes for each and every one of the employees out during the company.
For an outstanding job under very stressful conditions, when you're dealing with a pandemic and you're dealing with the and the you know.
A lot of people affected by being essential business don't think we weren't affected as an organization. We had people you know whether it was in corn came to dealing with Covidien then on top of that you're having reductions in workforce and you've you've got all this going on the job. They did was just over the top I just can't say that I can't be more proud to.
Jason to produce the results with the stresses.
And multitude of stresses you know.
Out of different channels coming at you.
That they did.
Managing expenses now the big question, which I knew would be the question and we've worked a lot on lately. You know is now okay. Now you've got you've gone down to this bottom.
Let me about expense base, well I have historically always told you what ever gross profit dollar that we create.
We're going to take probably 50 cents, it's going to cost me to do it I don't loan money I don't know things like that I work on parts on trucks and I'm, a big part so but I do this and deliver it takes personnel. Thanks personally I'm working with I'm not worried about eight objects I'm working with drugs, so, but because of what we've learned and because of the investments we've made.
You know over the last few years and maybe from lessons. We're learning in this current and these current its current environment. You know we've set a goal we set a goal not to 50% go we've gotta go to get 30% to 35%.
You talk about adding back of gross profit. So when you expenses to gross profit. So our goal is to keep two thirds or better somewhere in that range and not just 50% when the markets do come back.
When we do see which we've we've been offensive is enough times, it's going to come back I mean, not having I can't tell you the timeline exactly but sometimes a steeper the valley the bigger the rise back to so always remember that so it's going to come back so in order to as an organization. Our goal is to yeah, we're going have to spend a little money, but we're not going to spend as much as we ever did in the past that sorry.
Well I guess, we got approved right well, we'll see the proof buttons and eating and so I look forward to that challenge and I think the whole team from top to bottom looks forward to that chose to try to maintain.
At least a two thirds.
Of holding up the gross profit as the market does come back.
We've taken some rather compared to last you know we look at margin I mean I go back to Muggy July June July of last year. I mean, we're talking about you know taken $12 million a better gross profit out of a month.
And we manage they've done a great job managing on the expense side and but it's taught us some things I think in and then obviously the investments and all that combine has allowed us to set a new internal goal and then we said when I've tried to give you some high level view of how we're going to do it I can't get into the exact but I do believe.
With using technology and being forced a lot of ways to use more of it here in the last 90 120 days.
And then with the investments we made we'll be able to achieved that goal I gave you.
All right Rusty one last question, probably unfair, but you know it's it's a it's a compliment to you and your team you know you look we're going to covert environment. Your sales were down I don't know, 35% you put up 46 cents this quarter.
And that type of environment, you know with the costs you took out with the with the you know and you know the focus on the aftermarket parts business like why isn't the second quarter, you know the trough of earnings or why Shouldnt people think about sort of if we take that 46 cents or 45 cents multiply by four lies in a buck 80, new troffer.
Earnings for for Rush.
To answer if you don't want to you know I'm not going to Jamie Okay, I'm not going to start to drive.
Well Hi. This is the C., we went public June six doing the seventh we repriced in 16 December 1996, and if I'm going to stick you're going to get a new guy in here to get that started.
So I'm not going to go there I'm just going to say I'm proud, where we're at and the job that was done but you know it's on this is one down for sure I missed it listed a lot uncertainty out there okay. In many different ways not just opened with the elections and everything else going on.
Everybody is there's a lot of anxiety not just in our organization for sure just People's lives out there so I'm not going to get it right now so.
All right I tried congratulations [laughter] welcome good tracker [laughter].
Our next question comes from Justin Long of Stephens. Your line is open.
Thanks, Good morning, gentlemen.
Justin.
So I wanted to ask about the trend in parts and service revenue in the quarter and if you could give any color on how you think that compares to the industry and into Q and then also would love to get your thoughts around the competitive landscape in parts and service and how that could potentially change post cobot.
Sure.
You know I don't like we did any worse than you know that meet the parts and service.
Information is not the best together overall other than mine right. We've got a couple things that we look at and you know and from what I've seen I think we did a couple points better in parts, maybe a couple points worse in surface I'm not sure, but it's still you know our stayed flat with it.
I'm pretty confident we do a little bit better on the part side than most.
But I do expect certainly has bottomed as I said.
You know I just is creeping up they did creep up as I mentioned, Jamie a minute ago parts to creep up in June for sure service I still think we were feeling a lot of the effects I bottom now I'm looking at my gene technician count in the stuff and that's flattened out to after we had some declines for a bit of so I.
And then I'm looking at tickets written up as that is again I'm, just we had to get values on tickets back up because for a while the trust me in April and May people, just spend and what they had to nobody's been any active we didn't go. If you had this problem. It was going to break down you fix that you Didnt you said Ms Test would you like this and this done in that they didn't do that.
And then you had other people extending things like oil and the rules and stuff as people were you know struggling there for a while I mean I knew you know him at the rush on the stores certain market. There was market segment, driven now certain market segments were fine.
No, but certain market segments warrant you closing down all the department stores, and everything else and everything's going online that change, though a lot of you know thing a lot of Skus woodway lot of our customers.
We're not doing well in that environment I think that is straighten itself out somewhat I think it's going to be interesting to see.
How it all shakes out when we're done with all this.
Because of my stuff was pushed online et cetera et cetera, but.
I do believe weren't bottomed and you know we're poised to go up as I said I'd like to start picking up a couple of points.
Month.
I'm not.
I can't [noise].
He that I don't have the future in front of me, but that's what I'd like to see in I think we're seeing I think the confidence levels given what you see the freight companies large guys to put out there are going to help spin I thinking you know Maggie and I will talk more in ramble more you won't probably got remember the small and medium got you know there was a 100000.
Gummies, they've got BPP money, well that's 20%.
No that's 20% as we got DMT no that when you look into where the money went.
You know.
I can break it down, but you don't need to hear all that data from me, but point being they got some help those extensions Doug from what I can tell I was worried about a bubble out there, but from what I can tell talking to people in the business on the finance side with large finance companies and a couple of not just want to double three you know most of those people seem.
To be making their payments and habits are picking back up so that's a good day I know we've seen that inside of our lease portfolio, we've seen that inside of our lease portfolio that.
Where we had to extend some people they really are picking back up okay, and making them payments. So you know and we've seen utilization inside our rental come back and I'm, just giving you entered those public warn you want for wide no V shape, but at least you feel you ask the bottom when you're going to gradually get back there now what was your second question that my ramble.
Yes [laughter].
The competitive landscape I'm just wondering.
Yeah, I do you see some of these other companies and financial distress, and maybe a little bit of a shake out or consolidation opportunity on the other side of that.
No if he could if he didnt have spill the letter PPP I think I wouldn't be looking at some right now okay, but I wasn't able to do that we were rest what they will do that where we I think when price while I'm proud of that quarter more than anybody else I can't tell you how many dealers. So it's all put out there already [laughter] took PPP money along with drug.
Customers right. Unfortunately, we had to do it on our own what I think that speaks to the quality. The organization personally so whether it was a week, but theres a lot of dealers. It took a lot of money.
Then my rightfully, so nothing wrong with right baked goods, but given our size.
Wasn't the right thing to do for US it wasn't meant for us. So we just managed our business. So.
I do expect opportunities to come but they maybe you know a little further down I didn't give to push that I was looking for I think because a lot of people got money man [laughter] makes no sense and then following up on what he said about parts and service and some of the mix changes we saw on that and.
Second quarter I wanted to ask about parts and service gross margins going forward do you think they can get better versus what we saw in into Q and the service piece and prove there how should we be thinking about that yes. When service does combat that will affect the mix when it starts coming back at a higher rate.
So there's no question that we could you know we could see a pick up it was up from Q1, you know I mean margins were up from 36 six to 37 too.
We are nothing like Q2 last year Q2 was a blowout quarter best quarter, we'd add five years, so I don't I'm going to put that as anomaly, but I think we can you know I believe we're gonna be somewhere right for right now somewhere in where we're modeling around it.
I'm going to drive margins, but somewhere in the high 36 is to the mid Thirtys getting maybe get up to 37, something but in that range.
Yes, and I don't want to commit but when service does come up and starts coming up faster, which I anticipate it will.
Sometime over the next few months I'm not going to say right now, but it will as well we've had to take that hit as I said in LNG, which affected our service more than anything else.
But we will pass that I mean, you can see the results that's why I'm proud and I'm excited about where we can go when we do start getting stuff back.
<unk> rising closer to normal so yes, you could have some bump in the margin, but don't look for two points bump or something like that out there on 200, Bips I don't see that but his service does and you can start you start picking up 10 20 bips here in there as it becomes a larger piece of the growth and mix.
Okay that helps and last question just real quick on.
The longer term financial targets I know you guys put those out there a while back obviously the word worlds changed a lot any updated thoughts around you know one those targets and to the timing of when they can be achieved.
Well, I guess timing got extended a little bit right.
Target seven James if anything we're going to raise of targets.
That's what you do when you start talking about trying to hold a higher percentage of when you get down to the bottom and you're going back. This is there is there there is an exciting thing as I said about going where you get down your script down like this and then you can look at how you're going to growing back and really dial in on it. So targets is still out there you know how should we still want to 6% new parts.
Mark and I have looked to see where we're at and co would world I know, we had gone down we had grown from three eight to like 4647, we still have a goal when they get to 6% or the overall parts market out. There. We stated that you know I was going into this year I was excited too.
Until Kogan I was excited improved 30% off from truck sales and.
You know and ensure really good year, but that didn't happen in spite of what's going on I think we're going to end up showing a pretty doggone good year.
Given the environment now we've had to manage it so.
We're we're constantly a and we're constantly right now that I'm not I can't give you the timeline how about bat, okay, let's get out of this morning mistakes. Some of this uncertainty out here and allow me to hopefully later you know later this year or first part of next year, we get take some of this uncertainty this grey matter out in front of Adam a window.
And maybe we'll be able to give you a little bit of timeline, just not because I don't want to sheet from the hip on something with there's that much uncertainty out there, but don't think the goals look we haven't stopped strategic you see all that cost come out I don't think for one minute, we're stopping already strategic investments. We've got going on we have those would run cost and we're still working on strategic stuff that we.
We believe we'll continue to allow us to well do what we've done the last few years.
Okay, Great I appreciate the time congrats on the quarter.
Thank you Sir dig back my Piggy bank or folks.
Our next question comes from Joel Tiss of BMO. Your line is open.
Hey, guys hasn't gone.
Good how are you.
Hanging in there.
Hey, that's.
Yeah. That's all you can ask floreana.
Well you can as from why do go ahead.
Okay.
It sounds like Youre kind of softening up a little bit from what you're saying.
You know and earlier conversations about the potential for kind of smaller and medium sized guys to Ah you know seem more bankruptcies than we've seen before and you know a bunch of.
A low mileage used truck to come back in the market is up there.
Well, given what I'm seeing out there from a freight perspective in miles being driven and stuff like that and what I'm hearing.
Maybe there's going to maybe they're gonna whether all the store you know I was concerned now do you throw second degree shut their doors shutdown. A then all bets are off Okay. You give you lose shift. This place now then all bets are off but with the spot market do look at spot market. Just did all that this in the last four weeks or so okay. It was taken in May and early.
Jim It's just come back here over the last four or five weeks and you know I mean acceptance rates are still tenant retention rates are still pretty.
Pretty strong, but you're not as you know, but they've slowed a little bit so youre right now.
Just appears to be more freight I would have anticipated now that said you might have some little guys inner segment in wrong that may have some issues, but talking to the you know the first people. They got extensions are making payments, let's say that they're making their first payments from what I gather talking to like three different big finance companies. So.
No not everybody, but the majority vast vast majority or.
No. It does that mean, they're going to make it all agreement through the winter in long Beach I can't answer that based upon what's out there, but what I see right now.
You know that's still out there the only thing that you wouldn't watch out for and they may be coming down because a great rocking to so I were insurance rates were up there, but I think you know if the freight can come back then maybe people whether maybe it wasn't the extensions in the BPP money for the people that didn't get it.
We'll get them through to the other side, which.
I wasn't a little bit.
But that was looking at the freight market you know some news different six eight weeks ago six weeks ago, but it seems to have picked up the I'm not I don't have you know I don't have.
I can't see that far out there as I said earlier, it's still uncertainty and still little grey matter out there, but based upon the last few weeks from what I'm hearing most people.
This is pretty decent so that my whole over into the small and midsize Guy would be my only comment Joe I Didnt anticipate spot rates jumping up like to have your recently so.
And then do you use are you starting to feel like you obviously been doing this longer than all of us and starting to feel like we could we could squeeze the whole cyclical downturn into one year.
As how we usually kind of have you know whatever for good years into bad years and things like that you think the shape of the cycle changes.
Yes, I think that is very much could change the Ohio Theres No question in my mind.
You know the deeper the valleys quicker you come out on that have slowed that slow crawl down remember we were only supposed to go down looking back when we came into this year somewhere around you as retail was going to be 200, okay. Well now we're going to be in the one thing you want to 60 range. So we've taken a bigger here and if it continues.
But yes, we can is obviously, we had an oversupplied drugs, where you know as always we went out so loves trucks and 18 19, just like we didn't know five and six but yes, you could definitely.
Squeezing out entire I've I've said that a few folks you know it'll be I'm sure. Some I'll ask it'll be interesting to watch.
They use market, that's going to be a big indicators. We go forward. So.
And just more of a fit from a you know a bigger picture standpoint, what why would you what you're seeing how great. Your company has reacted to this you know unbelievable time why would you be reluctant to walk away from saying you know I think trough earnings or $1.50 or something like that I mean, no whatever knows what's going to happen but.
You, you've seen sort of the resiliency and and the excellence to your company.
Well I'm going to let you say that okay I'll, let before we all read that we all can read the tea leaves.
As we get out of this year to give you something around about wanting.
And put out there. So we'll let US finished the year out and we can call. This trough and you can take it from there I'm not I'm not wanting to put if he is out there Joel and as I told Jamie I'm not planning after 24 years plus of this to start today, maybe one day I'll get a little senile into it or something I don't know.
But for now I'm not planning on doing if you can read the tea leaves you can see the results and your ultimate Yup Brent.
All right I'll get you a couple more margaritas next time, thank you, Okay Mega doubles.
[laughter].
[laughter].
As a reminder to ask a question. Please press Star then one our next question comes from Andrew Obin of Bank of America. Your line is open.
Yes, good morning Rusty.
Good morning This road.
And I know you don't rush, Tim I appreciate how hard you know the anti rushed in working with these results. So current process.
Thank you may.
Not me I guess.
Oh, okay the message their knowledge.
Could you give us a run down by key geographies, California, Texas, Florida Midwest, what are the key trends you're seeing by industry and is there a material difference between let's just call. These four via.
That's right.
Right. Okay. Surprisingly you know, California has held in really nicely, Okay, California is held in very nicely.
Given what went on.
You know ship everything shutdown of the ports earlier in the quarter et cetera et cetera.
Done they've held on very nicely Arizona's held on I would tell you probably them.
That's the biggest you know the biggest hit which is our biggest most powerful region and that's Texas, Oklahoma folks that rely more on the LNG, while they're still very profitable relative to other parts of the country, they're not up to the usual standards right now.
For us when we look at where we would derive more earnings from at the same time, they're showing resiliency by holding one thing we could have not have still posted results were boasting and these because they were so always G driven and we have no Oh, Gee I said parts and services.
2% man and I remember when it was close to 15, a few years ago. So you know that's with those guys.
Posting not the levels, but it's we're continuing to evolve this region to be.
To be more diverse okay.
We continue to work on that San Antonio Dallas, Houston throughout we've got 24 or five stores in the state of Texas.
So I mean, we're heavily yeah, we got a lot of stores in Texas, but Texas is one good thing about taxes, it's got to help them, even without oil and gas gotta Hegman economy. So it typically is learn how to weather better.
If I look up in the Midwest.
I would tell you that they have for all and have started to.
Doing we're doing a little better looking, Illinois, and Ohio, and those states now.
There there are gradually coming back okay. We trough in April, let's say like everything else and but we're seeing I'm seeing.
Weve Im seeing some good stuff up there in internally.
With the results of our people that we've got in place up right now.
I'm seeing some good results coming out of that area. So I'm excited about where that can go.
In the future I I think it will maintain I think it's going to maintain stability better than we have in prior years and we are better client.
Coming out of that you move over you know in Georgia still tough.
There's no question, we're still tough in Atlanta around that area and over in the.
Southeast you know in North Carolina, Virginia, Georgia, those areas seem to be up a you know, they're they're there, okay, but they're having a tougher time getting through it all of but Florida, which started all maintaining strength.
I think.
When you ship you know were before like four or five locations around Orlando well when you shut down Mickey mouse.
And all that other it goes around there you you have some effect, but yet at the same time, they're handling still pretty well there I was looking at the results for the month in June and.
Doggone good job given so there.
I want to say they are maintaining.
Better than I would've their maintaining better.
I would have thought given there's you know there there how tourism and all that type of stuff in Florida is such a big deal throughout the state I'd, just say Atlanta just throughout the state. So you know I feel good about that so I hope that gives you some kind of.
You know when you're talking about market segments, while as I've said, you know I'm not Ken when we ever do ever given where we get oil and gas back you. Just you can just tag on those results. That's all I can tell you when that does happen one day, because you know we've always been pretty deep into that business, but we've had learned how to diversify the company. That's results were showing right now.
So you know your year year Foodservices you guys most of that mostly like your refrigerated stuff. Those guys had been pretty strong yeah, you lost two restaurants and things like that but boy the grocery stores, they can't get enough milk delivered or sort of stuff on the shelf you know.
Most of all you know our big guys.
Everybody seems to be coming back now right where people were in shock like I said to small and medium guys were hammered early even though the big guys would maintain most of them as you can see by the results.
They posted but I believe the Mark if you had the freight markets.
Pretty robust and most people are now projecting to get rate increases next year, where you know they weren't that wasn't Wow I read report the other day shippers, we're planning on only paying 0.6% more next year and asset to do an after three I can guarantee the carriers are looking for double that okay.
Hey, as they didnt have gotten fracs as things get to.
You know as things move forward. So those are good signs right. Those are good signs, we just don't mean anything stalling it out overall perspective, and I think we can you just gradually keep coming I'm not going visas anything like that you it'd be nice to see a solid continual March forward and I think it's possible without any outside influences.
I I think in your press release, you highlighted that you know the fact that parts and service business was down was a function of sort of headcount and trying to get tax and you also sort of talked about how going forward as you know perhaps you could.
Do more with less I can just talk about how will you ramp up our staffing.
And the parts and service Department I going forward will it be aligned with historical patterns or have you learned lessons that would allow you to be more efficient in that area of the business.
Thanks, Andrew well I'm going to reflect back on a comment I'm a little bit earlier I think on the call maybe but you know historically I go back said one more time historically I've always told everybody. We grow gross profit line wouldn't probably spent about 50 cents of every dollar but excluding investments we've made in the past few years and through the lessons learned.
And this pandemic now that we've taken it down as with the margins those back we haven't internal goal.
Another keeping around third somewhere around 30, 35%, we'll go back to cost backed in DNA. So you say how do you do it well. That's obviously you know is you know you become more more multi channel right you know more online stuff right technology of the you know our.
Ours, our phone systems and stuff, we're all interconnected throughout the whole country. You know you you're you're picking off there's there's a multitude of things here. Okay that allow you to continue to leverage you basically do a better job leveraging off the base, you've got and using technology.
Communicate and with your customer and you know that's only going to grow well you know one of the drug that is pretty mundane business. Unlike change what looks like and if you know this is sort of accelerate where you could go over to everybody's place you had curbside pickup you have this going on in you know you you learn a lot of things.
During the middle of all this and then.
You know position with the investments.
You go well, Okay. I believe I can you know we can do that and you can map it out and it's just not buying this guy talk because you're learning how to like I said, you leverage up all your phone representatives throughout the country. When one area is busy enrolled over that rolls over to roll. Though are you you may be doing business for you know Atlanta in California, or something you know.
And there's just a multitude I'm not going to get into all of them right now, but it all those are cost cutting right you don't need as many bodies in that one or you're just leveraging man and you continue to leverage and.
And I, just and you continue to get share the memory you just and that's what do you. The gross that comes from and then you you leverage off once you got I know it may sound, a little broad, but it's just really that's not works for them.
Thank you.
You bet you [noise].
Our next question comes from song Kim of Gabelli Fun. Your line is open.
Good morning resting congrats again to you and the team on a great quarter. Thank you John appreciate it.
Yeah, No problem I wanted to switch gears here just given some of the attention that some startup in the industry have been getting I wanted to get your thoughts your updated thoughts on hydrogen fuel cell technology in the commercial vehicles. Obviously this is probably more of a long term play, but just want to get some commentary are you having any discussions with customers are you seeing any sort of customer bad.
Any thoughts on timeline for the rollout of these technologies.
Okay.
I really feel so I'm not having any correct you know I'm discussions.
I mean, it's it.
It's really early and I know, there's a lot of value in some people's companies that we have few years for the breadth of first dollar.
Got it and so I'm not disputing its long term viability, okay, and I'm not disputing that we're not looking at how do we you know how do we conformed to that as it becomes relative and continue to become more relative to real life real day use I mean, if I was going to tell you anything.
I do that so folks when it comes to that one thing I know, they're not going to have service are there.
And there's one thing I've got bigger than anybody else and I've got a network. So I'm always looking to add ways to leverage off of that network and push for services and products, they're working on product, they're not working on distribution systems, they're not work all of that regardless I know everybody. Originally said well electric you noted there has been 35% less when 'em, we tend to take.
Morning, and maintenance and stuff. So you know I think it all that still to be foreseen and all of these startups is one thing they don't have and that distribution and the service network and we are in the commercial business and then the commercial business trucks can't sit and I don't care, how they build of things will break.
So I know I'm not answering your anhydride I'm not the expert on not involved in it have I've talked for some people about how we might do some things around yeah, but it's way too early for me to even fried or frame that for you.
But I can promise you this we will be.
It comes the electric and when it comes to hogs, and we will be we will be out there we already playing the natural gas space and we will play in the alternative fuel space you can rest assured driven by our Oems, but also you never know what else.
We might be able to do given the breadth of our network in the expertise. We have you know and other partnerships and things like that was all but there's so much as we know the big ones. There's a lot of smaller players out in the elect place to right now that you didnt, although most all most I'm trying to get merged or by bought up but at the same then there are people out there in that space.
And we are we we have we're watching it closely working inside of it and we're actually working I don't I can't talk about it but rest assured we're out there were I'm not looking at the world to stay the same for the next 10 or 15 years, either so we'll be involved it's just a little bit early for me to say, how and how rush is involved in it other than.
You can remember this will be driven by our Oems paccars for sure out and Navistar without any of you know they will.
Our medium duty stuff coming soon.
Largest come as distributors they will all be in that space. So we will be in that space with them.
Terrific. Thank you ask you appreciate it guys you bet.
No further questions like to turn the call back over to Mr. rest U.S. for any closing remarks.
Well, ladies and gentlemen, first off I want to thank you for joining us on the call today and most importantly, I wish you in years and everyone. You know all the health and safety I can.
So there are still very very uncertain times and so just.
Through the right thing as I spend a lot of time talking with my folks and if I can tell anybody anything get off the horse and do the right thing okay.
There's such a thing if.
We do the right thing around Russia, Okay, I can promise you that because the health and safety lot employees and our customers and just our communities in general.
As the most important thing so the rest of this really doesn't need a lot. So anyway. Thank you very much wish you all the best buy.
Ladies and gentlemen. This concludes today's conference call. Thank you for sustaining you may now disconnect everyone have a great day.
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