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Edited Transcript of RUSHA earnings conference call or presentation 15-Feb-18 3:00pm GMT

Q4 2017 Rush Enterprises Inc Earnings Call

NEW BRAUNFELS Mar 29, 2018 (Thomson StreetEvents) -- Edited Transcript of Rush Enterprises Inc earnings conference call or presentation Thursday, February 15, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Steven L. Keller

Rush Enterprises, Inc. - CFO and Treasurer

* W. Marvin Rush

Rush Enterprises, Inc. - Chairman, CEO & President

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Conference Call Participants

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* Albert Brad Delco

Stephens Inc., Research Division - MD

* Jamie Lyn Cook

Crédit Suisse AG, Research Division - MD, Sector Head of United States Capital Goods Research, and Analyst

* Joel Gifford Tiss

BMO Capital Markets Equity Research - MD & Senior Research Analyst

* Neil Andrew Frohnapple

The Buckingham Research Group Incorporated - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Rush Enterprises, Inc. Fourth Quarter and Year-end 2017 Earnings Results Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would not like to introduce your host for today's conference, Mr. Rusty Rush, Chairman, CEO and President. Sir, you may begin.

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [2]

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Good morning, everyone, and welcome to our fourth quarter and year-end 2017 earnings release conference call. On the call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Derrek Weaver, Executive Vice President; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Vice President, General Counsel, and Corporate Secretary.

Now Steve will say a few words regarding forward-looking statements.

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Steven L. Keller, Rush Enterprises, Inc. - CFO and Treasurer [3]

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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, 2016 and in our other filings with the Securities and Exchange Commission.

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [4]

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As indicated in our news release, we achieved annual revenues of $4.7 billion, net income of $172 million, or $4.20 per diluted share. In the fourth quarter, net income was $105.7 million, or $2.54 per diluted share, on gross revenues of $1.2 billion. Annual and quarterly pre-tax income was reduced by $7.2 million as a result of a one-time bonus provided to all employees. Also, as a result of tax reform legislation, the company's annual and fourth quarter tax expense decreased by $82.9 million. This was primarily due to the revaluation of the company's deferred tax liabilities at the new corporate Federal income tax rate of 21%.

Excluding these 2 events, the company's annual and fourth quarter diluted earnings per share would have been $2.28 or $0.66, respectively. I am very proud of our team for the company's excellent financial performance in 2017, particularly our record-high net income. Our strategic initiatives began to take hold and gain momentum in the second half of the year, positively impacting our financial results. Our performance was also driven by overall economic growth and strength throughout most market segments nationwide.

In the aftermarket, our annual parts, service and body shop revenues were $1.5 billion, and our annual absorption rate was 121%, a record high. Our aftermarket revenues increased by 16.4% in the fourth quarter of this year compared to the same quarter in 2016. Approximately half of that growth is attributable to broad-based strength in the overall commercial vehicle market, 15% is attributable to increased activity in the energy sector, and 35% is directly attributable to revenues from our aftermarket initiatives. This aftermarket growth combined with expense management, also helped us achieve a fourth quarter absorption rate of 128%, another record high.

With expected strength across market segments and incremental growth on parts and service [initiatives], we expect aftermarket activity to remain strong in 2018.

Turning to truck sales, in 2017 we sold 13,083 new Class 8 trucks, up 21% over the previous year, and accounting for 6.6% of the total Class 8 U.S. market. This resulted primarily from an overall healthy economy and growth in construction, refuse, energy, and general freight. Used truck values are for the most part stable. While we will continue to monitor the growing supply of used trucks entering the market, we believe our used truck inventory is positioned appropriately.

ACT Research currently forecasts U.S. Class 8 retail sales to be 247,000 units in 2018. We believe this growth will be driven by general economic optimism and activity in the market, indicated by record-high order intake in January. We expect our Class 8 new truck sales will remain solid in 2018, though our market share may normalize in 2018 to more historical levels.

In medium-duty, our Class 4 through 7 used truck sales reached 10,952 units, essentially flat for 2016, and accounted for 4.5% of the U.S. market. Our medium-duty sales performance was solid this year, due to our ability to meet customers' needs with our nationwide inventory of work-ready, medium-duty trucks. ACT forecasts U.S. Class 4 through 7 retail sales to be 244,750 units this year, up 1% from 2017. We expect the medium-duty market to have another strong year in 2018, and we believe our Class 4 through 7 results will continue to be solid as we look at the year ahead.

Even factoring in the one-time bonus paid to employees in 2017, we expect general and administrative expenses to be sequentially higher in the first quarter of 2018 due to normal seasonal increases in employee benefits and payroll taxes. We estimate that the recently-passed tax reform will result in an effective tax rate of approximately 25% during 2018, compared to our historical rate of 38% to 39%.

Looking ahead, we plan to use some of this tax benefit to accelerate investments in our strategic initiatives, which will result in increased SG&A expenses throughout 2018. As always, I commend all our employees for their dedication to our company. Without their hard work and commitment to our customers, we would not be able to achieve such positive financial results as we did in 2017.

With that, I'll take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Jamie Cook from Credit Suisse.

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Jamie Lyn Cook, Crédit Suisse AG, Research Division - MD, Sector Head of United States Capital Goods Research, and Analyst [2]

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A couple questions, one on the industry; and then two, Rusty, with regard to your business model specifically, the order growth for truck orders in January were obviously quite stronger versus expectations. Can you talk to me about the conversations you're having with customers on the sustainability of orders and how much of this is driven by bonus depreciation or tax, and sort of how concerned you are as 2018 surprises on the upside? That takes away from '19. And then, for 2018 specifically, can you give us just a little more color on what we should expect in terms of the parts and service revenue growth, and where you are, versus your longer-term goals? Because obviously, that's been contributing nicely to the profitability.

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [3]

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Well, as far as the order growth, obviously January, I said, was a record. It was a near-record month, the second largest in history. As I look at it, it was driven a lot by a lot of large fleets. A lot of your public fleets, large public carriers purchased, a lot of the leasing companies purchased here in January. You saw some big order intake at certain levels. We typically, our business is more broad-based. We're not just tied to the big, large fleets, and I think that's where the strength in 2017 showed up, where we were like 21% better than the market, because it was very broad-based. That's why I said, our market share might dip a little bit in 2018 because you're going to have a lot, I think it's going to be a lot more over-the-road growth, than there was last year because those customers, obviously -- I don't have to tell you about it, you can pay attention to reports -- everybody's rates have gone up quite nicely. So I would expect the over-the-road business to pick up. But concurrently, I expect the vocational business to remain strong. It probably won't have as big a pick-up percentage-wise as the over-the-road business will, but it's still going to be strong. It had its big pick-up last year, which is why we picked up a lot of market share, but the over-the-road business wasn't strong last year. Can you follow what I'm saying? So while we do over-the-road business, obviously lots, when it bounces like that we tend to maybe get a little less procedure in the market, but don't read into that that we're not going to get our fair share of broad-based across where it is. As far as taking away from '19, I think it's a little too early for me to say that. I mean, it has climbed dramatically when you look from where we were 4 or 5 months ago. I think ACT's forecasts were for somewhere around a flat year, from '17 to '18, and now we're up about 25%, about 50,000 units, roughly. So obviously, there is that concern that it could take away from it, but we've got to let it play out. Let's see if it'll maintain that pace throughout the year, but I don't see it maintaining the pace it's at in January by any stretch. But I don't see it -- activity from our perspective, is still strong. I look at our backlog, when I look at ours, our backlog is up. Compared to year-over-year at year-end, our backlog is up probably about 20%, 20%-25%. Now that being said, our backlog tends to peak inside a rush not until the summertime. So a lot of the business that we booked is going on right now, which will dictate where we're at. I'll know a whole lot more when I get to April and May as to what our whole year personally looks like, because we've got quite a bit of activity going on right at this moment. So I expect us, especially on some of these vocationals, on some of these other markets, not just the over-the-road business. Now as far as the parts or service business, I really couldn't be -- it'd be hard for me, I don't know -- I guess I could be more pleased. You could always be more pleased, I think it wouldn't be a fair statement. But am I pleased? Yes, as to where we're at. As you all know, I came back 2 years ago, and I started talking about our strategic initiatives, because I said it more than once, I kind of got out over my skis here in 2016 and early '17, in getting the results, the kind of investment it takes to get these results because of some focused initiatives that I probably won't get into the exact focused initiatives on the call. But it is very clear and obvious to me that these initiatives are paying off. As I said last quarter, coming out of Q3, I thought that some of the strategic initiatives, we narrowed it down. And these are, I'm going to say, approximate, but I'm very solid with the numbers because sometimes it's not an exact science, but I'm solid that we have done, 25% of our growth was -- went to Q3, if I remember right, was based upon our strategic initiatives, a lot more in the energy sector, and then the overall broad sector. Now in Q4 when we looked into the results, energy was only 15% of the growth, yet we had huge growth year-over-year, 16% was just outstanding. I can't remember a quarter like that in a while, on a year-over-year basis. But the great part was, we had 35% that was directly attributable to the initiatives that we've undertaken over the last 2 years, inside a 5-year plan, which is probably where we've got some real goals stretched out to 2022 that we'll communicate, obviously when we come to your conferences and stuff, and do. So I feel good about that. I would tell you, typically you go through the winter, and I've always said before, let's get rid of November, December, January, and February, sometimes I would. I love the holidays but it's tough on business. Less working days, and just things can move a little bit slower. We've got a lot of stores in the south, so there's no air conditioning work and things like that. But I would tell you, this is probably the strongest November through February that I've seen probably in my career, or in a long time. So I feel real good about it as spring opens up here and continues to, we move forward into spring, and we thaw out a little bit around. I feel very good about where we're at, and as I said, the focus of the organization on achieving these initiatives, and I think our folks can see that they are doable, and they are committed to it, and we are definitely focused on that. So I know I didn't give you an exact growth rate, but I would expect the space -- I always hedge my bet, I say high-singles, and hopefully we'll be in low-double-digit growth rates in the parts and service business. But as I also said in there, I'm going to accelerate some of the investment inside some of these levers that we'll be using, that we're pulling, to continue to facilitate that top line and that gross profit growth rate. That's what we're looking at. So I may have to spend a little -- I'm going to spend a little, as I said in the release, but then I think that's what we're supposed to do, I believe. Okay? I'm not supposed to just hoard it, I'm supposed to spend a little and grow our parts and service business, because obviously that's the key piece of our organization. That's the changes in our company over the last few years, is where the revenues truly come from, where the gross profits really come from. So we're excited about what we've seen, and it just makes us more excited for the future.

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Jamie Lyn Cook, Crédit Suisse AG, Research Division - MD, Sector Head of United States Capital Goods Research, and Analyst [4]

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Okay, and sorry, one last question. Can you just talk to what you're seeing on the pricing environment on the new truck side, whether or not we're able to get through price increases in particular, to your customers? Given the competitive dynamics?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [5]

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Well, as I've said, it's competitive out there. You see those big numbers, and I know you all -- I don't think you've seen them. I think our margins are going to be difficult with more large fleet business, to maintain margins. And they're competitive out there. Margins still remain -- it still remains very competitive. People are still going after deals. I don't see any big margin pick-up by any stretch from the OEMs or at my level, either. So I just don't see that out there right now. I think there's still plenty of capacity out there. Obviously, I think one OEM is further out in their schedule, and their build schedule. I don't really want to get into naming names, here, but I think everybody can figure it out. But the year's not over, by any stretch, for them. There's still 6 months left in the year of their build schedule. So with that kind of backlog to fill up, I don't see -- customers are much more savvy. They're not going to allow that kind of, I just don't see that happening out there right now. I know it's going to be very difficult for anybody to increase margins. Probably just going to be more of a growth perspective, from a revenue perspective, and a volume perspective. Increasing margins will be very difficult.

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Operator [6]

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Our next question comes from Brad Delco from Stephens.

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Albert Brad Delco, Stephens Inc., Research Division - MD [7]

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Rusty, I'm kind of putting the old history cap on. If I remember correctly, once you kind of get into the high 120s on the absorption ratio, I felt like you used to talk about, at that level you were probably turning down business, and you needed to expand the number of service bays. Do you think something has structurally changed with these initiatives that have seen 128% absorption ratio to be the new norm, or how do we think about that? And the one follow-up to that is, how much of this is a function, too, of seeing a little bit better performance with some of your more recent acquisitions?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [8]

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Well, it's interesting you'd say that. I don't think I could ever say that topping 120 is something as an organization, because I never was there, okay? But I get where you're coming from, Brad. When you get up in the 100 -- we have individual stores get in the 130s and 140s. Well, the model has changed, right? With the initiatives that we would have taken, not just on the parts side but especially on the service side also, from a mobile perspective, from an embedded technician perspective in customer shops, and then -- and the parts business doesn't require more bays, right? So you're getting growth on the parts side, it's just make sure you've got enough warehouse storage and you need to be turning your inventories better. I think the skillsets that we've acquired and the investments that we've made on the parts side, have allowed us to do a better job of managing our inventory, having the proper inventory, increasing the amount of salespeople that we have out in the street. We have increased the amount of salespeople on the street dramatically, and that is helping push more business. I'm going to tell you right now, they're not as effective as they're going to be. If I look at the cost of it, and I look at what they're turning, it's rolling every day. So and our focus on taking an all-makes look, right, going after all makes' parts, not just being the historical dealer and cherry-picking off the top of the tree or bottom of the tree, but trying to trim the whole tree. And that's really, from a parts perspective, where we've been. On the service side, we added, as I said, a lot of technicians. I don't know if I want to talk about how many, but we added a lot of technicians next year, I'll just say over 100, across the network. And over 100 and under 500, how's that? But we look to continue that, because remember, we don't utilize our bays 24/7. The utilization of our bays, we have lots of room to grow, and understand how to use our shops more effectively. And then you add in the mobile piece, our mobile piece, we continue to expand it. We've been doing that stuff for over 15 years, but I remember back in the day when we started, it was 80%, 90% was to the oilfield business. Right? Well, now that's probably a 35% player. So we've broadened that piece to other markets, and we continue to broaden it and bring it to stores such as -- bring it like to the state of Florida, where there's no oil or anything going on, but we've got a great [bulb] of service people over there. And we have other areas I could look at and tell you, we've got the same impacts going on, as we push down the things that we do well. Best practice approach, right? That's the old saying, to use best practices and move them around. And I'd like to believe that we've gotten better, and stronger, throughout the network. And no question that as we have brought in some of those stores, to answer your question about new stores, I don't know if we've bought anything here in about 3 years or so, but about 2 or 3 real run there, when I was buying a bunch of stores that had MAXXforce engines, right? Thank goodness that's mostly gone. It was getting them into your culture, and pushing down, the way you do business. I think we're seeing increases there. We saw increases in our absorption rate on both sides of the house, but there's still room to run. Now there's still some headwinds on the Navistar side, in the lower market share, but they're gaining market share back. And we're not using that as an excuse inside of our company, we're going out and attacking other business. I can work on a lot -- there's a lot of things I can work on, they don't have to necessarily be the name brand on the side of the building. So we have broadened our culture of doing that, and continue to build that inside on the Navistar side. But there's still a pretty good gap from an absorption perspective, between each division. So to me, you could look at it 2 different ways. To me, that's opportunity, right? If I've got about a 16 to 17 point difference between the stores, then that tells me maybe I don't get all of it, but what if I get half of that gap back on the other side of the house? That means everything, right? I would have to believe, going forward, that wherever the market is, the Navistar piece of our business should continue to grow. I don't care if the market in '19 goes 20, if it's at 250 and it goes back to 200, I expect our Navistar business to continue to grow and become a bigger piece of our company as we go forward, just given the fact that we've had the -- we continue to, as you said earlier, get those stores into our way of doing business, and they continue to grow and hopefully flourish. And they are doing better, and we look forward to them doing a lot better as we go forward. But don't discount the fact that we do a very nice job on the other side of the house, too, and all our medium-duty brands, which are scattered throughout both sides.

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Albert Brad Delco, Stephens Inc., Research Division - MD [9]

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And maybe just one follow-up. I don't know if you were sort of alluding to something, but in terms of the investments you're making this year, and clearly the fact that we saw some of the success of that with the 16%-plus parts and serviced growth in the fourth quarter, you're still sticking by the call it $7 billion of revenue by 2022, and 5% pre-tax margin?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [10]

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I'm sticking to it. But to do that, I'm going to, as I said, we're seeing successes, I guess, Brad, in what we're doing, and I'm not going to get into the individual initiatives, because they're proprietary to me, okay? I'm sorry, I'm not out to tell everybody what we're doing. But the numbers will speak for it. How's that? I'm going to accelerate some of those investments, because there are a lot of things still in front of us. This is a dynamic -- [it must] the old mundane truck business, it's pretty dynamic right now with everything going on. And I think that we have to continue to invest, and invest faster, smarter, and do what needs to be done, because I'm sure competition's always out there and gets keener every day also. And everybody gets to see what I do, I'm the only public truck guy out there. So I don't get to see what everyone else does. We're going to continue to invest, we've got a lot of -- the initiatives that we have invested in are paying off, and we're going to invest more now, and some other initiatives that we've got on the drawing board. So I'm just maybe accelerating some of them up. I think that's what the plan was, with this corporate tax rate. You're not supposed to hoard it all, and I'm going to -- I'm not going to spend it all, but I mean, I am going to accelerate some investments. That's the right -- when you're seeing results and you can get double-digit growth, it only makes sense to me when you can see that, you're getting traction, and not just getting traction but getting numbers. We need to do what's right, and that's let's see if we can even get there quicker. How's that?

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Albert Brad Delco, Stephens Inc., Research Division - MD [11]

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And then real quickly, Steve, can you just give us the breakdown of gross margins by heavy duty, medium duty, light duty, and used?

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Steven L. Keller, Rush Enterprises, Inc. - CFO and Treasurer [12]

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For the quarter, heavy was 7.2, medium 6.5, light 5.1, and used 10.1.

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Operator [13]

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And our next question comes from Neil Frohnapple with Buckingham Research.

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Neil Andrew Frohnapple, The Buckingham Research Group Incorporated - Analyst [14]

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Rusty, as a follow-up on the plans to accelerate the investment here and in 2018, can you say how much incremental G&A expense this will be for 2018 than you previously planned before the passage of the tax legislation, just so we can make sure we're accounting for that appropriately in the models?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [15]

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Well, let me see, Neil. That's going to be difficult right here at this time. I can pick projects, but as we get growth, remember as I've always said, when we grow our parts and service business, I spend money just naturally. There's a natural spend of gross profit. You just don't say, it's not -- this isn't Star Trek, you say, “beam me up the parts”. Someone has to pick them up, someone has to deliver them, someone has to sell them, it's not -- there's a lot of manpower that goes into it. Now from an investment on the backside, there's a lot of IT and strategic stuff that I'm spending money on, technology stuff. I could probably define that better. I really don't have it on the top of my head right now for you. I just know, we're still going to grow. I'm going to grow the net income level, just giving you exactly what that is right now would be difficult for me because we're really sort of just working our way through it. Q1 is always going to be, and I'll speak about just Q1, Q1 is always going to have accelerated expenses just because of comp costs, taxes, everything -- not Federal taxes, but just real estate taxes, property taxes, all that kind of stuff to go into play, and benefits, employee benefits, when you start paying all the taxes and everything again for the people that have capped out. Q1 will always be a comp cost, for benefit costs from stock options and things like that, accelerate in Q1. That happens every year. I mean, you can look back historically at us and that always happens. For me to define exactly what the acceleration rate of investment is at this moment, I'll try to do a better job for you on the next call. I think I'll have a better handle on it. But we're in the process of sorting that all out as we speak. We just knew, whenever it was, December 21 or whatever, that we were going to have the benefit of this tax, so we've spent the last 45 days looking at all the things that we've had to lay out for us over the next 3 years from an investment perspective. Because we had it laid out pretty tight, and we're just honing that up, and I'll try to give you a better number on what that looks like on the next call, exactly. But Q1 expenses are always up. If you look back, Q1 is typically on a normal year, is going to be our softest quarter and we typically grow from there, every year. You can pretty much see a seasonal pattern inside of our business. As it heats up, expenses increase a lot in Q1, normal expenses in a normal year. And then, we tend to accelerate revenues and gross profits as we go forward. But I will say this, we're pretty solid so far in the wintertime. That's why I can't wait to get to March, April and May, and see if we can accelerate it a lot, we can start working on air conditioners and things like that again in our shops in the south. You don't do a bunch of that work, there's some of the things that we do in those. So I'm pretty happy about where we've been from a revenue and a gross profit perspective on the parts and the service side through the 4 winter months, the way I look at it. So I'll get you a better number on the investment, and exactly what it is. I just don't, we're sorting that all out as I would say right now. Okay?

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Neil Andrew Frohnapple, The Buckingham Research Group Incorporated - Analyst [16]

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And then Rusty, you talked about your Class 8 market share for this year. Any outlook or granularity you can provide on outlook for medium-duty share?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [17]

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Sure, I'll tell you, I don't think -- you've got to remember we went from a 5.5 to a 6.6, we beat the market by 21%. I don't look for us to be at 6.6 this year, there's just too much large, over-the-road fleet business. That being said, remember, it's a numerator and a denominator. My vocational business looks good. I don't know, from a construction perspective and a refuse perspective, it looked good. Now oil and gas, I don't know, even though we've got oil and gas activities really nice on the parts and service side. I don't know how, I don't know if we'll be able to do the same on the CapEx side, on the truck side, as we did last year. But that's still to be seen. It's only February 15, we just finished Valentine's, and so I would look at somewhere in the high 5s, to 6 maybe? I don't see a 6.6 again for us, just because the growth number is going to go from 197 to 250 or whatever, right? And it's going to be really played inside of some big carriers, and big leasing companies, that we typically don't participate as much in. We have big over-the-road customers, but not as many, is what I think you're going to see a lot of the growth. For the same time, like I said, the vocational business isn't going backwards because that's what made -- that's why some OEMs had really strong years last year that participate heavily, like the PACCAR side did, because they're big in the vocational pieces when it comes to construction, and oil and gas, and all the other pieces, refuse and things like that. But it's going to be good. It's still going to be just as good, I think, as it was last year. I just don't know where oil and gas [let us out], but from our perspective, I don't see a 6.6 in force. But we're going to have a higher, big top number, so I'm not saying we're going to have less, sell less trucks, or anything like that. I'm just saying, not sure how much we're going to participate in that big uptick, of those large, those big carriers and largely leasing acquisitions.

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Neil Andrew Frohnapple, The Buckingham Research Group Incorporated - Analyst [18]

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Okay, that's helpful, but from a medium-duty business, though, would you expect to grow back…

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [19]

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Oh, I expect the medium-duty business to remain strong. The activity level is extremely high right now. My vice president in charge of medium duty was complaining yesterday, it was too busy. No, I'm just kidding, he was actually excited because the activity level remains extremely strong, so it's a little early for me to project it will be bigger. But I don't anticipate us delivering less medium-duty trucks. It's just a little still too early in the year to be able to say, hey, can we top that by 20%? I don't know that, but we've got lots of activity going on. As the year unfolds, I'll have a lot better view of where we're at as we get further into it, but I don't anticipate going backwards, by any stretch.

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Operator [20]

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Our last question in the queue is from Joel Tiss from BMO.

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Joel Gifford Tiss, BMO Capital Markets Equity Research - MD & Senior Research Analyst [21]

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Can you talk a little bit about acquisitions, now that you don't have to pay taxes anymore? And also, is there anything that you can do to be prepared, or a little more prepared, for the potential for Volkswagen and Navistar to become the same company?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [22]

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Well, is there anything I can do to prepare? I'm prepared. I mean, our Navistar store is more excited than they've been in a long time. We feel very good about where they're at. Now I don't know when -- I'm not privy to when Troy and the Volkswagen guys hook all that together, and how that unfolds. That's their business, but I do know that they're working closely, and you can see it across the board, I think, in their results. I don't know -- I'm not here to talk about when and where and how much, how that goes. That's their business, but on the acquisitions side, because -- you don't pay any taxes, is that right, Joel? Where are you, in New York? Maybe I need to move up there! Maybe I'll go move up there, since you don't pay any taxes. I still pay taxes down here. Not state income tax, by the way, in Texas. I'll let you know that. So but no, acquisitions -- I don't have any large ones right now. There's some areas I'd like to do some stuff, but right now because the market's so good, people are enjoying being truck dealers. And it's typically, everybody -- the Navistar piece, probably maybe a couple years ago before the Volkswagen thing, maybe I should have bought more. But at the time, I realized I bought a lot when I was dealing with MAXXforce engines and making sure that Troy and the gang at Navistar got through the tough part of it, and then they did. I thought I bought enough when they were down and everybody was worried they were going to go away, and I was going to be -- it was going to be “Rusty's Folly”. Fortunately, it didn't work out that way. So I still believe that's the biggest unpolished, one of the largest unpolished diamonds in the company, is that division, from a return perspective. So I don't -- we're prepared. I've built a lot of facilities. In the last couple years, I've spent a lot of money on facilities, because some of them that we took over were really, they were pretty much dogs. And not pretty ones, no, they weren't up in your dog show you had this week up in New York. There were no -- so they wouldn't have been in those shows. So we've spent some money and built some new facilities. I think we are prepared, for an uptick in market share -- and our Navistar backlog is the best it's been in a few years. So I feel good about that. So they're a big part…

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Joel Gifford Tiss, BMO Capital Markets Equity Research - MD & Senior Research Analyst [23]

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And there isn't anything that needs to be done, or sort of proactively would make sense in case maybe Scania, or MAN would eventually want to bring their product into the U.S., or to look a little further south into Mexico and Brazil, to be more of an integral part of whatever the longer-term future of Navistar is? It's way too early?

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [24]

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That's a thought. I mean, I need to see if that's what they're really thinking before I go doing anything. I've traveled down there before, like a few years ago, but then -- and actually went around with some Navistar folks, but nothing ever came of it. I'm not sure where they're headed. I mean, if they bring product like that to the U.S., then I'm sure that they'll use -- distribution is the key thing when it comes to dispersing product, that's the reason Volkswagen bought Navistar is because they needed distribution to get into this country. As I told everybody, that's the biggest hurdle to anyone coming here is the amount of money, right, an amount of millions and millions of private capital that put these distribution networks, that support these distribution networks, out. That's what they had to have. You just can't come over here with trucks and start up like you can with cars, because it's a commercial business. You've got to have support to keep it up and running. So I'm sure they would use their leverage off of the network that they have, but I have no inkling if that's in the plans for them, I'd be honest.

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Operator [25]

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And I'm showing no further questions in the queue at this time.

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W. Marvin Rush, Rush Enterprises, Inc. - Chairman, CEO & President [26]

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Okay, if there's no further questions, I hope everybody has a wonderful finish to February and we'll get into springtime here shortly. I'll be talking to you in April, thank you all very much.

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Operator [27]

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Ladies and gentlemen, this does conclude your program, and you may all disconnect. Everyone have a great day.