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

Good morning everyone and welcome to our third quarter 2015 earnings release conference call. On the call today are Marty Naegelin, Executive Vice President; Steve Keller, Senior Vice President and Chief Financial Officer; and Jay Hazelwood, Vice President and Controller. 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. As 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, 2014 and in our other filings with the Securities and Exchange Commission. As indicated in our news release, we achieved revenues $1.294 billion, a net income of $19.9 million or $0.48 per diluted share. In the aftermarket, our parts, service and body shop revenues were 360.7 million, up 5.9% compared to the third quarter of 2014. Our quarterly absorption rate was a 116.2. Demand for repair -- for repair and maintenance of vehicles in operation particularly strong on the East and West Coast, vehicle up-fitting for fleet and natural gas trucks and mobile services drove aftermarket revenues this quarter. In the meantime in an effort to improve aftermarket revenues in customer service we continue to expand our aftermarket solutions portfolio in areas of mobile services, RushCare Rapid Parts call centers and other service capabilities. We also remain focused on increasing our aftermarket sales presence and executing our procurement, asset management and process improvement initiatives. Turning to truck sales. Having outpaced the industry earlier this year, our Class 8 new truck sales remained flat compared to the third quarter of last year, and accounted for 6.6% of the U.S. Class 8 market. Deliveries to the large over-the-road fleets have allowed us to replace the majority of lost energy related Class 8 truck sales. Our Class 4-7 new truck…

[Operator Instructions] And our first question comes from the line of Jamie Cook. Your line is open.

Hi, good morning. This is actually Ben on for Jamie. So, my first question is, Rusty you talked about 2016 retail sales and expecting them to be down more than ACT forecasts. I guess can you provide any sort of order of magnitude, I mean do you expect retail sales down 10%, 20%, just what's the number you're thinking about?

Oh! Well, I'm not calling for a cliff, let's get that straight to begin with, okay? But I would tell you, it's an evolving process right now, we're at the -- we are right in the middle of what's typically one of the strongest part of the selling seasons as people order trucks for 2016. So, I mean I purposely did not put a number there, as I get my arms around. So, I'm not -- but again I'm not calling for a cliff, but we're -- their forecast is [down] I guess an almost 8%. You know we maybe double lf that but not no cliff there is no cliff but it's really a little bit early for me to give you up heart definitive, my heart definitive thoughts on it. You know when we talk in February I feel we'll have some very strong feelings on it at that time.

Okay got it. And maybe just question on the fourth quarter simply, I mean you are talking about stable truck sales for the rest year.

Okay.

I'm just trying to quantify a little bit, does that mean flat deliveries quarter-on-quarter in terms of Class 8 and medium-duty?

Yes, I would say yes I mean stable demand remains fairly flat right. It's not going to be an exact science because of timing, that's the timing that goes on with deliveries a lot of time right. But we do expect stable delivers through the fourth quarter.

Okay, got it, thank you.

Thank you. And our next question comes from the line of John Barnes from RBC Capital. Your line is open.

Hey. Good morning fellows. Rusty just going back to that the same kind of outlook question. If it's -- if the decline in ACT's forecast is more as a result of fleet age coming down, do you foresee less fleet buying and more continued purchasing by the smaller truckers? And if so, does that mean your model is a bit more resilient even if the Class 8 market is trending a bit lower?

Well I don’t know. I see it pretty much across the board John. I don’t see this as the just large fleets or just the medium-size of the small carriers pulling off. I think everyone will be a little more muted across the board from my perspective. I do -- you only have -- the visibility folks have is really truly only to the large fleets right, the large public carriers. We don't have a clear visibility to the other sectors. But I believe that it's just going to be fairly a little more muted across the board. I personally believe that used truck values are going to have a big thing to say a large thing to say as to what as to the replacement it continues to go on right. I normally use to have questions I guess on its way to like get to question, but I'll give you my thoughts on that and to how it plays in there remain a little bit of.

I’ll, that [was in] my next question so writer already come on saying that they were beginning to experience a bit of weaker demand on used truck demand thinking [indiscernible] announcement today they indicated less proceeds from truck sales, used truck sales. Can you just talk about what you're seeing there and what you expect?

No I mean and I won't look at it as strictly as a bandage, remember used trucks there is a big supplies which is always very easy to predict right. I mean if you go back and if you take a look at a typical four year cycle we sold 97,000 U.S. retail in '09, a 110,000 in 2010 and I think it was 173,000 in '11, well let's take 2012, we're still running around a 194,000 U.S. retail, we will guess what? That’s the four year market we're going to be entering into, so, you can look at the supply side, and just like everything else in this country, supply demand will drive the price right. So it will be as much supply-side driven as it will be demand side driven from our perspective so I don't think there's any way that we don’t have softening and we're already seeing some softening in used truck values as we speak. Now again I'm not calling for a cliff just like on new, I don’t look at this as a cliff, I just look at it as a normal market adjustment that we will deal with but it will inhibit the sale of some used trucks right because there will be -- the equity, in fact it won't be as easy to trade your truck if the values have been more addressed. So I'm not sure as to -- I'm not ready to give you a percentage exactly on that either so for anybody asked. But I'd tell you we're pushing towards a year-over-year from my perspective right now we might be off in this fourth quarter 5% on values or so but it's hard for me to predict where we are next year but I do know that there will be used truck value pressure next year there is no question about that.

Okay. And then lastly just offsets on the Class 8 side I mean if Class 8 is a little weaker and medium-duties continue to perform pretty well then can you just talk about maybe medium duty outlook or even from a vocational or municipality perspective I mean are there offsets that you anticipate that maybe can overcome some of the fleet weakness?

Yes well the fleet if you remember from our perspective it's not just all the fleet right we did a great job this year almost about the Class 8 question, we did a great job, I have replaced, if I am forgotten, I think I told everybody about 1,800 units from the best we could -- the best information we could gather for oil and gas we lost this year because of the tentacles that I talked about the going into the Texas Oklahoma and other areas and the organization did just what it's wanted to do, what it was built to do and that's geographically the coastline so picked up weakness in the center of the country right so we are having a pretty decent year. And I am very proud of the organization for that. So -- but I do not anticipate right now getting oil and gas back '16 either. From the best I can tell all that we're seeing some spotty stuff here and there but really and truly it's not going to come back in '16 like I might have hoped if you talked to me six months ago. I don't perceive that right now. And we will continue to monitor but we would love for that sector to come back but it doesn't appear that that's going to be the case at least for the first half of 2016, I'm not going to give up on the back half yet but at least for the first half of '16 we're not going to give that back. The back to your medium duty point yes I'm excited about medium-duty I think there is no question the medium-duty tends to be tied to more of the smaller, besides the leasing companies, when you've got construction and growth going on and I know there is some differing opinions on construction and things like that and where we're seeing it but we're -- we saw nice medium-duty growth in the quarter. So decent, they're probably the best medium-duty margins we've had. And so, now we're pretty silent or solid on medium-duty maintaining next year. I don't look for medium-duty to go backwards I look for medium-duty to grow next year. So, yes, if you're looking for a bright spot, there's one I'll give you right there.

Very good. Thanks for your time, nice quarter.

You bet. Thank you.

And our next question comes from the line of John -- of Neil Frohnapple from Longbow Research. Your line is open.

Hi, guys. Congrats on a nice quarter.

Thank you.

Rusty, can you just provide some higher level thoughts on the parts and service business revenue growth potential for 2016? I believe a portion of these businesses are tied to new truck sales such as up-fitting and pre-deliver inspections. So my question is can you still put up mid to high single-digit same-store sales growth for aftermarket in 2016 as Class 8 down -- Class 8 is down meaningfully, just some light of a lot of the growth initiatives you guys are putting in place such as service bay expansion?

That's the plan my friend, trust me that's the plan. We've got a lot of initiatives where I am not going to see here and go every one-on-one on this call right now, but we have an extreme, extremely focused effort going on right now to continue to drive in the markets, probably we haven't touched from a parts and service perspective. We're making huge investments whether it's our Rapid call Parts centers, or our -- and our telematics solution that we're just been rolling out for the last four or five months continuing to try to keep the customers up and running and giving them a reason to do business with Rush Truck Centers, above and beyond any of the competition. And I've got some other things going on that we are very excited about in the markets that we're going to go after. We probably haven't approach that we haven't approached in the past from a parts and service perspective. So, yes, the answer is yes to your question about growth.

And then just as a quick follow-up, I mean are you able to quantify the growth in the number of service bays you're expecting over say the next 12 months and?

Yes, and let --, yes let me speak to that once Naegelin go quick?

Yes, I can quantify that but I can also tell you the flip side too, Neil I'll tell you both side of the coin. We're going to grow over 200 service bays, if you look here is what we've done this year, we opened up Cleveland earlier in the year, we've opened up San Antonio this week, but we took it -- these stores were triple. We opened up in Cincinnati, we tripled the size of it. Coming online right now are Denver, Odessa, I'm missing one here, which one have I missed? Columbus, oh! Yes, Columbus is going up from 30,000 square feet to 90,000 square feet in Ohio, those were all opened in the next six months, now which should drive 200 additional bays into the dealership, whether that would be service or body, okay? At the same time when you do that, remember this from an [inflection] perspective, you're probably going to take a little bit of a hit in those stores beginning with, right? Expenses start day one, revenue growth comes over a six or 12 month timeframe, right? You don't immediately do the staffing with people and everything else that it takes to drive that and at the end of the day you pay me for absolute dollars. And I don't think we've ever failed and any new dealership we've put in, in the history of this organization. So, at the same time, you've got a little bit of a bubble there, we have never had this many new stores coming online with this much added capacity at the centre in eight months period, but we do. But trust me it's the right thing to do, it's the best thing to do from a long-term growth perspective, okay? And at the same time we continue to look to drive our mobile service solutions. I mean we've got very aggressive goals over the next 18 months in the organization to even add 50% more when it comes from that perspective, okay? So, and I guess we have many, many initiatives from our parts and service growth perspective, out there on the table. We just actually just finished up our senior management conference here three weeks ago, and it was quite exciting to really give the ball to our key managers and lay out the plans for the next five years for the organization. So, that's all I can tell you right there.

That's helpful color. And then just one final one from me, maybe for Steve just, what was the used gross margins in the quarter by class particularly just curious on the used truck side?

You see used by -- you wanted used only or did you want heavy-duty, medium-duty, light-duty in used?

I think for all of them, yes.

Heavy 6.4, medium 6.2, lights 4.7 and used is 10.4.

Okay. All right. Thanks a lot guys appreciate it.

You bet.

Our next question comes from Brad Delco from Stephens. Your line is open.

Hey good morning Rusty, good morning Steve.

Good morning Mr. Delco.

Rusty, you've answered all the good questions but I did have one for you that maybe is a decent question. Can you give us kind of your view, how you expect Momentum Fuel to ramp? What kind of contribution you think that could have maybe more specifically into year 2016?

Yes, I would tell that look I'm still not making money there, okay? I got my first dollar revenue in August. So, that was kind of need. At the same time, the excitement in that market that we're seeing and the interest we're seeing in the product that we're bringing into market gets me a little bit excited. I would -- if it's going to be a contributor be in the back half of the year, okay, we're continuing to our quoting is active, very actively quoting, we're continuing to come online with new -- remember there's many a different configurations here, okay. It's not that for different types of trucks. So we continue to evolve in the breadth of our product and we will continue that as we go forward. With more breadth of products we can touch the whole natural gas market. We're not there by any stretch right now. But I would tell you I really don't want to give you any color on numbers at this time, I might be able to give a little bit better color in February but I'm as confident as I've ever been in the investments that we've made and expensed over the last year and a half and what it'll do for the organization long-term, I truly am. And you just have to trust me on that one that we will be a player in that marketplace given our customer section, way we go to market which is different than any of the competition, remember no one can provide the service we can and the uptime for natural gas customers that we'll be able to across the world, across the U.S. So I'm not giving you any financial color, I hear that but I hope it will be a contributor in the back half of '16 and I'll probably give you a little better color on that in February when we go through the fourth quarter results, how's that.

It sounds great, and then Rusty just a follow up on one of Neil's questions, I know he asked longer term about parts and service and I think everyone understands that's a key focus for you.

You bet.

But looking in the fourth quarter I mean I guess seasonally because the holidays I mean you typically see down sequentially is that …

Correct.

… anything that would change that?

No, I don't see anything that's really going to change it. We continually monitor right. The fourth quarter is always the toughest quarter, or fourth and first probably obviously are always you know the toughest and especially the fourth. We usually do a pretty decent job of managing our expenses in the fourth quarter so I'm looking for that to happen again. I don't see anything outside the normal seasonality where you have a little bit less fewer working days, right, so you know people taking holidays and especially look at how Christmas and New Year falls. People will take weeks off and things like that so obviously when you're working with less technicians you're billing less hours because you're turning less expenses right, so.

Yes.

Most times, but that's the norm, you know we're used to dealing with it, so I don’t see anything really, truly what's going to outside of the normal seasonal stuff and we're monitoring it closely. Trust me this week we had conference calls of guys dealing with all the stores, probably saw a little bit maybe in October you know a little bit thereby it seems fairly confident having an investment end of this month up so October is a big month of the fourth quarter because then you get into the holidays in November and December, but like as I said just reverting back, nothing really outside of the normal seasonal.

And then maybe final question for you, Rusty. Taking a step back I mean you gave a lot of good insight into different verticals, seems like there're still hopefully some room to run on the construction side, housing in particular. Anything that you see that's very concerning to you just in terms of sort of overall economic cycle or anything that you're trying to prepare your business for looking forward?

Well, I don't think there's any question that you know we, we are going into an election year okay, there probably will be some uneasiness in the country. When you speak it about directly I hope pick up some oil and gas, right, next year but it doesn't appear that's going to be the case. You know I mean it will be watching interest rates to see how what happens with the feds as we go forward. Right now I would tell you the last three or four weeks, and I was talking to some of the guys and our reporting on mix of trucks was pretty strong. And it was a little soft about two months ago but it appears to have picked up so we'll see if, you know how that comes all to fruition. We're pretty active, what do we stock here right, we'll stock a 150 to 200 mixed trucks in inventory at all times, but we do right and have in the last year or so. So when you hear there's activity going on and you're still seeing activity at the medium duty level you know that bodes fairly well from my perspective that we would be know -- we'll get through next year. I don't, next year is not going, you know we're obviously with the truck market coming off, we do have other initiatives going on and we hope to help offset. Look, I go back to the first of this year, right, I told you guys at the first of the year $0.50 off well before we start the year, right. So we took it down $0.50 and this organization is going to be able to do a pretty good job of making the majority of all that back through the diversity and how we go to market and then the geographic diversity we have, and the new initiatives that we continue to put forward, but I don't see anything that's cliff again, again I'll say I don't see a cliff out there, I just see some softening but you'll be watching rates and we'll continue to watch everything right. Just continue to keep your thumbs on and your fingers on the pulse on everything.

No, I appreciate that color, I was just curious to know if you thought lighting up inventories or anything with that was sort of in your strategic plan in the near-term?

Well, we'll continue to watch, I mean we'll watch, we'll manage our stock sales, I'll be honest in the last 30 days our stock sales were softer than they were in the prior few months. So don't think we're not managing that but that's just part of running the business okay, where it's not like they were a cliff again, but they might be softer by 15% right, you know 10% to 15% so that's just indicative of what I've seen, right. But you know there's some good things and there's some bad stuff and we've got some great initiatives going that we hope to offset some of these things. As I was, I was telling to you guys like it is, and there's the good and the bad, which you got to listen to all of it to inform an equation to watch the results of the organization next year and I think you'll be happy.

Great, well thanks for the time Rusty.

You bet yes.

Our next question comes from the line of Rhem Wood from BB&T Capital Markets, your line is open.

Hey good morning.

Good morning, Rhem.

Rusty, can you just talk about the service technician shortage, what are you doing to attract technicians. One of your competitors mentioned that they had outsourced service in the quarter because they didn't have enough technicians. Did you guys benefit from that?

No, but tell them I can give my -- you want my number?

I wouldn’t know, we can have it.

We go 48 states, we'll really move out of country if they need help. That's why -- you're going to see still over 20% of my technicians are mobile and comparable brand is 32%, and we're growing on an [indiscernible] side. So, somehow we're able to recruit technicians. Now, probably one of the major focuses of the organization is retention with technicians. Not just recruitment, but retention, right. So, there're two sides to that coin right. If your retention rates get better then you don't have to recruit as much as you hope. So, we have some initiatives going on, we're able to fill the leads, we would probably if I could, could probably handle 10% more technicians, especially we'll find -- we're going to be testing a little bit here with these new shop opening up right. There'll be certain areas of the country that officially get tested pretty good with all those new shops. But I was talking to the ones that we were talking to one San Antonio yesterday right now they feel pretty confident that they can fill it. So, I mean we like to believe that when you look at our benefit package, you look at the other things we do from a recognition perspective and management perspective of handling technicians. We do a pretty, done a good job of keeping it right, just think about retention, I'm going to dive into something here real quick. What we've done from the last few years, if you go in the -- we opened Ohio, all those new stores would go, there are heated floors and everything else. Do you think anybody else does shop like us? I better bet you're wrong. Going to Texas, everything we build has got air conditioned shops okay. So, it's a multi-faceted approach, there is not one answer to recruiting technicians, and there's not one answer to the technician retention. But take there's many facets to it, now I won't time to go into all of them here today. I just want to give you what we've done from a facility perspective. When it costs me a $0.5 million or $1 million -- have a $1 million to air condition the shop, not everybody is going to do that. But our view is long-term enough and understanding that it'll give return on that investment, when it's a 105 degrees in Laredo, Texas, or some place or in San Antonio and you got the only air conditioned shop in town, where would you rather work right. So, that's just one additive of many things we do, and we don't worry, we work with the tech schools, we do all of these things, I mean I don't have time to go into them all right now, but there are many, many things we do to give ourselves that best technician workforce out there in the country.

Thanks, it's good color. And then as the Class 8 market turns, I mean does this give you the opportunity to get more acquisitive, how many big opportunities remain and then what areas are you targeting now?

Why would I tell you that? Okay, that's for me to know, and I'll tell you better when I do it. Of course we will always, look I'm always looking at possible acquisitions okay. And if you take a map to set it out and look where we're at it, it shouldn't be that difficult to figure out where we might want to go. But it takes time, now just a willing buyer takes a willing seller. And we did a couple of acquisitions this year that I'll call tuck-ins. So, nice acquisition up in Illinois and nice acquisition really pretty much gives us coverage all throughout Georgia, there are out sellers in Georgia this year. But they need to fit and with the growth of the organization the areas that you can go into to continue to shrink right. So, and the market has been good. So, it was very difficult for someone to most people were making money. So, we're going to continue to be opportunistic and look where opportunities arise and sometimes when markets do go down a little bit, we've shown the ability to have the opportunity to do more acquisitions.

Okay, fair enough. How many -- can you just give me how many units, the oil and gas business was off in the third quarter, I think it was 1,800 for the year but the third quarter and then was the Navistar business a drag for you in the quarter?

No, it made money. Okay, it's never done anything than make money.

Unit wise was it down?

I'm sorry?

Unit wise, was it down?

I think, it was 1,300 fleet or something in. 1,400?

1,399.

1,399. Okay we're 1,399 Class 8 units. I believe when you look back to Q3 last year, that was probably -- we've was about 1,400 last year, so it was pretty flat with Q3 of last year, okay. So, it seems they are stabilized in that area when you look at where we're at. So, there's no drag, there's only growth on that side of the house given where they're coming from, okay. I look at that as one of the largest upside opportunities in the organization right. You're coming off of the issues that we are dealt with three years ago with product that was out there. And from my perspective regardless of what other people may think, there's only upside right. And if we continue to make investments and facilities and upgrade all that also from the Rush perspective is how we represent that brand like we've always done with the Pac or Peterbilt brand. We're going to have more opportunities to sell more an average truck product as we go forward into the markets we're in because the further away we get as I will say from the -- further gets from where we were from the MaxxForce engine technology -- with the Cummins engine and the M13 with Cummins SCR and it's performing fine in the field. So, we're getting nothing but good reports on it so I think the upside in that organization is one of the most exciting things over the next couple of years for truck.

Okay. That's good. And then you talked about medium-duty, you talked about medium duty, but light duty was off a little bit. How should we think about that next year?

Light duty doesn't really matter of box, we’re talking about 300-sub, I don’t know, 300-sub to 300-something else. It’s not enough to worry about. We only telling couple of stores than couple of our four stores, and it is very in consequence when it comes to the overall it’s just sort of -- it is just really necessarily feast of what we do. The medium duty business and that Class 8 business we should stay focused on.

But, is that an opportunity for you guys, I guess, is the question?

No not necessarily though. Only a couple of our four franchises, there is different commercial franchises. Half of that, we have three different times not only to get it all out of the commercial franchises, but they have about 60 some-odd in the country, and we own about six of them right now. And some of them were all the down to 150s and the edges, it’s only had couple of three of those we have, the others we have maybe 250 and up. And in those areas where we have it, we always have typically we have a [operable] store or an international store. And it almost becomes a service to customers, because a lot of customers that have medium duty and heavy duty trucks run the light duty truck. So we’re not going out and competing with the auto retailers, if that’s what you’re saying in any way. That is not the focus of our business. It’s more compatible, good to have and a service to a lot of our other customers in the medium duty and heavy duty trucks.

And then last one Steve, can we share the same store absorption ratio?

The same store absorption ratio, yes, for the quarter, same store was 116.6.

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

It’s actually Richard Carlson in for Joel, how is it going today.

Well, tell Joe I miss him, it’s good.

I will do it for sure. I was hoping that I can get you to quantify a few things or maybe just more granularity around the energy impact there. You guys are pretty flat year-over-year. So, someone who does noticed where kind of looks like you’re hipping up with everything, but you have improved an awful life in other areas of the business. So, I was wondering if you could quantify what the impacts been so far and where are some of the biggest pieces that you’re seeing that catch up?

Well, when I went into the year, I think someone asked question maybe about probably getting around to it, right now, I said Q2 through Q4, we were probably only about 1,800 units and look these aren’t exacts, I mean we’re dealing with the pinnacles, it’s not just the oil service companies we’re talking about, I am talking about Class 8 sales and we’re talking about part and services and we’re separated too. So it was probably 500 units in Q2, 600 in Q3 and probably 700 in Q4 to the best of our -- the best we could analyze of our income, so we’re probably about 600 Class 8 units. I really can’t quantify what we lost in medium duty in the Texas and Oklahoma areas that was tied to oil and gas. But it wasn’t as dramatic but there was some. We made that up as I said with other types of sales I mean with more fleet business. So we made that up, we sort of kept it flat. As I go forward, we’re going to at least picture, I don’t have to be -- I don’t have oil and gas in there but there is the comps will not I won’t have to overcome the oil and gas losses of ’14 and ’15, we wanted to overcome that in ’16, a little bit in the first quarter but then once we get into Q2, there won’t be any from a truck perspective. From a parts and service perspective, there is no question that we’re starting, we’re feeling it. Our mobile service is still pretty strong but the overall in-shop business is still difficult because there’s so many less rigs working and so much less activity going on. But it hasn’t just fall into zero, which if you have talked to me in February I might have been little concerned about where it was headed but it seems to have taking it’s often and fortunately if the organization in the coast lines to pick that up. What we have lost in parts and service business in Texas and Oklahoma, and somewhat in New Mexico and some Colorado, we picked it up from the coast lines and then other parts of the Company. So we feel good about that. It’s fairly flat, parts and service things store to be honest with you. But it come to in a whole lot worse if we have to pick it up in other parts of the country because we’re feeling effects, there is no question in the oil and gas areas. But again, they’re still very profitable, just as profitable as they were.

And I guess that’s, I guess one other question is that you lost a pretty profitable those 1,800 trucks are more profitable. So, you’re seeing maybe there is some of the better mix there in the truck, because…

We don’t have the upticks to go on. So my margin is up. If you look at last year, the biggest difference and you say well your flag this is what you may have less. Well, the biggest difference it is the margin perspective because I don’t have all the up-bidding that goes into it. So I lost all that and that’s the biggest difference year-to-year, you want to get in Q3 and we’re not, we’ll go year-over-year and now sequentially, year-over-year it’s going to be from a margin perspective on Class 8, our medium duty margins but our Class 8 margins were up because we’re don’t have updating and so again to those smaller guys. We do a lot of work for, when you’re doing over the road truck, you don’t add much stuff to it. So that changes the margin mix.

And then as far as the SG&A as an SG&A impact in there as well, because I guess little surprised to see that being up 50 basis points this year, you’re working on a year-over-year basis.

Well, you got to separate, yes, you got to separate G&A, we don’t look at it as two separate pieces because the piece is a variable piece and then you've also got acquisitions in there too. So from a same-store perspective we're at 3%, 3.5% on G&A. So that's pretty decent, to be honest with the all the investments we're making right now.

Yes, sure. And then further out you know if the acquisitions slow down you guys did an awful lot in the past couple of years you know, can we see some potential share buybacks coming?

Wouldn't rule anything out. I'm finishing up right now this hundred and something plus million dollars of facility investment thank goodness over the next oh four or five months and by that time we're going to be paying cash rollout. So we’ll be done, and by the way that should take care of most other than some reverbs and stuff like that. That should take care of the organization is the way it fits right now from a facility perspective for a while, these were just necessary expansions and rebuilding on new storage that needed to be built. So don't rule anything out.

Got you. And then just last question around pricing both on new and used you know, I've heard a lot about a lot of your competitors across, across the country worrying about having too many new rigs sitting on lots right now and trying to reduce that. I am wondering if that's going to be some pricing there and then same thing on the used side, if we're starting into that point of cycle where we're going to start seeing some downward pressure?

I wouldn’t, the new side doesn't bother me as much. We feel it's fairly comfortable with our inventories, I mean we manage them pretty hard all the time okay. You'll see our new inventories if the stock sales start to slow down and we will adjust and slow down our inventory levels but I don't feel we're out of line for where we're at right now. Our turns about where they have been, our turns haven't changed a lot, so unless what you're monitoring all the time which turns are. I would tell you that on the used side, you know, I would be watching this fourth quarter, I don’t know there may be some, there may be a lot of used product we have dumped out there which could affect values. It wouldn't surprise me at all. But we're always on top of ours and making adjustments and monitoring the market all the time. So we'll try to manage our inventory like we always have in past pretty good. But I would imagine there's some people it might be way over inventory right now. And so you could see some folks dumping inventory which will affect values as we go over the next 90 days.

Hey, thanks guys, best of luck.

You bet.

Our next question comes from Andrew Owen of Bank of America Merrill Lynch. Your line is open.

Good morning, thanks for fitting me in guys.

Well, Andrew, there wouldn't be a call without having you here.

Oh, there you go, great execution, congratulations. I know it's not easy in this environment. Just a question in terms of what you are hearing from your energy customers because I think one of the concerns we have is that a lot of activity in shale has been aided by access to credit and the view is that some of this credit might go away into second half of the year. Is that a concern, was your customer base that, their working capital might get pulled?

Well I think, yes, you better believe it is. Okay. Given you can read all the banks and the financial institutions and what their exposure is to O&G, so you better believe that's the concern. That's probably why my concern here, like I said six months ago I was looking forward to getting the oil and gas coming back up a little bit in '16 and for sure it's not going to happen in the first half of the year and even for the customers that don’t need that much credit, your large service companies. I don't think anybody's cap numbers, Cap expenditure numbers are going to come back. I just don't see it in the for sure the first half and it would take some type of, some type of event that you can get it back in the second from my perspective and I think it's going to have to be stable. It can't be like it was earlier this year, we almost thought you'd get a bounce back in all up 60 and everybody starts getting a little bit excited and then the thought comes, it's going to have to stabilized for some period of time. And I'm not sure what that period of time, because I don't own an oil company, but will they start making investments. It'll have to be stable for a fair amount of time I can tell you for people to start making investments again, so we'll just sit back and watch and monitor it very, very closely like we have been for the last 12 months.

Let me ask you sort of a two part question. So first you didn't want to talk about in a lot of detail about '16 but I'm going to ask you a question about '17. So do you think given where we are relative to normalized demand for trucks? Do you think we could see another year of decline in '17 and part two of the question, if we're faced with a two year decline in new truck sales, can you still grow your parts and service revenue in this environment?

Yes and yes. I would expect '17, again it's not a cliff, okay. Look if we go down to 220,000 I'm just pulling a number out there for '16, that's a good year, okay. We guys, folks lose sight of the fact, but that's a good year. You know everybody wants peak all the time, well the world doesn't work that way. So you know, so if you go to 220 and you go to 205, I mean I'm throwing numbers out at you. I'm not here to get, '17 is way, and I don't get paid to come up with that number yet, but I don’t see any cliff out there and by the way if the average is 200 and you do an average a year is that terrible, from my perspective, no. And does that, what drives the parts and service grow through opportunities, you better service grow to opportunities you better believe it, we have initiatives going on and we're going to grow that business. I'm going as a non-traditional competition and I'm not going to take it any further than that -- just let us execute. We do have runway and we do have room for growth and we're going to do it in the parts and service side. I've got this huge asset base which I believe we've got a larger asset base than anybody does from a dealership perspective or just facility perspective and we're going to leverage off well.

Our next question comes from Bill Armstrong from C.L. King & Associates. Your line is open.

Good morning, gentlemen. Rusty about the leasing margins are about 10.7%, I think on the last call you were talking about rightsizing the fleet, if one of you could update us on that progress?

Just came back to talk with these folks yesterday. We're getting there, again it had lot to do with one area of the country. And we have that fixed, we're -- by the end of this month we'll have anyway -- by the end of this month we'll have that area fixed and we're headed in the right direction. Leasing margins are going to come up. So, we just had -- have one area of the country which I’ll be honest with you was Texas, that we got hit on earlier in the year, we had right-sized our fleet. We've done that, we had to freight out at couple of customers and update their product and we have and we're finishing that up right now in this month. And I was talking with them yesterday the rest of the portfolio is the best here we've had with our leases. So, I feel really good, they know -- we know we got to get to and we're not pleased about what we deal with but it was a hand where we dealt in and we've got it fixed and head in the right direction. I think we've done a nice job over the years and last few years we're growing our lease fleet, maintaining our margins and we'll get back in line, I promise you in '16.

Okay that sounds good. And then one other question on your new San Antonio Rust Truck Center that you opened it, is that a replacement for an old facility, can you remind us or is that new capacity?

How about if we added it to, okay. And difference than some of the other ones, we had bought -- we had 12 to 14 acres next door that we purchased long time ago. That when I was young and so we took that and built another 90,000 square feet I believe right next to it. So, we're going to utilize both facilities. So, we'll have -- but we also as I mentioned I think in the press release, we also -- that's where our headquarter our Rush Crane and our Rush Refuse to folks and all those folks are and our Rush Towing folks they're all headquartered there, Rush mix their folks also so, it will give us more space for our leasing company up there and also for those divisions, plus we'll have a whole lot more base. So we'll give up some of the old facility to them and then we'll keep some of it, plus we have the 90,000 square feet and that one wasn't 45,000 square feet if it was that. So you can tell the sizes, they'll be huge but we're very confident that we'll be able to continue to grow our business. As I said on these new stores we'll take some of the sourcing hits some of the areas immediately because expensive start day one, but then you got to ramp up but as I said I don't think we've ever had a fair view yet and come June, it'll be 20 years we've been public so.

Our next question comes from Jonathan Chin from Private Management Group. Your line is open.

Hey Rusty, hey Steven. So, kind of delving back into the international dealerships, I know flat units year-on-year, I was wondering if you can -- stock about units losing within for traffic and order book I know you touched on it in the past, I just want to get an update there?

I would take activity.

I was just talking with you guys said where these conference call activity is the best it's been. And I want to say that it's just not the huge leads but it's the five, the 10, the 15 to 20. Those are things for -- that took a long time because the fraction is going. Now of course the biggest problem, if it's not a new conquest customer is ready to deal with deal MaxxForce engines. So, we have to continue and try to work our way through it, but the new product that we are selling is good, our backlog is I want to say it's strong as it has been or better it's continues to improve, our backlog on those truck side continues to improve and so we feel good about what we're doing there. And at the same time, we are having to -- remember it's very difficult from a personnel perspective, we took a lot of hits, because it was hard to keep sales people back to three or four years ago when you were dealing with the MaxxForce engines they would ring up. So, we're making a lot of investments in personnel and things like that, it's a multi prompt approach to do that. You got to give people back better, if you lose some of your good people during times like that because it was difficult. So we feel good that our backlog on the international side given at the press levels it's been at unlike probably on evitable side, our backlog will continue to grow. So, hopefully we've offset some of the market driven, the overall market driven hits that will probably be from a backlog perspective taking on the other side of that.

Our next question comes from Brian Sponheimer from Gabelli and Company. Your line is open.

So beginning with some pain in the Peterbilt side just given your footprint Peterbilt side just given your footprint in the oil and gas side. Navistar obviously has its own issues. I guess if you can provide some perspective on the international side of the house going to market now versus where you were a year ago. You just talked about, based on used truck values, based on maybe the product assortment that you’re able to go to market with and I guess why you’ve got that confidence?

Well, I mean, I know sometimes it’s difficult when you look at where they’re at to have that confidence. But I believe that the marketplace, demand, a fourth manufacturer I’ve always spoke that way, that’s our investment is there. Unfortunately we’re adding to the MaxxForce issues, we had to deal with. Our confidence level is good as it’s been. We’re finally getting some breadth in product. I think we’re finally going to be able to get back in the construction market. We’ve been out of the construction market for a while. We’ve got new launch going on right now or I know at sometime I don’t know the exact time, that we’ll be able to get to stay into the more heavy all the mix of the business where we could, we couldn’t go even after those, you won’t see it. Well, they’re not the big markets we know but they’re very important markets to us. And we haven’t had that ability to do that. So, breadth of the product will continues to increase. When it comes to dealing with the MaxxForce used engines, it continues to -- we're just going to have to deal with it. Values, it’s not going to help given the overall state of the use market, it’s not going to help MaxxForce values but nobody’s value is going to be up. So the only good thing is it depreciates another dollar everyday on someone’s balance sheet, so hopefully the values can, as in my own simple way, well, I would say everyday that goes by hopefully it depreciates $2 in someone’s balance sheet and only $1 in value to continue to close that gap. So, it can’t get worse than what it was, Brian. It may look bad but it can’t be any worse when…

That’s terrific color. And then I mean I guess then on just on the Peterbilt side of the house, is the weakness that you expect just really only on the markets that are exposed to the oil and gas side?

It’s bad than what the normal what I think normal was, which I don’t know, there won’t be as many over the road trucks still next year either. I mean so you’re going to take, I don’t think we’re going to take anything outside, we’re just going to be with the market. We have, over the roadside, we’ve got some nice new Conquest customers, and I am not going to go into that, we have this year that I think they’re going to continue to purchase with us. Next year that I’ve got, whatever their plans are we’re going to participate in that on the Peterbilt side. I don’t see oil and gas coming back, our revenues business looks extremely good. and I am hoping lot of this activity I talked about earlier from a construction perspective, because this is the time of the year where you really get that activity going on because people, it springs-springs, people like and they’re building houses and moving stuff around, that’s typically where your delivery most of your mix and lot of your Class 8 construction trucks surround that time frame. So as I said I haven’t, it’s not closed by any stress but there is activity that’s always a good thing. So, we feel fairly confident I just don’t think we’re going to get oil and gas back and I think we’ll be just doing side of the market only, over the road stuff. And if we’re doing our job maybe we’ll make some of that up like go out there, buy doing a couple of more Conquest accounts because trust me we’re working on them. But I don’t want to promise something than to I don’t have in the bank for you at this moment. But hey if the -- we're also not going to fall apart next year but we just had a peak year. Let’s realize that this look back I mean it’s about 290, we’re going to 267,000 and that’s the difference, 290, okay, that’s less than 10% difference. So, as I told you all over the year, I’d rather have this year 230 or 240, but I can’t help what the market did, so I’d rather have you, but it wasn’t what it was. I think there is plenty of capacity out there. I am sure lot of folks [indiscernible] this week, truck load capacity and we know they’re not hurting for that right now.

Always appreciate the color, see you in about 10 days.

I was going to tell you Brian. Look forward to seeing you, and tell [Mario] look forward to seeing him also.

We’ll do.

Thank you.

Our next question comes from Art Hatfield from Raymond James. Your line is open.

Rusty you’re probably wondering if I actually have any good questions…

Arty, you’ve always got a good question.

That pretty all the good substance been taken. But I just want to clarify a couple of things. So on your energy exposure you can’t get worst on the new truck side than you are today. so you see further downside on the parking service or is there a lot of risk there or how should we think about that going forward?

Good question Art, I monitor it closely. Yes, there is where you say [can’t] allow to you as risk there. But I still don’t believe it will be clear. There is still things going on, I think what we have seen, I don’t want to -- I mean not going with here, but what we have seen is that we some of the updating and all that no question that’s going away, okay. But from -- as companies have had lay off some things like that they maybe outsourcing some stuff and we’re participating in some of that outsourcing, right. So it's not on their payroll, but we can be used as maybe kind of basis. So I think that has bought some stability to it. But you're always at risk in the oil and gas business because we’ve all seen it go from the peak of the mount or the bottom of the valley as long as they are out with those born and raised in Texas, so you're always a little fearful. But right now I think that business model we have going to market we’ll help those areas are maintaining. We’re actually if you go to the first year our mobile prospective were pretty flat if I am not mistaken. Right now we actually get up a little just maybe a smidge down, but I mean given where I was in February when I was talking to you, I am pleased with that and monitoring it daily and hoping it maintains.

Great. Just going to Class 8 trucks and the average revenue per tractor that you sold in the quarter was kind of lowest level, I know so much of that is mix related is the mix kind of getting stabilized or there before the mix gets down [indiscernible] on price?

No I think the mix is getting stabilize, once we got through all of the oil and gas they had all updating and we put on $25, $35 up pits that’s over with sometimes -- I would say should be fairly stable from here on now.

And then finally Rusty as you mentioned you’ve grown up with these oil and gas cycles. Can you -- and I think everybody misses this point a lot with your where it is today versus cycles maybe 20 years, 25 years ago. Can you really -- can you address kind of how different the company is today than back then and how better you're performing now than you would have if you hadn’t?

Arty, it's not even comparable, okay. I mean I take folks back in never may give this when I met investors in bulks, I take folks back to 1999, well it's something like 16 years ago, right. We were at 79% absorbs, 79, okay, always -- so we want close to 100 in ‘20 now, it's parts of the service other than 2009 and even here was more stable than drug sale it allowed us to still maintain probability and hopefully those high anymore, well I never have to see another [outline] see one of those, the quality of earnings in the organization it's not even comparable. And then when you look at the markets that we focused on that we go to and where our investments are it's a -- its bring stability inside of always what about this up and this down, is down, is down, the stability did brought by where we focus our investments on in the markets that we focus on compared to where we were back in those days is not even -- an example on those days, 65% of our gross profit, roughly 65 give or take two points here, I didn’t look at what it is this quarter came from the sale of trucks. So it's 35 with parts and service, now flip that around that’s where you're at right now, I mean there is nothing more compelling or telling about the change of the company than that and that’s it whether it was last quarter or quarter before it may leave a couple of points here or couple of points there, but it's always in the 60s from parts and service and always in the 30s from trucks. Well we know which one is more volatile don’t we, I like to think we do and that’s obviously the sale of trucks. So that’s -- you're not totally isolated from it, of course not. But it's through those performance, at least I’ve got at least I am in sub zero close instead around the basis. So I could whether the [storm] a hold lot better, okay.

But I don’t want to see you [indiscernible]. Hey two quick questions on that and I guess I can go back and run the math, but I hadn’t done it, but do you Steve by chance know what the earnings this year would be, if you are only running at the 79, 80 conversion ratio?

No, but I want to look. I do not have at the top of my head, I am sure we can get you that number. But I will be afraid to pull the covers unload.

Well theoretically hopefully you're never going back there, so it shouldn’t be that scale.

Look you remember in -- or 2009 I didn’t think it could ever happen, let's talk about it. We took a 25% hit in parts and services, I’ve never seen that in my life. But when we took a 10% hit in sourcing from 106 to 96, so we made up 15% of an expense cut. So we managed to stay profitable in spite of everything, we didn’t make it much money, but I always promise you folks money and we did every quarter, I mean I got a couple of stands but we made money every quarter. So thanks, but we've made money every quarter. So, now you look we'll go fast forward, we're up another 10 to 15 points from where we were at that time, so we further insulated ourselves right from where we were then.

One last one Rusty and then I'll let you go. Is there any reason or how should we think about 2016, we can all make our own assessments on what we think Class 8 market does, but what are your thoughts on what your market share should do in 2016?

Our market share should stabilize in the 7% range and if possibly we -- I don't see any reason, we were six-six this quarter and -- but we got a numerator and a denominator. I don't see our sales going to -- I don't -- if the market goes down 15 to 20 points, our sales better not going down 15 to 20 points I'm telling you that right now.

So, you think you're set up to outperform what the market does?

Yes, I do, because like as I said there's numerator and denominator, a lot of this was big stuff, it was born out there and we always tend to -- plus remember, I think as we have continued to get further down the trials and tribulations is a Navastar, that size should grow forth, so that end -- I think we'll be further insulated on the other side of the house given our go-to-market segments diversity, geographic diversity that will be in pretty good shape.

One last question that I came up when you mentioned Navastar, they have got the JV with Volkswagen on engines, just the troubles of Volkswagen send you at all?

You mean General Motors or?

I thought they had a JV with Volkswagen, Navastar?

No, that was with GOOD MORNING.

I'm sorry, my bad.

No worries Arty, but we read your article.

Our next question comes from Barry Haimes from Sage Asset Management. Your line is open.

Hi guys, thanks so much. Rusty I had a quick follow-up on the used pricing softening and you mentioned the supply side, but my question relates to the demand side, if you look at truck load rates, the place where you really seeing the softening -- it's in the contract rates, but it's the spot rates -- where the small medium guys tend to drive and then you look at who buys used typically would be the small, medium guy, and of course Peterbilt may be has a little bit more exposure to the small, medium versus the big fleet. So, I'm wondering if any of that rings pretty or you're seeing anything like that on the demand side of the used as opposed to the supply side? And then one last question on it is to the extent that the used prices have come down over the last month or two, when you look at Peterbilt versus Navastar which you say that the magnitude of decline has been some more or is there is a difference between the two brands? Thanks.

Well, obviously when I said that, to me the supply side was going to be the biggest driver, is there a demand side? Of course there is. And I understand that a lot of those smaller contractors that buy used typically go in -- have more spot type stuff, but through September and I don't have October's results yet, our demand was still steady. We have not seen it, I mean if it's going to hit me in the next month or two or three, call me and I'll tell you. But right now I'm not seeing the demand side, it may not be, it's not maybe, it's fine, it's steady, let's just call it steady. We haven't seen the 25% fall off in demand and used. When you look at our deliveries, they're in line where they have been really. So, now I expect those to -- I expect to maintain that, I might give some margin pressure to make that happen. You might not see 10% margins, I might have take a couple of points of margin here. But that will make the adjustments we need to keep that our demand moving. Remember, I have to sell used trucks, because I need to sell new trucks. That's the engine that drives the train. So, that'll take a little less margin to sell the used truck, I will. I will road drive our people to do that. So, always keep that in mind that we're not just a standalone used truck organization, I have to sell you trucks, because I need to trade trucks and sell new trucks. I'll move the margins and now we'll push the margins where around as we need to with the sales force. So, I wouldn't look for -- at the total number of units to just drop through -- margin might be hit, but generally mostly our units just drop-off 25% or something like that. As far as value, it's pretty across the board the same. I mean it's hard to compare anything what we had to deal on the MaxxForce side, because that's been -- but when if I compare here with the other brands, it's going to be a market adjustment for everyone, not one brand right now I don't see taking a more hit than another brand to be honest with.

Our next question comes from Ted Wheeler of Wheeler Capital. Your line is open.

Thanks for taking my call. Hi everyone. I want to circle back on a point you made, you didn't wanted to be specific but on the parts and service initiatives you're going after non-traditional markets, what kind of an expansion in the search market that you're looking at when you talk about there, I think you just kind of give the perimeter, how much more market you're going to be addressing, when you do this?

Yes, they're all my secrets, but no, we're going at -- look at a truck, let's step back a minute looking at truck, a truck is still loading truck. A truck is still more than 50% non-proprietary part, so which we call all makes business. So the opportunity obviously persists from a parts perspective on that side. If you want to look at the market, let’s take the parts market. Do you realize that of the whole parts market, we are 4% of the parts market, 4%, about $26 billion deal -- $264 billion, $26 billion deal, and we’re $1 billion up to $1.1 billion, so on 4% but what if I can make that four six. That’s a huge jump. So that’s what I am talking about when I look at it. And so I am not going to sit here and dictate where and how and how we’re going to go about it, what we’re going to do. But obviously that’s opportunity.

I was looking to the magnitude of the pursuit?

Well, the magnitude of the pursuit is just like I just said, and I think I gave you the flavor right there. And the parts market will continue to grow over time and there will be inflation and you can look at everybody’s studies, it tells you how large the parts markets will be. And then it’s just the matter of timing.

Yes, that was next question, are you going to be doing this gradually fairly soon, or…

There has been some, but we’re going to -- the initiatives will start and we’ll see the success rate as we go forward but it’s not going to be some that happens in one year or two years. But over a time frame when single digits I would hope, I really don’t want to get into the exacts of it all right now. We’re still -- we're going after, we’re going to grow our parts share just like we focused on growing our trucks share, we’ll probably start to calculate our parts, our percentage and communicate that to the street where we’re at from a parts perspective, communicate those numbers and keep you informed, so where we’re at percentage wise in the overall parts market.

And I’ll look forward to that. Thanks so much.

We have one final question from the line of Brian Lee from Private Management Group. Your line is open.

Thanks for taking the call. Last question on the Navistar side and I do appreciate all the previous color. Obviously, you knew it wasn’t going to be a straight line and immediate market share recovery. But compared to your expectations year ago for the brand, how is international performing? And just on your expectations.

Well, there’s two ways to look at it, and I’ve got an all company call, I got to get on here in a minute myself. So, there’s two ways if I’ve got any voice left to give color about whole organization and what’s going on. But two ways to look at it, market share and how do I feel about the product from my perspective. Market share wise now I was hoping to be a little better, a point or so better than where they’re at. The only good thing as I said you can see the last couple months they have their order intake has gotten better. So I hope I am not ready to go ahead and trim line yet, but I would hope that that would continue as we go forward, but that would continue. From a product perspective it is probably better than how we’d expected. Now that we’ve longer times to run, to commence power and the N13 power and the product and some improvements they are making now that they’re able to not to spend 90% of their money on engines anymore and they can start to spending money on products from an R&D perspective. We’re going to make some headway as I said coming out with construction product here right now and others in the pipeline incoming. So I am pleased with that piece of it a little bit. But the headwinds continue to be from a market share perspective, continue to be the hangover of the use, that’s the biggest thing you do. And that’s not going away but hopefully it continues to less than hopefully we’re halfway through or something along those lines of what I am thinking of dealing with this. So the light into the tunnel is sun shine I am hoping when we get there. So we’ll continue to work it. We’re still profitable in that business, don’t ever doubt that. But the upside for the Company is lot larger profitability as they try to regain share and get back and build confidence into the marketplace which they are doing would like a little bit more weaker, but sometimes it’s harder to tell with this 100 mile/hour hurricane winds and like, and that’s what trying to deal with the old MaxxForce engines is that light. But we’re dealing with it and they’re dealing with it.

Thanks for the color.

And Mr. Rush, I am showing no further questions.

Okay, well that’s great. Well, I appreciate everyone’s involvement this morning and we look forward to talking to you, I guess, it will be February when we do Q4 release. Thank you all very much.

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