Q2 2019 Earnings Call
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Thank you for calling me, having first seems like.
Ryan VR why am.
Fame.
Uri HD a eli.
You and your company name please.
Era eight era.
Well conference or your Johnny.
Looking forward the rush enterprises earnings.
Thank you <unk>, particularly vocational enlarged fleet deliveries and we believe our truck sales in the third quarter, we remain on pace with the second quarter.
HCT research currently forecast US class eight retail sales will be 275100 units in 2019.
However, there is excess capacity in the market and class eight orders have decreased significantly in the past few months as a result class eight truck sales could begin to decline as early as the fourth quarter of this year.
In medium duty our class four through seven new truck sales reached 30, 866 units and accounted for 5.5% of the U.S. market. This was a record setting quarter for us in the medium duty truck sales due to our ability to provide a robust inventory of ready to roll trucks nationwide and strong demand for construction and rental customers.
HCT research forecast U.S. class four through seven retail sales were 262300 units. This year up 1.5% from 2018, we expect our class four through trucks at full quarters of sales remain healthy through the rest of 2019, our used truck sales were up 2% over the second quarter of 2018.
Used truck values are beginning to face pressure due to the oversupply of used trucks coming into the market that said, we believe our used truck inventory is positioned to propylene appropriately to support the mark.
The company increased its lease and rental revenues by 4.4% in the second quarter of 2018 compared to the second quarter of 2018, primarily due to healthy lease fleet demand management of operating costs and execution of its lease fleet service model.
I would like to express my gratitude to our employees for their continued hard work and dedication to our customers, which helped us achieve.
Such a strong quarter with that I'll take your questions.
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One moment please for our first question.
Our first question coming from the line of Justin long from Stephens. Your line is open.
Thanks, Good morning, and congrats on the quarter.
Hey, Thanks, guys.
So maybe to start with parts and service gross margins. They were strong up about a 150 basis points from what we saw last quarter.
Can you talk about how much of that improvement you view as one time I just wanted to get a sense for how we should be modeling parts and service gross margins going forward.
Sure well as you know over the last year or so given our investment in some of the initiatives. We've been talking about for the last two and half three years, you have seen margins increase right steadily over the last three years I would I would kill the last year and a half or two I would tell you that.
I don't expect it was a record margin, we haven't seen probably and I can't remember six seven years in Q2, I do not expect the margins to remain quite that strong, but I do expect margins to continue to grow as they have over the last year and a half, but maybe in a more.
Go back to Q1, and I would expect them to start growing over Q1, maybe not quite as strong as Q2, but we should continue to see margin improvement.
Across the board I, just we had an extremely strong or a you know a lot of it had to do with mix and some other is things that were going on in the quarter, but we do continue getting to believe that we will continue to grow margins over what you saw in Q3 of last year for Q1, we've been steadily ramping margins up and I expect it to be born a steady pace of ramping up from there.
Okay, Great and then on parts and service revenue came in at about 6% and that was a little bit below the high single digits. You've talked about can you talk about how much of a headwind you saw from the energy market and then as we look into next year rats. The what's what's your view on parts and service growth do you still think we can get to that high single digits. Even if we see class eight sales around 200000 units in the energy markets stay about where it is today.
Yes, absolutely we can obviously, let you know the interview argued had a you know I think when things I'm. Most proud of I truly am is the fact is the headwinds we faced in the energy sector. If you look at it.
Year over year, they know the best we can.
Go across it when we when we segment our business parts of the business was probably off about 34% to energy customers and the service business was off 38%. So for a combined 35% year over year, a downturn in the energy sector. So that 6% number to me was outstanding given the given that if you think back to the organization say four years ago go back to 2000 or three years go back to 2016, when we saw the big energy hit everybody remembers we think thats going to $30 below barrel and everything shutdown at the end of 15, but through 16, we could never ever ever performed as well as we did in Q2, given the business model that we had them compared to the business model. We have now now so you know I'm really proud of the organization for producing the results we did.
No given those headwinds I mean this is just shows the diversification and the effectiveness of the strategy in the implementation of all the tools that we put in across the network over the last couple of years looking forward I do believe we can get back to high singles right because my comps would have less energy business.
Well already be out of there right. So I would hope and believe that we can get back to that high single I mean, there is no. It's not it's not a far stretch when you're going to run six.
And you're already high singles on your margins I'd like to leave you can get back there next year right. Even in spite of the headwinds of having a market that's.
You are right and we are my numbers are and Thats 200 us retail sales. Some people don't want to say that but I'm, telling you thats reality, but I still believe we can.
I'll get to that we'll get to that high single digit.
Because I don't think we've seen the full utilization of the investments and we're continuing to invest and I think you probably see it in my DNA line, we haven't set up and best so.
We think thats key to some of the things that you know the results that we've seen over the last couple of years not just the truck market. The results in the back ends of the business. So.
Yes. The answer is yes, I believe for sure that we should be able to.
I'm planning on it anyway I mean.
I wouldn't bet my life on it but I'm sure it had been a bit a lot.
It will still be able to produce somewhere between what do you call high singles eight something like that I would like to believe term.
Good that's great to hear and if you add if you were able to get a little bit of pickup bag in the energy business, we would take it.
Yes, so that that high single digits. It doesn't assume any pick up in the energy business. It just seems the energy business stays where it is I think right because the comps I would hope unity business doesn't go down in these.
Any more than it has you know from a parts and service perspective, because it no question as I said you can tell the numbers that throughout it has softened, but we're ready willing and able he wants to have it picks back up again, which.
Anybody when those energy knows it can it can be feast or famine from one year to the mix sometimes.
In that in that sector, but we're always ready to take but no I did not assume it didn't assume any up or down compared to where we're at right now.
Great. That's really helpful. I appreciate the time.
You bet.
You'll probably be an upgrade from Brad anyway.
I don't know about that.
This is your.
Allison trucks now.
Hey.
Thanks.
Our next question coming from the line of Neil.
From Buckingham Research your line is open.
Hey, good morning, gentlemen, congrats on a great quarter.
Right.
Just a follow up on Brad 2.0 is coming Justin's question. There just what percentage of overall aftermarket is tied to energy is it in that 15% to 20% range just in more normal times I guess roughly.
Yeah, I'm going to go lower that around the 10 give or take a couple of points. Okay, Okay and that that's as wag and but we would say that but it is.
It's a good business right.
Obviously it affects us.
You look at the VIX, our Texas stores, most of our West Texas stores.
Dramatically it has it has a.
And as it sometimes a more service effect than a parts effect on us, but yet it does because of all the up bidding and the other stuff, we do around the country I effects parts too, but the service revenues.
You know in Opex to dramatically.
Well more than say the part side of it but you have been that 10% range to answer your question.
Okay. So you guys would have done basically double digit aftermarket growth has had not there like than the high incremental yes for sure and double digit margins and we've been right at the I know.
The best of my ability is we'd have been right at that 10% Mark Okay give or take a point.
Okay, and then just one of the switch gears.
Obviously, you mentioned the 200000 class eight retail next year. So you asked yes.
Yes, so any event that class eight industry sales are down 25% to 30% do you think you can outperform that growth rate just based on your higher mix of vocational and maybe some more navistar share gains coming through I mean, just if you could talk to how you guys are positioned relative to the industry and actually got no I would like to believe so that's always been.
We have always performed best if you go back historically go back 15 20 years our best.
When it comes to the percentage of the U.S. class eight market that we get is in the not in the big robust over the road years is when it's a little bit more balanced and where that the flow of trucks goes into more different market segments because obviously.
There's been a huge over the road near the last two years and that's why you've seen our margin our margin percentage go back back behind 6% I would expect I know historically when you get about a 200000 market were over 6% so.
Of the market. So we would hope that we could perform like we always do because we do have.
We do have a very balanced approach to the market not so much tied to one just one market segment and we are very proud of that and we do believe we're going to have some tailwinds on the navistar side as they continue to gain share I mean in our navistar sales will be hopefully not take the hit hopefully that gives you take on the other side I'm sure there will be some but it won't be like 25%.
I was only about 30% somewhere I'm open there maybe because of the tailwind of gaining market share maybe they're all five or 10, right. So near to help you offset and pick up share. So both of those tools, though both of those reasons as you you brought up yourself Neil.
Or things that we believe will be in our favor mixture in a softer overall retail environment.
Okay, Great. That's helpful and just one last one for Steve I can normally ask just could you provide the gross margin breakdown by truck in the quarter.
Yeah heavy duty is 8.1 medium duty Fivenine light 3.7 used 8.3.
All right great. Thanks, so much guys and congrats again.
Thank you Sir.
And our next question coming from the line of Jamie Cook with Credit Suisse. Your line is open.
Hi, good morning, and nice quarter, I guess, a couple of questions Rusty on wind can you.
Just talk about where your visibility sits today sort of relative to as we're entering sort of a normal downturn is it extended just because some of the l. either are talking about that too can you talk about your comfort level with.
The the inventory at the dealer level and then my last question as I'm thinking about 2000, 2020 and assuming.
Yeah, we do see the downturn in the industry forecasts are right, maybe you or Steve is there any way you can put into context, how you're thinking about sort of trophee P.S. Just given you know we have we have the difference this cycle with with the aftermarket. Thank you.
Oh, Jamie.
Oh Rusty.
[laughter], you know I'm not going to give you any EPS guidance, but I will say this I can take them because they can just crazy.
No question is the consensus crazy or not.
I'm sorry, what was the concerns that content, yeah, but they havent just and reasonable.
Probably little bit out there.
I would say I haven't I haven't really studied them I don't know if anybody really honed in on 20, yet to be honest with you typically most of what anybody I don't even know how to think.
The number off the top of my head Jamie what it.
Whereas the consensus estimate for 2020.
Threes, it's like 363.
As that was little sounds a little sounds a little strong than me, but lets talk about the good stuff and the good stuff is if you look at last trough. If you look at a 200000 lets go back okay.
200000 units since it was 2016 and also 17 now those are the two big different years for us, but if I remember right. One was above one was around to do I feel much better going into a market like that this time than that then then you better believe I do I'm not going to tell you what my target is but let's just say it's above the last time. There was 200000 to over 195, I think I'm going off top my head and 196 or something around there. So you get a market like that and you look at our performance Ah you can rest assured our targets a lot more than that.
Okay with that type of market. So I'll leave it at that I don't know whether that I'd like us I think we as Steve said I'd paid much attention to the consensus for next year is I'm trying to get my arms around what next year is.
Sounds like everybody else is smarter than I am so I'm, so glad to get around what you get my arms around what it's going to be because I do believe given I don't have to tell anybody less six months 77000 units in North America through about Canada. That's 167000 annualize that you don't get to 130 right. So that's why we've been chewing up backlog, what's their backlog down to 180 something out it was over 300 and something that we're I mean, we're chewing it up folks. That's just the facts. So you know I think we have a whole lot better look on next year. Once we get to November Okay, and I know I'm kicking the can out but I think if you remember last year because the the orders were so far out there you had a summer that was we don't order intake in the summer as usually the summer doldrums right, where people were taking slots I'm, telling you last year I could tell you I believe all of it but lets go through we're building more where have we had people taken slots and.
Putting orders into the summer like never before.
Because usually each order pick up in October November and December and you can determine especially with their over the road customers.
Where you know where all thats going to be by that time by October of they've got their budgets, let they know where they are headed and things. That's what that's what you have going on so I think this would be more typical that.
October November and December will give us good indicators.
Our next year truly is going to land.
Okay.
But I'm not ready to call I mean, I I was in line with what Acds numbers I'll be honest, that's where I think is going to land. Some people may be a little more optimistic.
I'm just trying to be realistic guy.
As I always am.
Let's go back to your other question was there. So first question just visibility building.
Well again.
We have visibility to me and it's going to be you know as I said I got to get the November I I'll be honest, if you want with truck right now I could probably moves was up around again and voice before before we pop off fireworks on new year's Eve Guy or BOPUS Champaign models.
So I can probably figure out a way to get into the night, it's mostly full but don't think you couldn't get a drug.
Good good.
Okay don't don't buy that so that tells you you know is it a little bit softer than what we thought it would be yes, probably so but it is still pretty solid but I can still work in the fourth quarter and there's some stuff as I said in my and what I wrote what I wrote the Williams of fourth quarter might be a little weaker.
Well I could have written it in another way. It would have said the same thing to me, which doesn't mean, it's going to be bad just means we're back to more normalized times, finishing work in filling out finishing out the year. That's why I said there might be I said I could build your drop okay that doesn't mean that there's nothing in the quarter that just means there is a little opportunity still out there, which is a whole lot different than six months ago and everybody told you couldn't get the lingual 2020 right.
Okay and then that's just the nature of the Beast and you know I mean, it hasn't you know the over the road stuff I don't know if im sure everybody knows the freight market is young freight tonnage is up got at 4% or something for the year before or whatever but you know it's not it's in a different bryce.
Yeah, you know spot margins and we know we have been off most of the year.
Congrats domain agreement I read them all here all week long by putting out new contracts they were coming in flat to down.
After a huge step of shippers got hammered in 2018, they're probably going a little piece back.
That's just the way it works.
Uh huh.
Push and the pull you know the consumer is doing a great job with keeping the economy going.
Right now you know GDP is still solid I don't know why don't we were going to run at the rates. We have run. So you can use there's things out there.
Enormous it'll get three years in a row like this you know I told somebody the other day, let's go back to see 14, and 15, new as retail was like.
Mike who is like 485 or something or something like that between the two years guy than we got.
16, and 17 back to 297, and then we got 18 and I'd like 18, and 19 right now you'll probably get to 535.
So if you do that and take it to 20% out like it did before.
It gets you to about two to 420000 over a two year period looking at a two year cycles, and that's probably where I don't know somewhere around that number is where I'm going to like you know because you don't see three years strung together like what we got in 18 and 19. It just normally because you go if I can find it I can't.
It's hard to find in history as you run three years like that so you're going to have a little soft but doesn't mean, it's bad you know most people would tell you that 200000, you as retail is the norm right. Okay. So let's hope as what we are hoping no I don't want to go lower than that.
You know, it's an election year to you're going to have in this I think people will be a little indecisive, regardless of what you know.
Obviously, you can't get the claims through Washington to do anyway.
We can't get much done right now we can't even talk so you know theres just things out there to me that are going to make it around that 200 number okay. Okay. And then just last question any distinction between like what you're seeing the vocational markets just versus line haul any any change in trends and I'll get back in queue. After that thanks Rusty.
You bet, Jamie I would tell you that.
For sure over the road is going to be more stable you know because it's tied more you know.
Those other businesses now oil and gas is not there we haven't had hardly any oil and gas sales and anything up produce this year. Okay on that on the truck side remember I was talking about parts and service earlier being all 30 by present, but on the truck sale side, we really haven't had anything over a little dribs and drabs, but nothing of substance substance over the last year or so right as they have been chewing up all the inventory that they bought really back in.
17, and end date or first half of 18.
So, but if I look at the other I could always believe that will be more stable. It has historically been the other market segments, whether it be construction.
Housing starts are solid and not over the top but they are pretty solid right.
You know I mean, we run and they've been running pretty constant.
So you've got lots of road work going on we need an infrastructure bill that would sure help we shouldn't need to spend a little money on infrastructure in this country.
You know and there was other market segments that were in like that the construction. The refuse you know we're in the Crane business. We're in this we're in that we're all in all these different segments reporting you know going to be more constant in a more stable you know the over the road purchases have always historically been a little bit more up and down a little more volatile. So yes. That's why I said, we were talking earlier when I was talking to Neil I guess, it was but yeah I plan on having a better share of the class eight market and a 200000 market than I do in a 275000, Mark you better believe it.
So we historically have so you would say I guess that piece of the business is a little bit more stable.
Okay, great. Thank you I'll get back in queue.
You bet. Thank you ma'am.
Our next question coming from the line of Andrew.
With Bank of America Merrill Lynch. Your line is open.
Hey, good morning.
Good morning, Mr. Open are you there.
I I was not going to ask this but I'm clearly not as good as Jamie has or you well.
I stuck at math, but I just.
Walk through a couple of framework questions on your downturn guidance.
You didn't say that you're still committed to growth and services businesses, That's fair right.
Fair Jeff.
Yes, yes. It does seem that you are able to reduce your as DNA in a downturn as does the nature of you as DNA. That's fair right I've spent when it's a fair comment go back in history and you'll see it every time a brand don't think I'm not already worked planning on it. Okay about time, we get to Q4, you'll probably see a little a little color on that okay, and just and given your mix.
You should.
Outperformed the industry and the downturn and maybe even outperform paccar, just because you have more garbage more vacation and fewer large fleet. That's also a fair statement.
Well, we've always had higher market share in the downturn as I've said, a couple times today typically.
I'm here I'm, just tack has bad and math as I am I just want to check.
True why don't you try to model in here on me right now I don't know I'm I'm, not Jamie I'm nowhere as good a shape. So that's fine.
Okay I understand you still we're not going to you know we do better as I said, we our goals are to do better than 16 or 17. If you average those two years I can and we don't do better you can probably replace me. Okay. I have much much simpler. So you did say that you are investing in the quarter.
Equity on M&A could you quantify the investments and also more importantly.
Describe in more detail what are you doing because I think this has been a huge theme for the company improving operations over the past couple of years, just give us more color.
Well this is going to be a fine line to walk between what I like to consider proprietary information and what you want me to say on a call. Okay. Neil this.
Did they ever give that they were the Jack in the box opportunity would be in a secret sauce with back in the day no. So [laughter].
Am I going to tell you.
Everything I'm doing no I can tell you that in customer related.
Look let me go back to why I think Blake, we're capable right I think I just want to get that right.
Our operating philosophy.
Let me can I finish yes. Thank you and let's go back 10, 11, 12 years ago, We decided and I'll hold my hand up I was the.
I was the dozen or.
Tell me in the room that we needed different businesses them right. So we went down this as a platform that I told you I don't mind admitting my fault, but it would be three years and fill the board three years, and 15 million well you know six years or so or seven and 50 million later, we got it done. This I was off a little on my math, Andrew I think is about 35 mill and so but guess what we got with it we got data.
We got what we think is the role most robust data in the industry, Okay and that comes and allows us to do things and what we've been doing the last three years is taking learning how to use it because what good is data if you can't turn into revenue right.
Designs that dreams, but we're all going to computers appeared look at everything, but if I can't turn it into customer touch and revenue is absolutely worthless I'm not.
Im not writing books around here.
Selling drugs in parts and service so with that we have added tools around it which I'm not going to get into all the tools weve taken that and trying to turn into revenue and that's what we've been spending millions on price and I like to believe we continue that we have not.
We have not seen the full fruition of all that revenue out of the investments. We've made we have not we're still happy we're still learning were still headed down that path, but I can tell you. This we run our business a whole lot different than we did three or four years ago, Okay almost to the point being an old guy like I am you know it.
It's a little more you know, it's a lot more regimented than they know nobody can hide but wouldn't it allows you to really understand real time whats your do and take that and turn it into revenue I know I'm not telling you about what tools I've invested in because I'm not going to but we have in many many projects with millions of dollars I will tell you that I'm not going to get into exactly what's flowing through.
My My it Department is very large I'm looking at my CIO sitting across the table from here and.
But we continue to take it and invest and give our people the best tools out there, we believe and I know, there's a long rambling you may not think I'm answering it but I'm as are the best I can without getting into exactly what we're doing there is nothing is just investment and a lot of hard work from a lot of great people that we did you know what I'm Blessed 7600 people that I'm blessed to have in this company.
No that's fair fair and just the last question what do you see as sort of happening in the general economy, you're one of the largest medium truck dealers in the country you have very good systems.
A lot of debate about it would really appreciate color premier. Thank you very much great quarter.
Thank you Andrew well, my Vice President medium duty sitting over here and he's saying we are the largest cities is not one of these getting upset with you Andrew So I'll, let him he's now smiling better so mr. Taylor over here, but what do I see in the general economy yet.
I think I talked to you all back month or so ago. He called me and said what do you think gross the and I said you know what it's not going to say is high heat is no way, we're going to get 3% GDP next year is not going to happen.
You amongst a few others will resonate what do you think.
How do you spell nobody likes to talk with starting with the Rs and no no no no none of that is negative, but I see softening.
In the GDP, but our but medium duty is not is while driven by GDP. It's also driven by dynamics changing with all the hub and spoke and last mile and the stuff that's going on all that stuff is moving to and that's what we believe will help us as I mentioned on the call before given the given how.
So our where we are in that marketplace.
In the medium duty side, and it's going to get down into the class three business to eventually we're going to get into I mean, you're going to get into it as we get is this sorts itself out.
But you know with the brands we represent the one thing about every ran we represent this not only ate side.
Every brand we represent in the medium duty business. Okay. Thank about that not every brand we represents in the eight business. Okay. So.
People don't think about they forget that all the time I forget Peterbilt Navistar Hino as is lower.
All these guys that we represent they're all in the medium duty business and some are only in the meeting so I believe it will continue to remain strong.
Given given.
I always say is tied more to the general economic general economy, which it is at the same time. There's also dynamics that are changing around that should continue to allow that business to grow and be much more stable and somebody rovio. They will it will offset by snow is not going to offset what if you're going to hell. Okay.
It will continue to help because we see it being a more stable market going forward. So when you add that to the continued great job Baggers. None are Peter was done with their market share has been better the last two or three years and it never has been and then you get where navistar is going with their market share. So you add all that together and Thats why we hope to do a little better would hey, I can't get away from I can't make a market I cannot make a truck sales market. If you know what it can do we can learn not me, but the organization we can't operate inside of it.
No and understand what to do we can't drag it anywhere, but we sure is that can operate inside changing environments, we like to believe as well as anybody out there and that's what we plan on doing guys.
You very much.
You bet.
And that's all my listen gentlemen, just a question. Please press the Star then the one key on your Touchtone telephone.
Our next question coming from the line of Joel Tiss with B M.
Your line is open.
I was going guys.
Oh wait and talk to you all want to know.
Yeah.
Yeah. No. So you think you think between the used market being a little bit a little bit heavy.
And.
And orders like probably too many classes class eight orders out there because of cancellations and things like that you think in 2021, we're going to clear out all that all the frothiness or do you think whatever happens in 2020, there theres not going to be enough of an adjustment to be able to.
To get everything back to kind of normal so we can start to grow again in 2021.
Well good question Bill I mean, you know I would think that if we can run a couple 200000 years are you know to 10 and maybe 2021.
A little bit that.
And I you know one of the rig I can see getting back I can see we need 20 look we've got to you asked about use no. One has I figured I'd. Once again to use question. You know uses remains stronger than I ever expected to do for longer but we are seeing softening you can look at our average sales price and you can look at our margin you can tell in Q2 for the first time, it's more normalized we've been elevated you know we were elevated I think the last three or four quarters, which as I told everybody I was going to go down in the fall of last year and it Didnt write ratably were happy to be wrong, but I do think we're finally going to see an oversupply of used drugs. We just we're just taking a lot of trades coming in and the economy has been we've been chewing them up and gets into them back out there because the product the quality of the product is so much different than it was 10 15 20 years ago. This is Greg even the drugs got 4000 500000 mile I still good piece. So it can still go out and compete with new drugs, where it used to have to go in a more regionalized calls.
Things like that nowadays it can still go back over the road.
Because it's just better stuff.
I believe that we'll get through all that I hope in 2020.
But you know what 200000 U.S. retails when everybody is always told me his normal so no.
No, but what I will say it is one of the things it does spur activity and could continue to spur activity is the quality is fuel mileage you know the engines of just continuing continually gotten better and better from a few miles perspective. So you can make sense out of it.
You just got to be able to balance that with the used values to be able to dispose the U.S. So.
No I can see it picking up a little better in 21, we go through 20, I'm not I'm not here to guarantee anything about that because you've got industry. You got two things you got the industry trends and then you got macroeconomic drive to get the country, the GDP and everything else that goes into it. So if the stars aligned properly and we go go down in 20, which we are going to sell less trucks in 2020, they will have to start producing so much product.
And we can clear out all that to your point I can see it picking up a little over 20, and 21, but I'm not ready to guarantee that.
And.
I'm not ready to get into that right. So, but I can see that happening I just want to as I said earlier I want to get through November here really see if were more normalized from an order intake perspective right no see if it gets things can get better is what we've been looking at it is this is just natural.
And that's why we've positioned the company and broke driven so hard on parts and service. So we can prove that we're not just tied to the Doug isn't going to affect US, yes, but were not just tied to class eight truck sales.
We've changed his organization, whether 65% of the profits come from parts and service.
And we're going to stay focused on that and the markets will sort out where they do but I think 200 next year and possible upside to that in 21 as required a long winded way as always.
And then.
You know you guys used to talk maybe 18 months ago, a little more about sort of the gap between your best dealership location in terms of profitability in the worst and I just wondered if you could give us a little update there has has the gap narrowed is there still a lot of opportunity and what are some of the things that that you guys are working on and we could kind of look forward to in terms of milestones.
Well, we're we're the one good thing.
Something good about when you soften like this makes it cleanly the clean house up a little better right. When you Morgan solves a little but we're always working on that I think the most important thing is what we used to talk about was the gap between the navistar stores and the peterbilt stores right right.
And the returns are still higher on the payroll side of the house, but the gas closing and not because we will sort of going backwards, because and that was our doors are getting better and so that continues to be you know I think thats as I've always told everybody. That's that's what I believe you know one of the best use of that as the hidden tailwind and the organization is that and you know it's not an add water in a store or you know overnight sensation, but its a steady ongoing thing and it's been it it is.
As part of these numbers, Okay without me getting in and breaking it all apart is part of that as we look at the numbers we've posted okay. It didnt all this come from one place they've been the Navistar side as growth has continued to be their service growth was was very helpful. In the Q2 way better than the payables as individuals I took a big engineering energy sector, because they are tied more to the energy sector. So that was a nice thing that we got out of there and Q2 right and their parts, we're getting through remember the tough thing for on the Navistar side and that's really what I think you were driving it it was a diversity of both sides of the house is.
Well they took all the 2000 everything was produced in 10, 11, and 12 and halfway through 13 was nasty were called Maxxforce. Okay.
And but all those drugs got pretty much are gone, okay. They really went to Vietnam or the boneyard. Okay. One of the two other crazy our Vietnam. Thanks. So you what happened was you missed this big gap of trucks to work off. So you know you didnt have those trucks, but guess what now we're flowing we're getting we're going to be taking step up because our sweet spot the truth sweet spot for us in the parts and service business really is you know year Oh four through year at nine or 10, right in that sweet spot Thats, where we produced the most parts and service revenue off of true up and it's not necessarily that first owner of an over the road drug is that second and third owner not necessarily the forward with that second third or EM. We lost three years production man, we lost three years of product on that side of the house and they've done a great job of weathering it and.
With the job that they've done and they've gotten their products better and their products are appealing dislike minerals. We're very proud of what we represent all brands were going to go as I said on both those so we believe that steel will continue to be a tailwind and you know.
Sort of.
Be a plus for us right as they continue to gain market share we continue to roll into where they started producing.
Rosemary producing some with their own engine, but mainly with Cummins engines in the.
Second quarter of 13, well you think about that Thats getting me to about a six year old drugs that sweet spot for us. So we believe it will get back in.
Picking up more product to work on so we're not having to scrape hustle and work on and we work on everything remember, we'll work on any drugs, but you do like to work on the brand you represent most so.
I know, it's a one was on much all mine.
Okay. That's got it very helpful. Thank you.
You bet.
Okay.
At this time Im showing no further questions I would like to.
Back over to Mr., Rusty rush for closing remarks.
Very good well. Thank you ma'am I hope everybody have a wonderful summer are so far you've got August left.
We will talk to everybody in October with our third quarter release. Thank you.
Okay.
Ladies and gentlemen, thank you for your participation in today's conference.
This concludes the program you may all disconnect good day.