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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to the Rush Enterprises, Inc. second quarter earnings release conference call. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions]
I'd now like to hand the call over to Mr. Rusty Rush, Chairman, CEO and President. Please go ahead.
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.
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.
As indicated in our news release, we achieved quarterly revenues of $1 billion and net income was $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 economic 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 right-sized 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, and including our online parts ordering and web-based communication system, enabled 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 to 50.5% from the second quarter of 2019. Our truck sales accounted for 5.2% of the total U.S. Class 8 market. Our results were down significantly, as we expected, due to the COVID-19 pandemic and an industry-wide shutdown in Class 8 truck sales. Several of them without 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 U.S. Class 8 retail sales forecast to 159,000 units in 2020, which is up significantly from ACT's previous estimate.
We're seeing increased quoting activity, but our customers still remain somewhat hesitant due to uncertainty in both 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 through 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 easily start by purchasing used trucks, which is an encouraging sign.
In medium-duty, our Class 4-7 truck sales were 2,331 units, down 40% year-over-year and accounted for 4.6% of the U.S. market. These results were primarily due to an overall decline in activity 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 4-7 new truck orders are not as much as we had expected to be. ACT Research is forecasting U.S. 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 thing 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 the 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 am 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.
[Operator Instructions] Our first question comes from Jamie Cook of Crédit Suisse.
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, and 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 -- 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?
Good questions, Jamie. Well, as far as looking forward from a truck sales perspective, let's start there. As 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. We're not talking about getting back to levels what we -- beforehand. It has definitely increased, and I expect it to stay that way, right? [indiscernible] anyway, 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 we've seen all the reports from a lot of our customers, the large customers anyway, they've reported nice reports that come in and spot rates are probably getting back 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 because we know it's 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 seize what we thought -- I would call out, we were [indiscernible] bottling on the bottom. Now, if I look at the 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 that has to do with the oil and gas business, even though it's way less the percentage than what we used to be. I mean, it's not even what we were 4, 5 years ago. It was less than -- I want tell you -- I told you in the first quarter, I think it was 3% to 4% of our parts and service. Well now, it's less than 2%, okay? 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, increased. So not -- 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, a good indicators, I believe, out there, that we will continue. It's not going to be any V shaped, 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 is some of the absolute dollar values on the tickets. 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 it's something we've 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 house. And for sure, 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 -- I can't 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, you're dealing with the -- a lot of people affected by it 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 at you, but they did, and managing the expenses.
Now the big question, which I knew would be the question, and we've worked a lot on it lately. Okay, now you've gone down to this bottom. Well, tell me about the expense base. Well, I have historically always told you, you know what, every gross profit dollar that we create, we're going to take probably $0.50 is 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 do pick parts up, but I do this and I deliver, it takes personnel. It takes personnel. I'm working with them. I'm not working with [indiscernible] 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 lessons we're learning in this current environment, we've set a goal -- we've set a goal, not a 50% goal. We've got a goal to get to 30% to 35%, when you talk about adding back our gross profit. So when you -- expenses to gross profit. So our goal is to keep 2/3 or better, somewhere in that range and not just 50%, when the markets do come back. When we do see, which we've been -- I've been to this enough times. It's going to come back. I may not have -- I can't tell you the time line 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 -- yes, 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 if 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 a 2/3 of holding of the gross profit as the market does come back.
We think it's a -- rather compared to last -- when you look at the margin, I mean, I go back to July, June, last year. I mean, we're talking about taking $12 million of better gross profit out a month, okay? And we've managed -- they've done a great job of managing on the expense side, 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 we said, when I try 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've made, we'll be able to achieve that goal I gave you.
All right. Rusty, one last question, probably unfair, but it's a complement to you and your team. You look, we're in a 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. Like why isn't 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 it by 4, why isn't $1.80 the new trough for earnings for Rush? Steve can answer if you don't want to.
You know I'm not going to, Jamie. Okay. I'm not going to start...
I have to try.
Well, we went public June 6, June 7. We [indiscernible] June 6, June 7, 1996, and if I'm going to -- you 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 of where we're at and the job that was done. But it's not -- this is one for sure. There's still a lot of uncertainty out there, okay, in many different ways, not just COVID, with elections and everything else going on, everybody is -- there's a lot of lens i.e., not just in our organization, for sure, just people's lives out there. So I'm not going to get out there right now with all that.
All right, I tried. Congratulations.
Our next question comes from Justin Long of Stephens.
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, would love to get your thoughts around the competitive landscape in parts and service and how that could potentially change post COVID.
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 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 parts and service, I'm not sure. But it's -- or stay flat with it. I'm pretty confident we did a little bit better on the parts side than the most. But I do expect, certainly, 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. And I'm looking at tickets written up, I said is, again, I'm just -- we had to get values on tickets back up because for a while there, trust me in April and May, people are just spending what they had to. Nobody spent any extra. We didn't go -- if you had this problem, and I was going to break the truck now, and you fixed that. But you didn't miss a test, would you like to do this and this, and that and that. They didn't do that. And then you had other people extending things like oil intervals and stuff as people were struggling there for a while. I mean, I know when we had the Rush on the stores, certain market -- it 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 customers' ways. A lot of our customers were not doing well in that environment. I think that is straightening itself out somewhat. I think it's going to be interesting to see how it all shakes out when we're done with all this because there's much stuff that was pushed online, et cetera, et cetera. 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 can't see that. I don't have the future in front of me, but that's what I'd 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 spend. I think -- I mean, I can talk more and ramble more and you want problem, but you've got to move to the small and medium guy. There was 100,000 truck companies. They got PPP money. Well, that's 20% of now -- that's 40% of people who got [DOT]. Now I hope that when you look at where the money went, I got -- I can't 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, I met a couple of them, not one, a couple for real, most of those people seemed to be making their payments now that they're 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, okay, and making their payments. And we see utilization inside our rental come back. I'm just giving you anecdotes, probably more than you want for why no V shape, but at least you feel that you pass the bottom and you're going to gradually get back there.
Now what was your second question? I know I rambled on, I didn't get.
The competitive landscape. I'm just wondering -- yes. 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?
If you could -- you didn't have to spell the letter P-P-P. I think I would be looking at some right now, okay? But I wasn't able to do that. Well, we were [indiscernible] they will do that. Where we -- I think 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 all put out there to read. It took PPP money along with truck with 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 weak. But there's a lot of dealers that took a lot of money, and rightfully so. Nothing wrong. 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. So 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.
Makes sense. And then following up on what you said about parts and service and some of the mix changes we saw 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? Has the service piece improved? Or how should we be thinking about that?
Yes. When service does come back, that will affect the mix when it starts coming back at a higher rate. So there's no question that we could see a pick up. It was up from Q1. I mean margins were up from 36.6% to 37.2%. Now they were nothing like Q2. Last year, Q2, was a [indiscernible] quarter -- best quarter we'd had in 5 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 in where we're bottomed around. I'm not going to drive margins, but somewhere in the high 36s and -- mid 30, maybe get up to 37 or something. But in that range, Justin, I don't want to commit. But when service does come up and it starts coming up faster, which I anticipate it will, sometime over the next few months, I'm not going to say it right now, but it will as we've had to take that hit, as I said, in 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 getting stuff back a little, rising closer to normal. So yes, you could have some bump in the margin, but don't look for 2 points bump or something like that out there or 200 bps. I don't see that. But if service does, and then you can start picking up 10, 20 bps here and there as it becomes a larger piece of the growth in the mix.
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?
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 -- when you get down to the bottom and you're going back -- there's an exciting thing, as I said about going. When you get down, you strip down like this, and then you can look at how you're going to grow it back and really dial in on it. So the targets are still out there. We still want 6% of the parts market. I have to look to see where we're at in the COVID world. I know we haven't gone down. We had grown from 38 to like 46, 47. We still have a goal of wanting to get to 6% of the overall parts market out there. We've stated that. I was going into this year, I was excited to -- until COVID, I was excited to prove 30% off in truck sales and show a really good year, but that didn't happen. And despite of what's going on, I think we're going to end up showing a pretty darn good year given the environment and how we've had to manage it.
So we're constantly -- right now, though, I'm not -- I can't give you the time line. How about that, okay? Let's get out of this more. I'd just take some of this uncertainty out of here and allow me to, hopefully, later this year or first quarter of next year, we get to take some of this uncertainty, this gray matter out in front of me out on a window, and maybe we'll be able to give you a little bit of time line, Justin. Because I don't want to shoot from the hip of something with the same uncertainty out there. But don't think the goal is -- look, we haven't stopped strategically, yes, you see all that cost come out. Don't think for 1 minute, we're stopping on any strategic investments we've got going on. We have -- those will run costs and we're still working on strategic stuff that we believe will continue to allow us to -- we'll do what we've done in the last few years.
Okay. Great. I appreciate the time and congrats on the quarter.
Our next question comes from Joel Tiss of BMO.
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?
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 they're going to weather all the storm. I was concerned -- did you throw a second -- those shutdown out there all bets are off, okay? You really ship this place down and all bets are off. But with the spot market -- look, the spot market just did all that -- this in the last 4 weeks or so, okay? It was taken in May and early June. It's just come back here over the last 4 or 5 weeks. And I mean, acceptance rates are still [indiscernible] are still pretty strong, but you're not -- but they've slowed a little bit. So right now, it 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 -- the first people that got extensions are making payments, let's say that. They're making their first payments from what I gathered, talking to like 3 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 the way and weather through the winter and long gone? I answer that based upon what's out there. But what I see right now, that's still out there. The only thing that you wouldn't watch out for, and they may be coming down because the rocket is so high, were insurance rates were up there. But I think if the freight can come back, then maybe people weather it. Maybe it wasn't the extensions and the PPP money for the people that didn't get it, will get them through to the other side, which I was a little bit -- but I was looking at the freight market, it was different 6, 8 weeks ago, 6 weeks ago, but it seems to have picked up. I'm not -- I don't have -- I can't see that far out there, as I said earlier. There's still uncertainty, and there's still a little great matter out there. But based on the last few weeks from what I'm hearing most people -- most businesses pretty decent. So that may hold over into the small and midsized guy, would be my only comment, Joel. I didn't anticipate spot rates jumping up like they have recently.
And then do you -- are you starting to feel like -- you've obviously been doing this longer than all of us, and are you starting to feel like we could squeeze the whole cyclical downturn into 1 year versus how we usually kind of have whatever, 4 good years and 2 bad years and things like that? Do you think the shape of the cycle changes?
Yes. I think that it very much could change, Joel. There's no question in my mind. The deeper the valleys, the quicker you come out of that slow crawl down. Remember, we were always supposed to go down, looking back where we came into this year, somewhere around U.S. retail is going to be 200. Well, now we're going to be in the 150, 160 range. So we've taken a bigger hit. And if it continues at those paces into next year any more then, yes, there's no question you could squeeze this. It may not be 12 months, but you just squeeze it into 18 or less, somewhere in there, where you get this thing right-sized back as long to -- now look, as long as we've got good decency going on. But yes, because obviously, we had an oversupply of trucks. There's always -- we went out and there's still lots of trucks in '18, '19, just like we did in '05 and '06. But yes, you can definitely squeeze it down tighter. I've said that to a few folks. It will be -- I'm sure someone will ask, it will be interesting to watch the used market that's going to be a big indicator as we go forward.
And just more about it 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?
Well, I'm going to let you say that, okay? I'll let the -- we all can read the tea leaves, all right? As we get out of this year, I'll give you something to write about wanting and put out there. So we'll let us finish the year out and we can call this trough, and you can take it from there. I'm not wanting to put ECS 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. You can read the tea leaves, you can see the results and [indiscernible].
All right. I'll get you a couple more margaritas next time.
[Operator Instructions] Our next question comes from Andrew Obin of Bank of America.
I appreciate how hard the entire Rush work to deliver these results. So very impressive.
Thank you. Everybody -- of course, it's not me. But I think everybody else, but I appreciate it. I'll relay the message, if they're not listening.
Just a question, could you just give us more of a rundown -- 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 4 regions, right?
Right, okay. Surprisingly, California has held in really nicely, okay? California has held in very nicely. Given what went on, everything shut down the ports early in the quarter, et cetera, et cetera, they've held on very nicely. Arizona has held on, I would tell you. Probably about 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. Well, while there are still very proud relative to other parts of the country. They're not up to their usual standards right now for us, when we look at where we derive at our earnings from. At the same time, they're showing resiliency by holding [indiscernible] we could have not have still posted the results we're posting in these -- because they were so O&G-driven. And we have no O&G -- I said 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, yes, we're still posting not total levels, but it's -- we're continuing to evolve this region to be more diverse, okay? We continue to work on that. We know with 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, the one good thing about Texas, it's got a heck of -- even without oil and gas -- got heck of an economy. So it typically -- it's learned how to weather better.
If I look over the Midwest, I would tell you that they have troughed and have started doing -- we do a little better. Look at Illinois and Ohio, in those states. Now they'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've seen 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 and be on the better client coming out of that.
You move over -- and Georgia is still tough, no question. We're still tough in Atlanta around that area. And over in the Southeast, North Carolina, Virgina, Georgia, those areas seem to be -- they're okay, but they're having a tougher time getting through it all. But Florida, which started off maintaining strength, I think when you check -- they're kind of like 4, 5 locations around Orlando. when we shut down Mickey Mouse, and all that other goes around there, you have some effect. But yet, at the same time, their handling is still pretty well. They're -- I was looking at their results for the month of June, and they did a -- done a good job. So they're -- I don't want to say they're maintaining better than I would -- they're maintaining better than I would have thought, given how tourism and all that type of stuff in Florida is such a big deal throughout the state, not just Carolina, just throughout the state. So I feel good about that. So I hope that gives you some kind of -- when you're talking about market segments, as I've said, I'm not -- when we ever do -- if we ever get oil and gas back, 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 haven't learned how to diversify the company, and that's the results we're showing right now.
So your food services, your guys -- most of that -- most like your refrigerated stuff, those guys have been pretty strong. Yes, you lost your restaurants and things like that. But boy, the grocery stores, they can't get enough milk delivered or stuff on the shelf. Most of all, our big guys, and 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, but they've posted. But I believe that the market -- the freight market is pretty robust, and most people are now projecting to get rate increases next year, where they weren't -- that wasn't when I read a report the other day, that shippers were planning on only paying 0.6% more next year. Now it's up to 2.5% to 3%. And I can guarantee that carriers are looking for double that, okay, 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 that from an overall perspective. And I think we can just gradually keep coming. I'm not calling Bs or anything like that. I think it would be nice to see a solid continual march forward, and I think it's possible without any outside influences.
I think in your press release, you've highlighted that -- the fact that parts and service business was down, was the function of sort of headcount 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?
Thanks, Andrew. Well, I'm going to reflect that when a comment I made a little bit earlier, I think, on the call, maybe. But historically, I'll go back and 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 excluding investments we've made in the past few years, and through the lessons learned in this pandemic, now that we squeeze taking it down, as the market grows back, we have an internal goal to keep it around 1/3, somewhere being 30% to 35% will go back to cost, back to G&A. So you say, how do you do it? Well, it's obviously, you become more multichannel, right? More online stuff, right? Technology, our phone systems and stuff are all interconnected throughout the whole country. You're picking off -- there's a multitude of things here, okay, 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 with your customer. And that's only going to grow. Well, we're in the truck business, pretty mundane business. Doesn't like change. Well, it's like it's -- this just sort of accelerate. When 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 pack up -- position with the investments you go, well, okay, I believe I can -- we can do that. You can map it out and it's just not pie in the sky talk because you're learning on it -- and like I said, you leverage off all your phone representatives throughout the country. When one area is busy, it rolls over, it rolls over, it rolls over. You may be doing business for Atlanta and California or something, and it's just a multitude. I'm not going to get all of them right now. But all those are cost cutting, right? You don't need as many bodies in that one area here. 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 where the growth side comes from. And then you leverage off what you got. I know it may sound a little broad, but it's just really that's how it works, man.
Our next question comes from Shawn Kim of Gabelli Fund.
Rusty, and congrats again to you and the team on a great quarter. I wanted to switch gears here. Just given some of the attention that some startups in the industry have been getting. I 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 time line for the rollout of these technologies?
Okay. On hydro fuels up, I'm not having incurring discussions. I mean, it's really early. And I know there's a lot of value in some people's companies, be a few years before they even rent the first dollar, okay? So I'm not disputing its long-term viability, okay? I'm not disputing that we're not looking at how do we conform to that 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, as I 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 got a network. So I'm always looking to add ways to leverage off of that network and push more services and products to it. They're working on product. They're not working on just distribution systems. They're not working -- all of that, regardless -- I know everybody originally said, well, electric, you go spend 35% less. Well, now I'm reading 10% to 20% in maintenance and stuff. So I think all that's still to be foreseen. And all of these start-ups have one thing they don't have, and that's distribution in the service network. And we are in the commercial business. In the commercial business, trucks can't sit, and I don't care how they build, things will break. So I know I'm not handing on hydrogen, I'm not the expert. I'm not involved in it. Have I talked to some people about how we might do some things around it? Yes, but it's way too early for me to even try to frame that for you. But I can promise you this, we will be -- when it comes to electric, and when it comes to hydrogen, 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 assured, driven by our OEM 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 -- but there's so much -- we know the big ones. There's a lot of smaller players out in the electric space, too, right now and they're really getting -- most of them are getting merged or bought up. But at the same time, there are people out there in that space. And we are -- we're watching it closely and working inside of it. And we're actually working -- I don't know -- I can't talk about it, but rest assured, we're out there. We're -- I'm not looking at the world to stay the same for the next 10 or 15 years either. So we'll be involved. It's just a little bit early for me to say how and how rough is involved in it.
Other than -- you can remember this, it will be driven by our OEMs. PACCAR is for sure adding them. Navistar, we had in it, they will -- our medium-duty stuff coming. So the largest distributor [indiscernible], they will all be in that space. So we will be in that space with them.
There are no further questions. I'd like to turn the call back over to Mr. Rusty Rush for the closing remarks. .
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 to do the right thing. I 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, okay? There's such a thing. We do the right thing around Rush, okay? 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.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.