What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-09 · 252 added, 232 removed, 550 unchanged (47% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2024, AND DECEMBER 31, 2023

(In Thousands, Except Shares)

September 30,

Current assets:

36 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

10 unchanged sentences

Depreciation and amortization expense

Gain (loss) on sale of assets

Gain on disposition of assets

Operating income

Other (expense) income

Other income (expense)

Interest expense, net

1 unchanged sentence

Income tax provision

Net income (loss) attributable to noncontrolling interest

Net income attributable to noncontrolling interest

Net income attributable to Rush Enterprises, Inc.

9 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30,

Nine Months Ended

September 30,

Other comprehensive income (loss), net of tax:

10 unchanged sentences

Comprehensive

Rush Enterprises,

Shareholders’

Noncontrolling

Non-controlling

Shareholders’

19 unchanged sentences

Balance, June 30, 2024

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

Cash dividends declared on Class A common stock

Cash dividends declared on Class B common stock

Foreign currency translation adjustment

Balance, September 30, 2024

RUSH ENTERPRISES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY (continued)

(In Thousands)

Comprehensive

Rush Enterprises,

Shareholders’

Noncontrolling

Non-controlling

Shareholders’

13 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

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

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

Deferred income tax expense

Change in accounts and notes receivable, net

Gain on sale of property and equipment

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

14 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 in cash, cash equivalents and restricted cash

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

Effect of exchange rate on cash

4 unchanged sentences

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 $ 4.1 million as of September 30, 2024.

Authorized Shares

6 unchanged sentences

The functional currency of the Company’s foreign subsidiary, Rush Truck Centres of Canada Limited (“RTC Canada”), is the local currency, the Canadian dollar.

Results of operations for RTC Canada are translated to USD using the average exchange rate on a monthly basis during each quarter.

Results of operations for RTC Canada are translated to USD using the average monthly exchange rate during each quarter.

The assets and liabilities of RTC Canada are translated into USD using the exchange rate in effect on the balance sheet date.

2 unchanged sentences

From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business.

The Company maintains liability insurance, through self-insurance and third-party excess insurance, including product liability coverage, in amounts deemed adequate by management.

The Company maintains liability insurance, including product liability coverage, in amounts deemed adequate by management.

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, 2024, 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, 2024, 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.

3 – 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

Denominator for basic earnings per share – weighted average shares outstanding

Effect of dilutive securities– Employee stock options and restricted stock awards

Effect of dilutive securities–

Employee and director stock options and restricted share awards

Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions

1 unchanged sentence

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, 2024, and 2023, 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, 2024 and 2023 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

4 – Stock Options and Restricted Stock Awards

1 unchanged sentence

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718-10, Compensation – 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 $ 5.5 million for the three months ended June 30, 2024, and $ 6.0 million for the three months ended June 30, 2023.

Stock-based compensation expense, included in selling, general and administrative expense, was $ 19.6 million for the six months ended June 30, 2024, and was $ 19.0 million for the six months ended June 30, 2023.

As of June 30, 2024, the Company had $ 15.9 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 $ 20.0 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 $ 5.3 million for the three months ended September 30, 2024, and $ 6.3 million for the three months ended September 30, 2023.

Stock-based compensation expense was $ 24.9 million for the nine months ended September 30, 2024, and $ 25.3 million for the nine months ended September 30, 2023.

As of September 30, 2024, the Company had $ 14.2 million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of 2.2 years and $ 16.6 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.3 years.

5 – Financial Instruments and Fair Value

1 unchanged sentence

Financial instruments consist primarily of cash, accounts receivable, accounts payable and floor plan notes payable.

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, 2024, and December 31, 2023.

The carrying values of the Company’s financial instruments approximate fair value due to their short-term nature or the 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 September 30, 2024, and December 31, 2023.

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

14 unchanged sentences

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The Company evaluates its 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, 2024 and 2023 (in thousands):

As of and for the three months ended June 30, 2024

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

As of and for the three months ended September 30, 2024

Revenues from external customers

2 unchanged sentences

Segment assets

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

Revenues from external customers

1 unchanged sentence

Segment income before taxes

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

2 unchanged sentences

7 – Income Taxes

The Company had unrecognized income tax benefits totaling $ 6.7 million and $ 5.3 million as a component of accrued liabilities as of June 30, 2024 and December 31, 2023, the total of which, if recognized, would impact the Company’s effective tax rate.

The Company had unrecognized income tax benefits totaling $ 6.7 million and $ 5.3 million as a component of accrued liabilities as of September 30, 2024 and December 31, 2023, 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 $ 389,000 accrued for the payment of interest as of June 30, 2024 and December 31, 2023.

The Company had approximately $ 389,000 and $ 302,000 accrued for the payment of interest as of September 30, 2024 and December 31, 2023.

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, 2024, the tax years ended December 31, 2020 through 2023 remained subject to audit by federal tax authorities, and the tax years ended December 31, 2019 through 2023, 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.

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

As of September 30, 2024, 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 generated from the sale of finished products to customers.

Revenue from 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:

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, 2024 and 2023 (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, 2024 and 2023 (in thousands):

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

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, 2024.

The Company did not have any material contract assets or contract liabilities on the balance sheet as of September 30, 2024.

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.

Lease of Vehicles as Lessor

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

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

The Company does not separate lease and nonlease components.

5 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.

Lease and rental income during the three and six months ended June 30, 2024 and June 30, 2023 consisted of the following (in thousands):

Lease and rental income during the three and nine months ended September 30, 2024 and September 30, 2023 consisted of the following (in thousands):

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30,

Nine Months Ended

September 30,

Minimum rental payments

Nonlease payments

10 – Accumulated Other Comprehensive Income

10 – 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, 2024

Foreign currency translation adjustment

Balance as of September 30, 2024

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

13 unchanged sentences

Provision for

June 30, 2024

September 30,

Allowance, net

of Recoveries

September 30,

Commercial vehicle receivables

25 unchanged sentences

Navistar ® is a registered trademark of Navistar International, Inc.

International ® is a registered trademark of Navistar, Inc.

International ® is a registered trademark of International Motors, LLC (f/k/a Navistar, Inc.).

Idealease is a registered trademark of Idealease, Inc.

16 unchanged sentences

Our Rush Truck Centers are principally located in high traffic areas throughout the United States and Ontario, Canada.

Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 125 franchised Rush Truck Centers in 23 states.

Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate 124 franchised Rush Truck Centers in 23 states.

In 2019, we purchased a 50% equity interest in an entity in Canada, Rush Truck Centres of Canada Limited (“RTC Canada”) and on May 2, 2022, we purchased an additional 30% equity interest in RTC Canada that increased our equity interest to 80%.

1 unchanged sentence

Prior to acquiring the additional 30%, we accounted for the equity interest in RTC Canada using the equity method of accounting.

Now, the operating results of RTC Canada are consolidated in the Consolidated Statements of Operations, the Statements of Comprehensive Income, the Consolidated Balance Sheets and commercial vehicle unit sales data as of May 2, 2022.

The operating results of RTC Canada are consolidated in the Consolidated Statements of Operations, the Statements of Comprehensive Income, the Consolidated Balance Sheets and commercial vehicle unit sales data since May 2, 2022.

Our business strategy consists of providing solutions to the commercial vehicle industry through our network of commercial vehicle dealerships.

4 unchanged sentences

Class 8 retail truck sales to be 235,000 units in 2024, which would represent a 13.5% decrease compared to 2023.

As anticipated, we experienced healthy sales growth in the second quarter, compared to the first quarter, due primarily to the timing of deliveries to certain large customers and continued strong demand from vocational fleets.

We expect vocational sales to remain strong in the third quarter.

However, we also expect that new U.S.

Class 8 retail truck sales in the second half of 2024 will be less than in the first half of the year.

We expect our U.S.

5 unchanged sentences

Research currently forecasts sales to be 268,300 units in 2024, which would represent a 4.2% increase compared to 2023.

As we look forward, production continues to increase and delivery lead times have improved.

However, we continue to monitor delays at body manufacturers that could impact deliveries to customers.

Currently, we believe Class 4 through 7 commercial vehicle sales in third quarter will be consistent with our second quarter results.

We expect our U.S.

3 unchanged sentences

We expect to sell approximately 2,000 to 2,200 light-duty vehicles and approximately 6,500 to 7,500 used commercial vehicles in 2024.

In addition, we expect lease and rental revenues to remain flat during 2024.

With respect to our parts, service, and collision center (collectively referred to herein as “Aftermarket Products and Services”) operations, we expect that the sluggish freight market and persistent high interest rates will continue to negatively impact our over-the-road customers, including both small carriers and larger fleets.

Despite the challenging operating environment that is impacting the industry, we believe that the strategic decisions we made several years ago to diversify our customer base and focus on supporting large national fleets, along with the operating expense reduction measures we undertook at the beginning of the second quarter, will allow us to successfully navigate this difficult market cycle.

We also believe that our Aftermarket Products and Services revenues will remain flat to slightly down in 2024, compared to 2023.

Critical Accounting Policies and Estimates

We expect lease and rental revenue to remain flat during 2024, compared to 2023.

With respect to our parts, service, and collision center (collectively referred to herein as “Aftermarket Products and Services”) operations, revenues were down slightly year-over-year, but were improved compared to our second quarter results.

Although the ongoing freight recession continues to negatively affect Aftermarket Products and Services results, we did experience growth in the third quarter with respect to our over-the-road and wholesale customers for the first time since 2023.

We are hopeful that declines in Aftermarket Products and Sales revenues are behind us and that we will begin to experience more normal market conditions starting in the first quarter of 2025.

We expect that our Aftermarket Products and Services revenues will remain flat to slightly down in 2024, compared to 2023.

Critical Accounting Estimates

The preparation of our interim unaudited consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities in our interim unaudited consolidated financial statements and accompanying notes.

5 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, 2024 and 2023.

The following discussion and analysis includes our historical results of operations for the three months and nine months ended September 30, 2024 and 2023.

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:

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

2 unchanged sentences

Management uses several performance metrics to evaluate the performance of our commercial vehicle dealerships and considers Rush Truck Centers’ “absorption ratio” to be of critical importance.

Our absorption ratio is calculated by dividing the gross profit from our Aftermarket Products and Services departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory.

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 134.0% absorption ratio for the second quarter of 2024 and a 139.7% absorption ratio for the second quarter of 2023.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Total revenues increased $24.0 million, or 1.2%, in the second quarter of 2024, compared to the second quarter of 2023.

This increase was primarily due to strong truck sales during the quarter.

Our Aftermarket Products and Services revenues decreased $23.7 million, or 3.6%, in the second quarter of 2024, compared to the second quarter of 2023.

The decrease in Aftermarket Parts and Services revenues was primarily a result of weaker demand caused by the ongoing freight recession and high interest rates impacting our over-the-road customers.

Revenues from sales of new and used commercial vehicles increased $49.5 million, or 4.0%, in the second quarter of 2024, compared to the second quarter of 2023.

This increase was primarily due to the timing of deliveries to certain large fleet customers and continued strong demand from vocational fleets.

We sold 4,128 new Class 8 trucks in the second quarter of 2024, a 4.0% decrease compared to 4,300 new Class 8 trucks in the second quarter of 2023.

The decrease in new Class 8 truck sales was primarily due to new truck production having caught up to the prior pent-up market demand.

We sold 3,691 new Class 4 through 7 commercial vehicles, including 343 buses, in the second quarter of 2024, a 6.2% increase compared to 3,477 new medium-duty commercial vehicles, including 462 buses, in the second quarter of 2023.

Our absorption ratio is calculated by dividing the gross profit from our Aftermarket Products and Services departments by the overhead expenses all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory.

When 100% absorption is achieved, 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 132.6% absorption ratio for the third quarter of 2024, compared to a 132.8% absorption ratio for the third quarter of 2023.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Total revenues decreased $84.6 million, or 4.3%, in the third quarter of 2024, compared to the third quarter of 2023.

This decrease was primarily the result of the ongoing freight recession resulting in continued weak demand for Class 8 trucks.

Our Aftermarket Products and Services revenues totaled $633.0 million in the third quarter of 2024, down 1.6% from the third quarter of 2023.

The decrease in Aftermarket Parts and Services revenues was primarily a result of weaker demand caused by the ongoing freight recession.

Revenues from sales of new and used commercial vehicles decreased $72.5 million, or 5.9%, in the third quarter of 2024, compared to the third quarter of 2023.

The decrease in new and used commercial vehicle revenues was primarily a result of weak demand for Class 8 trucks, which was partially offset by strong demand for Class 4 through 7 medium-duty commercial vehicles.

We sold 3,604 new Class 8 trucks in the third quarter of 2024, a 16.7% decrease compared to 4,326 new Class 8 trucks sold in the third quarter of 2023.

The decrease in new Class 8 truck sales was primarily due to the ongoing freight recession that is negatively impacting over-the-road-carriers.

and Canadian Class 8 retail truck sales totaled 73,037 units in the third quarter of 2024, a decrease of 3.5% compared to the third quarter of 2023, according to ACT Research.

We sold 3,379 new Class 4 through 7 medium-duty commercial vehicles, including 258 buses, in the third quarter of 2024, a 4.2% increase compared to 3,224 new medium-duty commercial vehicles, including 422 buses, in the third quarter of 2023.

The increase in new Class 4 through 7 commercial vehicle sales was primarily a result of strong demand and increased production of commercial vehicles from the manufacturers we represent.

We sold 537 light-duty vehicles in the second quarter of 2024, an 18.8% increase compared to 452 light-duty vehicles sold in the second quarter of 2023.

We sold 1,723 used commercial vehicles in the second quarter of 2024, a 7.8% decrease compared to 1,869 used commercial vehicles sold in the second quarter of 2023.

We experienced a decline in used commercial vehicle sales year-over-year due to low freight rates, more readily available new truck alternatives and elevated interest rates.

Commercial vehicle lease and rental revenues decreased $0.9 million, or 1.0%, in the second quarter of 2024, compared to the second quarter of 2023.

This decrease in commercial vehicle lease and rental revenues was primarily a result of decreased rental vehicle utilization.

Finance and insurance revenues decreased $0.3 million, or 4.1%, in the second quarter of 2024, compared to the second quarter of 2023.

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

During the second quarter of 2024, 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 2024.

and Canadian Class 4 through 7 retail commercial vehicle sales totaled 68,923 units in the third quarter of 2024, down 1.1% compared to the third quarter of 2023, according to ACT Research.

We sold 574 light-duty vehicles in the third quarter of 2024, a 35.1% increase compared to 425 light-duty vehicles sold in the third quarter of 2023.

We sold 1,829 used commercial vehicles in the third quarter of 2024, a 1.8% increase compared to 1,797 used commercial vehicles in the third quarter of 2023.

We experienced a slight increase in used commercial vehicle sales year-over-year primarily due to our ability to successfully execute on our commercial vehicle sales strategies.

Commercial vehicle lease and rental revenues decreased $0.3 million, or 0.4%, in the third quarter of 2024, compared to the third quarter of 2023.

This decrease in commercial vehicle lease and rental revenues was primarily a result of a slight decrease in rental vehicle utilization.

Finance and insurance revenues decreased $0.5 million, or 8.5%, in the third quarter of 2024, compared to the third quarter of 2023.

This decrease is primarily due to the decline in sales of Class 8 trucks and tighter lending requirements from finance companies.

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

Gross profit decreased $21.5 million, or 5.2%, in the second quarter of 2024, compared to the second quarter of 2023.

Gross profit as a percentage of sales decreased to 19.4% in the second quarter of 2024, from 20.7% in the second quarter of 2023.

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 64.1% in the second quarter of 2024, from 62.4% in the second quarter of 2023.

Aftermarket Products and Services revenues, a higher margin revenue item, decreased as a percentage of total revenues to 31.0% in the second quarter of 2024, from 32.5% in the second quarter of 2023.

Gross margins from our Aftermarket Products and Services operations decreased to 37.5% in the second quarter of 2024, from 38.1% in the second quarter of 2023.

Gross profit from our Aftermarket Products and Services operations decreased to $235.3 million in the second quarter of 2024, from $247.8 million in the second quarter of 2023.

This decrease is primarily related to decreased demand resulting from the current freight recession and high interest rates.

Gross profit decreased $15.4 million, or 3.6%, in the third quarter of 2024, compared to the third quarter of 2023.

Gross profit as a percentage of sales increased to 20.0% in the third quarter of 2024, from 19.9% in the third quarter of 2023.

This increase 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, decreased as a percentage of total revenues to 61.3% in the third quarter of 2024, from 62.4% in the third quarter of 2023.

Aftermarket Products and Services revenues, a higher margin revenue item, increased as a percentage of total revenues to 33.4% in the third quarter of 2024, from 32.5% in the third quarter of 2023.

Gross margins from our Aftermarket Products and Services operations increased to 36.8% in the third quarter of 2024, from 36.2% in the third quarter of 2023.

Gross profit for the Aftermarket Products and Services departments increased to $233.1 million in the third quarter of 2024, from $232.7 million in the third quarter of 2023.

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 58.4% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2024 and 60.5% in the second quarter of 2023.

Service and collision center operations represented 38.8% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2024 and 39.5% in the second quarter of 2023.

Gross profits from parts sales represented 57.5% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2024 and 58.4% in the third quarter of 2023.

Service and collision center operations represented 42.5% of total gross profit for Aftermarket Products and Services operations in the third quarter of 2024 and 41.6% in the third quarter of 2023.

We expect blended gross margins on Aftermarket Products and Services operations to range from 36.5% to 37.5% in 2024.

Gross margins on new Class 8 truck sales decreased to 8.6% in the second quarter of 2024, from 10.3% in the second quarter of 2023.

This decrease was primarily due to weak demand and elevated new truck inventory valuation reserves.

In 2024, we expect overall gross margins from new heavy-duty truck sales of approximately 8.5% to 9.5%.

Gross margins on used commercial vehicle sales increased to 19.2% in the second quarter of 2024, from 11.8% in the second quarter of 2023.

This increase was primarily due to the successful execution of our used truck inventory and sales strategy.

Gross margins on new Class 8 truck sales decreased to 9.2% in the third quarter of 2024, from 9.9% in the third quarter of 2023.

This decrease was primarily due to weak demand caused by the ongoing freight recession.

For 2024, we expect overall gross margins from new Class 8 truck sales of approximately 9.0% to 10.0%.

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 10.3% in the third quarter of 2024, from 9.2% in the third quarter of 2023.

For 2024, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 9.0% to 10.0%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Gross margins on used commercial vehicle sales increased to 18.0% in the third quarter of 2024, from 11.3% in the third quarter of 2023.

This increase was primarily due to the successful execution of our used commercial vehicle sales strategy.

We expect margins on used commercial vehicles to range between 18.0% and 20.0% in 2024.

Gross Margins from truck lease and rental sales decreased to 28.5% in the second quarter of 2024 from 30.5% in the second quarter of 2023.

This decrease was primarily related to lower rental utilization.

We expect gross margins from lease and rental sales of approximately 28.0% to 30.0% during 2024.

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.

Gross Margins from truck lease and rental sales decreased to 28.5% in the second quarter of 2024 from 30.5% in the second quarter of 2023.

Gross margins from truck lease and rental sales decreased to 28.6% in the third quarter of 2024, from 30.6% in the third quarter of 2023.

This decrease was primarily related to lower rental utilization.

We expect gross margins from lease and rental sales of approximately 28.0% to 30.0% during 2024.

We expect rental utilization to increase slightly in the third quarter and will be in line with historical utilization rates.

As the age of our leasing and rental fleet continues to decrease with new vehicle production increasing, we expect our operating costs to continue to moderate.

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.

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 decreased $5.3 million, or 2.1%, in the second quarter of 2024, compared to the second quarter of 2023.

Selling, General and Administrative (“SG&A”) expenses decreased $17.4 million, or 6.8%, in the third quarter of 2024, compared to the third quarter of 2023.

This decrease primarily resulted from reductions to our operating expenses.

SG&A expenses as a percentage of total revenues decreased to 12.4% in the second quarter of 2024, from 12.8% in the second quarter of 2023.

SG&A expenses as a percentage of total revenues decreased to 12.6% in the third quarter of 2024, from 13.0% in the third quarter of 2023.

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 $7.2 million, or 59.1%, in the second quarter of 2024, compared to the second quarter of 2023.

This increase in interest expense is a result of an increase in our vehicle inventory levels and elevated interest rates on our variable rate debt compared to the second quarter of 2023.

We expect net interest expense in 2024, compared to 2023, to increase due to increased borrowings and interest related to our working capital lines of credit and floor plan debt, but the amount of the increase will depend on inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan arrangements.

Net interest expense increased $3.5 million, or 24.4%, in the third quarter of 2024, compared to the third quarter of 2023.

This increase in interest expense is a result of an increase in our vehicle inventory levels and elevated interest rates on our variable rate debt, compared to the third quarter of 2023.

For 2024, we expect net interest expense to increase 34.5% to 37.5% compared to 2023, primarily due to increased borrowings under our credit facilities and the interest related thereto.

Income before Income Taxes

As a result of the factors described above, income before income taxes decreased $25.5 million, or 19.5%, in the second quarter of 2024, compared to the second quarter of 2023.

Income taxes decreased $5.7 million, or 17.9%, in the second quarter of 2024, compared to the second quarter of 2023.

We provided for taxes at a 24.5% effective rate in the second quarter of 2024 and 24.5% in the second quarter of 2023.

As a result of the factors described above, income before income taxes decreased $4.3 million, or 4.0%, in the third quarter of 2024, compared to the third quarter of 2023.

Income taxes decreased $3.1 million, or 11.5%, in the third quarter of 2024, compared to the third quarter of 2023.

We provided for taxes at a 23.0% effective rate in the third quarter of 2024 and 25.0% in the third quarter of 2023.

We expect our effective tax rate to be approximately 23.5% to 24.5% of pretax income in 2024.

Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023

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, 2024, Compared to Three Months Ended June 30, 2023.”

Total revenues decreased $15.8 million, or 0.4%, in the first six months of 2024, compared to the first six months of 2023.

Sales of new and used commercial vehicles increased $11.1 million, or 0.5%, in the first six months of 2024, compared to the first six months of 2023.

Aftermarket Products and Services revenues decreased $22.7 million, or 1.7%, in the first six months of 2024, compared to the first six months of 2023.

We sold 7,391 new Class 8 heavy-duty trucks in the first six months of 2024 in the United States, an 11.7% decrease compared to 8,368 new Class 8 heavy-duty trucks in the first six months of 2023.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

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, 2024 Compared to Three Months Ended September 30, 2023.

Total revenues decreased $100.4 million, or 1.7%, in the first nine months of 2024, compared to the first nine months of 2023.

Aftermarket Products and Services revenues decreased $33.3 million, or 1.7%, in the first nine months of 2024, compared to the first nine months of 2023.

Revenues from the sales of new and used commercial vehicles decreased $61.4 million, or 1.7%, in the first nine months of 2024, compared to the first nine months of 2023.

We sold 10,895 new Class 8 heavy-duty trucks during the first nine months of 2024, a 13.1% decrease compared to 12,536 new Class 8 heavy-duty trucks in the first nine months of 2023.

According to A.C.T.

Research, retail sales in the U.S.

Class 8 truck market decreased 16.0% in the first six months of 2024, compared to the first six months of 2023.

We sold 231 new Class 8 heavy-duty trucks in the first six months of 2024 in Canada, a 22.2% decrease compared to 297 new Class 8 heavy-duty trucks in the first six months of 2023.

We sold 6,829 new Class 4 through 7 medium-duty commercial vehicles, including 734 buses, in the United States in the first six months of 2024.

This represented a 4.9% increase compared to 6,513 new Class 4 through 7 medium-duty commercial vehicles, including 805 buses, in the first six months of 2023.

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

increased approximately 1.4% in the first six months of 2024, compared to the first six months of 2023.

We sold 193 new Class 5 through 7 medium-duty commercial vehicles in the first six months of 2024 in Canada, a 6.6% increase compared to 181 new Class 5 through 7 medium-duty commercial vehicles in the first six months of 2023.

We sold 993 new light-duty vehicles in the first six months of 2024, a 3.9% increase compared to 956 new light-duty vehicles sold in the first six months of 2023.

We sold 3,541 used commercial vehicles in the first six months of 2024, a 0.3% decrease compared to 3,553 used commercial vehicles in the first six months of 2023.

Truck lease and rental revenues increased $0.4 million, or 0.2%, in the first six months of 2024, compared to the first six months of 2023.

Finance and insurance revenues decreased $1.4 million, or 11.2%, in the first six months of 2024, compared to the first six months of 2023.

Gross profit decreased $30.4 million, or 3.7%, in the first six months of 2024, compared to the first six months of 2023.

Gross profit as a percentage of sales was 20.1% in the first six months of 2024 and 20.8% in the first six months of 2023.

Gross margins from Aftermarket Products and Services operations decreased to 37.0% in the first six months of 2024, from 38.0% in the first six months of 2023.

Gross profit for Aftermarket Products and Services was $472.2 million in the first six months of 2024, compared to $493.9 million in the first six months of 2023.

Gross profit from parts sales represented 58.1% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2024 and 61.0% in the first six months of 2023.

Service and collision center operations represented 41.9% of the total gross profit for Aftermarket Products and Services operations in the first six months of 2024 and 39.0% in the first six months of 2023.

Gross margins on new Class 8 heavy-duty truck sales decreased to 9.1% in the first six months of 2024, from 10.1% in the first six months of 2023.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales remained flat at 8.8% in the first six months of 2024, compared to the first six months of 2023.

Gross margins on used commercial vehicle sales increased to 20.5% in the first six months of 2024, from 10.5% in the first six months of 2023.

Gross margins from truck lease and rental sales decreased to 28.0% in the first six months of 2024, from 30.4% in the first six months of 2023.

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 decreased 11.6% in the first nine months of 2024, compared to the first nine months of 2023.

We sold 331 new Class 8 heavy-duty trucks in the first nine months of 2024 in Canada, a 27.3% decrease compared to 455 new Class 8 heavy-duty trucks in the first nine months of 2023.

We sold 10,076 new Class 4 through 7 medium-duty commercial vehicles, including 922 buses, during the first nine months of 2024, a 6.3% increase compared to 9,483 new Class 4 through 7 medium-duty commercial vehicles, including 1,232 buses, in the first nine months of 2023.

Research estimates that unit sales of new Class 4 through 7 commercial vehicles, including buses, in the U.S increased 0.2% in the first nine months of 2024, compared to the first nine months of 2023.

We sold 325 new Class 5 through 7 medium-duty commercial vehicles in the first nine months of 2024 in Canada, an 18.6% increase compared to 274 new Class 5 through 7 medium-duty commercial vehicles in the first nine months of 2023.

We sold 1,567 new light-duty commercial vehicles during the first nine months of 2024, a 4.3% increase compared to 1,381 light-duty commercial vehicles in the first nine months of 2023.

We sold 5,370 used commercial vehicles during the first nine months of 2024, a 0.4% increase compared to 5,350 used commercial vehicles in the first nine months of 2023.

Truck lease and rental revenues remained flat in the first nine months of 2024, compared to the first nine months of 2023.

Finance and insurance revenues decreased $2.0 million, or 10.3%, in the first nine months of 2024, compared to the first nine months of 2023.

Gross profit decreased $45.7 million, or 3.8%, in the first nine months of 2024, compared to the first nine months of 2023.

Gross profit as a percentage of sales decreased to 20.0% in the first nine months of 2024, from 20.5% in the first nine months of 2023.

Gross margins from our Aftermarket Products and Services operations decreased to 36.9% in the first nine months of 2024, from 37.4% in the first nine months of 2023.

Gross profit for the Aftermarket Products and Services departments was $705.3 million in the first nine months of 2024, compared to $726.5 million in the first nine months of 2023.

Gross profits from parts sales represented 57.9% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2024 and 60.1% in the first nine months of 2023.

Service and collision center operations represented 42.1% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2024 and 39.9% in the first nine months of 2023.

Gross margins on new Class 8 truck sales decreased to 9.1% in the first nine months of 2024, from 10.0% in the first nine months of 2023.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales increased to 9.3% in the first nine months of 2024, from 8.9% in the first nine months of 2023.

Gross margins on used commercial vehicle sales increased to 19.7% in the first nine months of 2024, from 10.8% in the first nine months of 2023.

Gross margins from truck lease and rental sales decreased to 28.2% in the first nine months of 2024, from 30.4% in the first nine months of 2023.

Selling, General and Administrative Expenses

SG&A expenses increased $1.5 million, or 0.3%, in the first six months of 2024, compared to the first six months of 2023.

SG&A expenses equaled 13.2% of total revenue in the first six months of 2024, compared to 13.1% in the first six months of 2023.

Interest (Income) Expense, Net

Net interest expense increased $14.2 million, or 61.2%, in the first six months of 2024, compared to the first six months of 2023.

SG&A expenses decreased $15.9 million, or 2.1%, in the first nine months of 2024, compared to the first nine months of 2023.

SG&A expenses equaled 13.0% of total revenue in the first nine months of 2024, compared to 13.1% in the first nine months of 2023.

Interest Expense, Net

Net interest expense increased $17.7 million, or 47.3%, in the first nine months of 2024, compared to the first nine months of 2023.

Income before Income Taxes

Income before income taxes decreased $51.8 million, or 20.7%, in the first six months of 2024, compared to the first six months of 2023.

Income before income taxes decreased $56.1 million, or 15.7%, in the first nine months of 2024, compared to the first nine months of 2023.

Provision for Income Taxes

Income taxes decreased $12.7 million, or 21.1%, in the first six months of 2024, compared to the first six months of 2023.

We provided for taxes at a 24.1% rate in the first six months of 2024 and a 24.2% rate in the first six months of 2023.

Income taxes decreased $15.9 million in the first nine months of 2024, compared to the first nine months of 2023.

We provided for taxes at a 23% rate in the first nine months of 2024 and a 24.4% rate in the first nine months of 2023.

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, 2024, we had working capital of approximately $673.0 million, including $167.3 million in cash, available to fund our operations.

As of September 30, 2024, we had working capital of approximately $714.2 million, including $185.1 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 $25.0 million.

There were no advances outstanding under this secured line of credit on June 30, 2024, however, $18.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $6.1 million available for future borrowings as of June 30, 2024.

Our long-term debt, floor plan financing agreements and our 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, 2024, 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.

There were no advances outstanding under this secured line of credit on September 30, 2024, however, $18.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $6.1 million available for future borrowings as of September 30, 2024.

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 September 30, 2024, 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 these covenants in the foreseeable future.

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We also expect to make capital expenditures for the purchase of recurring items such as computers, shop tools and equipment and company vehicles of approximately $40.0 million to $45.0 million during 2024.

During the second quarter of 2024, we paid a cash dividend of $13.5 million.

Additionally, on July 31, 2024, our Board of Directors declared a cash dividend of $0.18 per share of Class A and Class B common stock, to be paid on September 10, 2024, to all shareholders of record as of August 13, 2024, which represents a 5.6% increase compared to the cash dividend we paid in the first quarter of 2024.

During the third quarter of 2024, we paid a cash dividend of $14.2 million.

Additionally, on October 28, 2024, our Board of Directors declared a cash dividend of $0.18 per share of Class A and Class B common stock, to be paid on December 12, 2024, to all shareholders of record as of November 12, 2024.

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, 2024, we had repurchased $77.2 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, 2024, we had repurchased $77.4 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, 2024, 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, 2024.

We have no other material commitments for capital expenditures as of September 30, 2024.

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.

The following table summarizes our cash flows for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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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 2024, operating activities resulted in net cash provided by operations of $115.5 million.

Net cash provided by operating activities primarily consisted of $150.3 million in net income, as well as non-cash adjustments related to depreciation and amortization of $114.3 million, stock-based compensation of $19.6 million and cash inflows for deferred income tax expense of $1.5 million.

Cash provided by operating activities included an aggregate of $169.7 million net change in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $3.9 million from the increase in accounts payable, which were offset by cash outflows of $34.0 million from the increase in accounts receivable, $63.4 million from the increase in inventories, $7.6 million from the increase in other assets, $49.2 million from the decrease in customer deposits and $19.4 million from the increase in accrued expenses.

During the first nine months of 2024, operating activities resulted in net cash provided by operations of $227.3 million.

Net cash provided by operating activities primarily consisted of $229.7 million in net income, as well as non-cash adjustments related to depreciation and amortization of $175.5 million, gain on sale of property and equipment of $0.7 million, stock-based compensation of $24.9 million and the benefit for deferred income tax expense of $11.1 million.

Cash used by operating activities included an aggregate of $212.7 million net changes in operating assets and liabilities.

Included in the net change in operating assets and liabilities were cash inflows of $11.6 million from the increase in accounts payable, which was offset primarily by cash outflows of $108.1 million from the increase in inventories, $30.5 million from the increase in accounts receivable, $58.2 million from the decrease in customer deposits and $22.3 million from the decrease in accrued expenses.

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

During the first six months of 2023, cash used in investing activities was $188.9 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 $186.0 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 $138.6 million for purchases of rental and lease vehicles for our rental and leasing operations.

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 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.

Cash Flows from Investing Activities

During the first six months of 2024, cash used in investing activities was $161.1 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 $172.5 million during the first six months of 2024 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $140.1 million for purchases of rental and lease vehicles for our rental and leasing operations.

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

During the first nine months of 2024, cash used in investing activities was $305.8 million.

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

See Note 12 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions.

Acquisition of property and equipment totaled $304.2 million during the first nine months of 2024 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $223.1 million for purchases of rental and lease vehicles for our rental and leasing operations.

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 $186.0 million during the first six months of 2024 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $138.6 million for purchases of rental and lease vehicles for our rental and leasing operations.

Acquisition of property and equipment totaled $289.1 million during the first nine 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.

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 2024, financing activities resulted in net cash provided by financing activities of $29.2 million, primarily related to cash inflows of $11.5 million from the issuance of shares related to equity compensation plans, $88.4 million from net draws on floor plan notes payable, non-trade and borrowings of $1.2 billion of long-term debt.

These cash inflows were offset by $1.2 billion used for principal repayments of long-term debt and capital lease obligations, $9.5 million for taxes related to net share settlement of equity awards, $9.5 million used for repurchases of common stock and $27.2 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 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 nine months of 2024, financing activities resulted in net cash provided by financing activities of $79.9 million, primarily related to $146.0 million from net draws on floor plan notes payable, non-trade, $1,621.3 million from borrowings of long-term debt and $20.2 million from the issuance of shares related to equity compensation plans.

These cash inflows were offset by cash outflows of $1,634.5 million used for principal repayments of long-term debt and capital lease obligations, $9.8 million used for repurchases of common stock, $9.5 million for taxes paid related to net share settlement of equity awards and $41.2 million used for payment of cash dividends.

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.

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”).

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We may borrow, repay and reborrow amounts pursuant to the WF Credit Agreement 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”) plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or (B) on or after the SOFR transition date, the SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio.

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”) plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or (B) on or after the SOFR transition date, SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio.

The WF Credit Agreement expires on September 14, 2026, 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 June 30, 2024, we had approximately $164.6 million outstanding under the WF Credit Agreement.

On November 1, 2023, we entered into certain Second Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company, (“PLC”), a division of PACCAR Financial Corp., as amended on April 9, 2024 (the “PLC Agreement”).

On September 30, 2024, we had approximately $175.0 million outstanding under the WF Credit Agreement.

Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $375.0 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 our PacLease franchises.

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

On June 30, 2024, we had approximately $133.2 million outstanding under the PLC Agreement.

On September 30, 2024, we had approximately $190.0 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.

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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, 2024, we had approximately $1.0 billion outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $972.8 million during the six months ended June 30, 2024.

On September 30, 2024, we had approximately $1.0 billion outstanding under the Floor Plan Credit Agreement.

The average daily outstanding borrowings under the Floor Plan Credit Agreement were $975.8 million during the nine months ended September 30, 2024.

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.

On May 31, 2022, RTC Canada entered into that certain BMO Revolving Lease and Rental Credit Agreement (the “RTC Canada Revolving Credit Agreement”) with Bank of Montreal (“BMO”).

On May 31, 2022, RTC Canada entered into that certain BMO Revolving Lease and Rental Credit Agreement (the “RTC Canada Revolving Credit Agreement”) with BMO.

Pursuant to the terms of the RTC Canada Revolving Credit Agreement, BMO agreed to make up to $120.0 million CAD of revolving credit loans to finance certain of RTC Canada’s capital expenditures, including commercial vehicle purchases and other equipment to be leased or rented through RTC Canada’s Idealease franchise, with an additional $20.0 million CAD available upon the request of RTC Canada and consent of BMO.

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

On June 30, 2024, we had approximately $57.4 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 BMO.

Pursuant to the terms of the Agreement as amended, BMO agreed to make up to $116.7 million CAD of revolving credit loans to finance RTC Canada’s purchase of new and used vehicle inventory.

On September 30, 2024, we had approximately $38.4 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”).

Pursuant to the terms of the Agreement, BMO agreed to make up to $116.7 million CAD of revolving credit loans to finance RTC Canada’s purchase of new and used vehicle inventory.

Loans to purchase used vehicle inventory are limited to twenty percent (20%) of the credit limit available at such time.

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

On June 30, 2024, we had approximately $72.3 million CAD outstanding under the RTC Canada Floor Plan Agreement.

The average daily outstanding borrowings under the RTC Canada Floor Plan Credit Agreement were $62.2 million during the six months ended June 30, 2024.

On June 30, 2024, our backlog of commercial vehicle orders was approximately $1,812.1 million, as compared to a backlog of commercial vehicle orders of approximately $4,041.6 million on June 30, 2023.

The decrease in our backlog primarily reflects the decreased demand for new Class 8 trucks resulting from production catching up to pent-up demand, low freight rates and high interest rates.

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.

On September 30, 2024, we had approximately $109.0 million CAD outstanding under the RTC Canada Floor Plan Agreement.

The average daily outstanding borrowings under the RTC Canada Floor Plan Credit Agreement were $76.5 million during the nine months ended September 30, 2024.

On September 30, 2024, our backlog of commercial vehicle orders was approximately $1,332.9 million, compared to a backlog of commercial vehicle orders of approximately $3,297.4 million on September 30, 2023.

The decrease in our backlog primarily reflects the decreased demand for new Class 8 trucks resulting from production catching up to pent-up demand and the ongoing freight recession.

Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each 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.

We include only confirmed orders in our backlog.

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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 several of our major fleet customers are included in our backlog as of June 30, 2024, and we expect to fill most of our backlog orders during 2024.

Given the difficult industry environment caused by freight rates and high interest rates, which are negatively impacting industry demand for new commercial vehicles, we believe that the longer it takes to fill our backlog, the greater the risk that a significant amount of commercial vehicle orders currently reflected in our backlog could be cancelled.

Orders from our major fleet customers are included in our backlog as of September 30, 2024, and we expect to fill most of our backlog orders during the remainder of 2024.

Our Truck Segment is moderately seasonal.

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However, Aftermarket Products and Services operations historically have experienced higher sales volumes in the second and third quarters.

Our business is dependent on a number of factors, including general economic conditions, freight rates, fuel prices, interest rate fluctuations, credit availability, environmental and other government regulations and customer business cycles.

Our business is dependent on several factors including general economic conditions, fuel prices, interest rate fluctuations, credit availability, environmental and other government regulations and customer business cycles.

Unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on these general economic conditions.

According to data published by A.C.T.

Research, total U.S.

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.

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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,” starting in model year 2024.

In July 2023, CARB and various manufacturers of heavy-duty commercial vehicles and engines, including PACCAR, Navistar, Ford, Hino, Isuzu and Cummins, entered into the Clean Truck Partnership, whereby the manufacturers agreed to comply with CARB’s emission requirements where applicable, regardless of whether any entity challenges CARB’s rule-making authority, and CARB agreed to work with manufacturers to provide reasonable lead time to meet CARB’s requirements and before imposing new regulations.

In July 2023, CARB and various manufacturers of heavy-duty commercial vehicles and engines, including PACCAR, International, Ford, Hino, Isuzu and Cummins, entered into the Clean Truck Partnership, whereby the manufacturers agreed to comply with CARB’s emission requirements where applicable, regardless of whether any entity challenges CARB’s rule-making authority, and CARB agreed to work with manufacturers to provide reasonable lead time to meet CARB’s requirements and before imposing new regulations.

In addition, CARB agreed to align its nitrogen oxide emissions rules with the EPA’s, which go into effect starting in model year 2027, and modify certain of its 2024 nitrogen oxide emissions regulations currently in effect, with respect to which manufacturers may provide certain offsets to meet CARB’s emission target in exchange for the ability to sell legacy engines.

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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