What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 549 added, 171 removed, 672 unchanged (52% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Shares and Per Share Amounts)

JUNE 30, 2021 AND DECEMBER 31, 2020

(In Thousands, Except Shares)

Current assets:

100 unchanged sentences

Three Months Ended

Six Months Ended

New and used commercial vehicle sales

$ 797,269  

$ 559,062  

$ 1,544,988  

$ 1,348,616  

Aftermarket products and services sales

Lease and rental

445,526  

377,553  

861,263  

805,531  

Lease and rental sales

61,396  

57,290  

119,623  

118,071  

Finance and insurance

13,872  

Total revenue

1,316,015  

1,002,512  

2,547,821  

2,289,175  

Cost of products sold

New and used commercial vehicle sales

719,768  

521,494  

1,396,860  

1,250,033  

Aftermarket products and services sales

Lease and rental

277,078  

237,196  

538,920  

508,611  

Lease and rental sales

48,387  

51,491  

96,445  

103,699  

Total cost of products sold

1,045,233  

810,181  

2,032,225  

1,862,343  

270,782  

192,331  

515,596  

426,832  

Selling, general and administrative expense

184,734  

156,195  

359,689  

341,269  

Depreciation and amortization expense

13,421  

14,516  

27,147  

28,846  

Gain on sale of assets

Operating income

Interest expense, net

72,791  

23,001  

129,016  

58,198  

Interest (income) expense, net

( 212 )  

Income before taxes

74,749  

22,512  

131,386  

54,181  

Income tax provision

16,705  

28,009  

14,258  

$ 58,044  

$ 16,816  

$ 103,377  

$ 39,923  

Earnings per common share:

$ 1.04  

$ 0.31  

$ 1.85  

$ 0.73  

$ 1.00  

$ 0.30  

$ 1.79  

$ 0.72  

Weighted average shares outstanding:

56,009  

54,436  

55,819  

54,581  

57,956  

55,351  

57,846  

55,670  

Dividends declared per common share

$ 0 .18  

$ 0.09  

$ 0.36  

$ 0.17  

Comprehensive income

$ 58,356  

$ 17,741  

$ 103,944  

$ 38,918  

The accompanying notes are an integral part of these consolidated financial statements.

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Comprehensive

Class A  

Class B  

Capital  

Earnings  

Income  

Balance, December 31, 2020

42,504  

12,470  

$ 437,646  

$ ( 2,879 )  

$ 831,850  

$ 1,268,037  

Stock options exercised and stock awards

Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

11,520  

Vesting of restricted share awards

( 6,780 )  

Issuance of common stock under employee stock purchase plan

Common stock repurchases

( 155 )  

( 6,483 )  

Dividend Class A common stock

( 7,684 )  

Dividend Class B common stock

( 2,380 )  

Other comprehensive income

45,333  

Balance, March 31, 2021

42,885  

12,660  

$ 449,790  

$ ( 9,362 )  

$ 867,119  

$ 1,124  

$ 1,309,229  

Stock options exercised and stock awards

Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

Vesting of restricted share awards

( 614 )  

Common stock repurchases

( 99 )  

( 4,223 )  

Dividend Class A common stock

( 7,735 )  

Dividend Class B common stock

( 2,425 )  

Other comprehensive income

58,044  

Balance, June 30, 2021

43,104  

12,561  

$ 456,785  

$ ( 13,585 )  

$ 915,003  

$ 1,436  

$ 1,360,199  

Comprehensive

Class A  

Class B  

Capital  

Earnings  

Income (Loss)  

Balance, December 31, 2019

41,930  

12,360  

$ 397,267  

$ ( 304,129 )  

$ 1,065,553  

$ 1,159,493  

Stock options exercised and stock awards

1 unchanged sentence

Vesting of restricted share awards

( 2,416 )  

Issuance of common stock under employee stock purchase plan

Common stock repurchases

( 833 )  

( 81 )  

( 19,902 )  

Dividend Class A common stock

( 3,646 )  

Dividend Class B common stock

Other comprehensive income (loss)

( 1,108 )  

Other comprehensive income

( 1,930 )  

23,107  

Balance, March 31, 2020

41,299  

12,616  

$ 406,725  

$ ( 324,031 )  

$ 1,083,906  

$ ( 1,593 )  

$ 1,165,476  

Stock options exercised and stock awards

Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

Vesting of restricted share awards

( 28 )  

Dividend Class A common stock

( 3,581 )  

Dividend Class B common stock

( 1,165 )  

Other comprehensive income

16,816  

Balance, June 30, 2020

41,593  

12,616  

$ 414,812  

$ ( 324,031 )  

$ 1,095,976  

$ ( 668 )  

$ 1,186,560  

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(In Thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

$ 103,377  

$ 39,923  

Adjustments to reconcile net income to net cash provided by operating activities-

Depreciation and amortization

84,891  

89,897  

Gain on sale of property and equipment, net

Stock-based compensation expense related to employee stock options and employee stock purchases

Provision for deferred income tax expense

Change in accounts receivable, net

Change in inventories

( 256 )  

Stock-based compensation expense related to employee equity awards and employee stock purchases

15,203  

12,139  

Deferred income tax expense

( 14,602 )  

Change in accounts and notes receivable, net

12,046  

21,027  

Change in inventories, net

76,772  

358,945  

Change in prepaid expenses and other, net

( 1,255 )  

Change in trade accounts payable

12,376  

Payments on floor plan notes payable –

Change in customer deposits

( 23,725 )  

Change in accrued expenses

( 26,243 )  

( 881 )  

Net cash provided by operating activities

237,703  

418,210  

Cash flows from investing activities:

Acquisition of property and equipment

( 84,352 )  

Proceeds from the sale of property and equipment

Net cash used in investing activities

( 82,879 )  

Cash flows from financing activities:

Draws (payments) on floor plan notes payable –

Payments on floor plan notes payable –

non-trade, net

( 40,909 )  

Proceeds from long-term debt

52,325  

119,348  

Principal payments on long-term debt

( 129,221 )  

Principal payments on finance lease obligations

( 6,361 )  

Proceeds from issuance of shares relating to employee stock options and employee stock purchases

Payments of cash dividends

( 19,922 )  

Common stock repurchased

( 10,818 )  

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

( 150,961 )  

Net increase in cash and cash equivalents

33,936  

Cash and cash equivalents, beginning of period

312,048  

181,620  

Cash and cash equivalents, end of period

$ 315,911  

$ 215,556  

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Income taxes paid (refunded), net

Noncash investing and financing activities:

$ 13,213  

$ 22,559  

Income taxes, net of refunds

$ 67,766  

Noncash activities:

Assets acquired under finance leases

$ 15,019  

$ 26,492  

The accompanying notes are an integral part of these consolidated financial statements.

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and have remained operational across the Company’s dealership network.

While the COVID- 19 pandemic is not over, business conditions have improved significantly since the second quarter of 2020.

The Company is unable to predict the impact that the COVID- 19 pandemic will have on its future business and operating results due to numerous uncertainties, including the duration and severity of the outbreak.

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LIBOR benchmarking is utilized in the Company’s working capital and floorplan facilities.

The Company is in the process of completing its evaluation of the impact that the adoption of the provisions from this standard will have on its Consolidated Financial Statements.

The Company is in the process of completing its evaluation of the impact, if any, that the adoption of this standard will have on its Consolidated Financial Statements.

Franchise Rights

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The fair value of the franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition.

The carrying value of the Company’s manufacturer franchise rights was $ 7.0 million as of March 31, 2021 and December 31, 2020, and is included in Other Assets on the accompanying Consolidated Balance Sheet.

The carrying value of the Company’s manufacturer franchise rights was $ 7.0 million as of June 30, 2021 and December 31, 2020, and is included in Other Assets on the accompanying Consolidated Balance Sheet.

The Company has determined that manufacturer franchise rights have an indefinite life, as there are no economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers’

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The Company was also granted a call option in the purchase agreement that provides the Company with the right to acquire the remaining 50 % equity interest in RTC Canada until the close of business on February 25, 2024.

The value of the Company’s call option was $ 3.6 million as of March 31, 2021, and is reported in Other Assets on the Consolidated Balance Sheet.

The value of the Company’s call option was $ 3.6 million as of June 30, 2021, and is reported in Other Assets on the Consolidated Balance Sheet.

On April 25, 2019, the Company entered into a Guaranty Agreement (“Guaranty”) with Bank of Montreal (“BMO”), pursuant to which the Company agreed to guaranty up to CAD250 million (the “Guaranty Cap”) of certain credit facilities entered into by and between Tallman Truck Centre Limited (“TTCL”) and BMO.

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In exchange for the Guaranty, RTC Canada is receiving a reduced rate of interest on its credit facilities with BMO.

The Guaranty was valued at $ 5.3 million as of March 31, 2021 and $ 5.2 million as of December 31, 2020, and is included in the investment in RTC Canada.

As of March 31, 2021, the Company’s investment in RTC Canada is $ 33.2 million.

The Guaranty was valued at $ 5.3 million as of June 30, 2021 and $ 5.2 million as of December 31, 2020, and is included in the investment in RTC Canada.

As of June 30, 2021, the Company’s investment in RTC Canada is $ 33.7 million.

The Company’s equity income in RTC Canada is included in Other income on the Consolidated Statements of Income.

The total capitalized costs of the Company’s SAP enterprise resource planning software platform (the “ERP Platform”) of $ 6.5 million are recorded on the Consolidated Balance Sheet in Other Assets.

Amortization expense relating to the ERP Platform, which is recognized in depreciation and amortization expense in the Consolidated Statements of Income and Comprehensive Income, was $ 0.5 million for the three months ended March 31, 2021 and $ 0.5 million for the three months ended March 31, 2020.

The total capitalized costs of the Company’s SAP enterprise resource planning software platform (“the ERP Platform”) of $ 6.1 million are recorded on the Consolidated Balance Sheet in Other Assets.

Amortization expense relating to the ERP Platform, which is recognized in depreciation and amortization expense in the Consolidated Statements of Income and Comprehensive Income, was $ 0.4 million for the three months ended June 30, 2021 and $ 0.5 million for the three months ended June 30, 2020, and $ 0.9 million for the six months ended June 30, 2021 and $ 1.0 million for the six months ended June 30, 2020.

The Company estimates that amortization expense relating to the ERP Platform will be approximately $ 1.5 million in 2021 and $ 1.2 million per year for the next four years.

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Three Months Ended

Six Months Ended

Numerator for basic and diluted earnings per share –

Net income available to common shareholders

$ 58,044  

$ 16,816  

$ 103,377  

$ 39,923  

Denominator for basic earnings per share –

weighted average shares outstanding

56,009  

54,436  

55,819  

54,581  

Effect of dilutive securities –

Employee and director stock options and restricted share awards

Employee stock options and restricted stock awards

Denominator for diluted earnings per share –

adjusted weighted average shares outstanding and assumed conversions

57,956  

55,351  

57,846  

55,670  

Basic earnings per common share

$ 1.04  

$ 0.31  

$ 1.85  

$ 0.73  

Diluted earnings per common share and common share equivalents

Options to purchase shares of common stock that were outstanding for the three months ended March 31, 2021 and 2020 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

Weighted average anti-dilutive options

$ 1.00  

$ 0.30  

$ 1.79  

$ 0.72  

Options to purchase shares of common stock that were outstanding for the three months and six months ended June 30, 2021, and 2020, which were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

Three Months Ended

Six Months Ended

Weighted average anti-dilutive stock options

Stock Options and Restricted Stock Awards

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Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors, including employee stock options, restricted stock unit awards, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair values.

Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options and included in selling, general and administrative expense, was $ 11.5 million for the three months ended March 31, 2021, and $ 8.6 million for the three months ended March 31, 2020.

As of March 31, 2021, the Company had $ 12.3 million of unrecognized compensation cost related to non-vested employee stock options to be recognized over a weighted-average period of 2.6 years and $ 14.6 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.7 years.

Financial Instruments and Fair Value          

Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options, and included in selling, general and administrative expense, was $ 3.7 million for the three months ended June 30, 2021, and $ 3.6 million for the three months ended June 30, 2020.

Stock-based compensation expense, included in selling, general and administrative expense, was $ 15.2 million for the six months ended June 30, 2021, and was $ 12.1 million for the six months ended June 30, 2020.

As of June 30, 2021, the Company had $ 11.3 million of unrecognized compensation cost related to non-vested employee stock options to be recognized over a weighted-average period of 2.5 years and $ 12.8 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.5 years.

Financial Instruments and Fair Value

The Company measures certain financial assets and liabilities at fair value on a recurring basis.

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The carrying values of the Company’s financial instruments approximate fair value due either to their short-term nature or existence of variable interest rates, which approximate market rates.

Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments as of March 31, 2021, and December 31, 2020.

Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments as of June 30, 2021, and December 31, 2020.

The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.

The fair value of the Company’s long-term debt is based on secondary market indicators.

Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral and liquidity.

Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rates, credit rating, collateral and liquidity.

Accordingly, the Company concluded that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar debt and the Company’s current credit standing.

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The Company evaluates performance based on income before income taxes, not including extraordinary items.

The following table contains summarized information about reportable segment revenues, segment income or loss from continuing operations and segment assets for the periods ended March 31, 2021 and 2020 (in thousands):

As of and for the three months ended March 31, 2021

As of and for the three months ended June 30, 2021

Revenues from external customers

Segment operating income (loss)

Segment income (loss) before taxes

$ 1,311,678  

$ 4,337  

$ 1,316,015  

Segment operating income

72,163  

72,791  

Segment income before taxes

74,191  

74,749  

Segment assets

As of and for the three months ended March 31, 2020

2,863,087  

49,037  

2,912,124  

For the six months ended June 30, 2021

Revenues from external customers

Segment operating income (loss)

Segment income (loss) before taxes

$ 2,539,790  

$ 8,031  

$ 2,547,821  

Segment operating income

128,113  

129,016  

Segment income before taxes

130,623  

131,386  

As of and for the three months ended June 30, 2020

Revenues from external customers

$ 998,739  

$ 3,773  

$ 1,002,512  

Segment operating income

22,678  

23,001  

Segment income before taxes

22,260  

22,512  

Segment assets

The Company had unrecognized income tax benefits totaling $ 3.3 million as a component of accrued liabilities as of March 31, 2021 and December 31, 2020, the total of which, if recognized, would impact the Company’s effective tax rate.

3,021,241  

43,360  

3,064,601  

For the six months ended June 30, 2020

Revenues from external customers

$ 2,282,118  

$ 7,057  

$ 2,289,175  

Segment operating income

58,129  

58,198  

Segment income before taxes

54,253  

( 72 )  

54,181  

The Company had unrecognized income tax benefits totaling $ 3.3 million as a component of accrued liabilities as of June 30, 2021 and December 31, 2020, the total of which, if recognized, would impact the Company’s effective tax rate.

An unfavorable settlement may require a charge to income tax expense and a favorable resolution would be recognized as a reduction to income tax expense.

The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense.

The Company had approximately $ 150,000 accrued for the payment of interest as of March 31, 2021 and December 31, 2020.

The Company had approximately $ 150,000 accrued for the payment of interest as of June 30, 2021 and December 31, 2020.

No amounts were accrued for penalties.

The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months.

As of March 31, 2021, the tax years ended December 31, 2017 through 2020 remained subject to audit by federal tax authorities, and the tax years ended December 31, 2016 through 2020, remained subject to audit by state tax authorities.

The effective tax rate of 20 % for the three months ended March 31, 2021 is lower than the statutory federal rate of 21 % primarily due to the tax benefit related to the gain associated with the vesting and exercise of equity awards granted through the Company’s long-term incentive plan.

As of June 30, 2021, the tax years ended December 31, 2017 through 2020 remained subject to audit by federal tax authorities, and the tax years ended December 31, 2016 through 2020, remained subject to audit by state tax authorities.

The Company’s revenues are primarily generated from the sale of finished products to customers.

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Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.  

The following table summarizes the Company’s disaggregated revenue by revenue source for the three months ended March 31, 2021 and 2020 (in thousands):

March 31, 2021

March 31, 2020

The following table summarizes the Company’s disaggregated revenue by revenue source for the three months and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Commercial vehicle sales revenue

$ 797,269  

$ 559,062  

$ 1,544,988  

$ 1,348,616  

Parts revenue

263,491  

211,804  

503,927  

448,402  

Commercial vehicle repair service revenue

182,035  

165,749  

357,336  

357,129  

Finance revenue

1 unchanged sentence

Other revenue

$ 1,254,619  

$ 945,222  

$ 2,428,198  

$ 2,171,104  

All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time.

The Company did not have any material contract assets or contract liabilities on the balance sheet as of March 31, 2021.

Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.

The Company did not have any material contract assets or contract liabilities on the balance sheet as of June 30, 2021.

Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of the Company’s other revenues are related to the Truck Segment.

Lease of Vehicles as Lessor

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The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term.

The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term.

The lease unit is depreciated to a residual value that approximates the expected fair value at the expiration of the lease term.

This policy results in the Company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.

1 unchanged sentence

The lessee obtains control of the underlying asset and the Company recognizes sales revenue upon lease commencement.

The receivable for sales-type leases as of March 31, 2021, in the amount of $ 5.2 million and as of December 31, 2020, in the amount of $ 5.6 million is reflected in Other Assets on the Consolidated Balance Sheet.

Rental and lease income during the three months ended March 31, 2021 and March 31, 2020 consisted of the following (in thousands):

March 31, 2021

March 31, 2020

The receivable for sales-type leases was $ 5.2 million as of June 30, 2021, and was $ 5.6 million as of December 31, 2020, and is reflected in Other Assets on the Consolidated Balance Sheet.

Lease and rental income during the three and six months ended June 30, 2021 and June 30, 2020 consisted of the following (in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Minimum rental payments

$ 52,948  

$ 50,195  

$ 103,653  

$ 103,368  

Nonlease payments

15,971  

14,703  

$ 61,397  

$ 57,290  

$ 119,624  

$ 118,071  

Accumulated Other Comprehensive Income

The following table shows the components of accumulated other comprehensive income (loss) (in thousands):

The following table shows the components of accumulated other comprehensive (loss) income (in thousands):

Balance as of December 31, 2020

1 unchanged sentence

Balance as of March 31, 2021

The equity method investment in RTC Canada was valued using the exchange rate of one US Dollar to 1.2562 Canadian dollars as of March 31, 2021.

$ 1,124  

Foreign currency translation adjustment

Balance as of June 30, 2021

$ 1,436  

The equity method investment in RTC Canada was valued using the exchange rate of one US Dollar equals 1.2398 Canadian dollars as of June 30, 2021.

The adjustment is reflected in Other Assets on the Consolidated Balance Sheet.

1 unchanged sentence

The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected.

Under Topic 326, the Company is required to remeasure expected credit losses for financial instruments held on the reporting date based on historical experience, current conditions and reasonable forecasts.

Under Topic 326 :

Measurement of Credit Losses on Financial Instruments , the Company is required to remeasure expected credit losses for financial instruments held on the reporting date based on historical experience, current conditions and reasonable forecasts.

Accounts receivable consists primarily of commercial vehicle sales receivables, manufacturers’

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Provision for

Allowance, net

of Recoveries

June 30, 2021

Commercial vehicle receivables

$ ( 40 )  

Manufacturers’

( 578 )  

Leasing, parts and service receivables

( 637 )  

Other receivables

$ 1,605  

$ 1,062  

$ ( 1,222 )  

$ 1,445  

Management ’

78 unchanged sentences

Our dealership network has remained operational since the beginning of the COVID-19 pandemic.

Despite our dealerships remaining open, the COVID-19 pandemic had a significant negative impact on our revenues for 2020.

While the COVID-19 pandemic is not over, business conditions have improved significantly.

We expect the general economic recovery to continue as more states fully re-open and businesses return to operating at full or close-to-full capacity.

Based on current market conditions and the steps we have taken to reduce expenses, we believe the worst of the pandemic’s effect on our business is behind us.

While the COVID-19 pandemic is not over, business conditions have improved significantly since the second quarter of 2020.

However, supply chain issues resulting from the pandemic continue to impact our aftermarket sales and new commercial vehicle availability.

Based on current market conditions and the steps we have taken to reduce expenses, we continue to believe the worst of the pandemic’s effect on our business is behind us.

All of our businesses, except commercial vehicle service, are back to pre-pandemic levels.

Commercial Vehicle Sales

All of the commercial vehicle manufacturers that we represent resumed operations following any COVID-19 related shutdowns in 2020.

However, supply chain delays related to manufacturing components have forced some of the manufacturers we represent to temporarily cease production and may limit the commercial vehicle industry’s ability to meet commercial vehicle sales demand throughout 2021.

However, supply chain delays related to manufacturing components have forced some of the manufacturers we represent to temporarily cease production at times and may limit the commercial vehicle industry’s ability to meet commercial vehicle sales demand throughout 2021.

Aftermarket Products and Services

With respect to our parts, service and collision center (collectively, “Aftermarket Products and Services”) departments, with some minor exceptions, our parts supply chain has remained relatively uninterrupted to-date.

We believe that the investments we have made over the years in our aftermarket strategic initiatives enabled us to mitigate the impact of the COVID-19 pandemic on our Aftermarket Products and Service business.

We believe that the investments we made over the years with respect to our aftermarket strategic initiatives enabled us to mitigate the impact of the COVID-19 pandemic on our Aftermarket Products and Service business.

Rental and Leasing Operations

With respect to our rental and leasing operations in 2020, we allowed certain credit-worthy customers that serve industries that were dramatically impacted by the COVID-19 pandemic to skip up to three months of lease payments and either extend the lease term by three months or increase the remaining payments to keep the same lease term. 

With respect to our rental and leasing operations, in 2020, we allowed certain credit-worthy customers serving industries that were dramatically impacted by the COVID-19 pandemic to skip up to three months of lease payments and either extend the lease term by three months or increase the remaining payments to keep the same lease term. 

These customers have resumed payments.

As of March 31, 2021, our total net liquidity was approximately $421.6 million, including $316.1 million in cash and $105.5 million available under our various credit agreements, excluding our floor plan credit agreements.

Our rental and leasing operations are back to pre-pandemic levels.

As of June 30, 2021, our total net liquidity was approximately $421.5 million, including $315.9 million in cash and $105.6 million available under our various credit agreements, excluding our floor plan credit agreements.

Our working capital facility (“the Working Capital Facility”) with BMO Harris Bank N.A.

2 unchanged sentences

For further discussion of our liquidity, see the Liquidity and Capital Resources discussion set forth herein.

Research Co., LLC (“A.

Research Co., LLC (“A.C.T.

Research”), a commercial vehicle industry data and forecasting service provider, currently forecasts new U.S.

Class 8 retail truck sales to be 248,400 units in 2021, which would represent a 26.9% increase compared to 2020. 

 We expect our market share of new Class 8 truck sales to range between 5.5% and 6.0% in 2021.

Class 8 retail truck sales to be 259,000 units in 2021, which would represent a 32.4% increase compared to 2020.

While demand for new commercial vehicles is currently strong, we believe that component supply chain issues could push the timing of new commercial vehicle deliveries well into 2022, which would negatively impact A.C.T.

Research’s forecasts.

We expect our market share of new Class 8 truck sales to range between 4.8% and 5.3% in 2021.

This market share percentage would result in the sale of approximately 12,500 to 13,800 of new Class 8 trucks in 2021, based on A.C.T.

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We expect lease and rental revenue to increase 6% to 9% during 2021, compared to 2020.

Although our Aftermarket Products and Services revenues were down slightly compared to the first quarter of 2020, they improved over the fourth quarter of 2020, and we expect to see gradual improvement as the year progresses. 

While parts supply chain constraints are expected to impact the industry over the next two quarters, we do not believe these constraints will have a significant overall effect on our Aftermarket Products and Services revenues for 2021.

We continue to make progress on our strategic initiatives to increase our Aftermarket Products and Services revenues.

While parts supply chain constraints are expected to negatively impact the Aftermarket Products and Services industry for the remainder of 2021, we do not believe these constraints will have a significant overall effect on our Aftermarket Products and Services revenues due to our ability to mitigate supply chain issues with our parts inventory management system.

We believe our Aftermarket Products and Services revenues will increase 8% to 10% in 2021, compared to 2020.

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The allowances take into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, collection experience, current economic conditions, estimates for supportable forecasts (when appropriate) and credit risk characteristics.

On September 15, 2020, our Board of Directors declared a 3-for-2 stock split of our Class A common stock and Class B common stock, to be effected in the form of a stock dividend.

On October 12, 2020, we distributed one additional share of stock for every two shares of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of September 28, 2020.

All share and per share data in this Form 10-Q have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period presented.

Results of Operations

The following discussion and analysis includes our historical results of operations for the three months ended March 31, 2021 and 2020.

The following table sets forth certain financial data as a percentage of total revenues:

The following discussion and analysis includes our historical results of operations for the three months and six months periods ended June 30, 2021 and 2020.

The following table sets forth certain financial data as a percentage of total revenues for the periods indicated:

Three Months Ended

Six Months Ended

New and used commercial vehicle sales

Parts and service sales

Lease and rental

Aftermarket products and services sales

Lease and rental sales

Finance and insurance

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Operating income

Equity in earnings of unconsolidated entities

Interest expense, net

Interest (income) expense, net

Income before income taxes

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Three Months Ended

Six Months Ended

Gross Profit:

New and used commercial vehicle sales

Parts and service sales

Lease and rental

Aftermarket products and services sales

Lease and rental sales

Finance and insurance

Total gross profit

The following table sets forth the unit sales and revenues for new heavy-duty, new medium-duty, new light-duty and used commercial vehicles and the absorption ratio (revenue in millions):

The following table sets forth the unit sales and revenues for new heavy-duty, new medium-duty, new light-duty and used commercial vehicles and the absorption ratio (revenues in millions):

Three Months Ended

Six Months Ended

Vehicle unit sales:

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Used vehicles

Vehicle revenues:

Vehicle revenue:

New heavy-duty vehicles

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Used vehicle revenue

Other vehicle revenues:

Other vehicle revenue:

Dealership absorption ratio:

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When 100% absorption is achieved, all of the gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit.

Our commercial vehicle dealerships achieved a 122.6% absorption ratio for the first quarter of 2021 and a 114.3% absorption ratio for the first quarter of 2020.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Total revenues decreased $54.9 million, or 4.3%, in the first quarter of 2021, compared to the first quarter of 2020.

Our Aftermarket Products and Services revenues decreased $12.2 million, or 2.9%, in the first quarter of 2021, compared to the first quarter of 2020.

Although Aftermarket Products and Services revenues were down slightly compared to the first quarter of 2020, they were up 5.3% compared to the fourth quarter of 2020.

The increase over the fourth quarter of 2020 is primarily due to the overall economic recovery in the U.S.

and continued increase in activity from the industries that we serve.

Revenues from sales of new and used commercial vehicles decreased $41.8 million, or 5.3%, in the first quarter of 2021, compared to the first quarter of 2020.

We sold 2,995 new Class 8 trucks in the first quarter of 2021, a 2.7% decrease compared to 3,078 new Class 8 trucks in the first quarter of 2020.

This was primarily due to the timing of certain large fleet deliveries in the first quarter of 2020.

We sold 2,334 new Class 4 through 7 commercial vehicles, including 140 buses, in the first quarter of 2021, a 28.5% decrease compared to 3,264 new medium-duty commercial vehicles, including 216 buses, in the first quarter of 2020.

Our first quarter 2021 Class 4 through 7 commercial vehicle sales were down primarily due to decreased activity from our lease and rental and food service customers and production shutdowns from some of the manufacturers we represent related to component supply issues.

We sold 395 new light-duty vehicles in the first quarter of 2021, a 47.9% increase compared to 267 new light-duty vehicles in the first quarter of 2020.

We sold 1,924 used commercial vehicles in the first quarter of 2021, a 23.5% increase compared to 1,558 used commercial vehicles in the first quarter of 2020.

The increase in used truck sales in the first quarter of 2021 was primarily due to increased demand for used trucks in light of the supply constraints on new commercial vehicle production.

We believe overall used truck values and demand will remain strong through 2021.

Commercial vehicle lease and rental revenues decreased $2.6 million, or 4.2%, in the first quarter of 2021, compared to the first quarter of 2020.

The decrease is primarily due to the reduction in the rental fleet compared to the first quarter of 2020.

Finance and insurance revenues increased $2.0 million, or 44.7%, in the first quarter of 2021, compared to the first quarter of 2020.

The increase in finance and insurance revenues was due to sales of finance and insurance products to a higher percentage of new and used commercial vehicle purchasers in the first quarter of 2021.

Our commercial vehicle dealerships achieved a 129.1% absorption ratio for the second quarter of 2021 and a 110.2% absorption ratio for the second quarter of 2020.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Total revenues increased $313.5 million, or 31.3%, in the second quarter of 2021, compared to the second quarter of 2020.

Our Aftermarket Products and Services revenues increased $68.0 million, or 18.0%, in the second quarter of 2021, compared to the second quarter of 2020.

This increase was primarily due to the overall continued recovery of the national economy.

Revenues from sales of new and used commercial vehicles increased $238.2 million, or 42.6%, in the second quarter of 2021, compared to the second quarter of 2020.

This increase was also primarily due to continued recovery of the national economy, which has led to strong freight rates throughout the country and strong demand for commercial vehicles.

We sold 2,954 new Class 8 trucks in the second quarter of 2021, a 58.3% increase compared to 1,866 new Class 8 trucks in the second quarter of 2020.

Our new Class 8 truck sales were up significantly in the second quarter of 2021 due to strong demand from a wide variety of market segments, including vocational, construction and over-the-road customers.

According to A.C.T.

Research, retail sales in the U.S.

Class 8 truck market increased 63.3% in the second quarter of 2021, compared to the second quarter of 2020.

We sold 2,825 new Class 4 through 7 commercial vehicles, including 230 buses, in the second quarter of 2021, a 21.1% increase compared to 2,333 new medium-duty commercial vehicles, including 204 buses, in the second quarter of 2020.

Our second quarter 2021 Class 4 through 7 commercial vehicle sales were up primarily due to the overall continued economic recovery as well as increased commercial vehicle sales to our lease and rental and food service customers.

Research estimates that unit sales of new Class 4 through 7 commercial vehicles in the U.S.

increased approximately 26.1% in the second quarter of 2021, compared to the second quarter of 2020.

We sold 472 light-duty vehicles in the second quarter of 2021, an 85.8% increase compared to 254 light-duty vehicles sold in the second quarter of 2020.

We sold 2,094 used commercial vehicles in the second quarter of 2021, an 18.4% increase compared to 1,768 used commercial vehicles sold in the second quarter of 2020.

The increase in used truck sales in the second quarter of 2021 was primarily due to increased demand for used trucks because supply constraints are limiting new commercial vehicle production.

We believe used truck values will decrease when new truck production increases;

however, we believe demand for used trucks will remain strong through 2021.

Commercial vehicle lease and rental revenues increased $4.1 million, or 7.2%, in the second quarter of 2021, compared to the second quarter of 2020.

The increase is primarily due to increased rental fleet utilization.

Finance and insurance revenues increased $2.4 million, or 49.3%, in the second quarter of 2021, compared to the second quarter of 2020.

We expect finance and insurance revenues to fluctuate proportionately with our new and used commercial vehicle sales in 2021.

Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of our operating profits.

Other income decreased $0.2 million, or 5.8%, in the first quarter of 2021, compared to the first quarter of 2020.

Other income consists primarily of document fees related to commercial vehicle sales.

Gross profit increased $10.3 million, or 4.4%, in the first quarter of 2021, compared to the first quarter of 2020.

Gross profit as a percentage of sales increased to 19.9% in the first quarter of 2021, from 18.2% in the first quarter of 2020.

This increase in gross profit as a percentage of sales is a result of increased gross margins related to used commercial vehicle sales and a change in our overall product sales mix.

Commercial vehicle sales, a lower margin revenue item, decreased as a percentage of total revenues to 60.7% in 2021, from 61.4% in 2020.

Aftermarket Products and Services revenues, a higher margin revenue item, increased as a percentage of total revenues to 33.8% in 2021, from 33.3% in 2020.

Gross margins from our Aftermarket Products and Services operations increased to 37.0% in the first quarter of 2021, compared to 36.6% in the first quarter of 2020.

Gross profit from our Aftermarket Products and Services operations decreased to $153.9 million in the first quarter of 2021, from $156.6 million in the first quarter of 2020.

Gross profit increased $78.5 million, or 40.8%, in the second quarter of 2021, compared to the second quarter of 2020.

Gross profit as a percentage of sales increased to 20.6% in the second quarter of 2021, from 19.2% in the second quarter of 2020.

This increase in gross profit as a percentage of sales is a result of widespread increased gross margins from new and used commercial vehicle sales, Aftermarket Products and Services sales and lease and rental sales.

Gross margins from our Aftermarket Products and Services operations increased to 37.8% in the second quarter of 2021, from 37.2% in the second quarter of 2020.

Gross profit from our Aftermarket Products and Services operations increased to $168.4 million in the second quarter of 2021, from $140.4 million in the second quarter of 2020.

Historically, gross margins on parts sales range from 27% to 28% and gross margins on service and collision center operations range from 61% to 65%.

Gross profits from parts sales represented 59.5% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2021 and 58.8% in the first quarter of 2020.

Service and collision center operations represented 40.5% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2021 and 41.2% in the first quarter of 2020.

Gross profits from parts sales represented 61% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2021 and 60% in the second quarter of 2020.

Service and collision center operations represented 39% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2021 and 40% in the second quarter of 2020.

We expect blended gross margins on Aftermarket Products and Services operations to range from 37.0% to 38.0% in 2021.

Gross margins on new Class 8 truck sales were 8.9% in the first quarter of 2021 and in the first quarter of 2020.

Gross margins on new Class 8 truck sales increased to 9.1% in the second quarter of 2021, from 7.3% in the second quarter of 2020.

This increase is primarily due to strong demand for Class 8 trucks and the mix of purchasers during the second quarter of 2021.

In 2021, we expect overall gross margins from new heavy-duty truck sales of approximately 8.0% to 9.0%.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 7.1% in the first quarter of 2021, from 6.1% in the first quarter of 2020.

This increase is primarily due to the mix of purchasers during the first quarter of 2021.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 7.4% in the second quarter of 2021, from 6.1% in the second quarter of 2020.

This increase is primarily due to the mix of purchasers during the second quarter of 2021.

For 2021, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 6.5% to 7.5%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Gross margins on used commercial vehicle sales increased to 18.1% in the first quarter of 2021, from 5.7% in the first quarter of 2020.

This increase in margins in the first quarter of 2021 was primarily due to the increase in used truck values due to the strong demand for used commercial vehicles.

The lower margins that we recognized in 2020 were due to weak demand for used trucks in early 2020 caused by the COVID-19 pandemic and write-downs of used truck inventory to appropriately value our inventory for market conditions caused by the oversupply of used trucks in the U.S.

used truck market.

We expect margins on used commercial vehicles to be approximately 10% to 14% in 2021.

Gross margins from truck lease and rental sales increased to 18.4% in the first quarter of 2021, from 14.1% in the first quarter of 2020.

Gross margins on used commercial vehicle sales increased to 17.4% in the second quarter of 2021, from 5.4% in the second quarter of 2020.

This increase in margins in the second quarter of 2021 was primarily due to the increase in used truck values due to strong demand for used commercial vehicles.

The lower margins that we recognized in 2020 were due to weak demand for used trucks in early 2020 caused by the beginning of the COVID-19 pandemic and the write-down of used truck inventory values to account for extremely weak market conditions at that time.

We expect margins on used commercial vehicles to be approximately 12% to 16% for the remainder of 2021.

Gross margins from truck lease and rental sales increased to 21.2% in the second quarter of 2021, from 10.1% in the second quarter of 2020.

This increase is primarily related to increased rental fleet utilization.

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This policy results in us realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.

Finance and insurance revenues and other income, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Finance and insurance revenues and other revenues, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses decreased $10.1 million, or 5.5%, in the first quarter of 2021, compared to the first quarter of 2020.

This decrease resulted from expense reductions necessitated by the COVID-19 pandemic and decreased selling expense, compared to 2020.

SG&A expenses as a percentage of total revenues decreased to 14.2% in the first quarter of 2021, from 14.4% in the first quarter of 2020.

Selling, General and Administrative (“SG&A”) expenses increased $28.5 million, or 18.3%, in the second quarter of 2021, compared to the second quarter of 2020.

This increase resulted from increased personnel expense and increased selling expense, compared to 2020.

SG&A expenses as a percentage of total revenues decreased to 14.0% in the second quarter of 2021, from 15.6% in the second quarter of 2020.

Annual SG&A expenses as a percentage of total revenues have ranged from 12.4% to 14.0% over the last five years.

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Depreciation and Amortization Expense

Depreciation and amortization expense decreased $0.6 million, or 4.2%, in the first quarter of 2021, compared to the first quarter of 2020.

Interest Expense, Net

Net interest expense decreased $4.3 million, or 89.4%, in the first quarter of 2021, compared to the first quarter of 2020.

This decrease in interest expense is a result of the decrease in inventory levels and lower floor plan interest rates in 2021, compared to 2020.

We expect net interest expense in 2021 to decrease compared to 2020, but the amount of the decrease will depend on inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan arrangements.

Depreciation and amortization expense decreased $1.1 million, or 7.5%, in the second quarter of 2021, compared to the second quarter of 2020.

Interest (Income) Expense, Net

Net interest (income) expense decreased $2.4 million, or 109.6%, in the second quarter of 2021, compared to the second quarter of 2020.

This decrease was primarily due to the decrease in floorplan liability related to lower commercial vehicle inventory levels, the product mix of our commercial vehicle inventory and the reduction in our real estate debt.

During the second quarter of 2021, a higher portion of our vehicle inventory was from commercial vehicle manufacturers that were offering more favorable floorplan terms than in the second quarter of 2020.

The Company also paid off its remaining real estate debt of approximately $40.0 million in April of 2021.

We expect net interest expense in 2021 to decrease compared to 2020, but the amount of the decrease will depend on commercial vehicle inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan arrangements, which limits our interest expense.

Income before Income Taxes

As a result of the factors described above, income from continuing operations before income taxes increased $25.0 million, or 78.8%, in the first quarter of 2021, compared to the first quarter of 2020.

Income taxes increased $2.7 million, or 32.0%, in the first quarter of 2021, compared to the first quarter of 2020.

We provided for taxes at a 20.0% effective rate in the first quarter of 2021 and 28.0% in the first quarter of 2020.

The tax rate in the first quarter of 2021 was primarily impacted by the tax benefit related to the gain associated with vesting and exercise of equity awards granted through our long-term incentive plan.

As a result of the factors described above, income before income taxes increased $52.2 million, or 232.0%, in the second quarter of 2021, compared to the second quarter of 2020.

Income taxes increased $11.0 million, or 193.3%, in the second quarter of 2021, compared to the second quarter of 2020.

We provided for taxes at a 22.3% effective rate in the second quarter of 2021 and 25.3% in the second quarter of 2020.

We expect our effective tax rate to be approximately 23.0% to 25.0% of pretax income in 2021.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

Unless otherwise stated below, our variance explanations and future expectations with regards to the items discussed in this section are set forth in the discussion of the “Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020.”

Total revenues increased $258.6 million, or 11.3%, in the first six months of 2021, compared to the first six months of 2020.

Sales of new and used commercial vehicles increased $196.4 million, or 14.6%, in the first six months of 2021, compared to the first six months of 2020.

Aftermarket Products and Services revenues increased $55.7 million, or 6.9%, in the first six months of 2021, compared to the first six months of 2020.

We sold 5,949 new Class 8 heavy-duty trucks in the first six months of 2021, a 20.3% increase compared to 4,944 new Class 8 heavy-duty trucks in the first six months of 2020.

According to A.C.T.

Research, retail sales in the U.S.

Class 8 truck market increased 34.9% in the first six months of 2021, compared to the first six months of 2020.

We sold 5,159 new Class 4 through 7 medium-duty commercial vehicles, including 370 buses, in the first six months of 2021.

This represented a 7.8% decrease compared to 5,597 new Class 4 through 7 medium-duty commercial vehicles, including 420 buses, in the first six months of 2020.

The decrease in sales for the first six months of 2021, compared to the first six months of 2020, is largely the result of robust sales of new Class 4 through 7 medium-duty commercial vehicle sales throughout our dealership network in the first quarter of 2020.

Research estimates that unit sales of new Class 4 through 7 commercial vehicles in the U.S.

increased approximately 19.6% in the first six months of 2021, compared to the first six months of 2020.

We sold 867 new light-duty vehicles in the first six months of 2021, a 66.4% increase compared to 521 new light-duty vehicles sold in the first six months of 2020.

We sold 4,018 used commercial vehicles in the first six months of 2021, a 20.8% increase compared to 3,326 used commercial vehicles in the first six months of 2020.

Truck lease and rental revenues increased $1.6 million, or 1.3%, in the first six months of 2021, compared to the first six months of 2020.

Finance and insurance revenues increased $4.4 million, or 47.2%, in the first six months of 2021, compared to the first six months of 2020.

The increase in finance and insurance revenues was due to sales of finance and insurance products to a higher percentage of new and used commercial vehicle purchasers in the first six months of 2021.

Gross profit increased $88.8 million, or 20.8%, in the first six months of 2021, compared to the first six months of 2020.

Gross profit as a percentage of sales was 20.2% in the first six months of 2021 and 18.6% in the first six months of 2020.

Gross margins from Aftermarket Products and Services operations increased to 37.4% in the first six months of 2021, from 36.9% in the first six months of 2020.

Gross profit for Aftermarket Products and Services was $322.3 million in the first six months of 2021, compared to $296.9 million in the first six months of 2020.

Gross profit from parts sales represented 60% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2021 and 2020.

Service and collision center operations represented 40% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2021 and 2020.

Gross margins on new Class 8 heavy-duty truck sales increased to 9.0% in the first six months of 2021, from 8.3% in the first six months of 2020.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales increased to 7.3% in the first six months of 2021, from 6.1% in the first six months of 2020.

Gross margins on used commercial vehicle sales increased to 17.7% in the first six months of 2021, from 5.5% in the first six months of 2020.

Gross margins from truck lease and rental sales increased to 19.4% in the first six months of 2021, from 12.2% in the first six months of 2020.

Finance and insurance revenues and other income, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Selling, General and Administrative Expenses

SG&A expenses increased $18.4 million, or 5.4%, in the first six months of 2021, compared to the first six months of 2020.

SG&A expenses equaled 14.1% of total revenue in the first six months of 2021, compared to 14.9% in the first six months of 2020.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $1.7 million, or 5.9%, in the first six months of 2021, compared to the first six months of 2020.

Interest (Income) Expense, Net

Net interest expense decreased $6.7 million, or 95.8%, in the first six months of 2021, compared to the first six months of 2020.

Income before Income Taxes

Income before income taxes increased $77.2 million, or 142.5%, in the first six months of 2021, compared to the first six months of 2020.

Provision for Income Taxes

Income taxes increased $13.8 million, or 96.4%, in the first six months of 2021, compared to the first six months of 2020.

We provided for taxes at a 21.3% rate in the first six months of 2021 and a 26.3% rate in the first six months of 2020.

Liquidity and Capital Resources

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Historically, these cash requirements have been met through the retention of profits, borrowings under our floor plan arrangements and bank financings.

As of March 31, 2021, we had working capital of approximately $368.4 million, including $316.1 million in cash, available to fund our operations.

As of June 30, 2021, we had working capital of approximately $377.5 million, including $315.9 million in cash, available to fund our operations.

We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months.

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We have a secured line of credit that provides for a maximum borrowing of $17.5 million.

There were no advances outstanding under this secured line of credit on March 31, 2021, however, $12.0 million was pledged to secure various letters of credit related to self-insurance products, leaving $5.5 million available for future borrowings as of March 31, 2021.

There were no advances outstanding under this secured line of credit on June 30, 2021, however, $12.0 million was pledged to secure various letters of credit related to self-insurance products, leaving $5.6 million available for future borrowings as of June 30, 2021.

The Working Capital Facility with BMO Harris includes up to $100.0 million of revolving credit loans available to us for working capital, capital expenditures and other general corporate purposes.

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The Working Capital Facility expires on the earlier of (i) June 30, 2022 and (ii) the date on which all commitments under the Working Capital Facility shall have terminated, whether as a result of the occurrence of the Commitment Termination Date (as defined in the Working Capital Facility) or otherwise.

There were no advances outstanding under the Working Capital Facility as of March 31, 2021.

Our long-term debt, floor plan financing agreements and the Working Capital Facility require us to satisfy various financial ratios such as the debt-to-worth ratio, leverage ratio and the fixed charge coverage ratio and certain requirements for tangible net worth and Generally Accepted Accounting Principles (“GAAP”) net worth.

As of March 31, 2021, we were in compliance with all debt covenants related to debt secured by real estate, lease and rental units, our floor plan credit agreements and the Working Capital Facility.

There were no advances outstanding under the Working Capital Facility as of June 30, 2021.

Our long-term debt, floor plan financing agreements and the Working Capital Facility require us to satisfy various financial ratios such as the debt-to-worth ratio, leverage ratio and the fixed charge coverage ratio and certain requirements for tangible net worth and generally accepted accounting principles net worth.

As of June 30, 2021, we were in compliance with all debt covenants related to debt secured by real estate, lease and rental units, our floor plan credit agreements and the Working Capital Facility.

We do not anticipate any breach of the covenants in the foreseeable future.

We expect to purchase or lease commercial vehicles worth approximately $150.0 million to $180.0 million for our leasing operations during 2021, depending on customer demand, all of which will be financed.

We expect to purchase or lease commercial vehicles worth approximately $150.0 million to $180.0 million for our leasing operations during 2021, depending on customer demand, most of which will be financed.

We also expect to make capital expenditures for recurring items such as computers, shop tools and equipment and vehicles of approximately $30.0 million to $35.0 million during 2021.

During the first quarter of 2021, we paid a cash dividend of $9.9 million.

Additionally, on April 21, 2021, our Board of Directors declared a cash dividend of $0.18 per share of Class A and Class B Common Stock, to be paid on June 10, 2021, to all shareholders of record as of May 10, 2021.

During the second quarter of 2021, we paid a cash dividend of $10.0 million.

Additionally, on July 20, 2021, our Board of Directors declared a cash dividend of $0.19 per share of Class A and Class B Common Stock, to be paid on September 10, 2021, to all shareholders of record as of August 10, 2021.

The total dividend disbursement is estimated at approximately $10.6 million.

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The actual timing, number and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including market conditions, stock price and other factors, including those related to the ownership requirements of our dealership agreements with Peterbilt.

As of March 31, 2021, we had repurchased $8.3 million of our shares of common stock under the current stock repurchase program.

As of June 30, 2021, we had repurchased $12.5 million of our shares of common stock under the current stock repurchase program.

The current stock repurchase program expires on December 31, 2021, and may be suspended or discontinued at any time.

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We have the ability to fund the construction or purchase of new facilities through our operating cash flows or by financing.

We have no other material commitments for capital expenditures as of March 31, 2021.

We have no other material commitments for capital expenditures as of June 30, 2021.

However, we will continue to purchase vehicles for our lease and rental operations and authorize capital expenditures for the improvement or expansion of our existing dealership facilities and construction or purchase of new facilities based on market opportunities.

Cash and cash equivalents increased by $4.0 million during the three months ended March 31, 2021, and decreased by $44.1 million during the three months ended March 31, 2020.

Cash and cash equivalents increased by $3.9 million during the six months ended June 30, 2021 and increased by $33.9 million during the six months ended June 30, 2020.

The major components of these changes are discussed below.

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Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital.

During the first quarter of 2021, operating activities resulted in net cash provided by operations of $40.1 million.

Net cash provided by operating activities primarily consisted of $45.3 million in net income, as well as non-cash adjustments related to depreciation and amortization of $42.6 million, deferred income tax benefit of $8.4 million and stock-based compensation of $11.5 million.

During the first six months of 2021, operating activities resulted in net cash provided by operations of $237.7 million.

Net cash provided by operating activities primarily consisted of $103.4 million in net income, as well as non-cash adjustments related to depreciation and amortization of $84.9 million, stock-based compensation of $15.2 million and the benefit for deferred income tax expense of $14.6 million.

Cash provided by operating activities included an aggregate of $50.0 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities was primarily cash outflows of $14.7 million from the increase in accounts receivable, $1.8 million from the increase in inventory, $0.7 million in the increase in other current assets, $1.6 million from the net decrease in accounts payable and accrued liabilities, $31.2 million from the decrease in customer deposits.

Included in the net change in operating assets and liabilities were cash inflows of $76.8 million from the decrease in inventories, $12.0 million from the decrease in accounts receivable and $12.4 million from the increase in accounts payable, which was offset by cash outflows of $1.3 million from the increase in other assets, $26.2 million from the decrease in accrued liabilities and $23.7 million from the decrease in customer deposits.

The majority of our commercial vehicle inventory is financed through our floor plan credit agreements.

During the first quarter of 2020, operating activities resulted in net cash provided by operations of $138.8 million.

Net cash provided by operating activities primarily consisted of $23.1 million in net income, as well as non-cash adjustments related to depreciation and amortization of $45.2 million, deferred income tax benefit of $7.2 million and stock-based compensation of $8.6 million.

During the first six months of 2020, operating activities resulted in net cash provided by operations of $418.2 million.

Net cash provided by operating activities primarily consisted of $39.9 million in net income, as well as non-cash adjustments related to depreciation and amortization of $89.9 million, stock-based compensation of $12.1 million and the benefit for deferred income tax expense of $10.4 million.

Cash provided by operating activities included an aggregate of $290.1 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were primarily cash inflows of $153.6 million from the decrease in inventory and $6.0 million in the decrease in other current assets, which was offset by $30.9 million from the increase in accounts receivable, $26.9 million from the net decrease in accounts payable and accrued liabilities, $16.7 million from the decrease in customer deposits and $16.7 million from the net decrease in floor plan (trade).

Included in the net change in operating assets and liabilities were cash inflows of $358.9 million from the decrease in inventories, $21.0 million from the decrease in accounts receivable and $5.2 million from the decrease in other assets, which was offset by cash outflows of $36.1 million from the decrease in accounts payable, $32.6 million from the net decrease in floor plan, trade, $1.2 million from the decrease in accrued liabilities and $25.1 million from the decrease in customer deposits.

Cash Flows from Investing Activities

During the first quarter of 2021, cash used in investing activities was $32.2 million.

During the first six months of 2021, cash used in investing activities was $82.9 million.

Cash flows used in investing activities consist primarily of cash used for capital expenditures.

Capital expenditures of $32.9 million consisted primarily of $8.3 million for purchases of property and equipment and improvements to our existing dealership facilities and $24.6 million for additional units for the rental and leasing operations, which were directly offset by borrowings of long-term debt.

During the first quarter of 2020, cash used in investing activities was $47.3 million.

Capital expenditures were $84.4 million during the first six months of 2021 and consisted primarily of purchases of property and equipment and improvements to our existing dealership facilities.

Property and equipment purchases during the first six months of 2021 included $64.7 million for additional units for the rental and leasing operations, the majority of which were directly offset by borrowings of long-term debt.

During the first six months of 2020, cash used in investing activities was $74.4 million.

Cash flows used in investing activities consist primarily of cash used for capital expenditures.

Capital expenditures of $49.5 million consisted primarily of $15.0 million for purchases of property and equipment and improvements to our existing dealership facilities and $34.5 million for additional units for the rental and leasing operations, which were directly offset by borrowings of long-term debt.

Capital expenditures were $82.2 million during the first six months of 2020 and consisted primarily of purchases of property and equipment and improvements to our existing dealership facilities.

Property and equipment purchases during the first six months of 2020 included $57.8 million for additional units for the rental and leasing operations, the majority of which were directly offset by borrowings of long-term debt.

Cash Flows from Financing Activities

Cash flows from financing activities include borrowings and repayments of long-term debt and net proceeds of floor plan notes payable, non-trade.

During the first quarter of 2021, financing activities used $4.0 million in net cash flow.

Cash outflows were primarily related to $46.8 million used for principal repayments of long-term debt and capital lease obligations, $6.6 million used for the repurchase of our common stock and $9.9 million used for the payment of cash dividends.

These cash outflows were offset by cash inflows related to borrowings of $28.2 million of long-term debt and $38.5 million used for net draws on floor plan (non-trade).

The borrowings of long-term debt were related to purchasing units for the rental and leasing operations.

During the first quarter of 2020, financing activities used $135.6 million in net cash flow.

Cash outflows were primarily related to $92.6 million used for net payments floor plan (non-trade), $47.5 million used for principal repayments of long-term debt and capital lease obligations, $19.9 million used for the repurchase of our common stock and $4.8 million used for the payment of cash dividends.

These cash outflows were offset by cash inflows related to borrowings of $28.2 million of long-term debt.

The borrowings of long-term debt were related to purchasing units for the rental and leasing operations.

During the first six months of 2021, financing activities resulted in net cash used in financing of $151.0 million, primarily related to cash inflows of $3.9 million from the issuance of shares related to equity compensation plans and borrowings of $52.3 million of long-term debt.

These cash inflows were offset by $40.9 million from net payments on floor plan notes payable, non-trade, $135.6 million used for principal repayments of long-term debt and capital lease obligations, $10.8 million used for repurchases of common stock and $19.9 million used for payment of cash dividends.

The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

During the first six months of 2020, financing activities resulted in net cash used in financing of $309.9 million, primarily related to cash inflows of $5.4 million from the issuance of shares related to equity compensation plans and borrowings of $119.3 million of long-term debt.

These cash inflows were offset by $238.8 million from net payments on floor plan notes payable, non-trade, $166.5 million used for principal repayments of long-term debt and capital lease obligations, $19.9 million used for repurchases of common stock and $9.5 million used for payment of cash dividends.

The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

Most of our commercial vehicle inventory purchases are made on terms requiring payment to the manufacturer within 15 days or less from the date the commercial vehicles are invoiced from the factory.

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The Floor Plan Credit Agreement expires June 30, 2022, although BMO Harris has the right to terminate at any time upon 360 days written notice and we may terminate at any time, subject to specified limited exceptions.

On March 31, 2021, we had approximately $456.6 million outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $436.5 million during the three months ended March 31, 2021.

On June 30, 2021, we had approximately $388.6 million outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $403.6 million during the six months ended June 30, 2021.

We utilize our excess cash on hand to pay down our outstanding borrowings under the Floor Plan Credit Agreement, and the resulting interest earned is recognized as an offset to our gross interest expense under the Floor Plan Credit Agreement.

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If the commercial vehicle is not sold within the interest-free period, we then finance the commercial vehicle under the Floor Plan Credit Agreement.

On March 31, 2021, our backlog of commercial vehicle orders was approximately $1,736.0 million, compared to a backlog of commercial vehicle orders of approximately $1,091.4 million on March 31, 2020.

On June 30, 2021, our backlog of commercial vehicle orders was approximately $2,258.9 million, as compared to a backlog of commercial vehicle orders of approximately $1,057.1 million on June 30, 2020.

Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each particular type of commercial vehicle ordered by a customer at our Rush Truck Centers by the recent average selling price for that type of commercial vehicle.

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We sell the majority of our new heavy-duty commercial vehicles by customer special order and we sell the majority of our medium- and light-duty commercial vehicles out of inventory.

Orders from a number of our major fleet customers are included in our backlog as of March 31, 2021, and we expect to fill the majority of our backlog orders during 2021.

Orders from a number of our major fleet customers are included in our backlog as of June 30, 2021, and we expect to fill our backlog orders during the remainder of 2021 and 2022.

Our Truck Segment is moderately seasonal.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements