[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements, including balance sheets, income statements, statements of shareholders' equity, and cash flow statements, along with detailed notes explaining accounting policies, segment information, and specific financial instruments. Key highlights include increased net income and gross profit, a decrease in total assets and liabilities, and an increase in shareholders' equity for the nine months ended September 30, 2021 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | Change (%) | | :-------------------------- | :----------- | :----------- | :------- | :--------- | | Total Assets | $2,777,329 | $2,985,393 | $(208,064) | -7.0% | | Total Liabilities | $1,364,546 | $1,717,356 | $(352,810) | -20.5% | | Total Shareholders' Equity | $1,412,783 | $1,268,037 | $144,746 | 11.4% | | Cash and cash equivalents | $259,693 | $312,048 | $(52,355) | -16.8% | | Inventories, net | $754,006 | $858,291 | $(104,285) | -12.1% | | Floor plan notes payable | $354,346 | $511,786 | $(157,440) | -30.8% | [Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section outlines the company's financial performance over specific periods, showing revenues, expenses, and net income Consolidated Statements of Income Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Total revenue | $1,266,521 | $1,178,568 | 7.5% | | Gross profit | $282,295 | $212,452 | 32.9% | | Operating income | $90,169 | $42,868 | 110.3% | | Net income | $69,399 | $33,939 | 104.5% | | Basic EPS | $1.24 | $0.62 | 100.0% | | Diluted EPS | $1.20 | $0.60 | 126.5% | | | | | | | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | | Total revenue | $3,814,342 | $3,467,743 | 10.0% | | Gross profit | $797,891 | $639,284 | 24.8% | | Operating income | $219,185 | $101,066 | 116.9% | | Net income | $172,776 | $73,862 | 133.9% | | Basic EPS | $3.09 | $1.35 | 128.9% | | Diluted EPS | $2.99 | $1.32 | 126.5% | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) This section details changes in the company's equity accounts, including retained earnings, common stock, and other comprehensive income Shareholders' Equity Changes (in thousands) | Metric | Balance, Dec 31, 2020 | Balance, Sep 30, 2021 | Change | | :-------------------------------- | :-------------------- | :-------------------- | :------- | | Total Shareholders' Equity | $1,268,037 | $1,412,783 | $144,746 | | Retained Earnings | $831,850 | $973,665 | $141,815 | | Common Stock Repurchases (9 months ended Sep 30, 2021) | N/A | $(21,726) | N/A | | Dividends Declared (9 months ended Sep 30, 2021) | N/A | $(30,499) | N/A | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Cash Flow Summary (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2021 | 2020 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Net cash provided by operating activities | $438,645 | $590,469 | $(151,824) | | Net cash used in investing activities | $(121,352) | $(98,898) | $(22,454) | | Net cash used in financing activities | $(369,648) | $(413,648) | $44,000 | | Net (decrease) increase in cash and cash equivalents | $(52,355) | $77,923 | $(130,278) | | Cash and cash equivalents, end of period | $259,693 | $259,543 | $150 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information regarding the accounting policies and specific items presented in the financial statements [Principles of Consolidation and Basis of Presentation](index=11&type=section&id=1%20%E2%80%93%20Principles%20of%20Consolidation%20and%20Basis%20of%20Presentation) This section outlines the accounting principles used for preparing the interim consolidated financial statements and the impact of current events like COVID-19 and LIBOR reform - The interim consolidated financial statements are unaudited and prepared in accordance with SEC rules, with all necessary adjustments made[24](index=24&type=chunk) - The company's commercial vehicle dealerships are classified as 'essential businesses' and have remained operational during the COVID-19 pandemic[25](index=25&type=chunk) - Business conditions have significantly improved since the second quarter of 2020, but the future impact of the COVID-19 pandemic remains uncertain[25](index=25&type=chunk) - The company is evaluating the impact of ASU 2020-04 and 2021-01 on Reference Rate Reform (LIBOR) on its financial statements[26](index=26&type=chunk) [Other Assets](index=11&type=section&id=2%20%E2%80%93Other%20Assets) This section details the composition and valuation of various non-current assets, including manufacturer franchise rights, equity investments, and capitalized ERP costs - Manufacturer franchise rights, valued at **$7.0 million** as of September 30, 2021, are considered indefinite-lived and are not amortized; no impairment write-down was required[27](index=27&type=chunk)[30](index=30&type=chunk) - The company holds a 50% equity interest in Rush Truck Centres of Canada Limited (RTC Canada), with an investment value of **$35.1 million** as of September 30, 2021[32](index=32&type=chunk) - A call option to acquire the remaining 50% equity interest in RTC Canada is valued at **$3.6 million** as of September 30, 2021, expiring on February 25, 2024[31](index=31&type=chunk) - Capitalized costs for the SAP enterprise resource planning (ERP) platform total **$5.8 million**, with amortization expense of **$0.3 million** for Q3 2021 and **$1.2 million** for the nine months ended September 30, 2021[33](index=33&type=chunk) [Commitments and Contingencies](index=12&type=section&id=3%20%E2%80%93%20Commitments%20and%20Contingencies) This section describes the company's legal obligations and potential future liabilities arising from its ordinary course of business - The company is involved in litigation arising from its ordinary course of business and maintains adequate liability insurance[34](index=34&type=chunk) - No pending claims or litigation are believed to have a material adverse effect on the company's financial position or results of operations[34](index=34&type=chunk) [Earnings Per Share](index=13&type=section&id=4%20%E2%80%93%20Earnings%20Per%20Share) This section presents the basic and diluted earnings per common share for various reporting periods Earnings Per Common Share | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic earnings per common share | $1.24 | $0.62 | $3.09 | $1.35 | | Diluted earnings per common share | $1.20 | $0.60 | $2.99 | $1.32 | | Weighted average anti-dilutive options (in thousands) | 624 | 1,100 | 460 | 1,799 | [Stock Options and Restricted Stock Awards](index=13&type=section&id=5%20%E2%80%93%20Stock%20Options%20and%20Restricted%20Stock%20Awards) This section details the company's stock-based compensation expense and unrecognized compensation for equity awards - Stock-based compensation expense was **$18.3 million** for the nine months ended September 30, 2021, up from **$15.5 million** in the prior year[38](index=38&type=chunk) - As of September 30, 2021, unrecognized compensation expense for non-vested employee stock options was **$10.3 million** (over 2.3 years) and for restricted stock awards was **$11.0 million** (over 1.4 years)[39](index=39&type=chunk) [Financial Instruments and Fair Value](index=13&type=section&id=6%20%E2%80%93%20Financial%20Instruments%20and%20Fair%20Value) This section discusses the fair value of the company's financial instruments, including current assets, liabilities, and long-term debt - The carrying values of current financial instruments (cash, accounts receivable, accounts payable, floor plan notes payable) approximate fair value due to their short-term nature or variable interest rates[40](index=40&type=chunk) - The carrying amount of long-term debt approximates fair value, based on current market interest rates and the company's credit standing[42](index=42&type=chunk) [Segment Information](index=15&type=section&id=7%20%E2%80%93%20Segment%20Information) This section provides financial data for the company's primary reportable business segment, the Truck Segment, detailing its operations and revenue sources - The company operates primarily through one reportable business segment, the Truck Segment, which includes a nationwide network of commercial vehicle dealerships[43](index=43&type=chunk) - The Truck Segment provides retail sales of new and used commercial vehicles, aftermarket parts, service and collision center facilities, and financial services[43](index=43&type=chunk) Segment Income Before Taxes (in thousands) | Segment | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :----------------------------- | :----------------------------- | | Truck Segment | $222,218 | $98,097 | | All Other | $1,017 | $12 | | Total | $223,235 | $98,109 | [Income Taxes](index=15&type=section&id=8%20%E2%80%93%20Income%20Taxes) This section outlines the company's income tax provisions, unrecognized tax benefits, and periods subject to audit - Unrecognized income tax benefits totaled **$4.5 million** as of September 30, 2021, with **$150,000** accrued for interest[46](index=46&type=chunk) - No significant change in unrecognized tax benefits is anticipated in the next 12 months[47](index=47&type=chunk) - Tax years 2017-2020 (federal) and 2016-2020 (state) remain subject to audit[47](index=47&type=chunk) [Revenue](index=16&type=section&id=9%20%E2%80%93%20Revenue) This section describes the company's revenue recognition policies and disaggregates revenue by primary sources - Revenue is primarily generated from the sale of finished products, recognized when the customer obtains control, typically upon delivery[48](index=48&type=chunk) - Key revenue streams include commercial vehicle sales, aftermarket parts and services, finance, and insurance[48](index=48&type=chunk) Disaggregated Revenue by Source (Nine Months Ended September 30, in thousands) | Revenue Source | 2021 | 2020 | | :-------------------------------- | :----------- | :----------- | | Commercial vehicle sales revenue | $2,274,332 | $2,060,370 | | Parts revenue | $778,479 | $683,684 | | Commercial vehicle repair service revenue | $545,804 | $522,107 | | Finance revenue | $12,210 | $7,986 | | Insurance revenue | $8,513 | $7,074 | | Other revenue | $12,692 | $10,538 | | **Total** | **$3,632,030** | **$3,291,759** | [Leases](index=16&type=section&id=10%20%E2%80%93%20Leases) This section details the company's leasing activities, including commercial vehicle leases to customers and related income - The company leases commercial vehicles to customers for periods of one to ten years, depreciating them straight-line to an estimated residual value[50](index=50&type=chunk)[51](index=51&type=chunk) - Sales-type lease receivables were **$5.4 million** as of September 30, 2021[52](index=52&type=chunk) Lease and Rental Income (in thousands) | Period | 2021 | 2020 | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Three Months Ended Sep 30 | $62,689 | $57,913 | 8.2% | | Nine Months Ended Sep 30 | $182,312 | $175,984 | 3.6% | [Accumulated Other Comprehensive Income (Loss)](index=17&type=section&id=11%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This section reports changes in accumulated other comprehensive income, primarily driven by foreign currency translation adjustments - Accumulated other comprehensive income increased to **$965,000** as of September 30, 2021, primarily due to foreign currency translation adjustments[54](index=54&type=chunk) [Accounts Receivable and Allowance for Credit Losses](index=17&type=section&id=12%20%E2%80%93%20Accounts%20Receivable%20and%20Allowance%20for%20Credit%20Losses) This section explains the company's policy for estimating and maintaining an allowance for credit losses on trade receivables - The company maintains an allowance for credit losses based on historical experience, current conditions, and reasonable forecasts[55](index=55&type=chunk)[56](index=56&type=chunk) Allowance for Credit Losses (in thousands) | Metric | Balance Dec 31, 2020 | Provision (9 months 2021) | Write-offs (net of recoveries) | Balance Sep 30, 2021 | | :-------------------------------- | :------------------- | :------------------------ | :----------------------------- | :------------------- | | Total Allowance for Credit Losses | $1,605 | $1,699 | $(1,696) | $1,608 | [Asset Purchase Agreement](index=18&type=section&id=13%20%E2%80%93%20Asset%20Purchase%20Agreement) This section details the company's agreement to acquire full-service commercial vehicle dealerships and Idealease franchises from The Summit Truck Group - On September 7, 2021, the company agreed to acquire full-service commercial vehicle dealerships and Idealease franchises from The Summit Truck Group in several states[58](index=58&type=chunk) - The estimated purchase price is approximately **$223.0 million**, excluding an anticipated **$60.0 million** for real property[58](index=58&type=chunk) - Approximately **$114.0 million** of the purchase price is expected to be financed, with closing anticipated in December 2021[58](index=58&type=chunk) [Lease and Rental Debt](index=18&type=section&id=14%20%E2%80%93%20Lease%20and%20Rental%20Debt) This section describes new revolving credit agreements established to finance commercial vehicle purchases for the Idealease lease and rental fleet - The company entered into a **$250.0 million** revolving credit agreement with Wells Fargo Bank, N.A. (WF Credit Agreement) on September 14, 2021, primarily for purchasing commercial vehicles for its Idealease lease and rental fleet[59](index=59&type=chunk) - Interest expense from the WF Credit Agreement (**$1.2 million** in Q3 2021) is now recorded in interest expense, which will increase gross margins from Idealease lease and rental sales[60](index=60&type=chunk) [Subsequent Event](index=18&type=section&id=15%20%E2%80%93%20Subsequent%20Event) This section reports a significant event occurring after the reporting period, specifically a new revolving credit agreement for PacLease fleet purchases - On October 1, 2021, the company entered into a **$300.0 million** revolving credit agreement with PACCAR Financial Corp. (PLC Agreement) to finance PacLease fleet purchases[61](index=61&type=chunk) - Similar to the WF Credit Agreement, interest from the PLC Agreement will be recorded in interest expense, increasing gross margins from PacLease lease and rental sales[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting revenue and profit growth, critical accounting policies, liquidity, and industry factors [General Business Overview](index=19&type=section&id=General) This section introduces Rush Enterprises, Inc. as a full-service commercial vehicle retailer and outlines its strategic approach to integrated solutions and network expansion - Rush Enterprises, Inc. is a full-service, integrated retailer of commercial vehicles and related services, operating over **100 Rush Truck Centers** in **22 states**[67](index=67&type=chunk)[68](index=68&type=chunk) - The company's business strategy focuses on providing integrated solutions, expanding product offerings, and growing its dealership network through strategic acquisitions and new locations[69](index=69&type=chunk) [COVID-19 Impact and Business Conditions](index=20&type=section&id=The%20COVID-19%20Pandemic%20and%20Its%20Impact%20on%20Our%20Business) This section discusses the operational status of the company's dealerships during the pandemic, the impact of supply chain issues, and the recovery of rental and leasing revenues - The company's dealership network remained operational during the COVID-19 pandemic, and business conditions have significantly improved since Q2 2020[70](index=70&type=chunk) - The industry continues to be impacted by supply chain issues, negatively affecting new commercial vehicle production and aftermarket parts availability[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Revenues from rental and leasing operations have returned to pre-pandemic levels after temporary payment deferrals in 2020[73](index=73&type=chunk) [Outlook](index=20&type=section&id=Outlook) This section provides forecasts for new and used commercial vehicle sales, lease and rental revenues, aftermarket products and services, and planned strategic acquisitions for the upcoming period - New U.S. Class 8 retail truck sales are forecasted to increase by **16.8%** to **228,500 units** in 2021, with the company expecting to sell **11,400 to 11,900 units** (**5.0%-5.2% market share**)[75](index=75&type=chunk)[76](index=76&type=chunk) - New U.S. Class 4-7 retail commercial vehicle sales are forecasted to increase by **8.2%** to **251,000 units** in 2021, with the company expecting to sell **10,000 to 10,800 units** (**4.0%-4.3% market share**)[77](index=77&type=chunk) - The company expects to sell approximately **1,600 light-duty vehicles** and **7,200 to 7,400 used commercial vehicles** in 2021[78](index=78&type=chunk) - Lease and rental revenue is expected to increase **5% to 7%**, and Aftermarket Products and Services revenues are expected to increase **10% to 12%** in 2021[78](index=78&type=chunk)[79](index=79&type=chunk) - Strategic acquisitions are planned, including an independent parts and service facility in Victorville, CA, a Hino and Isuzu dealership in Elk Grove, IL, and Summit Truck Group dealerships in multiple states (expected to close in December 2021)[80](index=80&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section details the key accounting policies and significant management judgments involved in financial reporting, including inventory valuation, goodwill impairment, self-insurance, income taxes, revenue recognition, leases, and credit losses - Inventories are stated at the lower of cost or net realizable value, with reserves established based on historical loss experience and market trends[82](index=82&type=chunk) - Goodwill is tested for impairment annually using a two-step discounted cash flow method, with the Truck Segment considered the reporting unit; no impairment was required in Q4 2020[83](index=83&type=chunk)[84](index=84&type=chunk)[86](index=86&type=chunk) - The company is partially self-insured for property and casualty, workers' compensation, and medical insurance programs, with accruals based on third-party actuarial information and management estimates[87](index=87&type=chunk) - Accounting for income taxes requires management judgment to determine provisions and deferred tax asset realization, with a liability for unrecognized tax benefits adjusted based on settlements or new information[89](index=89&type=chunk)[90](index=90&type=chunk) - Revenue recognition follows Topic 606, recognizing revenue when the customer obtains control of promised goods or services, typically at a point in time[92](index=92&type=chunk) - Leases for commercial vehicles and real estate are recorded as lease assets and liabilities for terms greater than twelve months, discounted using the implicit rate or estimated incremental borrowing rate[93](index=93&type=chunk)[94](index=94&type=chunk) - An allowance for credit losses is maintained for trade receivables, estimated based on probability of default, historical loss experience, aging, and current economic conditions[96](index=96&type=chunk) [Results of Operations Analysis](index=23&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, comparing revenues, gross profit, and expenses across different reporting periods [Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020](index=24&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202020) This section compares the company's financial results for the three months ended September 30, highlighting changes in revenues, gross profit, and expenses Revenue and Gross Profit Performance (Three Months Ended September 30, in millions) | Metric | 2021 | 2020 | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | | Total revenues | $1,266.5 | $1,178.6 | 7.5% | | Aftermarket Products and Services revenues | $463.0 | $400.3 | 15.7% | | New and used commercial vehicle sales revenues | $729.3 | $711.8 | 2.5% | | Gross profit | $282.3 | $212.5 | 32.9% | | Gross profit as % of sales | 22.3% | 18.0% | 4.3 pp | | Aftermarket Products and Services gross margins | 39.3% | 35.4% | 3.9 pp | | Used commercial vehicle sales gross margins | 19.7% | 12.0% | 7.7 pp | | Net interest expense | $0.3 | $1.1 | -74.3% | | Income before income taxes | $91.8 | $43.9 | 109.1% | | Effective tax rate | 24.75% | 22.7% | 2.05 pp | - New Class 8 truck sales decreased by **1.8%** to **2,537 units** due to industry-wide production constraints, while used commercial vehicle sales decreased by **16.7%** to **1,712 units**, primarily due to inventory availability despite strong demand[103](index=103&type=chunk)[106](index=106&type=chunk) - Selling, General and Administrative (SG&A) expenses increased by **15.7%** to **$179.9 million**, rising to **14.2%** of total revenues from **13.2%** in the prior year[116](index=116&type=chunk) [Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020](index=27&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202020) This section compares the company's financial results for the nine months ended September 30, detailing changes in revenues, gross profit, and expenses Revenue and Gross Profit Performance (Nine Months Ended September 30, in millions) | Metric | 2021 | 2020 | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | | Total revenues | $3,814.3 | $3,467.7 | 10.0% | | Aftermarket Products and Services revenues | $1,324.3 | $1,205.8 | 9.8% | | New and used commercial vehicle sales revenues | $2,274.3 | $2,060.4 | 10.4% | | Gross profit | $797.9 | $639.3 | 24.8% | | Gross profit as % of sales | 20.9% | 18.4% | 2.5 pp | | Aftermarket Products and Services gross margins | 38.1% | 36.4% | 1.7 pp | | Used commercial vehicle sales gross margins | 18.4% | 8.0% | 10.4 pp | | Net interest expense | $0.6 | $8.0 | -93.0% | | Income before income taxes | $223.2 | $98.1 | 127.5% | | Effective tax rate | 23.0% | 24.7% | -1.7 pp | - New Class 8 heavy-duty truck sales increased by **12.7%** to **8,486 units**, while new Class 4-7 medium-duty commercial vehicle sales decreased by **6.9%** to **7,951 units** due to production constraints[123](index=123&type=chunk)[124](index=124&type=chunk) - Used commercial vehicle sales increased by **6.5%** to **5,730 units**[125](index=125&type=chunk) - Selling, General and Administrative (SG&A) expenses increased by **8.6%**, but as a percentage of total revenue, it slightly decreased to **14.2%** from **14.3%**[131](index=131&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations, including working capital, cash, capital expenditures, dividends, and stock repurchases - As of September 30, 2021, the company had **$405.3 million** in working capital, including **$259.7 million** in cash, and was in compliance with all debt covenants[136](index=136&type=chunk)[138](index=138&type=chunk) - Expected capital expenditures for leasing operations are **$150.0-$180.0 million** in 2021, and **$30.0-$35.0 million** for recurring items[139](index=139&type=chunk) - The company paid a cash dividend of **$10.6 million** in Q3 2021 and declared a **$0.19 per share** dividend for December 2021[140](index=140&type=chunk) - Under its **$100.0 million** stock repurchase program (expiring Dec 31, 2021), **$23.8 million** of common stock had been repurchased as of September 30, 2021[141](index=141&type=chunk) - The acquisition of Summit Truck Group dealerships is estimated at **$223.0 million** (plus **$60.0 million** for real property), with **$114.0 million** to be financed[143](index=143&type=chunk) [Cash Flows Analysis](index=29&type=section&id=Cash%20Flows) This section provides a detailed breakdown of the company's cash inflows and outflows from operating, investing, and financing activities [Cash Flows from Operating Activities](index=29&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section details the cash generated or used by the company's primary business operations, including changes in working capital - Net cash provided by operating activities was **$438.6 million** for the nine months ended September 30, 2021, a decrease from **$590.5 million** in the prior year[146](index=146&type=chunk)[147](index=147&type=chunk) - Key cash inflows included **$147.3 million** from decreased inventories and **$23.2 million** from decreased accounts receivable[146](index=146&type=chunk) - Cash outflows included **$30.4 million** from decreased customer deposits[146](index=146&type=chunk) [Cash Flows from Investing Activities](index=31&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section outlines the cash used for or generated from investment-related activities, such as capital expenditures and acquisitions - Net cash used in investing activities increased to **$121.4 million** for the nine months ended September 30, 2021, from **$98.9 million** in the prior year[149](index=149&type=chunk)[150](index=150&type=chunk) - Capital expenditures totaled **$122.3 million**, including **$88.0 million** for additional units for rental and leasing operations[149](index=149&type=chunk) [Cash Flows from Financing Activities](index=31&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section describes the cash flows related to debt, equity, and dividend payments, including new credit agreements - Net cash used in financing activities was **$369.6 million** for the nine months ended September 30, 2021, a decrease from **$413.6 million** in the prior year[151](index=151&type=chunk)[152](index=152&type=chunk) - Major outflows included **$157.4 million** in net payments on floor plan notes, **$232.8 million** in principal repayments of debt, **$21.7 million** in stock repurchases, and **$30.5 million** in cash dividends[151](index=151&type=chunk) - The company entered new credit agreements: a **$250.0 million** revolving credit facility with Wells Fargo (WF Credit Agreement) for Idealease fleet and a **$300.0 million** revolving credit facility with PACCAR Financial Corp. (PLC Agreement) for PacLease fleet[153](index=153&type=chunk)[154](index=154&type=chunk) - The Floor Plan Credit Agreement has an aggregate loan commitment of **$1.0 billion**, with approximately **$333.7 million** outstanding as of September 30, 2021[155](index=155&type=chunk) [Backlog](index=32&type=section&id=Backlog) This section reports the significant increase in commercial vehicle order backlog, reflecting strong demand despite supply chain uncertainties - The commercial vehicle order backlog significantly increased to approximately **$2,720.2 million** as of September 30, 2021, compared to **$1,067.3 million** a year prior[157](index=157&type=chunk) - The substantial increase reflects strong demand, but fulfillment timing is uncertain due to current supply chain delays[157](index=157&type=chunk) [Seasonality](index=32&type=section&id=Seasonality) This section discusses the moderate seasonal variations in the Truck Segment, particularly for Aftermarket Products and Services, and mitigating factors - The Truck Segment experiences moderate seasonality, with Aftermarket Products and Services historically seeing higher sales volumes in the second and third quarters[158](index=158&type=chunk) - Diverse geographic locations of dealerships and a diverse customer base help mitigate seasonal effects on new commercial vehicle sales[158](index=158&type=chunk) [Cyclicality](index=32&type=section&id=Cyclicality) This section explains how the company's business is influenced by economic cycles and outlines strategies to mitigate these effects - The company's business is subject to cyclical variations influenced by general economic conditions, fuel prices, interest rates, credit availability, and government regulations[159](index=159&type=chunk) - New commercial vehicle unit sales have historically shown substantial cyclicality[159](index=159&type=chunk) - Strategies to reduce negative impacts of cyclical trends include geographic expansion, concentration on higher-margin Aftermarket Products and Services, and diversification of the customer base[159](index=159&type=chunk) [Environmental Standards and Other Governmental Regulations](index=32&type=section&id=Environmental%20Standards%20and%20Other%20Governmental%20Regulations) This section details the company's compliance with environmental laws and regulations, and the potential impact of future regulatory changes - The company is subject to federal, state, and local environmental laws and regulations governing discharges, storage tanks, hazardous substances, and waste disposal (e.g., RCRA, CERCLA, Clean Water Act, Clean Air Act)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Compliance with current environmental laws is not expected to have a material adverse effect, but future changes in regulations (e.g., GHG emissions, zero-emission vehicle mandates) or unforeseen liabilities from acquisitions could materially impact the business[164](index=164&type=chunk)[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section describes the company's exposure to market risks, primarily interest rate fluctuations, and their potential financial impact - The company is exposed to interest rate risk from its floor plan financing agreements, the WF Credit Agreement, the PLC Agreement, and discount rates related to finance sales[167](index=167&type=chunk) - As of September 30, 2021, floor plan borrowings were approximately **$354.3 million**[167](index=167&type=chunk) - A **100 basis point** increase or decrease in LIBOR could result in an approximate **$3.5 million** change in annual interest expense[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021[168](index=168&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2021[169](index=169&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation arising from its operations and maintains adequate liability insurance. No current legal proceedings are expected to have a material adverse effect on its financial position or results of operations - The company is involved in litigation in the ordinary course of business and maintains adequate liability insurance[170](index=170&type=chunk) - No pending claims or litigation are expected to have a material adverse effect on the company's financial position or results of operations[170](index=170&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.Risk%20Factors) The company acknowledges the inherent risks and uncertainties associated with its business. A comprehensive discussion of these factors is provided in Item 1A, Part I of its 2020 Annual Report on Form 10-K - The company's business is subject to inherent risks and uncertainties[171](index=171&type=chunk) - For a detailed discussion of risk factors, refer to Item 1A, Part I of the company's 2020 Annual Report on Form 10-K[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not make any unregistered sales of equity securities during the third quarter of 2021. It repurchased 259,011 shares of common stock (primarily Class B) during the quarter under its $100.0 million stock repurchase program, with approximately $76.2 million remaining authorized as of September 30, 2021 - No unregistered sales of equity securities were made during the third quarter of 2021[172](index=172&type=chunk) - The company repurchased **259,011 shares** of common stock (primarily Class B) during Q3 2021[173](index=173&type=chunk)[174](index=174&type=chunk) - As of September 30, 2021, approximately **$76.2 million** remained authorized under the **$100.0 million** stock repurchase program, which expires on December 31, 2021[141](index=141&type=chunk)[173](index=173&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No other information is required to be reported under this item [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, significant asset purchase agreements, various credit agreements (e.g., with BMO Harris, Wells Fargo, PACCAR Financial Corp.), and required certifications from the CEO and CFO - Exhibits include Restated Articles of Incorporation and Amended and Restated Bylaws[175](index=175&type=chunk) - Key agreements filed include the Asset Purchase Agreement with Summit Truck Group, the Fifth Amended and Restated Credit Agreement with BMO Harris Bank N.A., and the Credit Agreement with Wells Fargo Bank, National Association[175](index=175&type=chunk) - The Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company (dated October 1, 2021) is also included[177](index=177&type=chunk) - Certifications of the CEO and CFO pursuant to the Sarbanes-Oxley Act are filed[178](index=178&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) [Signatures](index=37&type=section&id=Signatures) The report was duly signed on November 5, 2021, by W.M. "Rusty" Rush, President, Chief Executive Officer and Chairman of the Board, and Steven L. Keller, Chief Financial Officer and Treasurer - The report was signed on **November 5, 2021**[181](index=181&type=chunk) - Signatories include W.M. "Rusty" Rush (President, CEO, and Chairman) and Steven L. Keller (CFO and Treasurer)[181](index=181&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission File Number 0-20797 RUSH ENTERPRISES, INC. FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _______________________ (Exact name of registrant as specified ...

Financial Performance - Total revenues decreased by $54.9 million, or 4.3%, in Q1 2021 compared to Q1 2020[97]. - New and used commercial vehicle sales accounted for 60.7% of total revenues in Q1 2021, down from 61.4% in Q1 2020[94]. - Gross profit increased by $10.3 million, or 4.4%, in Q1 2021, with gross profit as a percentage of sales rising to 19.9% from 18.2%[107]. - Income from continuing operations before income taxes increased by $25.0 million, or 78.8%, in Q1 2021 compared to Q1 2020[117]. - Cash flows from operating activities provided $40.1 million in Q1 2021, compared to $138.8 million in Q1 2020[129]. - Selling, General and Administrative (SG&A) expenses decreased by $10.1 million, or 5.5%, in Q1 2021, with SG&A as a percentage of total revenues decreasing to 14.2% from 14.4% year-over-year[114]. Sales Forecast - A.C.T. Research forecasts new U.S. Class 8 retail truck sales to be 248,400 units in 2021, representing a 26.9% increase compared to 2020, with the company expecting to sell approximately 13,600 to 14,900 new Class 8 trucks[71]. - For new U.S. Class 4-7 retail commercial vehicle sales, A.C.T. Research forecasts sales to be 251,500 units in 2021, an 8.4% increase compared to 2020, with expected sales of approximately 10,800 to 12,500 vehicles[72]. - The company anticipates selling approximately 1,600 light-duty vehicles and 7,000 to 7,500 used commercial vehicles in 2021[73]. - The company expects blended gross margins on Aftermarket Products and Services operations to range from 36.5% to 37.5% in 2021[108]. - The company anticipates filling the majority of its backlog orders during 2021, driven by confirmed orders from major fleet customers[138]. Revenue Streams - Lease and rental revenue is expected to increase by 6% to 9% during 2021 compared to 2020[73]. - Aftermarket Products and Services revenues are projected to increase by 8% to 10% in 2021 compared to 2020, despite slight declines compared to Q1 2020[74]. - Finance and insurance revenues rose by $2.0 million, or 44.7%, in Q1 2021 compared to Q1 2020[105]. - Aftermarket Products and Services revenues decreased by $12.2 million, or 2.9%, in Q1 2021 compared to Q1 2020, but were up 5.3% from Q4 2020[98]. Operational Insights - The company operates over 100 Rush Truck Centers across 22 states, providing a comprehensive range of services for commercial vehicle customers[63]. - The company plans to continue expanding its dealership network through strategic acquisitions and new dealership openings[64]. - The absorption ratio for commercial vehicle dealerships was 122.6% in Q1 2021, compared to 114.3% in Q1 2020[96]. - The Truck Segment experiences moderate seasonality, with higher sales volumes in the second and third quarters for Aftermarket Products and Services[139]. - The diverse geographic locations of the company's dealerships help mitigate seasonal effects on new commercial vehicle sales[139]. Market Conditions - The impact of the COVID-19 pandemic on the company's revenues was significant in 2020, but business conditions have improved significantly as the economy recovers[66]. - The company has made investments in aftermarket strategic initiatives, which helped mitigate the pandemic's impact on its Aftermarket Products and Services business[68]. - New heavy-duty vehicle sales decreased by 2.7% to 2,995 units in Q1 2021, while new medium-duty vehicle sales dropped by 28.5% to 2,334 units[99][100]. - Used commercial vehicle sales increased by 23.5% to 1,924 units in Q1 2021, driven by strong demand amid supply constraints on new vehicles[103]. Financial Position - As of March 31, 2021, the company's total net liquidity was approximately $421.6 million, including $316.1 million in cash and $105.5 million available under credit agreements[70]. - As of March 31, 2021, the company had working capital of approximately $368.4 million, including $316.1 million in cash[119]. - The Floor Plan Credit Agreement has an aggregate loan commitment of $1.0 billion, with approximately $456.6 million outstanding as of March 31, 2021[136]. - As of March 31, 2021, the backlog of commercial vehicle orders was approximately $1,736.0 million, up from $1,091.4 million on March 31, 2020, indicating a year-over-year increase of approximately 59%[138]. - As of March 31, 2021, the company had floor plan borrowings of approximately $550.3 million and variable interest rate real estate debt of approximately $39.0 million, exposing it to interest rate risk[148]. Regulatory and Environmental Considerations - The company has incurred and will continue to incur capital and operating expenditures to comply with federal, state, and local environmental laws and regulations, which may impact financial performance[141]. - Future regulations may require a certain percentage of commercial vehicles sold in California to be zero-emission vehicles starting in model year 2024, which could impact the company's operations[145]. - The company does not currently believe it has any material environmental liabilities, but acknowledges potential future costs related to environmental compliance[146]. - An increase or decrease in LIBOR by 100 basis points could result in an annual interest expense change of approximately $5.9 million[148].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-20797 RUSH ENTERPRISES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporat ...

Rush Enterprises, Inc. (NASDAQ:RUSHA) Q4 2020 Earnings Conference Call February 11, 2021 10:00 AM ET Company Participants Rusty Rush - Chairman, CEO and President Mike McRoberts - COO Steve Keller - CFO Derrek Weaver - EVP Jay Hazelwood - VP and Controller Michael Goldstone - VP, General Counsel and Corporate Secretary Conference Call Participants Justin Long - Stephens Jamie Cook - Credit Suisse Andrew Obin - Bank of America Joel Tiss - BMO Brian Schwartz - Oppenheimer Operator Ladies and gentlemen, thank ...

Financial Data and Key Metrics Changes - The company reported quarterly revenues of $1.18 billion and net income of $34 million, or $0.60 per diluted share, with a cash dividend of $0.14 per common share [6] - Compared to Q2 2020, revenues increased significantly due to higher truck sales and improved profitability from expense reduction measures [7] - The company declared a three-for-two stock split during the quarter [6] Business Line Data and Key Metrics Changes - In the aftermarket segment, annual parts, service, and body shop revenues were $400 million, with an absorption ratio of 119.4%, showing a 6% improvement compared to Q2 2020 [8] - Class 8 new truck sales were 2,584 units, representing 5% of the total US Class 8 market, with a 38% increase compared to Q2 2020 [9][10] - Class 4 through 7 new truck sales were 2,941 units, accounting for 4.8% of the US market, up 26% over Q2 2020 [14] Market Data and Key Metrics Changes - Government stimulus payments and state reopenings bolstered consumer spending, leading to improved freight and spot market rates [11] - The Class 8 retail sales forecast for 2020 was adjusted to 186,300 units, a significant increase from earlier estimates [13] - The company expects Class 4 through 7 truck sales to remain consistent with Q3 results in the fourth quarter [15] Company Strategy and Development Direction - The company remains focused on monitoring the impact of COVID-19 and is cautiously optimistic about economic recovery [7] - Management believes that the gradual recovery of the aftermarket business will continue despite uncertainties in the energy sector [9] - The company is committed to managing expenses effectively as gross profit grows, aiming for a target of spending around 35% of gross profit from parts and service [22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the economic recovery, although uncertainties remain regarding the pandemic and the energy sector [9] - The company anticipates a typical seasonal decline through winter but expects continued recovery in aftermarket business [9] - Management highlighted the importance of maintaining margins and managing expenses effectively in the current environment [22][36] Other Important Information - The company is excited about the potential long-term benefits of the Navistar trade announcement, which is expected to enhance product offerings and leverage global partnerships [64] - Management noted that the market has rebounded sharply after a steep decline, driven by increased freight activity and consumer spending [78] Q&A Session Summary Question: General and Administrative (G&A) Expenses Outlook - Management expects G&A expenses to remain relatively flat in Q4, with some gradual increases due to the pickup in parts and service business [19][23] Question: Parts and Service Performance - Management indicated that parts sales have significantly outpaced service sales, leading to a mix issue affecting overall margins [35][36] Question: Truck Sales Trends - Management noted that used truck margins improved significantly, while new truck sales saw slight increases, indicating a recovery in the market [33][34] Question: Market Share in an Upturn - Management believes that the company's market share in Class 8 trucks has bottomed out and expects to maintain historical levels moving forward [45][46] Question: Economic Activity by Geography - Management reported strong economic activity in states like California and Florida, while noting challenges in oil and gas-related areas [54][56]

Financial Data and Key Metrics Changes - The company reported quarterly revenues of $1 billion, with a net income of $16.8 million or $0.46 per diluted share, and declared a cash dividend of $0.14 per common share, representing a 7.7% increase over the previous quarter [6][7][16] Business Line Data and Key Metrics Changes - Aftermarket revenues for parts, service, and body shop totaled $378 million, down 15.8% compared to Q2 2019, with an absorption ratio of 110.2% [9] - New Class 8 truck sales were 1,866 units, a decrease of 50.5% year-over-year, accounting for 5.2% of the total U.S. Class 8 market [11] - Used truck sales decreased by 15.8% year-over-year, but sales began to stabilize and rise in June [13] - Medium-duty Class 4-7 truck sales were 2,331 units, down 40% year-over-year, representing 4.6% of the U.S. market [15] Market Data and Key Metrics Changes - The energy sector was significantly impacted, with expectations of continued challenges due to global pricing wars and reduced rig counts [9] - ACT Research adjusted its U.S. Class 8 retail sales forecast to 159,000 units in 2020, an increase from previous estimates, indicating a potential recovery in the market [12] Company Strategy and Development Direction - The company is focused on maintaining long-term financial strength by implementing immediate cost management measures and strategic initiatives, including online parts ordering [7][10] - A commitment to returning value to shareholders was emphasized, with a share repurchase program reinstated and wage increases for employees [16] - The company aims to achieve a cost-to-gross profit ratio of 30% to 35% as the market recovers, down from the historical 50% [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about revenue stabilization and gradual recovery, despite ongoing uncertainties related to COVID-19 and the economic environment [8][21] - The company noted that service revenue was more heavily impacted by the oil and gas sector, but there are signs of recovery in parts and service as backlogs increase [22][23] - Management highlighted the importance of leveraging technology and improving operational efficiency to adapt to changing market conditions [62] Other Important Information - The company has not taken PPP loans, indicating a focus on self-management during the pandemic [39] - There is an ongoing evaluation of the competitive landscape, with potential opportunities for consolidation in the industry as some companies face financial distress [39] Q&A Session Summary Question: Trends in truck sales and service - Management noted an increase in quoting activity and a gradual improvement in truck sales and service, particularly in June, but emphasized the need for caution due to ongoing uncertainties [20][21] Question: Cost management and future expense structure - Management discussed efforts to reduce costs and maintain a lower expense base moving forward, aiming for a more efficient operation [24][26] Question: Geographic performance trends - California has performed well, while Texas, heavily reliant on oil and gas, has faced challenges. The Midwest is showing signs of recovery, and Florida has maintained strength despite tourism impacts [56][57] Question: Hydrogen fuel cell technology - Management acknowledged the potential of hydrogen fuel cell technology but indicated that it is still early for significant discussions or developments in this area [65][66]

Rush Enterprises, Inc. (NASDAQ:RUSHA) Q1 2020 Earnings Conference Call April 23, 2020 10:00 AM ET Company Participants Rusty Rush - Chairman, President and CEO Steve Keller - CFO Mike McRoberts - COO Derrek Weaver - EVP Jay Hazelwood - Vice President and Controller Michael Goldstone - Vice President, General Counsel, and Corporate Secretary Conference Call Participants Jamie Cook - Credit Suisse Justin Long - Stephens Joel Tiss - BMO Andrew Obin - Bank of America Operator Good morning, ladies and gentlemen, ...

Rush Enterprises, Inc. (NASDAQ:RUSHA) Q4 2019 Earnings Conference Call February 13, 2020 10:00 AM ET CompanyParticipants Rusty Rush - Chairman, President & CEO Steve Keller - CFO Conference Call Participants Jamie Cook - Credit Suisse Justin Long - Stephens Joel Tiss - BMO Capital Markets Chris Armes - Buckingham Research Operator Good morning, ladies and gentlemen, and welcome to the Rush Enterprises, Inc. Fourth Quarter and Year End 2019 Earnings Results. At this time, all participants are in a listen-onl ...