What changed in this filing

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Item 1A. Risk Factors

2025-02-24 compared with 2024-02-23 · 53 added, 44 removed, 205 unchanged (32% of the section changed)

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In addition to the other information contained in this Form 10-K, we recommend that you carefully consider the following risk factors in evaluating our business.

If any of the following risks actually occur, our financial condition and results of operations could be materially adversely affected.

If any of the following risks occur, our financial condition and results of operations could be materially adversely affected.

If this were to happen, the value of our common stock could decline significantly, and you could lose all or part of your investment.

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Risks Related to Our Business Operations

We are dependent upon PACCAR for the supply of Peterbilt trucks and parts, the sale of which generates the majority of our revenues.

We are dependent upon PACCAR for the supply of Peterbilt trucks and parts, as well as the financing of Peterbilt trucks, the sale of which generates the majority of our revenues.

At certain Rush Truck Centers, we operate as a dealer of Peterbilt trucks and parts pursuant to dealership agreements with Peterbilt, a division of PACCAR.

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A negative change in any of the preceding, or a change in control of PACCAR, could have a material adverse effect on our operations, revenues and profitability.

We are dependent upon Navistar for the supply of International trucks and parts and IC buses and parts, the sale of which generate a significant portion of our revenues.

At certain Rush Truck Centers, we operate as a dealer of International trucks and parts and IC buses and parts pursuant to dealership agreements with International and IC Bus, each of which are divisions of Navistar.

We have no control over the management or operation of International, IC Bus or Navistar.

During 2023, a significant portion of our revenues resulted from sales of trucks purchased from International, buses purchased from IC Bus and parts purchased from Navistar.

Due to our dependence on Navistar, International and IC Bus, we believe that our long-term success depends, in large part, on the following:

In addition to the factors listed above, we also finance our Peterbilt commercial vehicle inventory through the PFC Floor Plan Agreement with PFC, and thus, the financial health of PACCAR is also important to our business operations.

We are dependent upon International Motors for the supply of International trucks and parts and IC buses and parts, the sale of which generate a significant portion of our revenues.

We have no control over the management or operation of International, IC Bus or International Motors.

During 2024, a significant portion of our revenues resulted from sales of trucks purchased from International, buses purchased from IC Bus and parts purchased from International Motors.

Due to our dependence on International Motors, International and IC Bus, we believe that our long-term success depends, in large part, on the following:

our ability to maintain our dealership agreements with International and IC Bus;

the manufacture and delivery of competitively priced, technologically current, emissions-compliant, high-quality International trucks and IC buses in quantities sufficient to meet our requirements;

the overall success of Navistar;

the maintenance of goodwill associated with the International and IC Bus brands, which can be adversely affected by decisions made by Navistar and the owners of other International and IC Bus dealerships.

A negative change in any of the preceding, or a change in control of Navistar, could have a material adverse effect on our operations, revenues and profitability.

the overall success of International Motors;

the maintenance of goodwill associated with the International and IC Bus brands, which can be adversely affected by decisions made by International Motors and the owners of other International and IC Bus dealerships.

A negative change in any of the preceding, or a change in control of International Motors, could have a material adverse effect on our operations, revenues and profitability.

Our dealership agreements may be terminable upon a change of control, and we cannot control whether our controlling shareholder and management maintain their current ownership positions.

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(i) with respect to the election of directors, the aggregate voting power held by W.M.

“Rusty” Rush, Scott Anderson, Steven Keller, Corey Lowe, Jody Pollard, Jason Wilder, Michael Goldstone, Mike Eppes and Michael McRoberts, along with certain other persons who no longer work for the Company (collectively, the “Dealer Principals”) decreases below 22% (the Dealer Principals, excluding those who no longer work for the Company, controlled approximately 41.6% of the aggregate voting power with respect to the election of directors as of December 31, 2023);

“Rusty” Rush, Steven Keller, Corey Lowe, Jody Pollard, Jason Wilder, Michael Goldstone, Mike Eppes and Michael McRoberts, along with certain other persons who no longer work for the Company (collectively, the “Dealer Principals”) decreases below 22% (the Dealer Principals, excluding those who no longer work for the Company, controlled approximately 41.2% of the aggregate voting power with respect to the election of directors as of December 31, 2024);

or (ii) any person or entity other than the Dealer Principals and their respective associates, or any person or entity who has been approved in writing by PACCAR, owns common stock with a greater percentage of the voting power with respect to the election of our directors than the Dealer Principals and their respective associates, in the aggregate, or any person other than Mr.

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Accordingly, we engage in sales and other marketing activities outside our assigned areas of responsibility and other dealers engage in similar activities within our areas of responsibility.

Our dealership agreements with the manufacturers we represent have current terms expiring between March 2024 and May 2029.

Our dealership agreements with Peterbilt and International have current terms expiring between May 2025 and May 2029.

Our dealerships agreements with the other manufacturers we represent generally have terms expiring between 2025 and 2028 or have indefinite terms.

Upon expiration of each agreement, we must negotiate a renewal.

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However, to the extent such laws did allow for nonrenewal or the imposition of new terms, the relatively short terms would give manufacturers the opportunity to exercise such rights.

Any nonrenewal or imposition of less favorable terms upon renewal could have an adverse impact on our business and in the case of the Peterbilt or Navistar dealership agreements, would have an adverse impact on our business.

Any nonrenewal or imposition of less favorable terms upon renewal could have an adverse impact on our business and in the case of the Peterbilt or International dealership agreements, would have an adverse impact on our business.

Our growth strategies may be unsuccessful if we are unable to successfully execute our strategic initiatives or identify and complete future acquisitions.

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The concerns over climate change may impact our business in the future.

Our current business model depends on our ability to sell, and provide services to, commercial vehicles primarily powered by diesel and gasoline internal combustion engines, which result in greenhouse gas emissions.

While the manufacturers we represent have made substantial progress in reducing the amount of greenhouse gas emissions that result from internal combustion engines, it is widely accepted that alternative fuel vehicles are necessary to address climate change.

While the manufacturers we represent have made substantial progress in reducing the amount of nitrogen oxide and greenhouse gas emissions that result from internal combustion engines, it is widely accepted that alternative fuel vehicles are necessary to address climate change.

Reductions in the sale and use of commercial vehicles powered by internal combustion engines creates risks to our historical business operations and we cannot predict the future costs to our business resulting from these developments.

However, we also believe that an industry transition away from internal combustion engines presents significant opportunities for us.

Due in large part to the geographic reach of our dealership network, relationships with both the manufacturers we represent and our customers and our access to capital, we believe we are well-positioned to serve our customers’ evolving needs and help them reduce their greenhouse gas emissions by helping them integrate more alternative fuel vehicles into their fleets and providing various services related thereto.

Scientific evidence suggests that a warming climate potentially results in an environment more prone to natural disasters, such as hurricanes and flooding.

Some of our dealerships are located in regions of the United States where natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, tornadoes and hailstorms) may disrupt our operations, which may adversely impact our business, results of operations, financial condition and cash flows.

Due in large part to the geographic reach of our dealership network, relationships with both the manufacturers we represent and our customers and our access to capital, we believe we are well-positioned to serve our customers’ evolving needs and help them reduce their nitrogen oxide and greenhouse gas emissions by helping them integrate more alternative fuel vehicles into their fleets and providing various services related thereto.

Although we have not experienced any material losses from natural disasters or severe weather events, it is possible that future natural disasters and severe weather events may adversely impact our business, results of operations, financial condition and cash flows.

In addition to business interruption, our business is subject to substantial risk of property loss due to the significant concentration of property at dealership locations.

Although our vehicle inventory is insured, we self-insure our property insurance with respect to the real property and personal property (other than our vehicle inventory) that we own.

Although our vehicle inventory is insured, we self-insure our real property and personal property (other than our vehicle inventory) that we own.

Thus, we may be exposed to property losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows, although we believe that such a material adverse effect would be unlikely.

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We generally purchase new and used commercial vehicle inventories with the assistance of floor plan financing agreements.

Our primary floor plan financing agreement, the Floor Plan Credit Agreement, expires on September 14, 2026, and may be terminated without cause upon 360 days’ notice.

Our primary floor plan financing agreements include the PFC Floor Plan Credit Agreement and the BMO Floor Plan Credit Agreement.

Both of these floor plan credit agreements expire in December 2029 and may be terminated without cause upon 360 days’ notice.

In the event that our floor plan financing becomes insufficient to satisfy our future requirements or our floor plan providers are unable to continue to extend credit under our floor plan agreements, we would need to obtain similar financing from other sources.

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Changes in interest rates could have a negative adverse effect on our profitability.

Our Floor Plan Credit Agreement, RTC Canada Floor Plan Agreement, WF Credit Agreement, PLC Agreement and RTC Canada Revolving Credit Agreement are each subject to variable interest rates.

Our PFC Floor Plan Credit Agreement, BMO Floor Plan Credit Agreement, RTC Canada Floor Plan Credit Agreement, WF Credit Agreement, PLC Agreement and RTC Canada Revolving Credit Agreement are each subject to variable interest rates.

Therefore, our interest expense rises when interest rates increase.

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If we were to experience significant cancellations of orders in our backlog, our financial condition could be adversely affected.

Given the potential for industry headwinds in the coming months caused by low spot rates and high interest rates, which could negatively impact industry demand for new commercial vehicles moving forward, 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.

In addition, given the current regulatory uncertainty in connection with CARB’s rules and regulations, we believe that certain commercial vehicle orders currently reflected in our backlog could be cancelled with respect to customers that intend to operate such vehicles in California.

Given the current uncertainty in connection with recently proposed tariffs against Canada, Mexico and China, we believe that certain commercial vehicle orders currently reflected in our backlog could be cancelled in the event that such tariffs are enacted and significantly increase the aggregate price that our customers will have to pay for such vehicles.

Impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.

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Changes in these assumptions or a change in the Company’s reportable segments could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Goodwill” for more information regarding the potential impact of changes in assumptions.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates — Goodwill” for more information regarding the potential impact of changes in assumptions.

Our business is subject to a number of economic risks.

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Laws and regulations intended to achieve the goal of significantly reducing engine emissions associated with the operation of commercial vehicles are complex and subject to change.

For example, in August 2021, the President of the United States issued an executive order intended to increase fuel efficiency, further reduce GHG emissions and speed up the development of “zero-emission” vehicles.

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, 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,” 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 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 emmision targets in exhange for the ability to sell legacy engines.

Since July 2020, a group of seventeen U.S.

Currently, the commercial vehicle industry is subject to the EPA 2027 Low NOx and the EPA’s GHG-3 rule, each of which are scheduled to become effective starting in model year 2027.

In addition, owners and commercial fleets that register or operate commercial vehicles in the State of California are also subject to CARB’s HD Omnibus and Advanced Clean Truck rules, both of which became effective in January 2024.

It is widely expected that the current GHG-3 rule will be revoked or modified by a branch of the federal government, but it is less clear whether a branch of the federal government may attempt to revoke or modify the EPA 2027 Low NOx rule.

Recently, CARB revoked its request for a waiver from the EPA with respect to the Advanced Clean Fleet rule.

In addition, the EPA recently announced that it has asked Congress to review the previously granted waivers that CARB received with respect to the HD Omnibus and Advanced Clean Truck rules.

The current head of the EPA believes that these waivers should have been approved by Congress prior to becoming effective.

It is also worth noting that there are currently multiple lawsuits pending where plaintiffs are challenging CARB’s rules on the basis that, amongst other things, such rules are preempted by other federal laws and that the EPA exceeded its authority in granting the waivers with respect to the HD Omnibus and Advanced Clean Truck rules.

There are also multiple lawsuits pending where plaintiffs are challenging the GHG-3 rule on multiple grounds, including that the EPA exceeded its statutory authority in creating the rule.

In July 2023, CARB and various manufacturers of heavy-duty commercial vehicles and engines, including PACCAR, International Motors, 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.

It is unclear what effect, if any, the outcome of the multiple lawsuits challenging the HD Omnibus and Advanced Clean Truck rules, or Congress’ decisions with respect to the EPA’s previously granted waivers, might have on the Clean Truck Partnership.

A group of seventeen U.S.

states and the District of Columbia entered into a joint memorandum of understanding that adopts at least a portion of CARB’s emissions regulations and commits each of them to work together to advance and accelerate the market for electric Class 3 through 8 commercial vehicles.

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California, Colorado, New Mexico, North Carolina and Virginia.

The signatories to the memorandum all agreed on a goal of ensuring that 100% of new Class 3 through 8 commercial vehicles are zero emission by 2050, with an interim target of 30% zero emission vehicles by 2030, although multiple of these states have recently announced plans to delay various aspects of CARB’s regulations.

Attaining these goals would likely require the adoption of new laws and regulations and we cannot predict at this time whether such laws and regulations would have an adverse impact on our business.

In addition, engine emissions rules and regulations could affect demand for the products that we sell in certain markets.

For example, there is currently uncertainty regarding CARB’s regulations that became effective January 1, 2024.

The regulations require a certain percentage of each manufacturer’s commercial vehicles that are sold in California to be “zero-emission vehicles,” or “near-zero emission vehicles,” starting in model year 2024.

There are currently multiple lawsuits pending where plaintiffs are challenging CARB’s rules on the basis that, amongst other things, such rules are preempted by other federal laws and that the EPA exceeded its authority in granting a waiver allowing CARB’s rules to take effect.

We are working with the manufacturers we represent to understand the potential limitations on the sale of certain new commercial vehicles within California going forward, and the potential limitations that may apply to our customers that may operate model year 2024 and later commercial vehicles within California.

While we do not currently believe that any reduction in the number of new commercial vehicles that we may be able to sell due to CARB’s rules and regulations would have a material adverse effect on our results in 2024, our success going forward depends on the ability of our manufacturers to successfully supply new commercial vehicles that comply with existing and future emissions rules and regulations in each of the markets in which we operate.

Engine emissions rules and regulations could affect demand for the products that we sell in certain markets.

For example, we believe that the HD Omnibus and Advanced Clean Truck rules, and the uncertainty regarding CARB’s enforcement of the same, resulted in our California dealerships selling less new commercial vehicles in 2024 than they would have absent such rules.

While the reduction in the number of new commercial vehicles that we were able to sell in 2024 due to CARB’s rules was not material to our financial results, our success going forward depends on the ability of our manufacturers to successfully supply new commercial vehicles that comply with existing and future emissions rules and regulations in each of the markets in which we operate.

Disruptions to our information technology systems and breaches in data or system security could adversely affect our business.

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However, despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, could be vulnerable to cyberattacks and other security breaches, computer viruses, lost or misplaced data, programming errors, human errors or other events, and such incidents can remain undetected for a period of time despite our best efforts to detect and respond to them in a timely manner.

We have, from time to time, experienced threats to our data and systems, including malware, ransomware and computer virus attacks.

We have, from time to time, experienced threats to our data and systems, including malware, ransomware, phishing and computer virus attacks.

As discussed above, we are continuously developing and enhancing our controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access.

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If any of these breaches of security occur, we will be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

Any cyberattack, security breach or other event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information of personal identifiable information of employees or customers, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors and employees and result in litigation or regulatory actions, all of which could have a material adverse effect on our business and reputation.

Any cyberattack, security breach or other event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information or personal identifiable information of employees or customers, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors and employees and result in litigation or regulatory actions, all of which could have a material adverse effect on our business and reputation.

We are exposed to a variety of claims relating to our business and the liability associated with such claims may exceed the level of our insurance coverage.

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(i) our customers’ use of commercial vehicles that we sell, service, lease or rent;

(ii) our customers’ purchase of other products that we design, manufacture, sell or install, such as commercial vehicle parts, custom vehicle modifications and CNG fuel systems;

(ii) our customers’ purchase of other products that we design, manufacture, sell or install, such as commercial vehicle parts, custom vehicle modifications and CNG fuel systems through our joint venture with Cummins;

and (iii) injuries caused by motor vehicle accidents that our service or delivery personnel are involved in.

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We could also be subject to potential litigation associated with compliance with various laws and governmental regulations at the federal, state or local levels, such as those relating to vehicle and highway safety, health and workplace safety, security and employment-related claims.

We utilize a captive insurance company to manage our auto and general commercial liability insurance, which we supplement with excess insurance coverage.

We self-insure our property insurance with respect to the real property that we own and our personal property (excluding our vehicle inventory, which is insured).

We utilize a captive insurance company to provide our auto and general commercial liability insurance, which we supplement with excess insurance coverage.

We self-insure the real property that we own and our personal property (excluding our vehicle inventory, which is insured).

We also maintain various insurance policies with third-party insurers, each of which are subject to deductibles with high dollar amounts.

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In fact, due to the rising costs of premiums over the last couple of years, we have been generally increasing our use of self-insurance programs and increasing the amounts of our deductibles.

We are subject to risks associated with commercial vehicles and parts manufactured outside of the United States.

Our business involves the sale of commercial vehicles, parts and commercial vehicles composed of parts that are manufactured outside of the United States, including Canada, Mexico and China.

As a result, our operations are subject to certain risks of doing business outside of the United States, including import duties, exchange rates, trade restrictions and general political and socio-economic conditions in other countries.

The United States or the countries where certain of the commercial vehicles and parts that we sell are manufactured may, from time to time, impose new quotas, duties, tariffs or other restrictions or limitations, or adjust presently prevailing quotas, duties or tariffs.

The imposition of new, or adjustments to prevailing, quotas, duties, tariffs or other restrictions or limitations could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our dealerships are subject to federal, state and local environmental regulations that may result in claims and liabilities, which could be material.

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Our Class A common stock has limited voting power.

Each share of Class A common stock ranks substantially equal to each share of Class B common stock with respect to receipt of any dividends or distributions declared on shares of common stock and the right to receive proceeds on liquidation or dissolution of us after payment of our indebtedness and liquidation preference payments to holders of any preferred shares.

Each share of Class A common stock ranks equal to each share of Class B common stock with respect to receipt of any dividends or distributions declared on shares of common stock and the right to receive proceeds on liquidation or dissolution of us after payment of our indebtedness and liquidation preference payments to holders of any preferred shares.

However, holders of Class A common stock have 1/20th of one vote per share on all matters requiring a shareholder vote, while holders of Class B common stock have one full vote per share.

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The volume of trading in our Class B common stock varies greatly and may often be light.

As of December 31, 2023, the three-month average daily trading volume of our Class B common stock was approximately 20,330 shares, with five days having a trading volume below 10,000 shares.

As of December 31, 2024, the three-month average daily trading volume of our Class B common stock was approximately 17,000 shares, with twenty-three days having a trading volume below 10,000 shares.

If any large shareholder were to begin selling shares in the market, the added available supply of shares could cause the market price of our Class B common stock to drop.

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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-K

Item 1A. Risk Factors