What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 257 added, 212 removed, 643 unchanged (42% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2023 AND DECEMBER 31, 2022

(In Thousands, Except Shares)

September 30,

Current assets:

Cash and cash equivalents

Cash, cash equivalents and restricted cash

Accounts receivable, net

9 unchanged sentences

Floor plan notes payable

Current maturities of long-term debt

Current maturities of finance lease obligations

22 unchanged sentences

Retained earnings

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total Rush Enterprises, Inc.

9 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

New and used commercial vehicle sales

12 unchanged sentences

Operating income

Other (expense) income

Other income (expense)

Interest expense, net

13 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

September 30,

Nine Months Ended

September 30,

Other comprehensive income (loss), net of tax:

28 unchanged sentences

Vesting of restricted share awards

Issuance of common stock under employee stock purchase plan

Common stock repurchases

3 unchanged sentences

Balance, June 30, 2023

Stock options exercised and stock awards

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

Issuance of common stock under employee stock purchase plan

Common stock repurchases

Retirement of treasury shares and par value adjustment

Cash dividends declared on Class A common stock

Cash dividends declared on Class B common stock

Foreign currency translation adjustment

Balance, September 30, 2023

RUSH ENTERPRISES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’

EQUITY (continued)

(In Thousands)

Comprehensive

Rush Enterprises, Inc.

Shareholders’

26 unchanged sentences

Balance, June 30, 2022

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

Issuance of common stock under employee stock purchase plan

Common stock repurchases

Dividend Class A common stock

––

Dividend Class B common stock

––

Foreign currency translation adjustment

Balance, September 30, 2022

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

3 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Gain on sale of property and equipment, net

Gain on sale of property and equipment

Gain on joint venture transaction

Gain on business acquisition

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

Deferred income tax expense

Change in accounts and notes receivable, net

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

Provision for deferred income tax expense

Change in accounts receivable, net

Change in inventories, net

16 unchanged sentences

Principal payments on finance lease obligations

Proceeds from issuance of shares relating to equity awards and employee stock purchases

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

Taxes paid related to net share settlement of equity awards

2 unchanged sentences

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Effect of exchange rate on cash

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Supplemental disclosure of cash flow information:

1 unchanged sentence

Income taxes, net of refunds

Noncash activities:

Noncash investing and financing activities:

Assets acquired under finance leases

11 unchanged sentences

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.

Restricted Cash

Restricted cash consists of deposits for the statutory restriction on cash related to the Company’s captive insurance company of $ 2.3 million as of September 30, 2023.

On July 25, 2023, 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, which was effected in the form of a stock dividend.

On August 28, 2023, 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 August 7, 2023.

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.

Authorized Shares

On May 16, 2023, the Company’s shareholders approved the Certificate of Amendment to the Restated Articles of Incorporation of the Company to increase the number of authorized shares of Class A Common Stock from 60,000,000 to 105,000,000 and Class B Common Stock from 20,000,000 to 35,000,000 .

Treasury Stock Retirement

During the third quarter of 2023, the Company retired 3,052,899 shares of Class A common stock and 1,445,515 shares of Class B common stock.

The Company recorded the retirement directly against retained earnings based on the Company’s policy election.

The Company accounts for treasury stock using the cost method.

There was no effect on the Company’s overall equity position due to the retirement of the treasury shares.

Foreign Currency Transactions

8 unchanged sentences

However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the Company’s financial condition or results of operations.

As of June 30, 2023, the Company believes that there are no pending claims or litigation, individually or in the aggregate, that are reasonably likely to have a material adverse effect on its financial position or results of operations.

As of September 30, 2023, the Company believes that there are no pending claims or litigation, individually or in the aggregate, that are reasonably likely to have a material adverse effect on its financial position or results of operations.

However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations for the fiscal period in which such resolution occurred.

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 –

3 unchanged sentences

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 –

2 unchanged sentences

Diluted earnings per common share and common share equivalents

Options to purchase shares of common stock that were outstanding for the three months and six months ended June 30, 2023, and 2022, 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):

Options to purchase shares of common stock that were outstanding for the three months and nine months ended September 30, 2023 and 2022 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 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 $ 6.0 million for the three months ended June 30, 2023, and $ 4.2 million for the three months ended June 30, 2022.

Stock-based compensation expense, included in selling, general and administrative expense, was $ 19.0 million for the six months ended June 30, 2023, and was $ 18.0 million for the six months ended June 30, 2022.

As of June 30, 2023, the Company had $ 14.9 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 $ 18.8 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 $ 6.3 million for the three months ended September 30, 2023, and $ 3.6 million for the three months ended September 30, 2022.

Stock-based compensation expense was $ 25.3 million for the nine months ended September 30, 2023, and $ 21.5 million for the nine months ended September 30, 2022.

As of September 30, 2023, the Company had $ 13.4 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 $ 15.6 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, 2023, and December 31, 2022.

Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments as of September 30, 2023, and December 31, 2022.

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, 2023 and 2022 (in thousands):

As of and for the three months ended June 30, 2023

As of and for the three months ended September 30, 2023

Revenues from external customers

2 unchanged sentences

Segment assets

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Revenues from external customers

1 unchanged sentence

Segment income before taxes

As of and for the three months ended June 30, 2022

As of and for the three months ended September 30, 2022

Revenues from external customers

2 unchanged sentences

Segment assets

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Revenues from external customers

1 unchanged sentence

Segment income before taxes

The Company had unrecognized income tax benefits totaling $ 5.3 million as a component of accrued liabilities as of June 30, 2023 and December 31, 2022, the total of which, if recognized, would impact the Company’s effective tax rate.

The Company had unrecognized income tax benefits totaling $ 5.3 million as a component of accrued liabilities as of September 30, 2023 and December 31, 2022, the total of which, if recognized, would impact the Company’s effective tax rate.

An unfavorable settlement would 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 $ 302,000 accrued for the payment of interest as of June 30, 2023 and December 31, 2022.

The Company had approximately $ 302,000 accrued for the payment of interest as of September 30, 2023 and December 31, 2022.

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, 2023, the tax years ended December 31, 2019 through 2022 remained subject to audit by federal tax authorities, and the tax years ended December 31, 2018 through 2022, remained subject to audit by state tax authorities.

As of September 30, 2023, the tax years ended December 31, 2019 through 2022, remained subject to audit by federal tax authorities, and the tax years ended December 31, 2018 through 2022, remained subject to audit by state tax authorities.

The Company’s non-lease and rental revenues are primarily generated from the sale of finished products to customers.

1 unchanged sentence

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

the sale of new and used commercial vehicles, arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts.

the sale of new and used commercial vehicles, the arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts.

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, excluding lease and rental revenue, for the three months and six months ended June 30, 2023 and 2022 (in thousands):

The following table summarizes the Company’s disaggregated revenue by revenue source, excluding lease and rental revenue, for the three months and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

September 30,

Nine Months Ended

September 30,

Commercial vehicle sales revenue

5 unchanged sentences

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, 2023.

The Company did not have any material contract assets or contract liabilities on the balance sheet as of September 30, 2023.

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

8 unchanged sentences

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.

Sales-type leases are recognized by the Company as lease receivables.

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

The receivable for sales-type leases as of June 30, 2023 was $ 6.1 million, compared to $ 6.0 million as of December 31, 2022, and is reflected in Other Assets on the Consolidated Balance Sheet.

Lease and rental income during the three and six months ended June 30, 2023 and June 30, 2022 consisted of the following (in thousands):

Lease and rental income during the three and nine months ended September 30, 2023 and September 30, 2022 consisted of the following (in thousands):

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

September 30,

Nine Months Ended

September 30,

Minimum rental payments

Nonlease payments

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income (Loss)

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

4 unchanged sentences

Balance as of June 30, 2023

Foreign currency translation adjustment

Balance as of September 30, 2023

The functional currency of the Company’s foreign subsidiary, RTC Canada, is its local currency.

15 unchanged sentences

Provision for

June 30, 2023

September 30,

Commercial vehicle receivables

4 unchanged sentences

The acquisition was accounted for as an acquisition achieved in stages under ASC 805, Business Combinations .

The acquisition-date fair value of the previous 50 % equity interest was $ 44.7 million, resulting in a gain of $ 7.0 million included in the line item Other income (expense) on the Consolidated Statements of Income for the three months ended June 30, 2022 and for the six months ended June 30, 2022.

The Company also recognized a reversal of deferred tax liabilities of $ 2.2 million and $ 0.6 million related to reclassification of the foreign currency translation adjustment related to the remeasurement of the Company’s previous equity method investment in RTC Canada Income for the three months ended June 30, 2022 and for the six months ended June 30, 2022.

As of May 2, 2022, the Company established a noncontrolling interest related to the minority holders.

19 unchanged sentences

Gain on equity method investment

The goodwill of $ 44.2 million for the RTC Canada acquisition is primarily attributable to the synergies expected to arise after obtaining a controlling interest in the entity.

The goodwill of $ 44.2 million for the RTC Canada acquisition was primarily attributable to the synergies expected to arise after the Company obtained a controlling interest in the entity.

Prior to May 2, 2022, the Company accounted for its 50 % equity interest in RTC Canada as an equity-method investment.

1 unchanged sentence

Subsequent Event

On July 25, 2023, the Company’s Board of Directors declared a three -for- two stock split with respect to both the Company’s Class A and Class B common stock.

The stock split will be effected in the form of a stock dividend payable on August 28, 2023, to shareholders of record as of August 7, 2023.

Holders of the Company’s common stock will receive an additional one-half share for each share of common stock held as of the record date.

The Company’s Class A and Class B common stock will begin trading on a split adjusted basis on August 29, 2023.

On November 1, 2023, the Company entered into that certain Second Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company (“PLC”), a division of PACCAR Financial Corp.

(the “PLC Amended and Restated Agreement”).

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

The Company may borrow, repay and reborrow amounts pursuant to the PLC Amended and Restated Agreement from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the borrowing base.

The PLC Amended and Restated Agreement requires the Company to maintain a minimum balance threshold of $ 190,000,000 .

Advances under the PLC Amended and Restated Agreement bear interest per annum, payable on the fifth day of the following month, at our option, at either (A) the prime rate, minus 1.95 %, provided that the floating rate of interest is subject to a floor of 0 %, or (B) a fixed rate, to be determined between the Company and PLC in each instance of borrowing at a fixed rate.

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

Management ’

43 unchanged sentences

Navistar ®

is a registered trademark of Navistar, Inc.

is a registered trademark of Navistar International, Inc.

International ®

39 unchanged sentences

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

Research currently forecasts sales to be 248,150 units in 2023, which would represent a 6.2% increase compared to 2022. 

Research currently forecasts sales to be 253,500 units in 2023, which would represent an 8.5% increase compared to 2022. 

We expect our U.S.

4 unchanged sentences

We expect lease and rental revenue to increase 10% to 15% during 2023, compared to 2022.

This projected increase in lease and rental revenue is primarily related to strong demand for lease commercial vehicles and the consolidation of RTC Canada into our operating results.

With respect to Aftermarket Products and Services, we are beginning to see demand softening due to difficult operating conditions affecting certain customers, particularly our over-the-road customers, which is our largest customer segment.

Despite a difficult operating environment, we believe that our ability to execute on certain of our strategic initiatives and our commitment to diversifying our customer base over the last couple of years will enable us to continue to achieve strong financial results going forward.

This projected increase in lease and rental revenue is primarily related to strong demand for lease commercial vehicles and the consolidation of RTC Canada into our operating results.

With respect to Aftermarket Products and Services, growth in our aftermarket revenues moderated in the third quarter of 2023 compared to earlier in the year, and we expect that challenging economic conditions that are currently affecting many of our customers, including high interest rates and low freight rates, will continue to negatively impact our Aftermarket Product and Services revenues going forward.

In addition, we believe that the industry may experience some deflation with respect to the prices of certain commodity parts due to softening demand.

However, despite a challenging operating environment, we believe that the diversity of our customer base, as well as our focus on operational excellence, mobile service and supporting large national fleets, will allow us to offset some of the current industry challenges, and that our results will continue to outpace the industry.

The above projections for new commercial vehicle sales will depend on our ability to obtain commercial vehicles from the manufacturers we represent and such projections could be negatively impacted by manufacturer allocation decisions, supply chain issues affecting manufacturers’

9 unchanged sentences

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, 2023 and 2022.

The following discussion and analysis includes our historical results of operations for the three months and nine months ended September 30, 2023 and 2022.

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

6 unchanged sentences

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

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Gross Profit:

1 unchanged sentence

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:

4 unchanged sentences

Used vehicles

Vehicle revenue:

Vehicle revenues:

New heavy-duty vehicles

3 unchanged sentences

Used vehicle revenue

Other vehicle revenue (1)

Dealership absorption ratio:

Other vehicle revenues:

Absorption ratio:

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

6 unchanged sentences

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 139.7% absorption ratio for the second quarter of 2023 and a 136.4% absorption ratio for the second quarter of 2022.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Total revenues increased $211.8 million, or 11.8%, in the second quarter of 2023, compared to the second quarter of 2022.

This increase was primarily the result of strong demand for new commercial vehicles, increased production of commercial vehicles from the manufacturers we represent and the consolidation of RTC Canada into our operating results as of May 2022.

Our Aftermarket Products and Services revenues increased $52.8 million, or 8.8%, in the second quarter of 2023, compared to the second quarter of 2022.

The increase in Aftermarket Parts and Services revenues was primarily a result of healthy demand, inflation and the consolidation of RTC Canada into our operating results.

Revenues from sales of new and used commercial vehicles increased $152.5 million, or 13.9%, in the second quarter of 2023, compared to the second quarter of 2022.

The increase in new commercial vehicle revenues was primarily a result of strong demand, increased production of commercial vehicles from the manufacturers we represent and the consolidation of RTC Canada into our operating results.

We sold 4,300 new Class 8 trucks in the second quarter of 2023, a 3.2% increase compared to 4,168 new Class 8 trucks in the second quarter of 2022.

The increase in new Class 8 truck sales was primarily a result of strong demand, increased production of commercial vehicles from the manufacturers we represent and the consolidation of RTC Canada into our operating results.

We sold 3,477 new Class 4 through 7 commercial vehicles, including 462 buses, in the second quarter of 2023, a 23.5% increase compared to 2,815 new medium-duty commercial vehicles, including 279 buses, in the second quarter of 2022.

The increase in new Class 4 through 7 commercial vehicle sales was primarily a result of strong demand, increased production of commercial vehicles from the manufacturers we represent and the consolidation of RTC Canada into our operating results.

We sold 452 light-duty vehicles in the second quarter of 2023, a 10.8% increase compared to 408 light-duty vehicles sold in the second quarter of 2022.

We sold 1,869 used commercial vehicles in the second quarter of 2023, a 14.7% increase compared to 1,629 used commercial vehicles sold in the second quarter of 2022.

Although we experienced growth in used commercial vehicle sales year-over-year, we expect demand and values to remain low through 2023 due to new commercial vehicle production continuing to increase and anticipated low freight rates.

Commercial vehicle lease and rental revenues increased $8.0 million, or 9.9%, in the second quarter of 2023, compared to the second quarter of 2022.

This increase in commercial vehicle lease and rental revenues was primarily a result of strong demand for lease commercial vehicles and the consolidation of RTC Canada into our operating results.

Finance and insurance revenues decreased $1.6 million, or 20.2%, in the second quarter of 2023, compared to the second quarter of 2022.

Our commercial vehicle dealerships achieved a 132.8% absorption ratio for the third quarter of 2023 compared to a 136.2% absorption ratio for the third quarter of 2022.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Total revenues increased $116.5 million, or 6.2%, in the third quarter of 2023, compared to the third quarter of 2022.

This increase was primarily the result of strong demand for new commercial vehicles and increased production of commercial vehicles from the manufacturers we represent.

Our Aftermarket Products and Services revenues totaled $643.6 million in the third quarter of 2023, up 3.5% from the third quarter of 2022.

The slight increase in Aftermarket Parts and Services revenues was related to the continued stabilization of parts pricing and economic pressures that are negatively affecting our over-the-road customers.

Revenues from sales of new and used commercial vehicles increased $93.6 million, or 8.2%, in the third quarter of 2023, compared to the third quarter of 2022.

The increase in new commercial vehicle revenues was primarily a result of strong demand and increased production of commercial vehicles from the manufacturers we represent.

We sold 4,326 new Class 8 trucks in the third quarter of 2023, a 3.0% increase compared to 4,200 new Class 8 trucks sold in the third quarter of 2022.

The increase in new Class 8 truck sales was primarily a result of strong demand and increased production of commercial vehicles from the manufacturers we represent.

Class 8 retail truck sales totaled 68,010 units in the third quarter of 2023, an increase of 0.1% compared to the third quarter of 2022, according to ACT Research.

We sold 3,244 new Class 4 through 7 medium-duty commercial vehicles, including 422 buses, in the third quarter of 2023, a 0.7% increase compared to 3,223 new medium-duty commercial vehicles, including 537 buses, in the third quarter of 2022.

Our new Class 4 through 7 commercial vehicle sales were flat on a year-over-year basis primarily due to allocation decisions from the manufacturers we represent.

We are still experiencing limited production of medium-duty commercial vehicles from the manufacturers we represent.

New U.S. Class 4 through 7 retail commercial vehicle sales totaled 65,683 units in the third quarter of 2023, up 9.1% compared to the third quarter of 2022, according to ACT Research.

We sold 425 light-duty vehicles in the third quarter of 2023, a 30.1% decrease compared to 608 light-duty vehicles sold in the third quarter of 2022.

We sold 1,797 used commercial vehicles in the third quarter of 2023, a 1.9% increase compared to 1,763 used commercial vehicles in the third quarter of 2022.

We expect used commercial vehicle demand and values to remain low through 2023 due to new commercial vehicle production continuing to increase, high interest rates and anticipated low freight rates.

Commercial vehicle lease and rental revenues increased $3.8 million, or 4.4%, in the third quarter of 2023, compared to the third quarter of 2022.

This increase in commercial vehicle lease and rental revenues was primarily a result of strong demand for lease commercial vehicles.

Finance and insurance revenues decreased $1.3 million, or 17.3%, in the third quarter of 2023, compared to the third quarter of 2022.

This decrease is primarily due to the mix of purchasers of commercial vehicles. 

During the second quarter of 2023, most of our sales were to larger fleets, which usually arrange their own financing.

We are more likely to provide financing to owner-operators and smaller fleets, which comprised a smaller percentage of commercial vehicle sales during the second quarter of 2023.

During the third quarter of 2023, most of our sales were to larger fleets, which usually arrange their own financing.

We are more likely to provide financing to owner-operators and smaller fleets, which comprised a smaller percentage of commercial vehicle sales during the third quarter of 2023.

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

Gross profit increased $39.6 million, or 10.6%, in the second quarter of 2023, compared to the second quarter of 2022.

Gross profit as a percentage of sales decreased to 20.7% in the second quarter of 2023, from 20.9% in the second quarter of 2022.

Gross profit increased $13.0 million, or 3.4%, in the third quarter of 2023, compared to the third quarter of 2022.

Gross profit as a percentage of sales decreased to 19.9% in the third quarter of 2023, from 20.5% in the third quarter of 2022.

This decrease in gross profit as a percentage of sales is a result of a change in our product sales mix.

Commercial vehicle sales, a lower margin revenue item, increased as a percentage of total revenues to 62.4% in the second quarter of 2023, from 61.3% in the second quarter of 2022.

Aftermarket Products and Services revenues, a higher margin revenue item, decreased as a percentage of total revenues to 32.5% in the second quarter of 2023, from 33.4% in the second quarter of 2022.

Gross margins from our Aftermarket Products and Services operations decreased to 38.1% in the second quarter of 2023, from 38.6% in the second quarter of 2022.

Gross profit from our Aftermarket Products and Services operations increased to $247.8 million in the second quarter of 2023, from $231.0 million in the second quarter of 2022.

This increase is primarily related to the consolidation of RTC Canada into our operating results and strong parts and service demand.

Commercial vehicle sales, a lower margin revenue item, increased as a percentage of total revenues to 62.4% in the third quarter of 2023, from 61.3% in the third quarter of 2022.

Aftermarket Products and Services revenues, a higher margin revenue item, decreased as a percentage of total revenues to 32.5% in the third quarter of 2023, from 33.4% in the third quarter of 2022.

Gross margins from our Aftermarket Products and Services operations decreased to 36.2% in the third quarter of 2023, from 39.1% in the third quarter of 2022.

Gross profit for the Aftermarket Products and Services departments decreased to $232.7 million in the third quarter of 2023, from $243.4 million in the third quarter of 2022.

This decrease is primarily related to continued stabilization of parts pricing and softening demand due to difficult economic conditions impacting many of our customers.

Historically, gross margins on parts sales range from 28% to 30% and gross margins on service and collision center operations range from 66% to 68%.

Gross profits from parts sales represented 60.5% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2023 and 63.6% in the second quarter of 2022.

Service and collision center operations represented 39.5% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2023 and 36.4% in the second quarter of 2022.

Gross profits from parts sales represented 58.4% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2023 and 62.8% in the third quarter of 2022.

Service and collision center operations represented 41.6% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2023 and 37.2% in the third quarter of 2022.

We expect blended gross margins on Aftermarket Products and Services operations to range from 36.0% to 38.0% in 2023.

Gross margins on new Class 8 truck sales increased to 10.3% in the second quarter of 2023, from 9.9% in the second quarter of 2022.

This increase was primarily due to strong demand for new Class 8 trucks and the mix of purchasers during the first quarter of 2023.

Gross margins on new Class 8 truck sales remained flat at 9.9% in the third quarter of 2023 and the third quarter of 2022.

In 2023, we expect overall gross margins from new heavy-duty truck sales of approximately 9.0% to 10.0%.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 8.8% in the second quarter of 2023, from 7.3% in the second quarter of 2022.

This increase was primarily due to the mix of purchasers during the second quarter of 2023.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 9.2% in the third quarter of 2023, from 7.9% in the third quarter of 2022.

This increase was primarily due to the mix of purchasers during the third quarter of 2023.

For 2023, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 8.5% to 9.5%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Gross margins on used commercial vehicle sales increased to 11.8% in the second quarter of 2023, from 10.6% in the second quarter of 2022.

This increase was primarily due to strategic inventory management.

Gross margins on used commercial vehicle sales increased to 11.3% in the third quarter of 2023, from 1.6% in the third quarter of 2022.

This increase was primarily due to strategic inventory management of our used commercial vehicle inventory.

We expect margins on used commercial vehicles to range between 8.0% and 10.0% in 2023.

Gross margins from truck lease and rental sales decreased to 30.5% in the second quarter of 2023, from 31.3% in the second quarter of 2022.

This decrease is primarily related to increased maintenance expenses for the lease and rental fleet.

In addition, lease revenue, a lower margin revenue item, increased more than rental revenue, a higher margin revenue item, in the second quarter of 2023 compared to the second quarter of 2022.

Gross margins from truck lease and rental sales decreased to 30.6% in the third quarter of 2023, from 31.8% in the third quarter of 2022.

This decrease is primarily related to a decrease in rental utilization rates.

We expect gross margins from lease and rental sales of approximately 29.0% to 31.0% during 2023.

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

Finance and insurance revenues and other 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 $31.4 million, or 13.9%, in the second quarter of 2023, compared to the second quarter of 2022.

This increase primarily resulted from increased personnel expense and increased selling expense, compared to the second quarter of 2022, and in addition, increased general and administrative expense associated with consolidation of RTC Canada into our operating results.

SG&A expenses as a percentage of total revenues increased to 12.8% in the second quarter of 2023, from 12.6% in the second quarter of 2022.

Selling, General and Administrative (“SG&A”) expenses increased $14.5 million, or 6.0%, in the third quarter of 2023, compared to the third quarter of 2022.

This increase primarily resulted from increased personnel expense, increased selling expense and other increased costs due to inflation, compared to the third quarter of 2022.

SG&A expenses as a percentage of total revenues remained constant at 13.0% in the third quarter of 2023 and 2022.

Annual SG&A expenses as a percentage of total revenues have ranged from approximately 12.4% to 14.4% over the last five years.

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Interest Expense, Net

Net interest expense increased $9.1 million, or 286.3%, in the second quarter of 2023, compared to the second quarter of 2022.

Net interest expense increased $7.9 million, or 126.2%, in the third quarter of 2023, compared to the third quarter of 2022.

This increase in interest expense is a result of the increase in inventory levels and rising interest rates on our variable rate debt compared to 2022.

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Income before Income Taxes

As a result of the factors described above, income before income taxes decreased $9.7 million, or 6.9%, in the second quarter of 2023, compared to the second quarter of 2022.

This decrease is primarily due to the one-time gain of $9.8 million recognized in the second quarter of 2022 related to the acquisition of an additional 30% interest in Rush Truck Centres of Canada Limited.

Income taxes increased $2.5 million, or 8.4%, in the second quarter of 2023, compared to the second quarter of 2022.

We provided for taxes at a 24.5% effective rate in the second quarter of 2023 and 21.1% in the second quarter of 2022.

As a result of the factors described above, income before income taxes decreased $13.0 million, or 10.8%, in the third quarter of 2023, compared to the third quarter of 2022.

Income taxes decreased $3.0 million, or 9.9%, in the third quarter of 2023, compared to the third quarter of 2022.

We provided for taxes at a 25.0% effective rate in the third quarter of 2023 and 24.79% in the third quarter of 2022.

We expect our effective tax rate to be approximately 24.0% to 25.0% of pretax income in 2023.

Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022

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, 2023, Compared to Three Months Ended June 30, 2022.”

Total revenues increased $560.4 million, or 16.7%, in the first six months of 2023, compared to the first six months of 2022.

Sales of new and used commercial vehicles increased $378.5 million, or 18.6%, in the first six months of 2023, compared to the first six months of 2022.

Aftermarket Products and Services revenues increased $157.8 million, or 13.8%, in the first six months of 2023, compared to the first six months of 2022.

We sold 8,665 new Class 8 heavy-duty trucks in the first six months of 2023, a 12.6% increase compared to 7,696 new Class 8 heavy-duty trucks in the first six months of 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

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, 2023 Compared to Three Months Ended September 30, 2022.

Total revenues increased $676.8 million, or 13.0%, in the first nine months of 2023, compared to the first nine months of 2022.

Aftermarket Products and Services revenues increased $179.3 million, or 10.2%, in the first nine months of 2023, compared to the first nine months of 2022.

The increase in Aftermarket Parts and Services revenues was related to healthy demand during the first six months of 2023 and the consolidation of RTC Canada into our operating results.

Revenues from the sales of new and used commercial vehicles increased $472.1 million, or 14.9%, in the first nine months of 2023, compared to the first nine months of 2022.

The increase in new commercial vehicle revenues was primarily a result of strong demand, increased production of commercial vehicles from the manufacturers we represent and the consolidation of RTC Canada into our operating results.

We sold 12,991 new Class 8 heavy-duty trucks during the first nine months of 2023, a 9.2% increase compared to 11,896 new Class 8 heavy-duty trucks in the first nine months of 2022.

According to A.C.T.

Research, retail sales in the U.S.

Class 8 truck market increased 19.9% in the first six months of 2023, compared to the first six months of 2022.

We sold 6,513 new Class 4 through 7 medium-duty commercial vehicles, including 805 buses, in the first six months of 2023.

This represented a 31.4% increase compared to 4,956 new Class 4 through 7 medium-duty commercial vehicles, including 504 buses, in the first six months of 2022.

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

increased approximately 9.2% in the first six months of 2023, compared to the first six months of 2022.

We sold 956 new light-duty vehicles in the first six months of 2023, a 7.5% increase compared to 889 new light-duty vehicles sold in the first six months of 2022.

We sold 3,553 used commercial vehicles in the first six months of 2023, an 11.7% decrease compared to 4,024 used commercial vehicles in the first six months of 2022.

Truck lease and rental revenues increased $23.3 million, or 15.4%, in the first six months of 2023, compared to the first six months of 2022.

Finance and insurance revenues decreased $2.5 million, or 16.5%, in the first six months of 2023, compared to the first six months of 2022.

Gross profit increased $93.0 million, or 12.9%, in the first six months of 2023, compared to the first six months of 2022.

Gross profit as a percentage of sales was 20.8% in the first six months of 2023 and 21.5% in the first six months of 2022.

Gross margins from Aftermarket Products and Services operations decreased to 38.0% in the first six months of 2023, from 38.5% in the first six months of 2022.

Gross profit for Aftermarket Products and Services was $493.9 million in the first six months of 2023, compared to $440.1 million in the first six months of 2022.

Gross profit from parts sales represented 61.0% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2023 and 63.1% in the first six months of 2022.

Service and collision center operations represented 39.0% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2023 and 36.9% in the first six months of 2022.

Gross margins on new Class 8 heavy-duty truck sales increased to 10.1% in the first six months of 2023, from 9.8% in the first six months of 2022.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales increased to 8.8% in the first six months of 2023, from 7.8% in the first six months of 2022.

Gross margins on used commercial vehicle sales decreased to 10.5% in the first six months of 2023, from 13.6% in the first six months of 2022.

Gross margins from truck lease and rental sales decreased to 30.4% in the first six months of 2023, from 31.6% in the first six months of 2022.

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 12.9% in the first nine months of 2023, compared to the first nine months of 2022.

We sold 9,757 new Class 4 through 7 medium-duty commercial vehicles, including 1,232 buses, during the first nine months of 2023, a 19.3% increase compared to 8,179 new Class 4 through 7 medium-duty commercial vehicles, including 1,041 buses, in the first nine months of 2022.

Research estimates that unit sales of new Class 4 through 7 commercial vehicles, including buses, in the U.S increased approximately 9.2% in the first nine months of 2023, compared to the first nine months of 2022.

We sold 1,381 new light-duty commercial vehicles during the first nine months of 2023, a 7.7% decrease compared to 1,497 light-duty commercial vehicles in the first nine months of 2022.

We sold 5,350 used commercial vehicles during the first nine months of 2023, a 7.6% decrease compared to 5,787 used commercial vehicles in the first nine months of 2022.

Truck lease and rental revenues increased $27.1 million, or 11.4%, in the first nine months of 2023, compared to the first nine months of 2022.

This increase in commercial vehicle lease and rental revenues was primarily a result of strong demand for lease commercial vehicles and the consolidation of RTC Canada into our operating results.

Finance and insurance revenues decreased $3.8 million, or 16.8%, in the first nine months of 2023, compared to the first nine months of 2022.

Gross profit increased $106.0 million, or 9.6%, in the first nine months of 2023, compared to the first nine months of 2022.

Gross profit as a percentage of sales decreased to 20.5% in the first nine months of 2023, from 21.1% in the first nine months of 2022.

Gross margins from our Aftermarket Products and Services operations decreased to 37.4% in the first nine months of 2023, from 38.8% in the first nine months of 2022.

Gross profit for the Aftermarket Products and Services departments was $726.5 million in the first nine months of 2023, compared to $683.5 million in the first nine months of 2022.

This increase is primarily related to the consolidation of RTC Canada into our operating results and strong parts and service demand in the first six months of 2023.

Gross profits from parts sales represented 60.1% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2023 and 63.0% in the first nine months of 2022.

Service and collision center operations represented 39.9% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2023 and 37.0% in the first nine months of 2022.

Gross margins on new Class 8 truck sales increased to 10.0% in the first nine months of 2023, from 9.9% in the first nine months of 2022.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales increased to 8.9% in the first nine months of 2023, from 7.9% in the first nine months of 2022.

Gross margins on used commercial vehicle sales increased to 10.8% in the first nine months of 2023, from 10.2% in the first nine months of 2022.

Gross margins from truck lease and rental sales decreased to 30.4% in the first nine months of 2023, from 31.6% in the first nine months of 2022.

Selling, General and Administrative Expenses

SG&A expenses increased $63.7 million, or 14.2%, in the first six months of 2023, compared to the first six months of 2022.

SG&A expenses equaled 13.1% of total revenue in the first six months of 2023, compared to 13.4% in the first six months of 2022.

Interest (Income) Expense, Net

Net interest expense increased $18.8 million, or 429.3%, in the first six months of 2023, compared to the first six months of 2022.

SG&A expenses increased $78.2 million, or 11.3%, in the first nine months of 2023, compared to the first nine months of 2022.

SG&A expenses equaled 13.1% of total revenue in the first nine months of 2023, and 13.3% in the first nine months of 2022.

This increase primarily resulted from increased personnel expense, increased selling expense and other increased costs due to inflation, compared to the first nine months of 2022, and in addition, increased general and administrative expense associated with consolidation of RTC Canada into our operating results.

Interest Expense, Net

Net interest expense increased $26.8 million, or 250.9%, in the first nine months of 2023, compared to the first nine months of 2022.

Income before Income Taxes

Income before income taxes decreased $10.9 million, or 4.2%, in the first six months of 2023, compared to the first six months of 2022.

Income before income taxes decreased $23.9 million, or 6.3%, in the first nine months of 2023, compared to the first nine months of 2022.

Provision for Income Taxes

Income taxes increased $2.9 million, or 5.1%, in the first six months of 2023, compared to the first six months of 2022.

We provided for taxes at a 24.2% rate in the first six months of 2023 and a 22.0% rate in the first six months of 2022.

Income taxes remained flat in the first nine months of 2023, compared to the first nine months of 2022.

We provided for taxes at a 24.4% rate in the first nine months of 2023 and a 22.9% rate in the first nine months of 2022.

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, 2023, we had working capital of approximately $467.0 million, including $191.9 million in cash, available to fund our operations.

As of September 30, 2023, we had working capital of approximately $425.7 million, including $192.0 million in cash, available to fund our operations.

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

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We continually evaluate our liquidity and capital resources based upon:

(i) our cash and cash equivalents on hand;

(i) our cash, cash equivalents and restricted cash on hand;

(ii) the funds that we expect to generate through future operations;

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We have a secured line of credit that provides for a maximum borrowing of $20.0 million.

There were no advances outstanding under this secured line of credit on June 30, 2023, however, $18.0 million was pledged to secure various letters of credit related to self-insurance products, leaving $2.0 million available for future borrowings as of June 30, 2023.

There were no advances outstanding under this secured line of credit on September 30, 2023, however, $18.0 million was pledged to secure various letters of credit related to self-insurance products, leaving $2.0 million available for future borrowings as of September 30, 2023.

Our long-term debt, floor plan financing agreements and the credit agreement with Wells Fargo Bank, National Association 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 June 30, 2023, 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.

As of September 30, 2023, 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 are currently under contract to construct a new facility in the St.

Louis, Illinois area at an estimated cost of $13.9 million.

During the second quarter of 2023, we paid a cash dividend of $11.4 million.

Louis, Missouri area at an estimated cost of $13.9 million.

During the third quarter of 2023, we paid a cash dividend of $13.7 million.

On July 25, 2023, the Company’s Board of Directors declared a three-for-two stock split with respect to both the Company’s Class A and Class B common stock.

The stock split will be effected in the form of a stock dividend payable on August 28, 2023, to shareholders of record as of August 7, 2023.

Holders of the Company’s common stock will receive an additional one-half share for each share of common stock held as of the record date.

Additionally, on July 25, 2023, our Board of Directors declared a cash dividend of $0.17 per share of Class A and Class B common stock, to be paid on September 22, 2023, to all shareholders of record as of September 7, 2023, which on a post-stock split basis represents a 21.4% increase compared to the cash dividend we paid in the second quarter of 2023.

The total dividend disbursement is estimated at approximately $13.7 million.

The stock split was effected in the form of a stock dividend paid on August 28, 2023, to shareholders of record as of August 7, 2023.

Holders of the Company’s common stock received an additional one-half share for each share of common stock held as of the record date.

Additionally, on October 24, 2023, our Board of Directors declared a cash dividend of $0.17 per share of Class A and Class B common stock, to be paid on December 12, 2023, to all shareholders of record as of November 9, 2023.

We expect to continue paying cash dividends on a quarterly basis.

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Repurchases, if any, will be made at times and in amounts as we deem appropriate and may be made through open market transactions at prevailing market prices, privately negotiated transactions or by other means in accordance with federal securities laws.

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, 2023, we had repurchased $71.4 million of our shares of common stock under the current stock repurchase program.

The actual timing, number of shares 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.

As of September 30, 2023, we had repurchased $114.9 million of our shares of common stock under the current stock repurchase program, excluding federal excise tax.

The current stock repurchase program expires on December 31, 2023, and may be suspended or discontinued at any time.

The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. 

We have reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased. 

We anticipate funding the capital expenditures for the improvement and expansion of existing facilities and recurring expenses through our operating cash flows.

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, 2023.

We have no other material commitments for capital expenditures as of September 30, 2023.

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 decreased by $9.2 million during the six months ended June 30, 2023 and increased by $68.5 million during the six months ended June 30, 2022.

Cash, cash equivalents and restricted cash decreased by $9.1 million during the nine months ended September 30, 2023 and increased by $71.4 million during the nine months ended September 30, 2022.

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 2023, operating activities resulted in net cash provided by operations of $114.0 million.

Net cash provided by operating activities primarily consisted of $189.3 million in net income, as well as non-cash adjustments related to depreciation and amortization of $108.6 million, stock-based compensation of $19.0 million and the benefit for deferred income tax expense of $2.9 million.

Cash provided by operating activities included an aggregate of $205.7 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $12.8 million from the increase in accounts payable, which was offset by cash outflows of $15.9 million from the increase in accounts receivable, $174.4 million from the increase in inventories, $5.7 million from the increase in other assets, $14.9 million from the decrease in customer deposits and $7.4 million from the decrease in accrued liabilities.

During the first nine months of 2023, operating activities resulted in net cash provided by operations of $211.1 million.

Net cash provided by operating activities primarily consisted of $269.9 million in net income, as well as non-cash adjustments related to depreciation and amortization of $165.1 million, gain on sale of property and equipment of $0.6 million, stock-based compensation of $25.3 million and the benefit for deferred income tax expense of $3.5 million.

Cash used by operating activities included an aggregate of $252.2 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $4.5 million from the increase in accounts payable, which was offset primarily by cash outflows of $193.7 million from the increase in inventories, $42.8 million from the increase in accounts receivable, $13.3 million from the decrease in customer deposits and $4.1 million from the decrease in accrued expenses.

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

During the first six months of 2022, operating activities resulted in net cash provided by operations of $58.2 million.

Net cash provided by operating activities primarily consisted of $202.7 million in net income, as well as non-cash adjustments related to depreciation and amortization of $95.1 million, stock-based compensation of $18.0 million and the benefit for deferred income tax expense of $4.1 million.

Cash provided by operating activities included an aggregate of $236.9 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $33.3 million from the increase in accounts payable and $18.6 million from the increase in accrued liabilities, which was offset by cash outflows of $85.1 million from the increase in accounts receivable, $193.0 million from the increase in inventories, $1.9 million from the increase in other assets, and $8.8 million from the decrease in customer deposits.

During the first nine months of 2022, operating activities resulted in net cash provided by operations of $183.3 million.

Net cash provided by operating activities primarily consisted of $293.8 million in net income, as well as non-cash adjustments related to depreciation and amortization of $146.5 million, gain on sale of property and equipment, gain on joint venture and gain on business acquisition of $21.9 million, stock-based compensation of $21.6 million and the benefit for deferred income tax expense of $7.9 million.

Cash used by operating activities included an aggregate of $264.5 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $44.1 million from the increase in accounts payable, $9.7 million from the increase in customer deposits and $25.5 million from the increase in accrued expenses, which was offset primarily by cash outflows of $264.7 million from the increase in inventories and $75.1 million from the increase in accounts receivable.

Cash Flows from Investing Activities

During the first six months of 2023, cash used in investing activities was $188.9 million.

During the first nine months of 2023, cash used in investing activities was $291.0 million.

Cash flows used in investing activities consist primarily of cash used for the acquisition of property and equipment.

Acquisition of property and equipment totaled $289.1 million during the first six months of 2023 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $210.5 million for purchases of rental and lease vehicles for our rental and leasing operations.

During the first six months of 2022, cash used in investing activities was $94.2 million.

Cash flows used in investing activities consisted primarily of cash used for capital expenditures and the purchase of the additional 30% equity interest in RTC Canada.

During the first nine months of 2022, cash used in investing activities was $168.2 million.

Cash flows used in investing activities consist primarily of cash used for the acquisition of property and equipment.

Acquisition of property and equipment totaled $107.2 million during the first six months of 2022 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $71.4 million for purchases of rental and lease vehicles for our rental and leasing operations.

Additionally, during the first six months of 2022, cash outflows consisted of $15.1 million related to the acquisition of the additional 30% equity interest in RTC Canada.

The cash outflows were offset by the cash inflow of $27.5 million related to Cummins, Inc.’s acquisition of a 50% equity interest in Momentum Fuel Technologies in the first quarter of 2022.

Acquisition of property and equipment totaled $175.2 million during the first nine months of 2022 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $122.3 million for purchases of rental and lease vehicles for our rental and leasing operations.

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 2023, financing activities resulted in net cash provided by financing activities of $65.7 million, primarily related to cash inflows of $9.7 million from the issuance of shares related to equity compensation plans, $191.0 million from net draws on floor plan notes payable, non-trade and borrowings of $653.4 million of long-term debt.

These cash inflows were offset by $694.1 million used for principal repayments of long-term debt and capital lease obligations, $7.0 million for taxes related to net share settlement of equity awards, $63.9 million used for repurchases of common stock and $23.4 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 2022, financing activities resulted in net cash used in financing of $104.6 million, primarily related to cash inflows of $8.1 million from the issuance of shares related to equity compensation plans, $190.5 million from net draws on floor plan notes payable, non-trade and borrowings of $571.3 million of long-term debt.

These cash inflows were offset by $582.3 million used for principal repayments of long-term debt and capital lease obligations, $8.6 million for taxes related to net share settlement of equity awards, $52.8 million used for repurchases of common stock and $21.6 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 nine months of 2023, financing activities resulted in net cash provided by financing activities of $70.8 million, primarily related to $188.4 million from net draws on floor plan notes payable, non-trade, $995.1 million from borrowings of long-term debt and $14.7 million from the issuance of shares related to equity compensation plans.

These cash inflows were offset by cash outflows of $976.2 million used for principal repayments of long-term debt and capital lease obligations, $107.0 million used for repurchases of common stock, $7.0 million for taxes paid related to net share settlement of equity awards and $37.1 million used for payment of cash dividends.

During the first nine months of 2022, financing activities resulted in net cash provided by financing activities of $56.6 million, primarily related to $277.3 million from net draws on floor plan notes payable, non-trade, $695.2 million from borrowings of long-term debt and $11.1 million from the issuance of shares related to equity compensation plans.

These cash inflows were offset by cash outflows of $799.8 million used for principal repayments of long-term debt and capital lease obligations, $52.3 million used for repurchases of common stock, $8.7 million for taxes paid related to net share settlement of equity awards and $33.1 million used for payment of cash dividends.

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”) which was amended effective November 30, 2022.

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We may terminate the commitments at any time.

On June 30, 2023, we had approximately $41.3 million outstanding under the WF Credit Agreement.

On September 30, 2023, we had approximately $104.8 million outstanding under the WF Credit Agreement.

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

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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.

On June 30, 2023, we had approximately $150.0 million outstanding under the PLC Agreement.

Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 to 60 days or less from the date the commercial vehicles are invoiced from the factory. Navistar Financial Corporation and Peterbilt offer trade terms that provide an interest-free inventory stocking period for certain new commercial vehicles.

On September 30, 2023, we had approximately $150.0 million outstanding under the PLC Agreement.

Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 to 60 days or less from the date the commercial vehicles are invoiced from the factory.

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

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

7 unchanged sentences

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 June 30, 2023, we had approximately $940.4 million outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $824.2 million during the six months ended June 30, 2023.

On September 30, 2023, we had approximately $947.7 million outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $855.5 million during the nine months ended September 30, 2023.

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.

3 unchanged sentences

The RTC Canada Revolving Credit Agreement expires September 14, 2026.

On June 30, 2023, we had approximately $67.0 million CAD outstanding under the RTC Canada Revolving Credit Agreement.

On September 30, 2023, we had approximately $71.7 million CAD outstanding under the RTC Canada Revolving Credit Agreement.

On July 15, 2022, RTC Canada entered into that certain Amended and Restated BMO Wholesale Financing and Security Agreement (the “RTC Canada Floor Plan Agreement”) with Bank of Montreal (“BMO”).

6 unchanged sentences

The RTC Canada Floor Plan Agreement expires September 14, 2026.

On June 30, 2023, we had approximately $71.5 million CAD outstanding under the RTC Canada Floor Plan Agreement.

On June 30, 2023, our backlog of commercial vehicle orders was approximately $4,041.6 million, as compared to a backlog of commercial vehicle orders of approximately $3,682.9 million on June 30, 2022.

This increase in our backlog is primarily due to strong demand for new commercial vehicles and production constraints experienced by the manufacturers we represent.

On September 30, 2023, we had approximately $67.2 million CAD outstanding under the RTC Canada Floor Plan Agreement.

On September 30, 2023, our backlog of commercial vehicle orders was approximately $3,297.4 million, compared to a backlog of commercial vehicle orders of approximately $3,300.1 million on September 30, 2022.

The flatness of our backlog reflects the allocation decisions of the manufacturers we represent and continued demand associated with production constraints experienced by the manufacturers we represent.

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.

4 unchanged sentences

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, 2023, and we expect to fill the majority of our backlog orders during 2023 and the first half of 2024, assuming that the manufacturers we represent can meet their current production schedule.

Orders from a number of our major fleet customers are included in our backlog as of September 30, 2023, and we expect to fill the majority of our backlog orders during the remainder of 2023 and the first half of 2024, assuming that the manufacturers we represent can meet their current production schedule.

Our current backlog continues to be much higher than normal.

6 unchanged sentences

According to data published by A.C.T.

Research, total U.S.

retail sales of new Class 8 commercial vehicles have ranged from a low of approximately 187,600 in 2013, to a high of approximately 281,440 in 2019.

Research, in the last ten years, total U.S.

retail sales of new Class 8 commercial vehicles have ranged from a low of approximately 187,600 in 2013, to a high of approximately 281,440 in 2019. 

Through geographic expansion, concentration on higher margin Aftermarket Products and Services and diversification of our customer base, we have attempted to reduce the negative impact of adverse general economic conditions or cyclical trends affecting the Class 8 commercial vehicle industry on our earnings.

24 unchanged sentences

The executive order calls for the EPA and the Secretary of Transportation to adopt new rules and regulations for commercial vehicles starting as early as model year 2027.

Similarly, in June 2020, the California Air Resources Board (“CARB”) adopted a final rule that is intended to phase out the sale of diesel-powered commercial vehicles over time by requiring a certain percentage of each manufacturer’s commercial vehicles sold within the state to be “zero-emission vehicles,”

Similarly, in June 2020, the California Air Resources Board (“CARB”) adopted a final rule that is intended to phase out the sale of internal combustion engine commercial vehicles over time by requiring a certain percentage of each manufacturer’s commercial vehicles sold within the state to be “zero-emission vehicles,”

or “near-zero emission vehicles,”

17 unchanged sentences

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