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Rush Enterprises Inc (NASDAQ:RUSH.A) (NASDAQ:RUSH.B)
Q2 2020 Earnings Call
Jul. 23, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Rush Enterprises, Inc Second Quarter Earnings Release Conference Call. [Operator Instructions] I'd now like to hand the call over to Mr. Rusty Rush, Chairman, CEO and President. Please go ahead.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Good morning, and welcome to our Second Quarter 2020 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.

Steven L. Keller -- Chief Financial Officer and Treasurer

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, 2019 and in our other filings with the Securities and Exchange Commission.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

As indicated in our news release, we achieved quarterly revenues of $1 billion and net income of $16.8 million or $0.46 per diluted share. We also declared a cash dividend of $0.14 per common share, an increase of 7.7% over last quarter.

Since the COVID-19 pandemic began, Rush Truck Centers have remained fully operational across our dealership network. We are complying with all CDC guidelines, federal, state and local orders, and our own internal policies to keep the health and safety of our employees, customers and communities our top priority. As expected, the COVID-19 pandemic and resulting economics shutdown, combined with the industry shutdown and continued severe decline in the energy sector, had a significant negative impact on our financial results in the second quarter. To address this challenge and help ensure our long-term financial strength, we implemented immediate steps to reduce and manage expenses during the quarter. We are continuously monitoring COVID-19 and its effect on the economy and our industry, and we are cautiously optimistic we will not see any further declines in our revenues and believe we are rightsized to meet the needs of the market.

Turning now to our operations in the aftermarket, our annual parts, service and body shop revenues were $378 million or down 15.8% compared to the second quarter of 2019. Our absorption ratio was 110.2%. This was the result of declines in virtually all market segments and consistent with what the overall industry experienced this quarter. However, the energy sector remains hardest hit, due to global pricing wars and reduced rig counts, and we don't expect it to improve substantially in the near term.

The investments we've made in our strategic initiatives, including our online parts ordering and web-based communication system, enable us to capture sales in this tough environment. However, there is still great uncertainty in the market, and we anticipate that any recovery will be gradual. We believe the COVID-19 pandemic will continue to negatively impact our aftermarket results in the third quarter.

Regarding truck sales, we sold 1,866 new Class 8 trucks, down 50.5% from the second quarter of 2019. Our truck sales accounted for 5.2% of the total US Class 8 market. Our results were down significantly as we expected due to the COVID-19 pandemic and an industrywide shutdown in Class 8 truck sales. Several of the truck manufacturers we represent also experienced production closures in the early part of the quarter, which further impacted our Class 8 truck sales. On a positive note, ACT Research recently adjusted its US Class 8 retail sales forecast to 159,000 units in 2020, which is up significantly from ACT's previous estimate.

We are seeing increased quoting activity, but our customers still remain somewhat hesitant due to uncertainty about the COVID-19 pandemic and the upcoming elections. Our used truck sales decreased 15.8% year-over-year. We aggressively reduced our used truck prices and inventory levels in anticipation of the pandemic's impact on used truck sales. We experienced a significant decline in used truck sales, due to the COVID-19 pandemic in April and May, but we saw truck sales and values begin to stabilize and rise in June.

Further, new businesses are entering the market to take advantage of healthy spot rates, and those new businesses usually start by purchasing used trucks, which is an encouraging sign. In medium-duty, our Class 4 through 7 truck sales were 2,331 units, down 40% year-over-year and accounted for 4.6% of the US market. These results were primarily due to an overall decline in activities throughout the markets we support. Our customers, many of whom are small business owners, are uncertain about the economy and delaying purchases accordingly. That said, cancellations of Class 4 through 7 new truck orders are not as -- not as much as we had expected to be. ACT Research is forecasting US retail sales to be 176,500 in 2020, a 33.9% decrease compared to 2019.

We maintain our commitment to returning -- we maintained our commitment to returning value to our shareholders, as well as doing the right things for our employees. We have instituted the share repurchase program that was temporarily suspended in the first quarter and increased our quarterly dividend. We also lifted wage freeze on our service technicians that was implemented earlier this year as an expense management measure. And earlier this month, we raised our company minimum wage to $15 per hour to encourage employees to build long-lasting careers with us.

While challenges remain ahead, our employees and I take pride in being an essential business supporting our customers and helping our economy recover from this unprecedented time. I'm incredibly thankful to them for their dedication to our company and to protecting the health and safety of those around them.

With that, I'll take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jamie Cook of Credit Suisse. Your line is open.

Jamie Cook -- Credit Suisse-North America -- Analyst

Hi, good morning and nice quarter. I guess, a couple of questions. One, some of the OEs that have reported so far talked about when they thought about service or even order trends or sales, it was like April was the worst quarter, things improved into June, and it sounds like July. Just wondering what you're seeing from the truck sales part as well as the service part, whether service ended stronger relative to April?

And then, I guess my second question, the G&A was impressive in the quarter, how much you were able to sort of take out the -- take costs out to help your EPS? So wondering how we should think about going forward. And then, as we sort of go through COVID, is there an opportunity to sort of structurally reduce your cost base? Thank you.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Good questions, Jamie. Well, as far as looking forward from a truck sales perspective, let's start there. I mentioned in my comments earlier, no question quoting has increased, right? We are seeing some of that come to fruition, but we're continuing to hope the quoting activity continues to get better. As you saw, the net order intake for the month of June was more than was anticipated obviously. And we are still -- well, I don't want to say I'm super bullish on it. Now, we're not going to talking about getting back to levels what we -- beforehand. It has definitely increased, and I would expect it to stay that way, right? I'm counting on it staying that way unless we have some second wave as they talk about, but that type of stuff is out of my control.

From a business perspective given where the freight business is right now, as you've seen all the reports from a lot of our customers, the large customers anyway, they've reported -- nice reports have come in and spot rates are probably getting about as good as they 've been in a couple of years, so that usually bodes well for rate increases down the road for our over-the-road customer base, which we have about 70% of all the trucks sold. So looking at those indicators, you got to feel there's some legs on it there as we look out forward, right? That would be my opinion on that.

From a parts and service perspective, it was interesting. As I mentioned in the release, we took a little more hit in service. And while we did see what we thought -- I would call out, we kept on [Indecipherable] on the bottom. Now, if I look at parts -- from a parts perspective, we did increase for sure as we move through, April being the worst; May about the same, but it did increase somewhat in June. The service side, we took some pretty good hits in the quarter. And a lot of it has to do with the oil and gas business. Even though it's way less a percentage than what it used to be. I mean, it's not even what we were four or five years ago. It was less than -- I won't say it was -- I told you in the first quarter, I think it was 3% to 4% of our parts and service. Now, it's less than 2%, OK? And that is more heavily service weighted. So service took a little tougher hit in the quarter, but we do believe it's going to come back.

We are seeing backlogs in our shop and tickets we write up increase. So not -- and I don't take it dramatic increases. I'm looking to pick up a couple of points a month. As I said gradual, I just want to start picking it up slowly, which we have bottomed. I haven't seen all I want to see, but obviously good indicators I believe out there that we will continue. It's not going to be any V-shape, but that's fine. We just want to keep it going in the right direction. And I think we will, as I look at the backlogs, what we call work-in-process. I look at the amount of tickets we're writing up on a daily basis.

The problem we took for a while was some of the absolute dollar values on the ticket. The tickets have been coming back, but the dollar values were less, but I think they're starting to creep back a little too. So we got our eye on not just month-to-month or quarter-to-quarter, but week-to-week, day-to-day, hour-to-hour right now. But I do feel that we will gradually come back on that side of the planet or that side of the house. And for sure, even the parts business has bottomed and was gradually coming back also.

Now, the expenses. I've got to do one thing first. I've got to go without complementing our team and that goes for each and every one of the employees out there in the company for an outstanding job under very stressful conditions. When you're dealing with the pandemic and you're dealing with the -- a lot of people affected by being an essential business don't think we weren't affected as an organization. And we had people whether it was in quarantine or dealing with COVID. And then on top of that, you're having reductions in workforce. And you've got all this going on. The job they did was just over the top. I just can't say that -- I can't be more proud of the organization to produce the results with the stresses and multitude of stresses, a lot of different channels coming actually, that they did in managing the expenses.

Now, the big question, which I know would be the question. And we've worked on those a lot lately. As -- OK, now you've got -- you've gone down to this bottom. Well, tell me about the expense base. While I have historically always told you -- you know what, every gross profit dollar that we create, we're going to take probably $0.50, it's going to cost me to do it, I don't loan money, I don't do things like that. I work on parts of trucks and I pick parts, but I do this and I deliver, it takes personnel -- takes personnel. I'm working with -- I'm not working with innate objects, I'm working with trucks.

So -- but because of what we've learned and because of the investments we've made over the last few years and maybe from the lessons we're learning in this current environment, we've set a goal -- we set a goal, not the 50% goal, we've got to go to get 30% to 35% when you talk about adding back of gross profit, so we -- our expenses to gross profit. So our goal is to keep two-thirds or better, somewhere in that range and not just 50% when the markets do come back. When we do see, which we've -- we've been -- I have been through this enough times. It's going to come back. I mean, I don't have -- I can't tell you the timeline exactly, but sometimes the steeper the valley, the bigger the rise back too. So always remember that. So it's going to come back. So as an organization, our goal is to -- yeah, we're going to have to spend a little money, but we're not going to spend as much as we ever did in the past, that's our goal.

I guess, we got to prove it, right. Well, we'll see the proof of the pudding is in the eating. And so, I look forward to that challenge. And I think the whole team from top to bottom looks forward to that challenge to try to maintain at least the two-thirds of holding of the gross profit, as the market does come back.

We've taken some rather compared to last, when you look at margin, I mean I go back to July, June -- July last year, I mean, we're talking about you know taking $12 million of better gross profit out a month, OK? And we managed. They've done a great job of managing on the expense side and -- but it's taught us some things I think and obviously, the investments and all that combined has allowed us to set a new internal goal. And when we say -- when I'm trying to give you some high level view of how we're going to do it, I can't get into the exacts, but I do believe with using technology and being forced a lot of ways to use more of it here in the last 90, 120 days. And then with the investments we have made, we will be able to achieve that goal I gave you.

Jamie Cook -- Credit Suisse-North America -- Analyst

All right, Rusty. One last question, probably unfair, but it's a complement to you and your team. You look we are in COVID environment, your sales were down, I don't know, 35%. You put up $0.46 this quarter. In that type of environment, with the cost you took out, with the focus on the aftermarket parts business, likewise in the second quarter, the trough of earnings or why shouldn't people think about sort of, if we take the $0.46 or $0.45 multiply by four lies in a $1.80 [Phonetic] new trough of earnings for Rush? Steve can answer it, if you don't want to.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

You know, I'm not going to Jamie, OK? I'm not...

Jamie Cook -- Credit Suisse-North America -- Analyst

Have to try.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Well, hey, this is, let's see -- we went public June 6th, June 7th -- we priced in June 6, June 7 of 1996 and if I'm going to -- you're going to have to get a new guy in here to get that started, so I'm not going to go there. I'm just going to say I'm proud where we're at and the job that was done, but it's not -- this is one time for sure. I mean, it's a -- still a lot of uncertainty out there, OK, in many different ways, not just open with the elections, and everything else going on. There's -- everybody is -- there's a lot of anxiety, not just in our organization for sure, just people's lives out there. So I'm not going to get out of there right now of that.

Jamie Cook -- Credit Suisse-North America -- Analyst

All right. I tried. Congratulations.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

You're welcome. Good try girl.

Operator

Our next question comes from Justin Long of Stephens. Your line is open.

Justin Long -- Stephens, Inc. -- Analyst

Thanks. Good morning, gentlemen.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Hi, Justin.

Justin Long -- Stephens, Inc. -- Analyst

So I wanted to ask about the trend in parts and service revenue in the quarter. And if you could give any color on how you think that compares to the industry in 2Q. And then also, I would love to get your thoughts around the competitive landscape in parts and service and how that could potentially change post-COVID?

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Sure. I don't think we did any worse -- parts and service information is not the best to gather overall other than mine, right. We've got a couple of things that we look at and -- from what I've seen, I think we did a couple of points better in parts and maybe a couple of points worse in service. I'm not sure, but it's staying flat with it. I'm pretty confident we did a little bit better on the parts side than most.

And -- but I do expect it has bottomed, as I said. I just -- it's just creeping up -- it did creep up, as I mentioned to Jamie a minute ago; parts did creep up in June for sure. Service, I still think we were feeling a lot of the effects. They bottomed out. I'm looking at my technician count and stuff and that's flattened out too, but we had some declines for a bit. So -- and I'm looking to tickets written up as said again. I'm just -- we have to get values on tickets back up because for a while there. Trust me, in April and May, people were just spending what they had to, nobody spend any extra. We didn't go -- if you have this problem and was going to break the truck down, you fix that and you did misjudged, you would like to do this -- and this done or that done, they didn't do that.

And then, you had other people extending, things like oil and roles and stuff, as people were struggling there for a while. I mean, when we had the rush on the stores, certain market, there was market segment driven now. Certain market segments were fine, but certain market segments weren't. You're closing down all the department stores and everything else and everything is going online, that changed a lot of things and a lot of ways -- a lot of our customers were not doing well in that environment.

I think that has greatly self-out somewhat. I think it's going to be interesting to see how it all shakes out when we're done with all of this because so much stuff was pushed online, etc., etc. But I do believe we're bottomed and we're poised to go up, as I said. I'd like to start picking up a couple of points a month. I'm not -- I can't guarantee that. I don't have the future in front of me. But that's what I would like to see and I think we're seeing, I think, the confidence levels, given what you see the freight companies, the large guys who put out there are going to help spin.

I think -- I mean, and again talk more and ramble more and you want problem, but you got to remember the small and medium guy. There was 100,000 truck companies, they got PPP money. Well, that's 20% of now -- that's 20% of people got DOT. Now, of that, when you look at where the money went, I can break it down, but you don't need to get all that data from me, but point being they got some help; there was extensions done.

From what I can tell, I was worried about a bubble out there, but from what I can tell, talking to people in the business on the finance side with large finance companies, and there are a couple of them, not just one, a couple or three, most of those people seem to be making their payments and was picking them back up. So that's a good thing.

I know we've seen that inside of our lease portfolio. We've seen that inside of our lease portfolio that where we had to extend some people. They really are picking back up, OK, and making their payments. So -- and we've seen utilization inside our rental come back. I'm just giving you anecdotes probably more than you want for why now V-shape, but at least you feel you've passed the bottom and you're going to gradually get back there.

Now, what was your second question now that I rambled on again, Justin.

Justin Long -- Stephens, Inc. -- Analyst

The competitive landscape. I'm just wondering. [Speech Overlap] Yeah. Do you see some of these other companies in financial distress and maybe a little bit of a shakeout or consolidation opportunity on the other side of this.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

If you could, if you didn't have spell the letter PPP, I think I would be looking at some right now, OK, but I wasn't able to do that, what we were, Rush was not able to do that, were we -- I'm making progress. Well, I'm proud of that quarter more than anybody else because I can't tell you how many dealers, so I'll put -- it's all put out there and little read, took PPP money along with truckload customers, right.

Unfortunately, we had to do it on our own. But I think that speaks to the quality of the organization, personally. So whether it was we, but there is a lot of dealers that took a lot of money and they're rightfully so -- nothing wrong -- right they could. But given our size and it wasn't the right thing to do for us, it wasn't meant for us. So we just managed our business. I do expect opportunities to come but they may be a little further down. I didn't get the push that I was looking for I think because a lot of people got money man.

Justin Long -- Stephens, Inc. -- Analyst

Makes, makes sense. And then following up on what you said about parts and service and some of the mix changes we saw on the -- in the second quarter. I wanted to ask about parts and service gross margins going forward, do you think they can get better versus what we saw in 2Q as the service piece improve there. How should we be thinking about that?

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Yeah, if -- when service does come back, that will affect the mix when it starts coming back at a higher rate. So there is no question that we could, we could see a pickup, it was up from Q1. I mean, margins were up from 366 to 372 [Phonetic], OK. Now, they were nothing like Q2 last year. Q2 was a blowout quarter, best quarter we had in five years. So I don't -- I'm going to put that as anomaly. But I think we can -- I believe we're going to be somewhere right, for right now, somewhere, and where we're bottling around I know that.

I'm not going to drive margins, but somewhere in the high-36 to the mid '30s, maybe get up to 37 something, but in that range. Justin, I don't want to commit, but when service does come up and starts coming up faster, which I anticipated will sometime over the next few months. I'm not going to say right now, but it will, as we've had to take that hit. As I said at O&G which affected our service more than anything else.

But we're past that. I mean you can see the results, that's why I'm proud and I'm excited about where we can go when we do start -- get the stuff back a little way of rising closer to normal. So yes, you could have some bump in the margin. But you don't look for 2 points bump or something like that, on 200 bps I don't see that. But if service does then you can start picking up to 10-20 bps here and there as it becomes a larger piece of the growth and mix.

Justin Long -- Stephens, Inc. -- Analyst

Okay. That helps. And last question, just real quick on the longer-term financial targets. I know you guys put those out there a while back. Obviously the world's changed a lot. Any updated thoughts around, one, those targets, and two, the timing of when they could be achieved?

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Well, I guess timing got extended a little bit, right. Targets haven't changed, if anything we're going to raise the targets. That's what you do when you start talking about trying to hold a higher percentage of that when you get down to the bottom and you going back, there is -- there is an exciting thing as I said about going when you get down you script down like this. And then you can look at how you're going to grow it back and really dial-in on it.

So targets are still out there, we still want 6% of the parts market, I have looked to see where we're at in COVID world but I know we have gone down, we had grown from 3.8 to like 4.6, 4.7. We still have a goal to one day get to 6% of the overall parts market out there. We stated that, I was going into this year, I was excited to, until COVID, I was excited to prove 30% of in truck sales and ensure really good year, but that didn't happen and in spite of what's going on. I think we're going to end up showing pretty doggone good year given the environment and how we've had to manage it. So we are constantly -- we're constantly -- right now so I'm not -- I can't give you the timeline, how about that. Okay, let's get out of this mode, let's take some of this uncertainty out of here and allow me to hopefully later this year or first part of the next year we get -- take some of this uncertainty, this gray matter out in front of me out of my window and maybe we will be able to give you a little bit of timeline Justin because I don't want to shoot from the hip on something with that much uncertainty after but don't think the goals.

Look, we haven't stopped strategically, how you see all that cost come out, don't think for one minute we're stopping on any strategic investments we've got going on, we have those with run cost and we're still working on strategic steps that we believe will continue to allow us to -- we'll do what we've done in the last few years.

Justin Long -- Stephens, Inc. -- Analyst

Okay, great. I appreciate the time. Congrats on the quarter.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Thank you, sir.

Operator

Our next question comes from Joel Tiss of BMO. Your line is open.

Joel Tiss -- Bank of Montreal -- Analyst

Hey, guys, how's it going.

Steven L. Keller -- Chief Financial Officer and Treasurer

Good, Joel, how are you?

Joel Tiss -- Bank of Montreal -- Analyst

Hanging in there.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Hey, that's good.

Joel Tiss -- Bank of Montreal -- Analyst

Yeah, that's all you can ask for you know.

Steven L. Keller -- Chief Financial Officer and Treasurer

Well, you can ask for more. I do. Go ahead.

Joel Tiss -- Bank of Montreal -- Analyst

It sounds like you were kind of softening up a little bit from what you're saying in earlier conversations about the potential for kind of smaller and medium-sized guys to see more bankruptcies than we've seen before and a bunch of low mileage used trucks come back in the market, is that fair.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Well, given what I'm seeing out there from a freight perspective and miles being driven and stuff like that. And what I'm hearing maybe there is going to -- maybe they're going to weather all the storm. You know I was concerned, you throw a second, doors shutdown out there and all bets are off, OK. You get-you really shut this place now and all bets are off, but with the spot market. Look, the spot market, just did all that this in the last four weeks or so. Okay. It was panking [Phonetic] in May and early June, it's just come back here over the last four or five weeks. And you know I mean acceptance rates are still pretty strong. But you're not -- but they were sound a little bit. So you know right now, there just appears to be more freight than I would have anticipated.

Now that said, you might have some guys that are segmented wrong that may have some issues but talking to the first people that got extensions are making payments. Let's say that. They're making their first payments from what I gather talking to like three different big finance companies, so -- not everybody, but the majority, vast, vast majority are. Now, does that mean they're going to make it all through the winner and well beyond. I can't answer that based upon what's out there. But what I see right now. That's still out there. The only thing that you want to watch out for and they may be coming down because they rocketing still high were insurance rates were up there. But I think if the freight can come back then maybe people whether -- maybe was the extensions in the PPP money for the people who did get it will get them through to the other side, which -- I was a little bit -- but that was looking at the freight market, it was different six to eight weeks ago. Okay, six weeks ago. But it seems to have picked up.

I'm not -- I don't have. I don't have -- I can't see that far out there as I said earlier, it's still uncertainty and it's still a little gray matter out there. But based upon the last few weeks from what I'm hearing, most people -- most folks business is pretty decent. So that may hold over into the small and mid-sized guy, would be my only comment Joel. I didn't anticipate spot rates jumping up like they have here recently some.

Joel Tiss -- Bank of Montreal -- Analyst

And then do you -- are you starting to feel like you obviously been doing this longer than all of us. And do you -- are you starting to feel like we could -- we could squeeze the whole cyclical downturn into one year versus how we usually kind of have whatever four good years and two bad years and things like that, you think the shape of the cycle changes.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Yes, I think that it very much could change Joel. There is no question in my mind, you know the deeper the valleys the quicker you come out of them, that slow crawl down. Remember, we were only supposed to go down looking back what we came into this year somewhere around US retail was going to be 200 [Indecipherable] well now we're going to be in the 150-160 range. So we've taken a bigger hit and if it continues to paces into next year anymore then yeah, there is no question you could squeeze this -- it may not be 12 months, but you can squeeze it in 18 or less, somewhere in there, where you get this thing rightsized back as long -- now look as long as we've got good -- decent economy going on. But yes, because obviously we had an oversupply of trucks. As always, we went out and sold a lot of trucks in 18-19, just like we did in 05 and 06, but yes you can definitely squeeze it an entire -- I've said that to a few folks, it will be -- I'm sure someone will ask me, it will be interesting to watch the used market, that's going to be a big indicator as we go forward, so.

Joel Tiss -- Bank of Montreal -- Analyst

And just more of -- as I said from a bigger picture standpoint, why would you like seeing how great your company has reacted to this unbelievable time, why would you be reluctant to walk away from saying, I think trough earnings are $1.50 or something like that. I mean, no one ever knows what's going to happen, but you've seen sort of the resiliency and the excellence of your company.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Well, I'm going to let you say that. Okay. I'll let the -- we all read -- we all could read the tea leaves. As we get out of this year we'll give you something to write about [Phonetic] won't it and put out there. So let us finish the year out. And we can call this trough and you can take it from there. I'm not -- I'm not wanting to put if he is out there, Joel. And as I told, Jamie I'm not planning after 24 years plus of this to start today.

Maybe one day, I'll be a little senile and do it or something. I don't know, but for now I'm not planning on doing it. So you can read the tea leaves, you can see the results and you'll can prep what you'll can prep.

Joel Tiss -- Bank of Montreal -- Analyst

All right, I'll get you couple more margaritas next time. Thank you.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Okay, make them doubles.

Operator

[Operator Instructions] Our next question comes from Andrew Obin of Bank of America. Your line is open.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Yes. Good morning, Rusty.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Good morning, Mr. Obin.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

And now you and Rush team, I appreciate how hard the entire Rush team work to deliver these results. So, very impressive.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Thank you. Thank you. You mean thank everybody, of course it's not me, thank everybody else, but I appreciate. I'll relay the message if they're not listening.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Just a question, could you just give us more over year run down, a lot of questions have been answered, but could you give us a rundown by key geographies, California, Texas, Florida Midwest. what are the key trends you're seeing by industry and is there a material difference between, let's just call these four regions, right?

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Right. Okay. Surprisingly, California, has held in really nicely. California's held in very nicely given what went on ship, everything is shut down in the ports early in the quarter, etc., etc. They have held on very nicely. Arizona has held on. I would tell you, probably about the biggest -- the biggest hit, which is our biggest and most powerful region and that's Texas, Oklahoma, and the folks that rely more on O&G while they are still very profitable relative to other parts of the country, they are not up to their usual standards right now for us.

When we look at where we derive our earnings from. At the same time there're showing resiliency by holding what we could have not, still posted the results we're posting in and these -- because they were so O&G driven. And we have no O&G [Indecipherable] parts and services under 2%, man. And I remember when it was close to 15 a few years ago. So, that's with those kind of results yet we're still posting not through the levels, but it's -- we're continuing to evolve this region to be more diverse. Okay. We continue to work on that as San Antonio, Dallas, Houston throughout. We've got 24 or 25 stores in the state of Texas. Okay. So, I mean we're heavily -- we've got a lot of stores in Texas, but Texas, one good thing about Texas, it's got a heck of even without oil and gas, it's got a heck of the economy. So, it typically is to learn how to weather better.

If I look up in the Midwest I would tell you that they have trough and have started doing -- we're doing a little better. When you look at Illinois and Ohio and those states. Now there're gradually coming back. Okay, we troughed in April, let's say, like everything else, and, but we're seeing -- I'm seeing -- we've -- I'm seeing some good stuff up there Internally, even with the results of our people that we've got in place up there now, I'm seeing some good results coming out of that area. So I'm excited about where that can go in the future. I think it will maintain. I think it's going to maintain stability better than we have in prior years [Indecipherable] better climb coming out of that. You move over -- Georgia is still tough. There's no question we're still tough in Atlanta, around that area.

And over in the South East North Carolina, Virginia Georgia those areas seem to be -- there're OK but they are having a tougher time getting through it all. But Florida, which started off maintaining strength. I think when you shutting like four, five locations around Orlando, well when you shutdown Mickey Mouse and all that other that goes around there, you have some effect, but yet at the same time they're handling it still pretty well. I was looking at the results for the month of June and they [Indecipherable] good job given. So there, I don't want to say they're maintaining better than I would have -- they're maintaining better than I would have thought given there how -- there's tourism and all that type of stuff in Florida is such a big deal throughout the state.

Not just Orlando just throughout the state. So, I feel good about that. So I hope that gives you some kind of when you talk about market segments I've said, I'm not, when we ever do -- we get oil and gas back, you just, you can just tag on those results, that's all I can tell you when that does happen one day because we've always been pretty deep into that business, but we have had to learn how to diversify the company. And that's the results we're showing right now. So your food services, you guys, most of that -- most like your refrigerated stuff, those guys have been pretty strong. Yeah, you lost two restaurants and things like that, but [Indecipherable] they can't get enough of milk delivered [Indecipherable] on the shelf. Most of all -- our big guys everybody seems to be coming back, now, right.

Where people were in shock, like I said, the small and medium guys were hammered early even though the big guys would maintain most of them as you can see by the results that they posted, but I believe that the market, the other freight market is pretty robust and most people are now projecting to get rate increases next year where you know they weren't -- that wasn't what I read a report the other day the shippers were planning on only paying 0.6% more next year, now, it's up to 2.5 to 3 and I can guarantee the carriers are looking for double that, OK?

As they do the contracts as things get -- as things move forward. So those are good signs right, those are good signs. We just don't need anything stalling it out in overall perspective, and I think we can just gradually keep coming, I'm not going V's with anything like that, if we could it would be nice to see a solid continual march forward and I think it's possible without any outside influences.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

I think in your press release you highlighted that -- the fact that parts and service business was down and was the function of sort of head count in terms of your tax and you also sort of talked about how going forward. Perhaps you could do more with less. Can you just talk about how will you ramp up staffing in the parts and service department going forward. Will it be in line with historical patterns or have you learned lessons that would allow you to be more efficient in that area of the business.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Thanks, Andrew. Well, I'm going to reflect back on a comment I made little bit earlier, I think on the call, maybe, but historically, I go back to say it one more time. Historically, I've always told everybody that we grow gross profit and I'm going to probably spend about $0.50 of every dollar, but [Indecipherable] the investments we've made in the past few years and through the lessons learned in this pandemic now that we have taken it down as when the market grows back we have an internal goal you know to keep it around the third [Phonetic] somewhere between 30% and 35%. We'll go back to costs, back to G&A.

So you say, how do you do it, well it's obviously -- you become more -- you're more multi-channel right, more online stuff right, technology, our [Technical Issue] phone systems and stuff, we're all interconnected throughout the whole country, you're picking off. There is a multitude of things here, OK, that allow you to continue to leverage. You basically do a better job of leveraging off the base you've got and using technology to communicate and with your customer, and that's only going to grow. Well, we are in the truck business, pretty mundane business, doesn't like change. Well, it's like -- this is sort of accelerate where you couldn't go over to everybody's place, you had curbside pickups, you have this going on and you learn a lot of things during the middle of all this and then position with the investments you know you do -- OK, I believe I can -- we can do that and you can map it out and it is not just [Indecipherable] this guy talk because you're learning how to -- like I said you leverage off all your phone representatives throughout the country when one area is busy it rolls over and it rolls over and it rolls over, you may be doing business for you know Atlanta and California or something you know, and it's just a multitude.

I'm not going to get it all of them right now, but all those are cost-cutting, right, you don't need as many bodies in that one area, you're just leveraging that and you continue to leverage and I just -- and you continue to get share, remember you just -- and that's [Indecipherable] the growth side comes from, and then you levers off what you got. I know it may sound a little broad but it's just really that, that's how it works man.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Thank you.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

You bet.

Operator

Our next question comes from Shawn Kim of Gabelli Funds. Your line is open.

Shawn Kim -- Gabelli Funds -- Analyst

Good morning, Rusty. And congrats again to you and the team on the great quarter.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Thank you, John. Appreciate it.

Shawn Kim -- Gabelli Funds -- Analyst

Yeah, no problem. I wanted to switch gears here, just given some of the attention that some start-ups in the industry have been getting, wanted to get your thoughts, your updated thoughts on hydrogen fuel cell technology in commercial vehicles. Obviously, this is probably more of a long-term play, but I just wanted to get some commentary. Are you having any discussions with customers. Are you seeing any sort of customer demand. And any thoughts on timeline for the rollout of these technologies.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Okay. On hydrogen fuel cell, I am not having any current [Phonetic] you know discussions. I mean it's really early and I know there's a lot of value in some people's companies that it will be a few years before they even print the first dollar. Okay. So I'm not disputing its long-term viability OK, and I'm not disputing that we're not looking at how do we conformed about as it becomes relative and continues to become more relative to real-life, real day use. I mean if I was going to tell you anything I as I have told folks when it comes to that, one thing I know, they're not going to have service, are they? And there's one thing I've got bigger than anybody else. And I've got a network.

So I'm always looking to add ways to leverage off of that network and push more services and products, they're working on product, they're not working on this distribution systems, they're not -- all of that regardless [Indecipherable] everybody originally say, well, you got to spend 35% less, well now I'm [Indecipherable] 10 to 20 in maintenance and stuff. So I think all that still to be foreseen and all of these start-ups is one thing they don't have and that's distribution in the service network and we are in the commercial business and in the commercial business trucks can't sit and I don't care how they build them, things will break. So I know I'm not answering you on hydrogen. I'm not the expert, I'm not involved in it.

Have I talked with some people about how we might do some things around it? Yeah. But it's way too early for me to even try to frame that for you. But I can promise you that as we will be when it comes to electric and when it comes to hydrogen we will be -- we will be out there. We already play in the natural gas space and we will play in the alternative fuel space, you can rest assure.

Driven by our OEMs, but also you never know what else we might be able to do given the breadth of our network and the expertise we have and other partnerships and things like that with all -- well there's so much [Indecipherable]. We know the big ones -- there's a lot of smaller players out in the electric space too right now, they really getting -- almost I'm trying to get merged or by bought up but at the same time there are people out there in that space and we are -- we are watching it closely and working inside of it and we're actually working. I don't know if I can talk about it, but rest assured, we're out there, we are -- I'm not looking at the world to stay the same for the next 10 or 15 years either. So we will be involved and it's just a little bit early for me to say how and how Rush is involved in it, other than you can remember this, we'll be driven by our OEMs PACCAR's for sure out and that will [Indecipherable] we are in it. They will -- our medium-duty stuff coming. So we [Indecipherable] they will all be in that space. So we will be in that space with them.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Terrific. Thank you, Rusty. Appreciate it guys.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

You bet.

Operator

There are no further questions. I'd like to turn the call back over to Mr. Rusty Rush for the closing remarks.

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Well, ladies and gentlemen. First off, I want to thank you for joining us on the call today and most importantly, I wish you and yours and everyone all the health and safety, I can. So these are still very, very uncertain times and so just do the right thing. I have spent a lot of time talking with my folks. And if I can tell anybody anything get off your horse and do the right thing, OK. There is such a thing -- and I'm not. We do the right thing around Rush, OK, I can promise you that because the health and safety of our employees and our customers and just our communities in general are the most important things, so the rest of this really doesn't mean a lot. So anyway. Thank you very much. Wish you all the best. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

W.M. Rusty Rush -- Chairman of the Board, Chief Executive Office and President

Steven L. Keller -- Chief Financial Officer and Treasurer

Jamie Cook -- Credit Suisse-North America -- Analyst

Justin Long -- Stephens, Inc. -- Analyst

Joel Tiss -- Bank of Montreal -- Analyst

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Shawn Kim -- Gabelli Funds -- Analyst

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