Rush Enterprises, Inc. (RUSHA) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Rush Enterprises, Inc. First Quarter 2018 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions].And as a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Rusty Rush, Chairman, CEO and President. Sir, you may begin.

Good morning, everyone. And welcome to our first quarter 2018 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.

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 risk 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, 2017 and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved fourth quarter revenues of $1.2 billion and net income of $21 million, or $0.51 per diluted share. Excluding the $10.2 million charge related to our ERP platform, we achieved net income of $0.287 or $0.70 per diluted share. I am extremely proud of our team for the Company's strong financial performance in the first quarter. We remained focused on our strategic initiatives, which continue to build momentum and are now significantly contributing to our growth. Our results were also positively impacted by a strong commercial vehicle markets and a healthy economy. In the aftermarket, our annual parts service and body shop revenues in the first quarter were $400 million, and our absorption ratio was a record 120% for the first quarter. Our aftermarket revenues increased by 14.3% in the first quarter compared to same quarter in 2017. Approximately 40% to 45% of this growth is attributable to revenues from our aftermarket strategic initiative, with the remainder driven by broad-based strength in the overall commercial vehicle market. We were able to these parts and service results despite there being fewer international trucks in operation due to Navistar’s depressed market share over the past several years. We expect our aftermarket results will remain strong to the rest of the year. Turning to truck sales. We sold 3,312 new Class 8 trucks in the quarter, up 22% year-over-year and accounting for 6.4% of the total U.S Class 8 market. This was driven primarily by strong economy and broad-based growth in nearly all markets segments. It is worth noting that our Peterbilt dealerships are performing well and we are experiencing an increase in international truck sales as customers renew confidence in Navistar product line. Used truck depreciation rates were normalized, and we will continue to closely monitor used truck values as the number of used trucks entering the market accelerates for the remainder 2018. We believe our inventory is positioned appropriately to support market needs. ACP research currently forecast U.S Class 8 truck sales to be 254,000 units in 2018. Economic optimism has been driving extremely high order intake for the last several months. We believe our second quarter Class 8 truck sales will be consistent or slightly up with our first quarter. However, with the overall strength of the market growing constrained on fleet capacity and higher demand for Class 8 trucks, we expect our Class 8 new truck sales will accelerate in the second half of the year. In medium duty, our Class 4-7 new truck sales reached 2, 705 units, up 6% compared to the first quarter of 2017, accounting for 4.5% of U.S. market. We had another strong quarter for medium duty sales. Due to the strong economy, growth in the industries we support, and our ability to provide customers with nationwide inventory of work read medium duty trucks. ACT Research forecasts Class 4-7 retail sales to be 245,250 units this year, just up 1% from 2017. With truck deliveries to large fleets expected over the next several months and continued economic optimism, we believe our Class 4-7 truck sales will increase in the second and third quarters. As in previous years, employee benefits and payroll taxes contributed to increased expenses in the first quarter of 2018. Our balance sheet remains strong. And we were able to grow our cash position during the quarter even though we’ve spent approximately $60 million on share purchases and annual bonus spends. As always, I would like to thank our employees and wish to recognize them for their continued commitment to our customers and our vision. I am incredibly grateful to them for their hard work, which helped us achieve a strong start to the year. With that, I'll take your questions.

[Operator Instructions] Our first question comes from the line of Brad Delco with Stephens Inc. Your line is now open.

Could you just talk a little bit about the parts initiatives and give some example of where you’re seeing the success. How do you attribute 40% to 45% of this growth that we’re seeing this quarter to that, and what to maybe expect going forward? I know you’ve provided some commentary about a strong market ahead. But what does that look like from a growth perspective for the rest of '18?

Well, obviously, we've been working on this for a couple of years. And it was interesting. I look back into last year and I would say we’re getting traction. And then we got two, three and well about 25% we believe it is attributable to our strategic initiatives. And then we dial in 35% in Q4. Now we know it's between 40% and 45% where those are not exacts, we’re very comfortable with those numbers. There’s a lot of enablers involved. As I mentioned I think in the press release, whether it’s how you’re sourcing your parts, it’s putting more feet on the ground from a sales perspective. We’ve added 100 additional over the last nine months. We added 100 additional outside parts and service sales people. We’ve added, like I said in the press release, 100 technicians inside of the first quarter. And that’s not easy, trust me right now, that’s like driving. We’ve had a lot of initiatives around here, growing technicians, because you’re to having to train them. So we put a lot of focus around that, because obviously when you grow your service business your parts business grows accordingly with it, because we’re going to shop and obviously your parts business at the same time. There is a lot of different pricing initiatives. This all makes perspective. It’s training our people not to just sell proprietary parts, but to sale non-proprietary parts. And it’s about taking wallet share. I guess, going out and competing in an open market that that’s a competition market. But at the same time, it’s incremental business outside of your normal proprietary stuff, which you’re going to get after that non-proprietary which you just can't say it. Now there is a few other there are many enablers that are involved, and I probably don’t want to get into all of them, you don’t always want to give away your secrete sauce. So at the same time, we’re very proud of where we're at and we are looking forward into the year. Yes, our comps get tougher, because as I say we started accelerating really about a year ago coming up about now. But at the same time, I’m very comfortable that we’re still going to be able to maintain -- it's pretty comfortable, but we’re going to maintain double-digit growth even though the comps get harder, because this is where we started seeing accelerate at the time a year ago. So that being said, we feel pretty good about it. I mean, as I look there now, I am not going to give you any numbers, but April has continued to accelerate after the first quarter also. So we feel per day average and where we’re at. So we feel good about where we’re at and our goal for 2022 is doubling our parts business and almost adding over 600 technicians to our workforce by that time off the same base.

And then in terms of what we’ve been hearing some independent parts locations are popping up. How much of that is a driver of the strategy, or is that just one of these other enablers?

That’s another enabler that’s not even in the numbers now really. There is just a little bit but nothing that's -- nothing of substance in there currently. But no, that is another one of our -- that’s another part of our strategy. We’re in the process of rolling that out this year. And it will be next year at this time before I can tell you the best stuff is really, probably -- we're probably a year away from that really contributing of any substance to the numbers. But it’s an investment and it’s again getting customer touched in areas and places that we currently don’t have that touch regardless of whether we got a brand name OEM on the building on not. So we’re excited about the opportunities with that, but it just got to prove itself out too. So we feel confident, given the breadth of our customer base. I think sometimes given our size, we ourselves even lose touch with the understanding of the breath of our touch and because customers have become more national and consolidated, their areas that they want product in that we can support that even without a branding or even without an OEM brand upfront, because we can provide other support. So we’re going to test that out over the next year and we’re right in the middle of it.

And then may be quick one for Steve. Steve, can you give us the breakout of heavy, medium, light and then also how to think about SG&A sequentially through the year?

On the margins, heavy was 8.1, medium was 6.8, light was 6, and use was 11.2. As far as SG&A goes, we were accelerated in Q1 as we told you guys we would be all related to employee benefits, insurance, taxes, federal taxes and equity comp. That will subside some in Q2. As business picks up though and we increase back end, so forget that we spent $0.50 of our incremental gross profit dollar to produce that. So while we might get a small pull back and normal run rate G&A from those employee benefit items that I mentioned to you, hopefully unlikely it will be replaced by other G&A related to increased parts and service. So I would expect maybe a slight pullback in Q2 versus Q1 but not an extreme pull back. And then you know the seasonality at Q4 that will play itself out as the year goes on beyond that you’ll see but beyond that I think Q2, Q3, and Q4 will normalize like prior years.

Thank you. And our next question comes from the line of Jamie Cook with Credit Suisse. Your line is now open.

Rusty, I guess, a couple questions. One, to what degree are you concerned that the Class 8 market is overheated when you think about the order trends that we’ve been seeing. And to what degree do you think that the growth is sustainable in that 2018 to peak it’s like in 2019, we start to see things deteriorate. And then my second question is assuming ’18 is a peak and ’19 is a down year. How do we think about your ability to continue to grow the parts and service business in ’19 assuming that the market deteriorate just given your ability to grow market share?

I, over the last 60 days, has come to what I believe that ’18 not a peak. I look at it as a 24 month peak and let me at least, and I’m not going to rinse around in 2020, and let me just take some simplistic thought process. Let’s look back, remember the Class 8 truck market is still 70% driven by the over the road business. So if you take a look back to the years 2014 and 2015, we sold 227,000 Class 8 U.S retail in ‘14 and 253,000 retail again in ’15. So if you look at where we’re at this here and ACTs projections and for next year, that adds up for those two year were 480,000 units we’re adding up to 254, 247 or 500 and 1,000 units. If those were exacts because it’s what we have to work with if those were right. So we’re only talking about 4% increase basically over those two years. And most of the big over the road and that's where the lots going on right now, but its broad base but that’s where you’re getting a big bump from last year. There’s a lot of replacement going on for those four-year-old trucks, because typically those big public truck load carriers, if you’re going to average it out carry the product we’re about four years in that first lifecycle till they traded once all the warrantees and stuff are gone on it. And it goes into that secondary market. So is that really overheated or is that really just replacing. When then you add in where GDP is now where the economy is compared to where it was in '14 and '15 and you say where you’re up 4%. And a two-year-look and in '18 into '19 and then you look at it, you say look, there is rumors out on the street that I don’t want OEM as close to full for the year and out in the next year. Now they can move stuff around, I’m sure you can always move stuff around and build a few buildings. But the suppliers are also, I know I've heard of a lot of supplier questions from the OEMs I’ve talked to in the last few days it’s the second tier supplier, it's not the first tier supplier. It's not the translation back holders it’s a second and third tier supplier side that’s going to have a hard time to do much more, I think, to get out much more than 250 some thousand units. I think we were 51,000 in Q1 so if you’re 254 is at least 203, so you’re talking about you’re going to bump it up to about 68,000 or so, roughly somewhere near over the next three quarters on average. I’m sure it won't be same every quarter. But as you look at that I can make sense out of that and say well, that’s not -- I don’t -- order intake is not sales, because sometimes I think we get confused. I think there has been some probably and there are some people trying to control slots, and things like that worried about even some customers who want to put some stuff on the floor. I think it’s going to maintain a pace. I pretty much agree with them when I look at what production -- I mean there is more but if you get into -- there's some of those suppliers becomes our -- I think that there is a lags on 2018 into '19. So I don’t look at it as -- we're still 5% less or something whatever in 2019 over ’18 is that really that bigger deal, I don’t think so.

But before you answer the question on your billing growth parts business assuming a downturn, just -- and let's say you’re right, '19 is not that bad. We’re having supplier constraints that helps lengthen the cycle. What do you -- given the cycle so robust, what are you seeing on the pricing front on the new truck side? I mean, is the pricing environment still very challenged? Are we still being competitive, in particular with the material costs headwinds that people are expecting?

I haven’t seen much change. I mean, I haven’t seen much change from this year from last year normal. Are some increases, yes, but they’re slight they’re not -- we haven’t seen inflation hit it yet. That’s not to say they you won't get there. With all the stuff going on we’re seeing and everything else, it’s not to say that it won't get there but we have not really seen it yet.

But I guess my question is, do you think we will have more rational behavior of this cycle? Or do we just take it on the chin in terms of the material cost?

You’re talking about the unit we get prices raised. Look, I don’t know if you will. I think the market remains competitive. It's still competitive out there. And I’m not saying crazy, but it’s competitive. But the deals that we get on, we don’t get them all. And if somebody with an OEM, I’ll tell you this, if an OEM wants a deal it was one that’s important to that OEM if they’re going to get the deal. And so if someone makes it more competitive, that will sort it out and get their deal. Everyone always ends up giving their shares move, but I’m not going to get into names of all the OEMs. But I would say I don’t see there’s big raise in prices, I just don’t see. But what I do believe is I believe is OEMs have gotten better glory production cost efficiencies and things like that. I think in their backroom and the stuff outside now, which may -- maybe they have to get into some of that to offset material prices, because the competitiveness of the landscape that’s out there. But I don’t see -- I don’t believe you’re going to get big, big bumps in margins at the OEM level. But I’m not -- that's not my job but it’s just my opinion because they just continue to remain competitive out there. There is no one running from a deal, everyone is out there trying to get fighting for deal still. Even though the backlog is positive, people are not shying away, not from what I’ve seen. So that could change over the next 60 to 90 days, because I am sure April is going to be another pretty big month. I’m not totally sure that all those huge numbers are real each some. Some maybe holding slots than they have to go back in and that they get deals negotiate them into there and swap them out. I know some of that goes on in some OEMs. I don’t think there one OEM -- but I believe it's going on at some of the others. So now let’s talk about the part and service business. So your question was can we maintain, is that what you said Jamie again?

Well, I am just asking your ability to grow the parts business, assuming that you’re wrong and we start to see a down turn in ’19, because that obviously should probably and depreciate your earnings power itself…

Maybe it’s not to the same levels because comps -- we're a lot harder in ’19, but I still can see we’re running close to double-digit growth on our strategic self. I believe in what we’re doing and I believe it’s showing. And yes would have some headwinds, maybe if things -- if the freight went down a little bit and oil and gas went down a little bit and constriction slowed down, but I don’t really see this slowing down right now, not through ’19 regardless of truck purchases and we’re tied a lot to that piece of business. We’re trying to hold different fences of the economy but outside of all that, our strategic stuff will continue to grow. I have great confidence at what we're doing and the tools we put in place, because I’ve got other stuff we’re rolling out that are inside the numbers, I’m very comfortable. I’ve never been more confident in our abilities to continue to grow that. Now, maybe if I take a hit, because the market terms in some other areas, I still believe we’re going to go get wallet share, I believe we’re going to -- that’s what we’re after. We’re after growing it just organically with the market growth, but also we’re going out and we’re going to take share. And I am confident in the tools that we’re giving our folks to work with and there’s more stuff coming that we could maintain that – maintain. I am looking to maintain if not double-digit growth every year at least high single, I can tell you that. And as I mentioned in my comments a minute ago, we’re doing this in spite of headwinds on the international side. And no downgrade to where we’re at now with it, but we had some tough years and our market share both on medium and heavy, everyone has been 40 into the 20s in medium and six to seven, and from the teams in upper teens to get the mid 20s that was unrealistic fact seven years ago. But where that historically we’re up, 18% player if we go back in time, we got a team, so we got less trucks on the load. So even though the numbers you see growth wise for our parts and services operations will make some even more stellar in my mind and I look at it as a positive is that we’re, the Navistar side of the business is just up a couple points. All that growth was really -- so to say up a couple points, they’re actually gaining share in my mind, because they got less vehicles in operation. So everyone had to run out and hustle. So that just tells you, we’re up close to 20 points a little under that on the Peterbilt side of the house. So that again is something coming as they continue to grow back their market share over the next few years, that is another -- that’s another diamond or another bullet in our holster, should I say that we’ve got that should only get bet better. It can't get any worse than it was the last four or five years. And market share can only get better and it is going to get better. But there is going to be more trucks because we’re quoting more deals now and doing more. Our backlog is strong. It’s not like the backlog, but it is. If I told you my every meeting, maybe backlog was like you can say 2 times but double where it was in November, I’m not going to give you exact numbers, but that’s where it’s at. So that’s on the sales side. But on the parts and service side, we’re only up a couple points or so. We’re doing that with strong headwinds. So anyway that’s a lot of color there I think but you can see that I am pretty confident in our abilities to grow it in a market regardless of where the truck side is.

Thank you. And our next question comes from the line of Michael Shlisky with Seaport Global. Your line is now open.

I wanted to ask you and a follow up on your last answer there. If we do have a very strong '18 and very strong 2019 in Class 8 trucks and you’ve got previous outlook for double-digit growth in parts through 2019 peak assets. But having a strong '18 and strong '19, does that mean you’ll have a positive '20, '21, and '22, in parts given the higher population out there besides your existing initiatives to grow that business?

You could say that, because our typical sweet spot I’m going to tell you when it comes to where we sale the most parts to a vehicle. So I think really latter part to really your three, four, five, six, those are our sweet spots. So I feel pretty good, because you look at the big numbers of '14 and '15, there is still going to be the market. They’re just not going to be in the hands of same people. A lot of them won’t be, some will. So I think these with an operation were up because of laws, I think vehicles operations will stay but I don’t think miles will be as much. Obviously, with ELDs and mandates like that that will -- I think that is helping truck sales also. But for me to look at I am comfortable that we’re going to continue to grow our parts and service business in '20, '21 and '22. Don’t get me into guessing the truck markets that far out. I feel confident if we were in '19, I’ll have to wait. I got to get a little bit of color to tell you about the truck market side. I don’t know Class 8 for 2020. But I do feel confident, because the growth we should have -- there are plenty of vehicles in operation and at the same time we’re planning on taking share, as I told Jamie earlier and continue down the path that we’ve seen.

And then secondly, just give a little bit more color. Does that mean -- is it about Q2 that you’ll have a flattish maybe slightly up growth in the Class 8 shipments. Why wouldn’t that be higher? Just what's going on out there?

I think timing as much as anything, because as you know so I did say we’re still right in the back of the year. So our backlog has from when I talk to you folks in February till now, our backlog has evolved immensely. I mean a lot of those early orders stuff that you see in December or November or January, a lot of that stuff is for the big over the road guys. And that’s not -- we have some nice pick over the road customers. That's not just what we do. We’re very diverse in markets we touch, and some of those other markets kicked-in in the last 60 to 75 days. So that being said, the lead times are out more, a lot of the vehicles of ours, because just because they’re built in the factory, they’re turning on. It’s getting bodies or things done to it. It can take time to get the retailer and use. So you’re seeing lead times extended out at the OEMs and then there is always even if it’s an over the road truck, we’re not going to get it delivered from 30 days or so. It takes that long to get an over the road truck, because there is no work we did because some of bodywork and things like that, it can take 60 to 90 days. So that being said, it’s just timing. And as I said, we will accelerate. I anticipate having -- I mean, I actually got the market size data of 25%, I’m not here to tell you we’re going to be up that much this year, we’ll be up. We’ll sort it out. We’re still steeling. My OEM still has slots and we look forward to continuing to sell into slots as we go forward. We’re going to up and the back half of the year it’s going to -- I look to the back half of the year. And it accelerate nicely. It’s just the timing issue in second order. And our stock truck sales are the strong as they’ve been in years. So on top of that, we have a good stock truck quarter. As I said earlier in my -- I know the press release that I actually add in there, we’ll be probably consistent or up slightly. When I was talking when I go with my opening comments, because every day that goes I feel a little bit more positive that that will be the case, so it’s just timing issue.

Thank you. And our next question comes from the line of Neil Frohnapple with Buckingham Research. Your line is now open.

So a related follow-up on parts and service, so I think you guys have seen broad-based strength, particularly it’s been strong in the energy markets now if I think a few quarters. So just curious if you think that can continue in the energy markets?

Right now, I do for the parts and service side. I mean, I look yesterday what was it -- I don’t like rig counts to go over a 1,000, but they did. But rig count went over 1,000, 15, I just glanced at it yesterday, and of that it was 800 and something roughly were oil and the other 200 were in the gas side. Of the 800 in the oil side, 515 were in Texas, 127 Oklahoma, 90 in New Mexico. And that just happen in these states that we’re in. So we work over 700 oil rigs of the 800 working down here in this area and obviously the Permian basin I think had 55% of all the oil and the next biggest place is the Eagle Ford, so which is just south down here. As long as oil prices are like they are and don’t get me into global look, but we become an exporting -- we can’t get the oil -- we can probably moving the oil out of Permian right now. They’re talking about using trucks that would be a bad thing -- because they can’t get enough oil for the pipeline as we become exporting. So I don’t see at this moment but I was born and raised in Texas, so I’ve seen the oil and it can turn on a dime. But at this moment, there is nothing -- at this moment in time, we see nothing right now that’s going to do it. But that doesn’t say it won't one day. It always does, doesn’t it? But at this moment, I don’t see anything on the horizon, on the shorter horizon that says it's going to slowdown right at the moment.

And then just a question on the used truck market, you guys put up pretty strong performance from used truck gross margin again. Could you just talk currently what's going on in the used truck market with regard to pricing, your outlook for the remainder of the year? And I guess how Russia is positioned from an inventory standpoint?

We feel comfortable with inventory. I think it was 1,900 or so 2,000 that maybe up to 2,000, which is fine because the volume was up a little bit compared to Q1 of last year. And we are -- the used truck side, it’s two different -- it's an animal, it’s an interesting animal. We have to support the new truck side and the used truck side. Yet at the same time, we’re also out acquiring used trucks, because buying packages that we think we can sale through our network and make margin on. And I think that’s one of the things that you do when you run a used truck department is a lot of times, the stuff you trade for you don’t make it have margin, because you’re supporting the new truck side, yet you’re always -- you're bouncing between purchasing packages and then bringing more on in -- bringing then in. So I think one thing we haven’t really talked about a lot is -- on the calls, is we talk about our parts and service goal stuff but we don’t talk about our truck sales goals. We have the same pillars and the same thought processes running out through 2022. And now while we can't control market, we cannot control the market. But what we can do is control our performance or do our best to control our performance inside whatever market we’re given, new and used. I mean we’ve got goals to meet a solid 7% plus of the Class 8 truck markets, we’ve got goals to meet larger on the medium side. We’ve got goals to get to 10,000 used trucks. We’ve got some independent used truck operations, one rolling out now. And we’ve got, over the last year or two, we put into couple of three of them to help support also. And we’re going to do some more of that. Sometimes we don’t comment as much, but I will get back to where I think the used markets are. So I think that’s when you look inside the organization, we don’t talk that much better on this call. Now I go to investors and we sit in the conferences, sure we’ll talk about it one more time. I’d tell you that as we go through this year, obviously, there’s going to be a lot more trades coming. This is a lot of replacement as I said for '14 and '15 in my mind that we’re seeing. And with the economy as strong as it's been and used truck values has held up nicely. In fact that was as good a first quarter in used truck business as I’ve seen in a long time for first quarter, because usually that’s tough quarter, January February were not the best with used truck months. But we had a solid -- I think it was 100 and some odd units from last year but we had solid margins, solid numbers, they’re just solid. So I feel good about that. We will watch closely, as I said, because all those trades -- but there’s only 51,000 in retail sales. So if you’re going to get to the 250 stuff as I mentioned earlier, that means you’re going to be delivering 30% more trucks coming up, which a lot of them are going to have trades. So we’ll see how the used truck market sustains that from a value perspective and also from a consumption perspective. But I feel comfortable and confident in our abilities to and the valuations of what we have now on ground I am very comfortable with but you got to watch it. You have to be on top, because nothing have to be on top of more than the used truck business. And we‘ll do our best to make sure that our inventory is right and make sure we readjust our inventory every quarter. So we look at our inventory and value and make sure that we’re all right on line each quarter, it was just part of standard practice and how we run it. But we feel good about where we’re right now but we will be watching closely. But -- because most of those used trucks are not really going to until summer time, because you deliver trucks in April and May and because the freight market is so hot, a lot of times, it would take delivery of new truck. They’ll get it all stickered up and they won’t -- then they’ll pull used trucks off road, then it is going to be cleaned up. And then while the new truck goes -- because they don’t want to lose revenue. If we were in a soft rate environment, it might be different but we’re not in the soft rate environment. So everybody wants as much running on the road as they can. So you need to lag time until these used come, because I sold -- delivered the new truck they might even get it ready for road for a week or so and then they’re not going to run and put it in the road, then pull the used off. Then they’ve got to detail it up, because it has to meet certain freight criteria with us. And so we’ll watch it closely here throughout the summer and to see where -- see now how the used truck market goes. But right now it’s okay. But we do know supply is going to go up, there is no question supply side coming up.

Thank you [Operator Instructions]. Our next question comes from the line of Shawn Kim with Gabelli Asset Management. Your line is now open.

Just a quick question on the tax side, so outside of the solid economic environment and the positive freight environment. Do you guys get a sense of how much increased depreciation expenses from tax reform resulted in any accelerated truck purchases in either Q4 or Q1?

I would tell I know a couple of customers without naming names that place their orders in the fourth quarter related to tax. So without naming names, I do know people that are investing upgrading accelerating some of the purchases [indiscernible]. We always are -- everybody just to repurchase stock and then put it in the bank and that. I don’t see that with all customers I am sure some are, but I know some are not. So yes, I’ve seen -- I can directly correlate tax purchases and tax reform to accelerated replacement in some companies and maybe some growth side or some others. But yes -- but not everybody. But yes, there has been some.

And then just a quick question, so given some of the recent headlines with Volkswagen restructuring its business and the potential acquisition in Navistar. Any updated comment on how potential VW Nav combination could change your dynamic, whether that's with a larger group or even how you deal with a PACCAR?

Well, I don’t know it having any effects because there’s two separate operations. I mean I’ve run -- I mean, we don’t have them on the same yards and I’ve always made the commitment to both OEMs that whatever territory I represent in, they get 100% all Rush game on. So if I have Chicago Navistar all the away. So I don’t think it will be effective, I think our results would then go. I have never heard them complain about it. So I think we did a pretty good job wherever we represent, whatever market. But as far as the combination of Navistar and Volkswagen, it could only be good in my mind. I mean, when you look at it from a technology, from purchasing, from all the different things it brings to the table it accelerates their product line, their competitive -- pricing competitiveness and everything. It's just across the board, it has to be a good thing. You got to remember for Navistar all we did for seven years and we were about spending money on engines. It's just in the last couple of years that we started to rollout cars with the new -- we have a vocational truck. We got a brand-new highway truck and everything else that's by the way being very well received in the marketplace. So those are good things. Those are all positive. It's harder for me -- and not much negative I tell you where you go back four years ago and all you guys do was ask me if everyone was broke or not. So we needed all that I assume and so it's hard to find what’s best -- bad things to say about as we go forward. As I always say inside of this company to me that is the unpolished diamond, because it's a little rough, that's unpolished stuff yet. It will be continued to get better -- it can't get any worse like it was three or four years ago. So the returns on that side of the house, which has been very under the PACCAR side, well, I am not saying that criticism, to me that’s a positive for us. That’s a positive from an earnings perspective, the organizations -- it is not going to be a one day or one week or one year deal but it should be consistent over the next three to five years as they regain their place, they regain their spot in marketplace. I don’t know they’re going to see it, and that could be in my mind -- if we get back to the high teens, in the high teens in the Class 8 business and get back to close to that then that just bodes well for us. So remember they’ve got a new product coming out with GM later this year on the Class 5 side. We’ve got a couple of OEMs into new products and that our OEMs are investing in products. And I feel very comfortable with the brands that we represent, whichever brand it is from the medium all way through the Class 8 side right now, there is a lot of investment going on. I feel really good about the lines we support.

Thank you. And I am showing no further questions at this time. So I’d like to return the call to Mr. Rusty Rush for any closing remarks.

No, we don't have any other than spring has sprung. And I wish that everybody have a good next three months till we talk to you again in July. Thank you very much.

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