What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 327 added, 433 removed, 788 unchanged (49% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2021 AND DECEMBER 31, 2020

(In Thousands, Except Shares)

September 30,

Current assets:

100 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

New and used commercial vehicle sales

$ 797,269  

$ 559,062  

$ 1,544,988  

$ 1,348,616  

Aftermarket products and services sales

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

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

72,791  

23,001  

129,016  

58,198  

Interest (income) expense, net

( 212 )  

Interest expense, net

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.

28 unchanged sentences

( 7,684 )  

––

Dividend Class B common stock

( 2,380 )  

––

Other comprehensive income

18 unchanged sentences

( 7,735 )  

––

Dividend Class B common stock

( 2,425 )  

––

Other comprehensive income

9 unchanged sentences

$ 1,360,199  

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

( 53 )  

Issuance of common stock under employee stock purchase plan

Common stock repurchases

( 171 )  

( 88 )  

( 11,229 )  

Dividend Class A common stock

( 8,199 )  

––

Dividend Class B common stock

( 2,538 )  

––

Other comprehensive loss

( 471 )  

69,399  

Balance, September 30, 2021

43,018  

12,475  

$ 462,406  

$ ( 24,814 )  

$ 973,665  

$ 1,412,783  

Comprehensive

3 unchanged sentences

Earnings  

Income (Loss)  

(Loss)Income  

Balance, December 31, 2019

18 unchanged sentences

( 1,108 )  

Other comprehensive income

Other comprehensive loss

( 1,930 )  

28 unchanged sentences

$ 1,186,560  

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

RUSH ENTERPRISES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Six Months Ended

Cash flows from operating activities:

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

( 14 )  

Issuance of common stock under employee stock purchase plan

Common stock repurchases

( 95 )  

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

Depreciation and amortization

( 2,749 )  

Cancellation of treasury stock

326,057  

Gain on sale of property and equipment, net

( 326,129 )  

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

Dividend Class A common stock

( 3,922 )  

Dividend Class B common stock

( 1,258 )  

Deferred income tax expense

Other comprehensive income

33,939  

Change in accounts and notes receivable, net

33,939  

Balance, September 30, 2020

42,208  

Change in inventories, net

12,519  

$ 428,823  

Change in prepaid expenses and other, net

$ ( 723 )  

Change in trade accounts payable

$ 798,606  

$ ( 180 )  

$ 1,227,073  

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

RUSH ENTERPRISES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Nine Months Ended

September 30,

Cash flows from operating activities:

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

Depreciation and amortization

Gain on sale of property and equipment

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

Deferred income tax benefit

Change in accounts receivable, net

Change in inventories, net

Change in prepaid expenses and other, net

Change in trade accounts payable

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

Change in other assets

Net cash used in investing activities

( 82,879 )  

Cash flows from financing activities:

1 unchanged sentence

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

( 150,961 )  

Net increase in cash and cash equivalents

33,936  

Net (decrease) increase in cash and cash equivalents

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:

$ 13,213  

$ 22,559  

Income taxes, net of refunds

$ 67,766  

Noncash activities:

Noncash investing and financing 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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Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

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

On October 12, 2020, the Company 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.

COVID- 19 Risks and Uncertainties

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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 June 30, 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 September 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 June 30, 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 September 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.

3 unchanged sentences

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

As of September 30, 2021, the Company’s investment in RTC Canada is $ 35.1 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 $ 5.8 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.

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 $ 0.3 million for the three months ended September 30, 2021 and $ 0.5 million for the three months ended September 30, 2020, and $ 1.2 million for the nine months ended September 30, 2021 and $ 1.4 million for the nine months ended September 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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Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share information):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

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 stock options and restricted stock awards

Employee and director stock options and restricted share 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

$ 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):

Options to purchase shares of common stock that were outstanding for the three months and nine months ended September 30, 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):

Three Months Ended

Six Months Ended

Weighted average anti-dilutive stock options

September 30,

Nine Months Ended

September 30,

Weighted average anti-dilutive options

Stock Options and Restricted Stock Awards

2 unchanged sentences

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 $ 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.

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 $ 3.1 million for the three months ended September 30, 2021, and $ 3.3 million for the three months ended September 30, 2020.

Stock-based compensation expense was $ 18.3 million for the nine months ended September 30, 2021, and $ 15.5 million for the nine months ended September 30, 2020.

As of September 30, 2021, the Company had $ 10.3 million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of 2.3 years and $ 11.0 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.4 years.

Financial Instruments and Fair Value

2 unchanged sentences

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 June 30, 2021, and December 31, 2020.

Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments as of September 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.

15 unchanged sentences

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 June 30, 2021 and 2020 (in thousands):

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

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

Revenues from external customers

$ 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

2,863,087  

49,037  

2,912,124  

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

Revenues from external customers

$ 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

As of and for the three months ended September 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

3,021,241  

43,360  

3,064,601  

For the six months ended June 30, 2020

For the nine months ended September 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.

The Company had unrecognized income tax benefits totaling $ 4.5 million as a component of accrued liabilities as of September 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 June 30, 2021 and December 31, 2020.

The Company had approximately $ 150,000 accrued for the payment of interest as of September 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 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.

As of September 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.

Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer.

Those sales predominantly contain a single delivery element and revenue from such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer.

The Company’s material revenue streams have been identified as the following:

1 unchanged sentence

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 and six months ended June 30, 2021 and 2020 (in thousands):

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

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 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 June 30, 2021.

The Company did not have any material contract assets or contract liabilities on the balance sheet as of September 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

The Company leases commercial vehicles that the Company owns to customers primarily over periods of one to ten years.

The Company leases commercial vehicles to customers primarily over periods of one to ten years.

The Company does not separate lease and nonlease components.

1 unchanged sentence

The variable nonlease components are generally based on mileage.

Some leases contain an option for the lessee to purchase the commercial vehicle at the end of the lease term.

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 the expected fair value at the expiration of the lease term.

Some leases contain an option for the lessee to purchase the commercial vehicle.

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

The lease unit is depreciated to a residual value that is the estimated fair value of the lease unit 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 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):

The receivable for sales-type leases was $ 5.4 million as of September 30, 2021, and $ 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 nine months ended September 30, 2021, and September 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

Nine Months Ended

September 30,

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 (loss) income (in thousands):

Accumulated Other Comprehensive Income (Loss)

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

Balance as of December 31, 2020

1 unchanged sentence

Balance 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.

Foreign currency translation adjustment

Balance as of September 30, 2021

The equity method investment in RTC Canada was valued using the exchange rate of one US Dollar equals 1.2648 Canadian dollars as of September 30, 2021.

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

10 unchanged sentences

Provision for

June 30, 2021

September 30,

Commercial vehicle receivables

$ ( 40 )  

Manufacturers’

( 578 )  

Leasing, parts and service receivables

( 637 )  

Other receivables

$ 1,605  

$ 1,062  

$ ( 1,222 )  

$ 1,445  

Asset Purchase Agreement

On September 7, 2021, the Company entered into an Asset Purchase Agreement with certain subsidiaries and affiliates of The Summit Truck Group (“Summit”) to acquire full-service commercial vehicle dealerships and Idealease franchises in Arkansas, Kansas, Mississippi, Missouri, Oklahoma, Tennessee and Texas.

The acquisition includes Summit’s dealerships representing International, IC Bus, Idealease, Isuzu and other commercial vehicle manufacturers.

The Company estimates that the purchase price will be approximately $ 223.0 million, excluding the anticipated purchase of certain real property of the Seller for approximately $ 60.0 million pursuant to one or more real property purchase agreements.

At the closing, the Company anticipates that it will finance approximately $ 114.0 million of the purchase price.

The closing of the transaction, expected in December 2021, is subject to, amongst other things, manufacturers’

approval, various regulatory approvals and the satisfaction of the closing conditions set forth in the asset purchase agreement.

The Company does not expect to ultimately own Summit’s dealerships in Oklahoma or Mississippi.

Lease and Rental Debt

On September 14, 2021, the Company entered into a credit agreement (“the WF Credit Agreement”) with the Lenders signatory thereto (the “WF Lenders”) and Wells Fargo Bank, National Association (“WF”), as administrative agent (in such capacity, the “WF Agent”).

Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $ 250.0  million of revolving credit loans for certain of the Company’s capital expenditures, including commercial vehicle purchases for the Company’s Idealease lease and rental fleet, and general working capital needs.

The Company expects to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles for the Company’s Idealease lease and rental fleet.

The interest associated with the WF Credit Agreement was $ 1.2  million in the third quarter of 2021 and is recorded in interest expense on the financial statements.

The WF Credit Agreement is a general borrowing facility, whereas prior to the WF Credit Agreement, interest expense associated with the Company’s Idealease lease and rental fleet was recorded in cost of sales as the borrowings were directly related to each lease and rental vehicle.

This change in presentation of interest expense will result in increased gross margins from the Company’s Idealease lease and rental sales.

Subsequent Event

On October 1, 2021, the Company entered into that certain Amended and Restated Inventory Financing and Purchase Money Security Agreement with PLC, a division of PACCAR Financial Corp.

(the “PLC Agreement”).

Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $ 300.0 million of revolving credit loans to finance certain of our capital expenditures, including commercial vehicle purchases and other equipment to be leased or rented through the Company’s PacLease franchises.

The interest associated with the PLC Agreement will be recorded in interest expense on the financial statements because the PLC Agreement is a general borrowing facility.

This change in presentation of interest expense will result in increased gross margins from the Company’s PacLease lease and rental sales.

Management ’

71 unchanged sentences

We offer an integrated approach to meeting customer needs by providing service, parts and collision repairs in addition to new and used commercial vehicle sales and leasing, plus financial services, vehicle upfitting, CNG fuel systems and vehicle telematics products. We intend to continue to implement our business strategy, reinforce customer loyalty and remain a market leader by continuing to develop our Rush Truck Centers as we expand our product offerings and extend our dealership network through strategic acquisitions of new locations and opening new dealerships to enable us to better serve our customers.

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.

COVID-19  

3 unchanged sentences

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.

However, our industry continues to be impacted by supply chain issues generally believed to be attributable to the COVID-19 pandemic that are negatively affecting new commercial vehicle production and the availability of aftermarket parts.

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 at times and may limit the commercial vehicle industry’s ability to meet commercial vehicle sales demand throughout 2021.

However, supply chain delays related to commercial vehicle components have forced some of the manufacturers we represent to temporarily cease production at times and will limit the commercial vehicle industry’s ability to meet demand for commercial vehicles throughout the remainder of 2021 and into 2022.

The decrease in the supply of new commercial vehicles has resulted in increased demand for used commercial vehicles.

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 and our parts sales are back to pre-pandemic levels.

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.

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 and our parts sales are back to pre-pandemic levels.

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

However, with respect to parts availability going forward, we are dependent on our manufacturers and future production levels of certain parts and components are uncertain at this time.

Although the supply chain disruptions are only impacting a small percentage of the parts we sell, any delay we experience in receiving a part has a corresponding delay in our completion of services on the commercial vehicle for which the part was ordered.

Rental and Leasing Operations

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These customers have resumed payments.

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.

(“BMO Harris”) includes up to $100.0 million of revolving credit loans that are available to us for working capital, capital expenditures and other general corporate purposes.

We currently have no outstanding draws on this line of credit.

Revenues from our rental and leasing operations are back to pre-pandemic levels.

As of September 30, 2021, we had $259.7 million in cash.

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

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Class 8 retail truck sales to be 228,500 units in 2021, which would represent a 16.8% 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.

While demand for new commercial vehicles is currently strong, we believe that component supply chain issues will continue to delay production, pushing new Class 8 truck deliveries into 2022, and negatively impacting our new Class 8 truck sales in the fourth quarter of this year.

In addition, we have been informed by our manufacturers that production of commercial vehicles in 2022 will be allocated to all of their dealers based on historical purchases.

While we do not yet know our allocation for 2022, we believe that our allocation of commercial vehicles will not be less than the number of commercial vehicles we expect to sell in 2021.

We expect our market share of new Class 8 truck sales to range between 5.0% and 5.2% in 2021.

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With respect to new U.S.

Class 4-7 retail commercial vehicle sales, A.C.T.

Class 4 through 7 retail commercial vehicle sales, A.C.T.

Research currently forecasts sales to be 251,000 units in 2021, which would represent an 8.2% increase compared to 2020. 

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We expect lease and rental revenue to increase 5% to 7% during 2021, compared to 2020.

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 10% to 12% in 2021, compared to 2020.

In October 2021, we acquired an independent parts and service facility in Victorville, California that will be converted into a full service Peterbilt dealership.

We also plan to acquire a full-service Hino and Isuzu dealership in Elk Grove, Illinois in November 2021.

Additionally, on September 7, 2021, we entered into an agreement with certain subsidiaries and affiliates of The Summit Truck Group (“Summit”) to acquire full-service commercial vehicle dealerships and Idealease franchises in Arkansas, Kansas, Mississippi, Missouri, Oklahoma, Tennessee and Texas.

The acquisition includes Summit’s dealerships representing International, IC Bus, Idealease, Isuzu and other commercial vehicle manufacturers.

The closing of the transaction is subject to, amongst other things, manufacturers’

approval, various regulatory approvals and the satisfaction of the closing conditions set forth in the asset purchase agreement, but we expect the transaction to close in December 2021.

We do not expect to ultimately own Summit’s dealerships in Oklahoma or Mississippi.

Critical Accounting Policies and Estimates

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Results of Operations

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 discussion and analysis includes our historical results of operations for the three months and nine months ended September 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

September 30,

Nine Months Ended

September 30,

New and used commercial vehicle sales

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Depreciation and amortization

Gain (loss) on sale of assets

Gain on sale of assets

Operating income

Interest (income) expense, net

Interest expense, net

Income before income taxes

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Gross Profit:

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Aftermarket products and services sales

Lease and rental sales

Lease and rental

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 (revenues 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 our absorption ratio (revenue in millions):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Vehicle unit sales:

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Used vehicles

Vehicle revenue:

Vehicle revenues:

New heavy-duty vehicles

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Used vehicle revenue

Other vehicle revenue:

Dealership absorption ratio:

Other vehicle revenues:

Absorption ratio:

(1) Includes sales of truck bodies, trailers and other new equipment.

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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 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.

Our commercial vehicle dealerships achieved a 134.0% absorption ratio for the third quarter of 2021 compared to a 119.4% absorption ratio for the third quarter of 2020.

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

Total revenues increased $88.0 million, or 7.5%, in the third quarter of 2021, compared to the third quarter of 2020.

Our Aftermarket Products and Services revenues totaled $463.0 million in the third quarter of 2021, up 15.7% from the third quarter of 2020.

This increase was primarily due to the overall continued recovery of the national economy and strong demand for aftermarket parts and services.

Revenues from sales of new and used commercial vehicles increased $17.6 million, or 2.5%, in the third quarter of 2021, compared to the third quarter of 2020.

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

We sold 2,537 new Class 8 trucks in the third quarter of 2021, a 1.8% decrease compared to 2,584 new Class 8 trucks sold in the third quarter of 2020.

Our new Class 8 truck sales were negatively impacted by industry-wide new truck production constraints.

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.

Class 8 truck market increased 2.5% in the third quarter of 2021, compared to the third quarter of 2020.

We sold 2,792 new Class 4 through 7 medium-duty commercial vehicles, including 410 buses, in the third quarter of 2021, a 5.1% decrease compared to 2,941 new medium-duty commercial vehicles, including 429 buses, in the third quarter of 2020.

Our third quarter 2021 new Class 4 through 7 commercial vehicle sales were negatively impacted by industry-wide new truck production constraints.

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.

decreased approximately 2.2% in the third quarter of 2021, compared to the third quarter of 2020.

We sold 361 light-duty vehicles in the third quarter of 2021, a 27.6% increase compared to 283 light-duty vehicles sold in the third quarter of 2020.

We sold 1,712 used commercial vehicles in the third quarter of 2021, a 16.7% decrease compared to 2,055 used commercial vehicles in the third quarter of 2020.

Demand for used commercial vehicles remained strong in the third quarter of 2021, driven in large part by production delays for new Class 8 trucks, however, the number of used commercial vehicles we will be able to sell depends on our ability to acquire quality used commercial vehicle inventory.

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.

however, we believe demand for used trucks will remain strong through 2021 and into 2022.

Commercial vehicle lease and rental revenues increased $4.8 million, or 8.2%, in the third quarter of 2021, compared to the third quarter of 2020.

The increase is primarily due to increased rental fleet utilization and strong demand for vehicles to lease, which is partly due to the limited supply of new commercial vehicles.

Finance and insurance revenues increased $1.2 million, or 21.6%, in the third quarter of 2021, compared to the third 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.

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.

Gross profit increased $69.8 million, or 32.9%, in the third quarter of 2021, compared to the third quarter of 2020.

Gross profit as a percentage of sales increased to 22.3% in the third quarter of 2021, from 18.0% in the third quarter of 2020.

This increase in gross profit as a percentage of sales is a result of widespread increased gross margins across all of our operations.

Gross margins from our Aftermarket Products and Services operations increased to 39.3% in the third quarter of 2021, from 35.4% in the third quarter of 2020, which is primarily related to the increase in parts rebates from parts suppliers and increases in parts list pricing by the manufacturers we represent, which lead to increased margins on parts sales with respect to inventory acquired prior to the manufacturers’

price increases, compared to the third quarter of 2020.

Gross profit for the Aftermarket Products and Services departments increased to $182.2 million in the third quarter of 2021, from $141.9 million in the third 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 67% to 68%.

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 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 7.4% 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.

Gross profits from parts sales represented 62.4% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2021 and 58.8% in the third quarter of 2020.

Service and collision center operations represented 37.6% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2021 and 41.2% in the third quarter of 2020.

Gross margins on new Class 8 truck sales increased to 8.7% in the third quarter of 2021, from 7.8% in the third quarter of 2020.

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

In 2021, we expect overall gross margins from new Class 8 truck sales of approximately 8.0% to 9.0%.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 8.0% in the third quarter of 2021, from 5.9% in the third quarter of 2020.

This increase is primarily due to the mix of purchasers during the third 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 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.

Gross margins on used commercial vehicle sales increased to 19.7% in the third quarter of 2021, from 12.0% in the third quarter of 2020.

This increase in margins in the third 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.

Gross margins from truck lease and rental sales increased to 25.1% in the third quarter of 2021, from 14.4% in the third quarter of 2020.

This increase is primarily related to increased rental fleet utilization and changes to the way we finance commercial vehicles for our lease and rental fleet.

In the third quarter of 2021, we entered into a credit agreement with Wells Fargo Bank, N.A.

in the amount of $250.0 million (the “WF Credit Agreement”) that allows us to finance a portion of our Idealease lease and rental fleet through a general borrowing facility.

The interest associated with the WF Credit Agreement is recorded in interest expense on the financial statements and was $1.2 million in the third quarter of 2021.

Prior to the WF Credit Agreement, interest expense associated with our Idealease lease and rental fleet was recorded in cost of sales as the borrowings were directly related to each lease and rental vehicle.

This change in presentation of interest expense will result in increased gross margins from our Idealease truck lease and rental sales.

In October of 2021, we entered into a similar credit agreement with PACCAR Leasing Company (“PLC”) in the amount of $300.0 million for our PacLease lease and rental fleet.

Our policy is to depreciate our 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.

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

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

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

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.

Selling, General and Administrative (“SG&A”) expenses increased $24.4 million, or 15.7%, in the third quarter of 2021, compared to the third 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.

SG&A expenses as a percentage of total revenues increased to 14.2% in the third quarter of 2021, from 13.2% in the third 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 $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.

Depreciation and amortization expense decreased $1.3 million, or 8.9%, in the third quarter of 2021, compared to the third quarter of 2020.

Interest Expense, Net

Net interest expense decreased $0.8 million, or 74.3%, in the third quarter of 2021, compared to the third 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.

During the third 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 third quarter of 2020.

Income before Income Taxes

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.

As a result of the factors described above, income before income taxes increased $47.9 million, or 109.1%, in the third quarter of 2021, compared to the third quarter of 2020.

Income taxes increased $12.5 million, or 124.7%, in the third quarter of 2021, compared to the third quarter of 2020.

We provided for taxes at a 24.75% effective rate in the third quarter of 2021 and 22.7% in the third quarter of 2020.

We expect our effective tax rate to be approximately 23.0% to 24.0% 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.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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

Total revenues increased $346.6 million, or 10.0%, in the first nine months of 2021, compared to the first nine months of 2020.

Aftermarket Products and Services revenues increased $118.5 million, or 9.8%, in the first nine months of 2021, compared to the first nine months of 2020.

Revenues from the sales of new and used commercial vehicles increased $214.0 million, or 10.4%, in the first nine months of 2021, compared to the first nine months of 2020.

We sold 8,486 new Class 8 heavy-duty trucks during the first nine months of 2021, a 12.7% increase compared to 7,528 new Class 8 heavy-duty trucks in the first nine 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.

Research, new U.S.

Class 8 truck sales increased 22.6% in the first nine months of 2021, compared to the first nine months of 2020.

We sold 7,951 new Class 4 through 7 medium-duty commercial vehicles, including 788 buses, during the first nine months of 2021, a 6.9% decrease compared to 8,538 new Class 4 through 7 medium-duty commercial vehicles, including 853 buses, in the first nine months of 2020.

New Class 4 through 7 commercial vehicle sales in the first nine months of 2021 were negatively impacted by new truck production constraints on the manufacturers we represent.

Research estimates that unit sales of new Class 4 through 7 commercial vehicles, including buses, in the U.S increased approximately 11.6% in the first nine months of 2021, compared to the first nine months of 2020.

We sold 1,228 new light-duty commercial vehicles during the first nine months of 2021, a 52.7% increase compared to 804 light-duty commercial vehicles in the first nine months of 2020.

We sold 5,730 used commercial vehicles during the first nine months of 2021, a 6.5% increase compared to 5,381 used commercial vehicles in the first nine months of 2020.

Truck lease and rental revenues increased $6.3 million, or 3.6%, in the first nine months of 2021, compared to the first nine months of 2020.

Finance and insurance revenues increased $5.7 million, or 37.6%, in the first nine months of 2021, compared to the first nine months of 2020.

Gross profit increased $158.6 million, or 24.8%, in the first nine months of 2021, compared to the first nine months of 2020.

Gross profit as a percentage of sales increased to 20.9% in the first nine months of 2021, from 18.4% in the first nine months of 2020.

Gross margins from our Aftermarket Products and Services operations increased to 38.1% in the first nine months of 2021, from 36.4% in the first nine months of 2020.

Gross profit for the Aftermarket Products and Services departments was $504.5 million in the first nine months of 2021, compared to $438.8 million in the first nine months of 2020.

Gross profits from parts sales represented 61.0% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2021 and 59.3% in the first nine months of 2020.

Service and collision center operations represented 39.0% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2021 and 40.7% in the first nine months of 2020.

Gross margins on new Class 8 truck sales were 8.9% in the first nine months of 2021 and 8.1% in the first nine months of 2020.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales increased to 7.5% in the first nine months of 2021, from 6.0% in the first nine months of 2020.

Gross margins on used commercial vehicle sales increased to 18.4% in the first nine months of 2021, from 8.0% in the first nine months of 2020.

Gross margins from truck lease and rental sales increased to 21.3% in the first nine months of 2021, from 12.9% in the first nine months of 2020.

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.

SG&A expenses increased $42.8 million, or 8.6%, in the first nine months of 2021, compared to the first nine months of 2020.

SG&A expenses equaled 14.2% of total revenue in the first nine months of 2021, and 14.3% in the first nine 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.

Depreciation and amortization expense decreased $3.0 million, or 6.9%, in the first nine months of 2021, compared to the first nine months of 2020.

Interest Expense, Net

Net interest expense decreased $7.5 million, or 93.0%, in the first nine months of 2021, compared to the first nine 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.

Income before income taxes increased $125.1 million, or 127.5%, in the first nine months of 2021, compared to the first nine 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.

Income taxes increased $26.2 million, or 108.1%, in the first nine months of 2021, compared to the first nine months of 2020.

We provided for taxes at a 23.0% rate in the first nine months of 2021 and a 24.7% rate in the first nine 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 June 30, 2021, we had working capital of approximately $377.5 million, including $315.9 million in cash, available to fund our operations.

As of September 30, 2021, we had working capital of approximately $405.3 million, including $259.7 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.

From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under our floor plan credit agreement with BMO Harris (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.

From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under our floor plan credit agreement with BMO Harris Bank N.A.

(“BMO Harris”) (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.

We have a secured line of credit that provides for a maximum borrowing of $15.0 million.

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.

The amount of the borrowings under the Working Capital Facility are subject to borrowing base limitations based on the value of our eligible parts inventory and company vehicles.

The Working Capital Facility includes a $20 million letter of credit sublimit.

Borrowings under the Working Capital Facility bear interest at rates based on LIBOR or the Base Rate (as such terms are defined in the Working Capital Facility), plus an applicable margin determined based on outstanding borrowing under the Working Capital Facility.

In addition, we are required to pay a commitment fee on the amount unused under the Working Capital Facility.

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 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.

There were no advances outstanding under this secured line of credit at September 30, 2021, however, $11.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $3.1 million available for future borrowings as of September 30, 2021.

Our long-term debt, floor plan financing agreements and the WF Credit Agreement require us to satisfy various financial ratios such as the leverage ratio, the asset coverage ratio and the fixed charge coverage ratio.

As of September 30, 2021, we were in compliance with all debt covenants related to debt secured by lease and rental units, our floor plan credit agreements and the WF Credit Agreement.

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

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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 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.

During the third quarter of 2021, we paid a cash dividend of $10.6 million.

Additionally, on October 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 December 10, 2021, to all shareholders of record as of November 8, 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 June 30, 2021, we had repurchased $12.5 million of our shares of common stock under the current stock repurchase program.

As of September 30, 2021, we had repurchased $23.8 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 June 30, 2021.

On September 7, 2021, we entered into an Asset Purchase Agreement to acquire substantially all of the assets and assume certain liabilities of Summit Truck Group, LLC, a Texas limited liability company, and certain of its subsidiaries and affiliates (collectively, “Summit”), which assets are currently used in the conduct of commercial vehicle sales, leasing, rental, parts and service business operated by Summit at its dealership facilities located in Arkansas, Kansas, Mississippi, Missouri, Oklahoma, Tennessee and Texas.

We estimate that the purchase price, including goodwill, but excluding any real property, will be approximately $223.0 million.

At the closing, we anticipate that we will finance approximately $114.0 million of the purchase price.

In connection with the transaction, we also anticipate purchasing certain real property of the Seller for approximately $60.0 million pursuant to one or more real property purchase agreements.

We do not expect to ultimately own Summit’s dealerships located in Oklahoma or Mississippi.

We have no other material commitments for capital expenditures as of September 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 $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.

Cash and cash equivalents decreased by $52.4 million during the nine months ended September 30, 2021 and increased by $77.9 million during the nine months ended September 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 six months of 2021, operating activities resulted in net cash provided by operations of $237.7 million.

During the first nine months of 2021, operating activities resulted in net cash provided by operations of $438.6 million.

Net cash provided by operating activities primarily consisted of $172.8 million in net income, as well as non-cash adjustments related to depreciation and amortization of $126.7 million, stock-based compensation of $18.3 million and the benefit for deferred income tax expense of $23.0 million.

Cash provided by operating activities included an aggregate of $148.2 million net change in operating assets and liabilities.

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.

Included in the net change in operating assets and liabilities were cash inflows of $147.3 million from the decrease in inventories, $23.2 million from the decrease in accounts receivable and $16.7 million from the increase in accounts payable, which was offset by cash outflows of $8.4 million from decreases in accrued liabilities and $30.4 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 six months of 2020, operating activities resulted in net cash provided by operations of $418.2 million.

During the first nine months of 2020, operating activities resulted in net cash provided by operations of $590.5 million.

Net cash provided by operating activities primarily consisted of $73.9 million in net income, as well as non-cash adjustments related to depreciation and amortization of $134.0 million, stock-based compensation of $15.5 million and the benefit for deferred income tax expense of $11.6 million.

Cash provided by operating activities included an aggregate of $384.3 million net change in operating assets and liabilities.

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.

Included in the net change in operating assets and liabilities were cash inflows of $439.2 million from the decrease in inventories, $28.0 million from the decrease in accounts receivable and $7.4 million from the decrease in other assets and $3.0 million from the increase in accrued liabilities, which was offset by cash outflows of $24.9 million from decreases in accounts payables, $62.3 million from the net decrease in floor plan, trade and $6.1 million from the decrease in customer deposits.

Cash Flows from Investing Activities

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 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 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.

During the first nine months of 2021, cash used in investing activities was $121.4 million.

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

Capital expenditures were $122.3 million during the first nine 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 nine months of 2021 included $88.0 million for additional units for the rental and leasing operations.

During the first nine months of 2020, cash used in investing activities was $98.9 million.

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

Capital expenditures were $107.8 million during the first nine 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 nine months of 2020 included $75.6 million for additional units for the rental and leasing operations, 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 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.

During the first nine months of 2021, financing activities resulted in net cash used in financing of $369.6 million, primarily related to $157.4 million from net payments on floor plan notes payable, non-trade, $232.8 million used for principal repayments of long-term debt and capital lease obligations, $21.7 million used for repurchases of common stock and $30.5 million used for payment of cash dividends.

These cash outflows were offset by cash inflows of $6.4 million from the issuance of shares related to equity compensation plans and borrowings of $66.4 million of long-term debt.

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.

We finance the majority of all new commercial vehicle inventory and the loan value of our used commercial vehicle inventory under the Floor Plan Credit Agreement.

During the first nine months of 2020, financing activities resulted in net cash used in financing of $413.6 million, primarily related to $320.3 million from net payments on floor plan notes payable, non-trade, $212.2 million used for principal repayments of long-term debt and capital lease obligations, $22.4 million used for repurchases of common stock and $14.7 million used for payment of cash dividends.

These cash outflows were offset by cash inflows of $16.1 million from the issuance of shares related to equity compensation plans and borrowings of $139.9 million of long-term debt.

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

On September 14, 2021, we entered into the WF Credit Agreement with the Lenders signatory thereto (the “WF Lenders”) and Wells Fargo Bank, National Association (“WF”), as Administrative Agent (in such capacity, the “WF Agent”).

Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $250.0 million of revolving credit loans for certain of our capital expenditures, including commercial vehicle purchases for our Idealease leasing and rental fleet, and general working capital needs.

We expect to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles for our Idealease lease and rental fleet.

We may borrow, repay and reborrow loans from time to time until the maturity date.

Borrowings under the WF Credit Agreement bear interest per annum, payable on each interest payment date, as defined in the WF Credit Agreement, at (A) the daily simple secured overnight financing rate (“SOFR”) rate plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or (B) on or after the term SOFR transition date, the term SOFR rate plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio.

The WF Credit Agreement expires on September 14, 2024, although, upon the occurrence and during the continuance of an event of default, the WF Agent has the right to, or upon the request of the required lenders must, terminate the commitments and declare all outstanding principal and interest due and payable.

We may terminate the commitments at any time.

On October 1, 2021, we entered into that certain Amended and Restated Inventory Financing and Purchase Money Security Agreement with PLC, a division of PACCAR Financial Corp.

(the “PLC Agreement”).

Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $300 million of revolving credit loans to finance certain of our capital expenditures, including commercial vehicle purchases and other equipment to be leased or rented through our PacLease franchises.

We may borrow, repay and reborrow loans from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the borrowing base.

Advances under the PLC Agreement bear interest per annum, payable on the fifth day of the following month, at our option, at either (A) the prime rate, minus 1.55%, provided that the floating rate of interest is subject to a floor of 0%, or (B) a fixed rate, to be determined between us and PLC in each instance of borrowing at a fixed rate.

The PLC Agreement expires on October 1, 2025, although either party has the right to terminate the PLC Agreement at any time upon 180 days written notice.

If we terminate the PLC Agreement prior to October 1, 2025, then all payments will be deemed to be voluntary prepayments subject to a potential prepayment premium.

Most of our commercial vehicle 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.

On September 14, 2021, we entered into the Fifth Amended and Restated Floor Plan Credit Agreement with BMO Harris Bank N.A.

and the lenders signatory thereto (the Floor Plan Credit Agreement).

Prior to the Floor Plan Credit Agreement, we financed the majority of all new commercial vehicle inventory and the loan value of our used commercial vehicle inventory under the Fourth Amended and Restated Floor Plan Credit Agreement with BMO Harris Bank N.A.

and the majority of such financings will continue to occur under the Floor Plan Credit Agreement.

The Floor Plan Credit Agreement includes an aggregate loan commitment of $1.0 billion.

Borrowings under the Floor Plan Credit Agreement bear interest at an annual rate equal to (A) the greater of (i) zero and (ii) one month LIBOR rate, determined on the last day of the prior month, plus (B) 1.10% and are payable monthly.

Loans under the Floor Plan Credit Agreement for the purchase of used commercial vehicle inventory are limited to $150.0 million and loans for working capital purposes are limited to $200.0 million.

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 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.

Loans under the Floor Plan Credit Agreement for the purchase of used inventory are limited to $150.0 million and loans for working capital purposes are limited to $200.0 million.

The Floor Plan Credit Agreement expires September 14, 2026, 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 September 30, 2021, we had approximately $333.7 million outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $376.8 million during the nine months ended September 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.

Navistar Financial Corporation and Peterbilt offer trade terms that provide an interest-free inventory stocking period for certain new commercial vehicles.

Navistar Financial Corporation and Peterbilt offer trade terms that provide an interest-free inventory period for certain new commercial vehicles.

This interest-free period is generally 15 to 60 days.

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 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.

On September 30, 2021, our backlog of commercial vehicle orders was approximately $2,720.2 million, compared to a backlog of commercial vehicle orders of approximately $1,067.3 million on September 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 June 30, 2021, and we expect to fill our backlog orders during the remainder of 2021 and 2022.

Orders from a number of our major fleet customers are included in our backlog as of September 30, 2021, and we are uncertain of when we will fill our backlog orders due to the current supply chain delays.

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