Squeeze on Truck Margins Hurts RDO Profits

August 23, 2000

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Significant improvements in agricultural operations and the addition of truck dealerships last year helped boost second quarter revenues for RDO Equipment, but they weren’t enough to offset continuing equipment and truck margin pressures and higher than anticipated expenses, the company said.

“Like the rest of the equipment and truck dealership industries, we have continued to see our margins experience considerable pressure,” said Ronald Offutt, founder and chairman of the Fargo, ND-based truck and heavy equipment distributor. Expenses were also higher than normal due to consolidation and integration costs associated with the acquisition of several truck dealerships the end of last year.
For its second fiscal quarter ending July 31, RDO’s revenues totaled $183.5 million, up from $177.2 million a year earlier, but it reported a net loss of $1.3 million versus a $3.8 million profit the same period last year. Total revenue for the first half of the year totaled $369.4 million versus $357.8 million a year ago. Net loss for the first half was $426,000 compared to a $6 million profit the first half of 1999.
Truck revenues totaled $47.4 million for the second quarter, about 78% from truck sales and the rest from parts and service. In second quarter 1999, truck revenues were $45.2 million, 82% from new truck sales. Construction sales for the quarter, including equipment, parts and service, and rental, totaled $85.2 million versus $88 million second quarter 1999. Agriculture revenue was $49.3 million versus $34.8 million a year earlier.
RDO has 54 retail stores in nine states, including Mack and Volvo truck centers and John Deere construction and agriculture stores.

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