RUSHA filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 
 45 
 
 Consolidated Balance Sheets as of December 31, 2024 and 2023 
 47 
 
 Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022 
 48 
 
 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022 
 49 
 
 Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022 
 50 
 
 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022 
 51 
 
 Notes to Consolidated Financial Statements 
 52 
 
 39

 Table of Contents 

 Report of Independent Registered Public Accounting Firm 

 To the Shareholders and the Board of Directors of Rush Enterprises, Inc.

 Opinion on the Financial Statements 

 We have audited the accompanying consolidated balance sheets of Rush Enterprises, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2025 expressed an unqualified opinion thereon.

 Basis for Opinion 

 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matter 

 The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 Commercial Vehicle Inventory Reserves 

 Description of the Matter 

 At December 31, 2024, the Company’s commercial vehicle inventory balance is approximately $1.4 billion, which is net of management’s estimate of commercial vehicle inventory reserves in the amount of approximately $9.8 million. As described in Note 6 to the consolidated financial statements, management adjusts the value of its inventory to net realizable value to the extent it determines inventory cost cannot be recovered. Management estimates future demand and sales prices to calculate the commercial vehicle inventory reserves and to make corresponding adjustments to the carrying value of these inventories to reflect the lower of cost or net realizable value.

 Auditing management’s estimate of the commercial vehicle inventory reserves involved auditor subjective judgment because the estimate is sensitive to changes in management’s assumptions for forecasted product demand and future sales prices.

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 Table of Contents 

 How We Addressed the Matter in Our Audit 

 We evaluated and tested the design and operating effectiveness of controls over the Company’s processes to estimate the commercial vehicle inventory reserve, which included management’s review of the underlying significant assumptions.

 Our substantive audit procedures included, among others, evaluating the significant assumptions described above, and we tested the completeness and accuracy of underlying data used in the estimation calculations. We also compared the cost of on-hand commercial vehicle inventories to customer demand forecasts and historical sales. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the commercial vehicle inventory reserves that would result from changes in the assumptions.

 /s/ Ernst & Young LLP 

 We have served as the Company ’ s auditor since 2002. 

 San Antonio, Texas 

 February 21, 2025 

 41

 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 CONSOLIDATED BALANCE SHEETS 

 (In Thousands, Except Shares and Per Share Amounts)

 December 31, 

 December 31, 

 2024 

 2023 

 Assets 

 Current assets:

 Cash, cash equivalents and restricted cash

 $ 
 228,131 
 
 $ 
 183,725 
 
 Accounts receivable, net

 345,346 
 
 259,353 
 
 Notes receivable from affiliate

 9,536 
 
 – 
 
 Inventories, net

 1,787,744 
 
 1,801,447 
 
 Prepaid expenses and other

 18,958 
 
 15,779 
 
 Total current assets

 2,389,715 
 
 2,260,304 
 
 Property and equipment, net

 1,615,635 
 
 1,488,086 
 
 Operating lease right-of-use assets, net

 111,408 
 
 120,162 
 
 Goodwill, net

 427,493 
 
 420,708 
 
 Other assets, net

 73,296 
 
 74,981 
 
 Total assets 

 $ 
 4,617,547 
 
 $ 
 4,364,241 
 
 Liabilities and shareholders ’ equity 

 Current liabilities:

 Floor plan notes payable

 $ 
 1,081,199 
 
 $ 
 1,139,744 
 
 Current maturities of finance lease obligations

 38,476 
 
 36,119 
 
 Current maturities of operating lease obligations

 15,866 
 
 17,438 
 
 Trade accounts payable

 244,018 
 
 162,134 
 
 Customer deposits

 109,751 
 
 145,326 
 
 Accrued expenses

 160,809 
 
 172,549 
 
 Total current liabilities

 1,650,119 
 
 1,673,310 
 
 Long-term debt

 408,440 
 
 414,002 
 
 Finance lease obligations, net of current maturities

 92,235 
 
 97,617 
 
 Operating lease obligations, net of current maturities

 97,874 
 
 104,514 
 
 Other long-term liabilities

 28,060 
 
 24,811 
 
 Deferred income taxes, net

 178,916 
 
 159,571 
 
 Shareholders’ equity:

 Preferred stock, par value $ .01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2024 and 2023

 – 
 
 − 
 
 Common stock, par value $ .01 per share; 105,000,000 Class A shares and 35,000,000 Class B shares authorized; 62,604,986 Class A shares and 16,662,633 Class B shares outstanding in 2024; and 61,461,281 Class A shares and 16,364,158 Class B shares outstanding in 2023

 824 
 
 806 
 
 Additional paid-in capital

 587,639 
 
 542,046 
 
 Treasury stock, at cost: 1,387,013 Class A shares and 1,783,806 Class B shares in 2024; and 1,092,142 Class A shares and 1,731,157 Class B shares in 2023

 ( 136,235 
 ) 
 
 ( 119,835 
 ) 
 
 Retained earnings

 1,698,614 
 
 1,450,025 
 
 Accumulated other comprehensive loss

 ( 9,293 
 ) 
 
 ( 2,163 
 ) 
 
 Total Rush Enterprises, Inc. shareholders’ equity

 2,141,549 
 
 1,870,879 
 
 Noncontrolling interest

 20,354 
 
 19,537 
 
 Total shareholders’ equity

 2,161,903 
 
 1,890,416 
 
 Total liabilities and shareholders ’ equity 

 $ 
 4,617,547 
 
 $ 
 4,364,241 
 
 The accompanying notes are an integral part of these consolidated financial statements.

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 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF INCOME 

 (In Thousands, Except Per Share Amounts)

 Year Ended December 31, 

 2024 

 2023 

 2022 

 Revenues 

 New and used commercial vehicle sales

 $ 
 4,888,823 
 
 $ 
 4,957,969 
 
 $ 
 4,351,370 
 
 Aftermarket products and services sales

 2,516,020 
 
 2,562,141 
 
 2,372,439 
 
 Lease and rental sales

 354,939 
 
 353,780 
 
 322,257 
 
 Finance and insurance

 21,991 
 
 24,271 
 
 29,741 
 
 Other

 22,973 
 
 26,863 
 
 25,863 
 
 Total revenue

 7,804,746 
 
 7,925,024 
 
 7,101,670 
 
 Cost of products sold 

 New and used commercial vehicle sales

 4,426,292 
 
 4,474,616 
 
 3,937,091 
 
 Aftermarket products and services sales

 1,591,510 
 
 1,609,383 
 
 1,455,616 
 
 Lease and rental sales

 255,528 
 
 247,935 
 
 221,804 
 
 Total cost of products sold

 6,273,330 
 
 6,331,934 
 
 5,614,511 
 
 Gross profit 

 1,531,416 
 
 1,593,090 
 
 1,487,159 
 
 Selling, general and administrative

 995,586 
 
 1,021,722 
 
 927,836 
 
 Depreciation and amortization

 68,549 
 
 59,830 
 
 55,665 
 
 Gain on sale of assets

 809 
 
 843 
 
 2,455 
 
 Operating income 

 468,090 
 
 512,381 
 
 506,113 
 
 Other income

 583 
 
 2,597 
 
 22,338 
 
 Interest income (expense):

 Interest income

 1,166 
 
 777 
 
 639 
 
 Interest expense

 ( 72,024 
 ) 
 
 ( 53,694 
 ) 
 
 ( 19,763 
 ) 
 
 Total interest expense, net

 ( 70,858 
 ) 
 
 ( 52,917 
 ) 
 
 ( 19,124 
 ) 
 
 Income before taxes 

 397,815 
 
 462,061 
 
 509,327 
 
 Income tax provision

 92,845 
 
 114,000 
 
 117,242 
 
 Net income 

 304,970 
 
 348,061 
 
 392,085 
 
 Less: Net income attributable to noncontrolling interest

 817 
 
 1,006 
 
 703 
 
 Net income attributable to Rush Enterprises, Inc. 

 $ 
 304,153 
 
 $ 
 347,055 
 
 $ 
 391,382 
 
 Net income attributable to Rush Enterprises, Inc. per share of common stock: 

 Basic

 $ 
 3.85 
 
 $ 
 4.28 
 
 $ 
 4.71 
 
 Diluted

 $ 
 3.72 
 
 $ 
 4.15 
 
 $ 
 4.57 
 
 Dividends declared per common share 

 $ 
 0.70 
 
 $ 
 0.62 
 
 $ 
 0.53 
 
 The accompanying notes are an integral part of these consolidated financial statements.

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 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

 (In Thousands)

 2024 

 2023 

 2022 

 Net income 

 $ 
 304,970 
 
 $ 
 348,061 
 
 $ 
 392,085 
 
 Other comprehensive income (loss), net of tax:

 Foreign currency translation

 ( 7,130 
 ) 
 
 1,967 
 
 ( 4,316 
 ) 
 
 Reclassification of currency translation related to equity method accounting

 – 
 
 – 
 
 ( 601 
 ) 
 
 Other comprehensive income (loss) attributable to Rush Enterprises, Inc.

 ( 7,130 
 ) 
 
 1,967 
 
 ( 4,917 
 ) 
 
 Comprehensive income 

 $ 
 297,840 
 
 $ 
 350,028 
 
 $ 
 387,168 
 
 Less: Comprehensive income attributable to noncontrolling interest

 817 
 
 1,006 
 
 703 
 
 Comprehensive income attributable to Rush Enterprises, Inc. 

 $ 
 297,023 
 
 $ 
 349,022 
 
 $ 
 386,465 
 
 The accompanying notes are an integral part of these consolidated financial statements.

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 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY 

 (In Thousands) 

 Total

 Common Stock

 Accumulated

 Rush Enterprises,

 Shares 
 
 $0.01 
 
 Additional 
 
 Other 
 
 Inc. 
 
 Total 
 
 Outstanding 
 
 Par 
 
 Paid -In 
 
 Treasury 
 
 Retained 
 
 Comprehensive 
 
 Shareholders’ 
 
 Noncontrolling 
 
 Shareholders’ 
 
 Class A 
 
 Class B 
 
 Value 
 
 Capital 
 
 Stock 
 
 Earnings 
 
 Income (Loss) 
 
 Equity 
 
 Interest 
 
 Equity 
 
 Balance, December 31, 2021 

 64,662 
 
 18,598 
 
 563 
 
 470,750 
 
 ( 36,933 
 ) 
 
 1,031,582 
 
 787 
 
 1,466,749 
 
 – 
 
 1,466,749 
 
 Stock options exercised and stock awards

 585 
 
 – 
 
 4 
 
 8,029 
 
 – 
 
 – 
 
 – 
 
 8,033 
 
 – 
 
 8,033 
 
 Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

 – 
 
 – 
 
 – 
 
 25,315 
 
 – 
 
 – 
 
 – 
 
 25,315 
 
 – 
 
 25,315 
 
 Vesting of restricted share awards

 – 
 
 457 
 
 3 
 
 ( 8,669 
 ) 
 
 – 
 
 – 
 
 – 
 
 ( 8,666 
 ) 
 
 – 
 
 ( 8,666 
 ) 
 
 Issuance of common stock under employee stock purchase plan

 201 
 
 – 
 
 2 
 
 5,217 
 
 – 
 
 – 
 
 – 
 
 5,219 
 
 – 
 
 5,219 
 
 Common stock repurchases

 ( 1,930 
 ) 
 
 ( 930 
 ) 
 
 – 
 
 – 
 
 ( 93,997 
 ) 
 
 – 
 
 – 
 
 ( 93,997 
 ) 
 
 – 
 
 ( 93,997 
 ) 
 
 Cash dividends declared on Class A common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 34,207 
 ) 
 
 – 
 
 ( 34,207 
 ) 
 
 – 
 
 ( 34,207 
 ) 
 
 Cash dividends declared on Class B common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 10,420 
 ) 
 
 – 
 
 ( 10,420 
 ) 
 
 – 
 
 ( 10,420 
 ) 
 
 Reclassification of foreign currency translation related to equity method

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 601 
 ) 
 
 ( 601 
 ) 
 
 – 
 
 ( 601 
 ) 
 
 Foreign currency translation adjustment

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 4,316 
 ) 
 
 ( 4,316 
 ) 
 
 – 
 
 ( 4,316 
 ) 
 
 Noncontrolling interest equity

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 17,828 
 
 17,828 
 
 Net income

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 391,382 
 
 – 
 
 391,382 
 
 703 
 
 392,085 
 
 Balance, December 31, 2022 

 63,518 
 
 18,125 
 
 572 
 
 500,642 
 
 ( 130,930 
 ) 
 
 1,378,337 
 
 ( 4,130 
 ) 
 
 1,744,491 
 
 18,531 
 
 1,763,022 
 
 Stock options exercised and stock awards

 822 
 
 – 
 
 6 
 
 12,120 
 
 – 
 
 – 
 
 – 
 
 12,126 
 
 – 
 
 12,126 
 
 Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

 – 
 
 – 
 
 – 
 
 30,354 
 
 – 
 
 – 
 
 – 
 
 30,354 
 
 – 
 
 30,354 
 
 Vesting of restricted share awards

 – 
 
 421 
 
 3 
 
 ( 7,018 
 ) 
 
 – 
 
 – 
 
 – 
 
 ( 7,015 
 ) 
 
 – 
 
 ( 7,015 
 ) 
 
 Issuance of common stock under employee stock purchase plan

 209 
 
 – 
 
 1 
 
 5,951 
 
 – 
 
 – 
 
 – 
 
 5,952 
 
 – 
 
 5,952 
 
 Common stock repurchases

 ( 3,088 
 ) 
 
 ( 2,182 
 ) 
 
 – 
 
 – 
 
 ( 213,425 
 ) 
 
 – 
 
 – 
 
 ( 213,425 
 ) 
 
 – 
 
 ( 213,425 
 ) 
 
 Retirement of treasury shares and par value adjustment

 – 
 
 – 
 
 224 
 
 ( 3 
 ) 
 
 224,520 
 
 ( 224,744 
 ) 
 
 ( 3 
 ) 
 
 ( 3 
 ) 
 
 Cash dividends declared on Class A common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 38,727 
 ) 
 
 – 
 
 ( 38,727 
 ) 
 
 – 
 
 ( 38,727 
 ) 
 
 Cash dividends declared on Class B common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 11,896 
 ) 
 
 – 
 
 ( 11,896 
 ) 
 
 – 
 
 ( 11,896 
 ) 
 
 Foreign currency translation adjustment

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 1,967 
 
 1,967 
 
 – 
 
 1,967 
 
 Net income

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 347,055 
 
 – 
 
 347,055 
 
 1,006 
 
 348,061 
 
 Balance, December 31, 2023 

 61,461 
 
 16,364 
 
 806 
 
 542,046 
 
 ( 119,835 
 ) 
 
 1,450,025 
 
 ( 2,163 
 ) 
 
 1,870,879 
 
 19,537 
 
 1,890,416 
 
 Stock options exercised and stock awards

 1,243 
 
 – 
 
 12 
 
 18,494 
 
 – 
 
 – 
 
 – 
 
 18,506 
 
 – 
 
 18,506 
 
 Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

 – 
 
 – 
 
 – 
 
 30,350 
 
 – 
 
 – 
 
 – 
 
 30,350 
 
 – 
 
 30,350 
 
 Vesting of restricted share awards

 – 
 
 351 
 
 4 
 
 ( 10,116 
 ) 
 
 – 
 
 – 
 
 – 
 
 ( 10,112 
 ) 
 
 – 
 
 ( 10,112 
 ) 
 
 Issuance of common stock under employee stock purchase plan

 196 
 
 – 
 
 2 
 
 6,865 
 
 – 
 
 – 
 
 – 
 
 6,867 
 
 – 
 
 6,867 
 
 Common stock repurchases

 ( 295 
 ) 
 
 ( 52 
 ) 
 
 – 
 
 – 
 
 ( 16,400 
 ) 
 
 – 
 
 – 
 
 ( 16,400 
 ) 
 
 – 
 
 ( 16,400 
 ) 
 
 Cash dividends declared on Class A common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 43,449 
 ) 
 
 – 
 
 ( 43,449 
 ) 
 
 – 
 
 ( 43,449 
 ) 
 
 Cash dividends declared on Class B common stock

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 12,115 
 ) 
 
 – 
 
 ( 12,115 
 ) 
 
 – 
 
 ( 12,115 
 ) 
 
 Foreign currency translation adjustment

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 7,130 
 ) 
 
 ( 7,130 
 ) 
 
 – 
 
 ( 7,130 
 ) 
 
 Net income

 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 304,153 
 
 – 
 
 304,153 
 
 817 
 
 304,970 
 
 Balance, December 31, 2024 

 62,605 
 
 16,663 
 
 824 
 
 587,639 
 
 ( 136,235 
 ) 
 
 1,698,614 
 
 ( 9,293 
 ) 
 
 2,141,549 
 
 20,354 
 
 2,161,903 
 
 The accompanying notes are an integral part of these consolidated financial statements.

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 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (In Thousands)

 Year Ended December 31, 

 2024 

 2023 

 2022 

 Cash flows from operating activities: 

 Net income

 $ 
 304,970 
 
 $ 
 348,061 
 
 $ 
 392,085 
 
 Adjustments to reconcile net income to net cash provided by operating activities

 Depreciation and amortization

 236,101 
 
 221,141 
 
 199,149 
 
 Gain on sale of property and equipment, net

 ( 809 
 ) 
 
 ( 843 
 ) 
 
 ( 2,467 
 ) 
 
 Gain on joint venture transaction

 – 
 
 – 
 
 ( 12,500 
 ) 
 
 Gain on business acquisition

 – 
 
 – 
 
 ( 6,958 
 ) 
 
 Stock-based compensation expense related to employee stock options and employee stock purchases

 30,350 
 
 30,354 
 
 25,315 
 
 Provision for deferred income tax expense

 19,810 
 
 7,601 
 
 4,261 
 
 Change in accounts receivable, net

 ( 87,098 
 ) 
 
 ( 38,307 
 ) 
 
 ( 74,607 
 ) 
 
 Change in inventories

 85,071 
 
 ( 297,678 
 ) 
 
 ( 324,508 
 ) 
 
 Change in prepaid expenses and other, net

 ( 3,259 
 ) 
 
 862 
 
 1,340 
 
 Change in trade accounts payable

 81,862 
 
 ( 10,629 
 ) 
 
 31,438 
 
 Change in customer deposits

 ( 34,808 
 ) 
 
 28,803 
 
 34,121 
 
 Change in accrued expenses

 ( 12,199 
 ) 
 
 7,198 
 
 32,789 
 
 Other, net

 ( 441 
 ) 
 
 ( 850 
 ) 
 
 ( 5,058 
 ) 
 
 Net cash provided by operating activities

 619,550 
 
 295,713 
 
 294,400 
 
 Cash flows from investing activities: 

 Acquisition of property and equipment

 ( 433,047 
 ) 
 
 ( 368,881 
 ) 
 
 ( 243,060 
 ) 
 
 Proceeds from the sale of property and equipment

 9,437 
 
 2,212 
 
 7,124 
 
 Change in notes receivable from affiliate 
 
 ( 9,536 
 ) 
 
 – 
 
 – 
 
 Business disposition

 – 
 
 – 
 
 27,500 
 
 Business acquisitions, net of cash

 ( 16,364 
 ) 
 
 ( 16,050 
 ) 
 
 ( 20,762 
 ) 
 
 Other

 3,933 
 
 ( 4,311 
 ) 
 
 ( 11,732 
 ) 
 
 Net cash used in investing activities

 ( 445,577 
 ) 
 
 ( 387,030 
 ) 
 
 ( 240,930 
 ) 
 
 Cash flows from financing activities: 

 Draws (payments) on floor plan notes payable – non-trade, net

 ( 54,265 
 ) 
 
 205,487 
 
 273,906 
 
 Proceeds from long-term debt

 1,844,528 
 
 1,429,083 
 
 958,328 
 
 Principal payments on long-term debt

 ( 1,846,752 
 ) 
 
 ( 1,291,615 
 ) 
 
 ( 1,084,465 
 ) 
 
 Principal payments on finance lease obligations

 ( 16,839 
 ) 
 
 ( 17,693 
 ) 
 
 ( 14,780 
 ) 
 
 Proceeds from issuance of shares relating to employee stock options and employee stock purchases

 25,377 
 
 18,077 
 
 13,255 
 
 Taxes paid related to net share settlement of equity awards

 ( 10,116 
 ) 
 
 ( 7,017 
 ) 
 
 ( 8,669 
 ) 
 
 Payments of cash dividends

 ( 55,508 
 ) 
 
 ( 50,582 
 ) 
 
 ( 44,556 
 ) 
 
 Common stock repurchased

 ( 15,746 
 ) 
 
 ( 211,778 
 ) 
 
 ( 93,709 
 ) 
 
 Net cash provided by (used in) financing activities

 ( 129,321 
 ) 
 
 73,962 
 
 ( 690 
 ) 
 
 Net (decrease) increase in cash, cash equivalents and restricted cash 

 44,652 
 
 ( 17,355 
 ) 
 
 52,780 
 
 Effect of exchange rate on cash

 ( 246 
 ) 
 
 36 
 
 118 
 
 Cash, cash equivalents and restricted cash, beginning of year

 183,725 
 
 201,044 
 
 148,146 
 
 Cash, cash equivalents and restricted cash, end of year 

 $ 
 228,131 
 
 $ 
 183,725 
 
 $ 
 201,044 
 
 Supplemental disclosure of cash flow information: 

 Cash paid during the year for:

 Interest

 $ 
 78,292 
 
 $ 
 56,427 
 
 $ 
 21,694 
 
 Income taxes paid, net

 $ 
 76,028 
 
 $ 
 106,872 
 
 $ 
 102,038 
 
 Noncash investing and financing activities:

 Assets acquired under finance leases

 $ 
 31,412 
 
 $ 
 43,330 
 
 $ 
 33,654 
 
 The accompanying notes are an integral part of these consolidated financial statements.

 46

 Table of Contents 

 RUSH ENTERPRISES, INC. AND SUBSIDIARIES 

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

 1.

 ORGANIZATION AND OPERATIONS :

 Rush Enterprises, Inc. (the “Company”) was incorporated in 1965 under the laws of the State of Texas. The Company operates a network of commercial vehicle dealerships that primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, IC Bus, Blue Bird, Dennis Eagle, Blue Arc or Battle Motors. Through its strategically located network of Rush Truck Centers, the Company provides one-stop service for the needs of its commercial vehicle customers, including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.

 Restricted Cash 

 Restricted cash consists of deposits for the statutory restriction on cash related to the Company’s captive insurance company of $ 5.1 million as of December 31, 2024.

 Stock Split 

 On July 25, 2023, the Board of Directors of the Company declared a 3 -for- 2 stock split of the Company’s Class A common stock and Class B common stock, which was effected in the form of a stock dividend. On August 28, 2023, the Company distributed one additional share of stock for every two shares of Class A common stock, par value $ 0.01 per share, and Class B common stock, par value $ 0.01 per share, held by shareholders of record as of August 7, 2023. All share and per share data in this Form 10-K have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period presented.

 Authorized Shares 

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

 Treasury Stock Retirement 

 During the third quarter of 2023, the Company retired 3,052,899 shares of Class A common stock and 1,445,515 shares of Class B common stock. The Company recorded the retirement directly against retained earnings based on the Company’s policy election. The Company accounts for treasury stock using the cost method. There was no effect on the Company’s overall equity position due to the retirement of the treasury shares.

 Foreign Currency Transactions 

 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 monthly 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. The related translation adjustments are recorded as a separate component of the Company’s Consolidated Statements of Shareholders’ Equity in accumulated other comprehensive income (loss).

 2.

 SIGNIFICANT ACCOUNTING POLICIES :

 Principles of Consolidation 

 The consolidated financial statements presented herein include the accounts of Rush Enterprises, Inc. together with its consolidated subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

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 Table of Contents 

 Estimates in Financial Statements 

 The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Management analyzes the Company’s estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances, however, actual results could differ materially from such estimates.

 Cash, Cash Equivalents and Restricted Cash 

 Cash and cash equivalents generally consist of cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of ninety days or less to be cash equivalents. Restricted cash consists of deposits for the statutory restriction on cash related to the Company’s captive insurance company.

 Allowance for Credit Losses and Repossession Losses 

 The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic conditions. Accounts receivables consist primarily of commercial vehicle sales receivables, manufacturers’ receivables, leasing and parts and service receivables and other trade receivables. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.

 The Company provides an allowance for repossession losses after considering historical loss experience and other factors that might affect the ability of customers to meet their obligations on finance contracts sold by the Company when the Company has a potential liability.

 Inventories 

 Inventories are stated at the lower of cost or net realizable value. Cost is determined by specific identification of new and used commercial vehicle inventory. As the market value of the Company’s inventory typically declines over time, reserves are established based on historical loss experience and market trends. These reserves are charged to cost of sales and reduce the carrying value of the Company’s inventory on hand. An allowance is provided when it is anticipated that cost will exceed net realizable value.

 Property and Equipment 

 Property and equipment are stated at cost and depreciated over their estimated useful lives. Leasehold improvements are amortized over the useful life of the improvement, or the term of the lease, whichever is shorter. Provision for depreciation of property and equipment is calculated primarily on a straight-line basis. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest, when incurred, is added to the cost of the underlying assets and is amortized over the estimated useful life of such assets. The cost, accumulated depreciation and amortization and estimated useful lives of the Company’s property and equipment are summarized as follows (in thousands):

 2024

 2023

 Estimated Life

 (Years)

 Land

 $ 
 174,962 
 
 $ 
 172,396 
 
 Buildings and improvements

 616,521 
 
 591,992 
 
 10 
 – 
 39 
 
 Leasehold improvements

 47,518 
 
 43,088 
 
 2 
 – 
 39 
 
 Machinery and shop equipment

 120,689 
 
 105,544 
 
 5 
 – 
 20 
 
 Furniture, fixtures and computers

 127,165 
 
 111,242 
 
 3 
 – 
 15 
 
 Transportation equipment

 156,896 
 
 135,425 
 
 3 
 – 
 15 
 
 Lease and rental vehicles

 1,259,918 
 
 1,155,767 
 
 1 
 – 
 10 
 
 Construction in progress

 13,997 
 
 31,037 
 
 Accumulated depreciation and amortization

 ( 902,031 
 ) 
 
 ( 858,405 
 ) 
 
 Total

 $ 
 1,615,635 
 
 $ 
 1,488,086 
 
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 The Company recorded depreciation expense of $ 207.3 million and amortization expense of $ 28.8 million for the year ended December 31, 2024, depreciation expense of $ 194.1 million and amortization expense of $ 27.0 million for the year ended December 31, 2023, and depreciation expense of $ 177.1 million and amortization expense of $ 22.1 million for the year ended December 31, 2022.

 As of December 31, 2024, the Company had $ 122.4 million in lease and rental vehicles under various finance leases included in property and equipment, net of accumulated amortization of $ 66.9 million. The Company recorded depreciation and amortization expense of $ 167.6 million related to lease and rental vehicles in lease and rental cost of products sold for the year ended December 31, 2024, $ 161.3 million for the year ended December 31, 2023, and $ 143.5 million for the year ended December 31, 2022.

 Purchase Price Allocation, Intangible Assets and Goodwill 

 The Company uses the acquisition method of accounting for the recognition of assets acquired and liabilities assumed through acquisitions at their estimated fair values as of the date of acquisition. The purchase price allocation for business combinations and asset acquisitions requires the use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. As a result, during the measurement period, which is not to exceed one year from the date of acquisition, any changes in the estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Income.

 The Company determines whether substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the single asset or group of assets, as applicable, is not a business. If not, the Company determines whether the single asset or group of assets, as applicable, meets the definition of a business.

 In connection with the Company’s business combinations, it records certain intangible assets, including franchise rights. The Company periodically reviews the estimated useful lives and fair values of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a diminished fair value or revised useful life. See Note 15 – Acquisitions in the Notes to the Financial Statements for further discussion.

 Goodwill represents the excess, at the date of acquisition, of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired. In addition to goodwill, the Company recognizes separately identifiable intangible assets for rights under franchise agreements with manufacturers.

 The fair value of the intangible franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The carrying value of the Company’s manufacturer franchise rights was $ 12.0 million as of December 31, 2024 and December 31, 2023, and is included in Other Assets on the accompanying Consolidated Balance Sheet. The Company has determined that manufacturer franchise rights have an indefinite life, as there are no economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers’ brand names. Furthermore, to the extent that any agreements evidencing manufacturer franchise rights have expiration dates, the Company expects that it will be able to renew those agreements in the ordinary course of business. Accordingly, the Company does not amortize manufacturer franchise rights.

 Due to the fact that manufacturer franchise rights are specific to a geographic region, the Company has determined that evaluating and including all locations acquired in the geographic region is the appropriate level for purposes of testing franchise rights for impairment. The Company is subject to financial statement risk to the extent that manufacturer franchise rights become impaired due to decreases in the fair market value of its individual franchises.

 The Company assesses goodwill and intangible franchise rights for impairment annually in the fourth quarter, or whenever events or changes in circumstances indicate an impairment may have occurred. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs. See Fair Value Measurements below for further discussion of Level 3 fair value inputs.

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 For the annual goodwill and intangible franchise rights impairment assessment conducted in the fourth quarter of 2024, the Company elected to perform a qualitative assessment and determined that it was not more-likely-than-not that the fair values of the Company’s reporting units were less than their carrying values.

 No impairments of goodwill or intangible franchise rights were recorded during the years ended December 31, 2024, 2023 and 2022. 

 The following table sets forth the change in the carrying amount of goodwill for the Company for the year ended December 31, 2024 (in thousands):

 Balance December 31, 2023

 $ 
 420,708 
 
 Acquisitions during 2024

 10,230 
 
 Currency translation

 ( 3,445 
 ) 
 
 Balance December 31, 2024

 $ 
 427,493 
 
 Equity Method Investments 

 On February 25, 2019, the Company acquired 50 % of the equity interest in RTC Canada, which acquired the operating assets of Tallman Group, the largest International Truck dealer in Canada. Prior to acquiring an additional 30 % equity interest on May 2, 2022, for approximately $ 20.0 million, the Company accounted for the equity interest in RTC Canada using the equity method of accounting. After the Company’s acquisition of the additional 30 % equity interest on May 2, 2022, operations of RTC Canada were included in the accompanying consolidated financial statements. Income (loss) related to the 20 % equity owner of RTC Canada is reflected in the accompanying consolidated financial statements as a noncontrolling interest. See Note 15 – Acquisitions in the Notes to the Financial Statements for further discussion.

 On January 3, 2022, a subsidiary of Cummins, Inc. acquired a 50 % equity interest in Natural Gas Fuel Systems, LLC (“NGFS”) from the Company for $ 27.5 million. NGFS previously conducted business as Momentum Fuel Technologies. The $ 12.5 million gain realized on the transaction is included in Other income on the Consolidated Statements of Income for the year ended December 31, 2022. The Company is accounting for the business as a joint venture and recognizes the investment using the equity method. The Company’s equity income in NGFS is included in the line-item Other income on the Consolidated Statements of Income.

 Income Taxes 

 Management’s judgment is required to determine the provisions for income taxes and to determine whether deferred tax assets will be realized in full or in part. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When it is more likely than not that all or some portion of specific deferred income tax assets will not be realized, a valuation allowance must be established for the amount of deferred income tax assets that are determined not to be realizable. Accordingly, the facts and financial circumstances impacting deferred income tax assets are reviewed quarterly and management’s judgment is applied to determine the amount of valuation allowance required, if any, in any given period.

 In determining its provision for income taxes, the Company uses an annual effective income tax rate based on annual income, permanent differences between book and tax income, and statutory income tax rates. The effective income tax rate also reflects its assessment of the ultimate outcome of tax audits. The Company adjusts its annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they occur.

 The Company’s income tax returns are periodically audited by tax authorities. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions. In evaluating the exposures associated with its various tax filing positions, the Company adjusts its liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.

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 The Company’s liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with its various filing positions. The Company’s effective income tax rate is also affected by changes in tax law, the level of earnings and the results of tax audits. Although the Company believes that the judgments and estimates are reasonable, actual results could differ, and the Company may be exposed to losses or gains that could be material. An unfavorable tax settlement would require use of the Company’s cash and result in an increase in its effective income tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in the Company’s effective income tax rate in the period of resolution. The Company’s income tax expense includes the impact of reserve provisions and changes to reserves that it considers appropriate, as well as related interest.

 Revenue Recognition Policies 

 The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASU 2014-09, “ Revenue from Contracts with Customers ( “ Topic 606 ” ) , the Company performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. The Company then assesses whether each promised good or service is distinct and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for revenue, see Note 17 – Revenue of the Notes to Consolidated Financial Statements.

 Rental and Lease Revenue 

 The Company leases commercial vehicles that the Company owns to customers. Lease and rental revenues are recognized over the period of the related lease or rental agreement. Variable rental revenue is recognized when it is earned.

 Cost of Sales 

 For the Company’s new and used commercial vehicle operations, cost of sales consists primarily of the Company’s actual purchase price, plus make-ready expenses, less any applicable manufacturers’ incentives. For the Company’s parts operations, cost of sales consists primarily of the Company’s actual purchase price, less any applicable manufacturers’ incentives. For the Company’s service and collision center operations, technician labor cost is the primary component of cost of sales. For the Company’s rental and leasing operations, cost of sales consists primarily of depreciation and amortization, rent, maintenance costs, license costs and interest expense on finance leases. There are no costs of sales associated with the Company’s finance and insurance revenue or other revenue.

 Leases 

 The Company leases commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a lease at its inception. For leases with terms greater than twelve months, the Company records a lease asset and liability at the present value of lease payments over the term. Many of the Company’s leases include renewal options and termination options that are factored into its determination of lease payments when appropriate.

 When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

 Taxes Assessed by a Governmental Authority 

 The Company accounts for sales taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction on a net (excluded from revenues) basis.

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 Selling, General and Administrative Expenses 

 Selling, general and administrative expenses consist primarily of incentive-based compensation for sales, finance and general management personnel, salaries for administrative personnel and expenses for rent, marketing, insurance, utilities and other general operating purposes.

 Stock Based Compensation 

 The Company applies the provisions of ASC topic 718-10, “ Compensation – Stock Compensation, ” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including grants of employee stock options, restricted stock units, restricted stock awards and employee stock purchases under the Employee Stock Purchase Plan, based on estimated fair values.

 The Company uses the Black-Scholes option-pricing model to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is expected to vest is recognized as an expense over the requisite service periods.

 Compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is recognized based on awards expected to vest. Accordingly, stock-based compensation expense has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 The Company determines the fair value of share-based payment awards on the date of grant using an option-pricing model that is affected by the Company’s stock price, as well as assumptions regarding a number of subjective variables. These variables include the Company’s expected stock price volatility over the term of the awards and actual and projected stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s stock options have characteristics that are significantly different from traded options and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of fair value and it may not be indicative of the fair value observed in a market transaction between a willing buyer and a willing seller.

 The following table reflects the weighted-average fair value of stock options granted during each period using the Black-Scholes option valuation model with the following weighted-average assumptions used:

 2024

 2023

 2022

 Weighted-average stock volatility

 33.66 
 % 
 
 34.60 
 % 
 
 34.97 
 % 
 
 Expected dividend yield

 1.46 
 % 
 
 1.54 
 % 
 
 1.44 
 % 
 
 Risk-free interest rate

 4.33 
 % 
 
 3.58 
 % 
 
 2.13 
 % 
 
 Expected life (years)

 6.0 
 
 6.0 
 
 6.0 
 
 Weighted-average fair value of stock options granted

 $ 
 17.13 
 
 $ 
 11.82 
 
 $ 
 11.21 
 
 The Company computes its historical stock price volatility in accordance with ASC Topic 718-10. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected life of stock options represents the weighted-average period the stock options are expected to remain outstanding.

 Advertising Costs 

 Advertising costs are expensed as incurred. Advertising and marketing expense was $ 11.3 million for 2024, $ 10.0 million for 2023 and $ 8.7 million for 2022. Advertising and marketing expense is included in selling, general and administrative expense.

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 Accounting for Internal Use Software 

 The Company’s accounting policy with respect to accounting for computer software developed or obtained for internal use is consistent with ASC topic 350-40 (Internal Use Software) , which provides guidance on accounting for the costs of computer software developed or obtained for internal use and identifies characteristics of internal-use software. The Company has capitalized software costs, including capitalized interest, of approximately $ 1.8 million as of December 31, 2024, net of accumulated amortization of $ 17.2 million, and had $ 3.0 million as of December 31, 2023, net of accumulated amortization of $ 16.0 million.

 Insurance 

 The Company utilizes a captive insurance company to manage its auto and general commercial liability insurance, which the Company supplements with excess insurance coverage at a level management believes is sufficient. The Company is partially self-insured for a portion of the claims related to its worker’s compensation and medical insurance. The Company uses actuarial information provided from third-party administrators to calculate an accrual for claims incurred, but not reported, and for the remaining portion of claims that have been reported. The Company is fully self-insured for claims related to its real and personal property, except for its vehicle inventory, which is fully insured. 

 Fair Value Measurements 

 The Company has various financial instruments that it must measure at fair value on a recurring basis. See Note 9 – Financial Instruments and Fair Value of the Notes to Consolidated Financial Statements, for further information. The Company also applies the provisions of fair value measurement to various nonrecurring measurements for its financial and nonfinancial assets and liabilities.

 Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three levels of the fair value hierarchy:

 Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 Level 3 includes unobservable inputs that reflect the Company’s assumptions about what factors market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

 Recently Adopted Accounting Pronouncements 

 In November 2023, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance related to annual and interim segment disclosures (ASU 2023-07). The updated accounting guidance, among other things, intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. We adopted ASU 2023-07 in the fourth quarter of 2024, by identifying the Chief Operating Decision Maker (“CODM”), identifying and aggregating operating segments, determining reportable segments and including significant segment expenses reviewed by the Company’s CODM. Refer to Note 16, Segment Reporting, for our updated presentation.

 New Accounting Pronouncements Not Yet Adopted 

 In December 2023, the FASB issued ASU 2023-09, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption. These requirements are not expected to have an impact on our financial statements but will impact our income tax disclosures.

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 In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring more detailed disclosure about specified categories of expenses such as inventory purchases, employee compensation, depreciation and amortization in their financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, may be applied prospectively or retrospectively, and allows for early adoption. The Company is currently evaluating the impact, if any, adoption will have on its financial statements.

 3.

 SUPPLIER CONCENTRATION :

 Major Suppliers and Dealership Agreements 

 The Company has entered into dealership agreements with various manufacturers of commercial vehicles and buses (“Manufacturers”). These agreements are nonexclusive agreements that allow the Company to stock, sell at retail and service commercial vehicles and sell parts from the Manufacturers in the Company’s defined area of responsibility. The agreements allow the Company to use the Manufacturers’ names, trade symbols and intellectual property and expire as follows:

 Manufacturer

 Expiration Dates

 Peterbilt

 July 2025

 International

 May 2025 through January 2029

 Isuzu

 Indefinite

 Hino

 Indefinite

 Ford

 Indefinite

 Blue Bird

 Currently Negotiating

 IC Bus

 May 2025 through December 2027

 Dennis Eagle

 May 2029

 Blue Arc

 Oct 2026

 Battle Motors 
 
 Indefinite 
 
 These agreements, as well as agreements with various other Manufacturers, impose a number of restrictions and obligations on the Company, including restrictions on a change in control of the Company and the maintenance of certain required levels of working capital. Violation of these restrictions could result in the loss of the Company’s right to purchase the Manufacturers’ products and use the Manufacturers’ trademarks.

 The Company purchases its new Peterbilt vehicles from Peterbilt and most of the parts sold at its Peterbilt dealerships from PACCAR, Inc, the parent company of Peterbilt, at prevailing prices charged to all franchised dealers. Sales of new Peterbilt commercial vehicles accounted for approximately 58.8 % of the Company’s new vehicle sales revenue for the year ended December 31, 2024, 50.7 % of the Company’s new vehicle sales revenue for the year ended December 31, 2023, and 59.6 % of the Company’s new vehicle sales revenue for the year ended December 31, 2022.

 Primary Lenders 

 The Company purchases its new and used commercial vehicle inventories with the assistance of floor plan financing programs as described in Note 7 to these Notes to Consolidated Financial Statements. The Company finances its Peterbilt new vehicle inventory under the PFC Floor Plan Credit Agreement with PFC, which has an aggregate loan commitment of $ 800.0 million. The remainder of the Company’s new vehicle inventory, and all of its used vehicle inventory, is financed under the BMO Floor Plan Credit Agreement with BMO Bank, N.A., which has an aggregate loan commitment of $ 675.0 million. The Company’s floor plan financing agreements provide that the occurrence of certain events will be considered events of default. In the event that the Company’s floor plan financing becomes insufficient, or its relationship with any of its current primary lenders terminates, the Company would need to obtain similar financing from other sources. Management believes it can obtain additional floor plan financing or alternative financing if necessary.

 From time to time, the Company uses the WF Credit Agreement to finance its Idealease lease and rental fleet vehicles and for other working capital needs. Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $ 175.0 million of revolving credit loans for certain of the Company’s capital expenditures, including commercial vehicle purchases for the Company’s Idealease lease and rental fleet, and general working capital needs. The Company expects to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles for the Company’s Idealease lease, rental fleet and other working capital needs.

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 The Company uses the PLC Agreement to finance its PacLease lease and rental fleet vehicles. Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $ 500.0 million of revolving credit loans to finance commercial vehicle purchases and other equipment to be leased or rented through the Company’s PacLease franchises.

 RTC Canada uses the RTC Canada Revolving Credit Agreement to finance its Idealease lease and rental fleet vehicles. 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 available upon the request of RTC Canada and consent of BMO.

 RTC Canada uses the RTC Canada Floor Plan Credit Agreement to finance its new and used vehicle inventory. Pursuant to the terms of the RTC Canada Floor Plan 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.

 Concentrations of Credit Risks 

 Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash, and accounts receivable. The Company places its cash, cash equivalents and restricted cash with what it considers to be quality financial institutions based on periodic assessments of such institutions. The Company’s cash, cash equivalents and restricted cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.

 The Company controls credit risk through credit approvals and by selling most of its trade receivables, other than vehicle accounts receivable, without recourse. Concentrations of credit risk with respect to trade receivables are reduced because of the geographical diversity of the Company’s customer base; however, all the Company’s business is concentrated in the United States and Ontario, Canada commercial vehicle markets and related aftermarkets.

 The Company sells finance contracts it enters into with customers to finance the purchase of commercial vehicles to third parties. These finance contracts are sold by the Company both with and without recourse. Most of the Company’s finance contracts are sold without recourse. The Company provides an allowance for doubtful receivables and a reserve for repossession losses related to finance contracts sold with recourse. Historically, the Company’s allowances and reserves have covered losses inherent in these receivables.

 4.

 ACCOUNTS RECEIVABLE :

 The Company’s accounts receivable, net, consisted of the following (in thousands):

 December 31,

 2024

 2023

 Trade accounts receivable from sale of vehicles

 $ 
 212,216 
 
 $ 
 119,575 
 
 Trade receivables other than vehicles

 99,108 
 
 98,555 
 
 Warranty claims

 18,675 
 
 21,395 
 
 Other accounts receivable

 18,088 
 
 23,633 
 
 Less allowance for credit losses

 ( 2,741 
 ) 
 
 ( 3,805 
 ) 
 
 Total

 $ 
 345,346 
 
 $ 
 259,353 
 
 Accounts receivable as of January 1, 2023, was $ 220.7 million.

 Notes receivable from the Cummins Clean Fuel Technologies (“CCFT”) joint venture include a $ 15.0 million promissory note bearing interest at the monthly SOFR, plus 1.5 % and maturing on December 31, 2026. The note arose from a loan provided to the joint venture to fund its working capital needs. The Company's share of profits from the joint venture is subject to the terms of the partnership agreement and may be impacted by the performance of the joint venture.

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 5.

 INVENTORIES :

 The Company’s inventories, net, consisted of the following (in thousands):

 December 31,

 2024

 2023

 New commercial vehicles

 $ 
 1,381,684 
 
 $ 
 1,388,687 
 
 Used commercial vehicles

 55,336 
 
 47,036 
 
 Parts and accessories

 341,458 
 
 353,992 
 
 Other

 26,789 
 
 33,100 
 
 Less allowance

 ( 17,523 
 ) 
 
 ( 21,368 
 ) 
 
 Total

 $ 
 1,787,744 
 
 $ 
 1,801,447 
 
 6.

 VALUATION ACCOUNTS: 

 Valuation and allowance accounts include the following (in thousands):

 Balance

 Beginning

 of Year

 Net Charged

 to Costs and

 Expenses

 Net Write-

 Offs

 Balance

 End

 of Year

 2024

 Reserve for parts inventory

 $ 
 9,165 
 
 $ 
 6,411 
 
 $ 
 ( 7,879 
 ) 
 
 $ 
 7,697 
 
 Reserve for commercial vehicle inventory

 12,203 
 
 18,242 
 
 ( 20,620 
 ) 
 
 9,825 
 
 2023

 Reserve for parts inventory

 $ 
 9,423 
 
 $ 
 6,274 
 
 $ 
 ( 6,532 
 ) 
 
 $ 
 9,165 
 
 Reserve for commercial vehicle inventory

 7,065 
 
 11,191 
 
 ( 6,053 
 ) 
 
 12,203 
 
 2022

 Reserve for parts inventory

 $ 
 7,460 
 
 $ 
 7,378 
 
 $ 
 ( 5,415 
 ) 
 
 $ 
 9,423 
 
 Reserve for commercial vehicle inventory

 919 
 
 13,653 
 
 ( 7,507 
 ) 
 
 7,065 
 
 Inventory 

 The Company provides a reserve for obsolete and slow-moving parts. The reserve is reviewed and, if necessary, adjustments are made on a quarterly basis. The Company relies on historical information to support its reserve. Once the inventory is written down, the Company does not reverse any reserve balance until the inventory is sold.

 The valuation for new and used commercial vehicle inventory is based on specific identification. A detail of new and used commercial vehicle inventory is reviewed and, if necessary, adjustments to the value of specific vehicles are made on a quarterly basis.

 Accounts Receivable and Allowance for Credit Losses 

 The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. Under Accounting Standards Topic 326, Financial Instruments – Credit Losses , the Company is required to remeasure expected credit losses for financial instruments held on the reporting date based on historical experience, current conditions and reasonable forecasts.

 Accounts receivable consists primarily of commercial vehicle sales receivables, manufacturers’ receivables and leasing, parts and service sales receivables and other trade receivables. The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic conditions. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.

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 The following table summarizes the changes in the allowance for credit losses (in thousands):

 Balance

 December 31,

 2023

 Provision for the

 Year Ended

 December 31,

 2024

 Write offs

 Against

 Allowance,

 net of

 Recoveries

 Balance

 December 31,

 2024

 Commercial vehicle receivables

 $ 
 102 
 
 $ 
 10 
 
 $ 
 125 
 
 $ 
 237 
 
 Manufacturers’ receivables

 964 
 
 2,927 
 
 ( 3,054 
 ) 
 
 837 
 
 Leasing, parts and service receivables

 1,660 
 
 3,517 
 
 ( 3,510 
 ) 
 
 1,667 
 
 Other receivables

 1,079 
 
 17 
 
 ( 1,096 
 ) 
 
 - 
 
 Total

 $ 
 3,805 
 
 $ 
 6,471 
 
 $ 
 ( 7,535 
 ) 
 
 $ 
 2,741 
 
 7.

 FLOOR PLAN NOTES PAYABLE AND LINE OF CREDIT :

 Floor Plan Notes Payable 

 Floor plan notes are financing agreements to facilitate the Company’s purchase of new and used commercial vehicle inventory. These notes are collateralized by the inventory purchased, and accounts receivable arising from the sale thereof. The Company’s BMO Floor Plan Credit Agreement with BMO Bank, N.A. provides for a loan commitment of up to $ 675.0 million. The interest rate under the BMO Floor Plan Credit Agreement is the one-month SOFR, plus 1.20 %. The effective interest rate applicable to the BMO Floor Plan Credit Agreement was approximately 5.69 % as of December 31, 2024. The Company utilizes its excess cash on hand to pay down its outstanding borrowings under its BMO Floor Plan Credit Agreement, and the resulting interest earned is recognized as an offset to the Company’s gross interest expense under the BMO Floor Plan Credit Agreement.

 The Company’s PFC Floor Plan Credit Agreement with PFC provides for a loan commitment of up to $ 800.0 million. The interest rate under the PFC Floor Plan Credit Agreement is the prime rate, minus 2.10 %. The effective interest rate applicable to the PFC Floor Plan Credit Agreement was approximately 5.4 % as of December 31, 2024. The Company utilizes its excess cash on hand to pay down its outstanding borrowings under the PFC Floor Plan Credit Agreement, and the resulting interest earned is recognized as an offset to the Company’s gross interest expense under the PFC Floor Plan Credit Agreement.

 The Company’s RTC Canada Floor Plan Credit Agreement provides for a loan commitment of 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. RTC Canada may borrow, repay and reborrow loans from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the credit limits set forth above with respect to new and used vehicles. Advances under the RTC Canada Floor Plan Credit Agreement bear interest per annum, payable on the first business day of each calendar month, payable monthly, at CORRA, plus 1.27 %.

 The Company finances all of the purchase price of its new commercial vehicle inventory and the loan value of its used commercial vehicle inventory under the PFC Floor Plan Credit Agreement, the BMO Floor Plan Credit Agreement and the RTC Canada Floor Plan Agreement, under which BMO Bank, N.A., PFC and BMO pay the manufacturer directly with respect to new commercial vehicles. Amounts borrowed under the agreements are due when the related commercial vehicle inventory (collateral) is sold. The BMO Floor Plan Credit Agreement expires December 31, 2029, although BMO Bank, N.A. has the right to terminate the BMO Floor Plan Credit Agreement at any time upon 360 days written notice and the Company may terminate at any time, subject to specified limited exceptions. The PFC Floor Plan Credit Agreement expires December 16, 2029, although either party has the right to terminate the PFC Floor Plan Credit Agreement at any time upon 360 days written notice. On December 31, 2024, we had approximately $ 492.7 million outstanding under the PFC Floor Plan Credit Agreement. On December 31, 2024, the Company had approximately $ 389.3 million outstanding under its BMO Floor Plan Credit Agreement. The Company’s RTC Canada Floor Plan Credit Agreement expires September 14, 2026. On December 31, 2024, the Company had approximately $ 78.2 million CAD outstanding under the RTC Canada Floor Plan Agreement.

 The Company’s weighted average interest rate for floor plan notes payable was 4.4 % for the year ended December 31, 2024, and 3.3 % for the year ended December 31, 2023, which is net of interest related to prepayments of new and used inventory loans.

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 Assets pledged as collateral were as follows (in thousands):

 December 31,

 2024

 2023

 Inventories, new and used vehicles at cost based on specific identification, net of allowance

 $ 
 1,427,196 
 
 $ 
 1,423,521 
 
 Vehicle sale-related accounts receivable

 197,186 
 
 119,575 
 
 Total

 $ 
 1,624,382 
 
 $ 
 1,543,096 
 
 Floor plan notes payable related to vehicles

 $ 
 1,081,199 
 
 $ 
 1,139,744 
 
 Line of Credit 

 The Company has a line of credit that provides for a maximum borrowing of $ 25.0 million. There were no advances outstanding under this secured line of credit as of December 31, 2024, however, $ 18.8 million was pledged to secure various letters of credit related to self-insurance products, leaving $ 6.2 million available for future borrowings as of December 31, 2024.

 8.

 LONG-TERM DEBT :

 Long-term debt was comprised of the following variable interest rate term notes (in thousands):

 December 31,

 2024

 2023

 Total long-term debt, net of current maturities

 $ 
 408,440 
 
 $ 
 414,002 
 
 As of December 31, 2024, long-term debt maturities were as follows (in thousands):

 2025

 $ 
 – 
 
 2026

 188,440 
 
 2027

 – 
 
 2028

 – 
 
 2029

 220,000 
 
 Thereafter

 – 
 
 Total

 $ 
 408,440 
 
 On September 14, 2021, the Company entered the WF Credit Agreement with the WF Lenders and the WF Agent. Pursuant to the terms of the WF Credit Agreement (as amended), the WF Lenders have agreed to make up to $ 175.0 million of revolving credit loans for certain of the Company’s capital expenditures, including commercial vehicle purchases for the Company’s Idealease lease and rental fleet, and general working capital needs. Borrowings under the WF Credit Agreement bear interest per annum, payable on each interest payment date, at (A) SOFR plus (i) 1.25 % or (ii) 1.5 %, depending on the Company’s consolidated leverage ratio or (B) on or after the term SOFR transition date, the term SOFR plus (i) 1.25 % or (ii) 1.5 %, depending on the Company’s 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. The Company may terminate the commitments at any time. The Company expects to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles for the Company’s Idealease lease and rental fleet.

 On November 1, 2023, the Company entered into the PLC Agreement with PFC. Pursuant to the terms of the PLC Agreement (as amended), PLC agreed to make up to $ 500.0 million of revolving credit loans to finance certain of the Company’s capital expenditures, including commercial vehicle purchases and other equipment to be leased or rented through its PacLease franchises. The Company may borrow, repay and reborrow amounts pursuant to the PLC Agreement from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the borrowing base. In addition, the Company must maintain a minimum balance of $ 220.0 million. Advances under the PLC Agreement bear interest per annum, payable on the fifth day of the following month, at the Company’s option, at either (A) the prime rate, minus 2.10 %, provided that the floating rate of interest is subject to a floor of 0 %, or (B) a fixed rate, to be determined between us and PLC in each instance of borrowing at a fixed rate. The PLC Agreement expires on December 16, 2029, although either party has the right to terminate the PLC Agreement at any time upon 360 days written notice.

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 On May 31, 2022, RTC Canada entered into 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. Borrowings under the RTC Revolving Credit Agreement bear interest per annum payable monthly at CORRA, plus 1.72 %. The RTC Canada Revolving Credit Agreement expires September 14, 2026.

 The interest associated with the WF Credit Agreement, PLC Agreement and RTC Canada Revolving Credit Agreement is recorded in interest expense on the Consolidated Statement of Income. The WF Credit Agreement, PLC Agreement and RTC Canada Revolving Credit Agreement are general borrowing facilities, whereas prior to these credit agreements, interest expense associated with the Company’s lease and rental fleet was recorded in cost of sales as the borrowings were directly related to each lease and rental vehicle.

 The BMO Floor Plan Credit Agreement and the WF Credit Agreement require the Company to satisfy various financial ratios such as the leverage ratio, the asset coverage ratio and the fixed charge coverage ratio. As of December 31, 2024, the Company was in compliance with all debt covenants related to the BMO Floor Plan Credit Agreement and the WF Credit Agreement. The Company does not anticipate any breach of the covenants in the foreseeable future.

 9.

 FINANCIAL INSTRUMENTS AND FAIR VALUE :

 The Company measures certain financial assets and liabilities at fair value on a recurring basis. 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 December 31, 2024, and 2023. The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.

 The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral and liquidity. Accordingly, the Company concluded that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar debt and the Company’s current credit standing. The Company has categorized such debt within Level 2 of the hierarchy framework. The carrying amount approximates fair value.

 10.

 LEASES :

 The Company’s accounting policy with respect to leases complies with ASU 842, Leases . The standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than twelve months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

 A lease is classified as a finance lease if any of the following conditions exist on the date of lease commencement:

 ●

 The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.

 ●

 The lease provides the lessee an option to purchase the underlying asset, and that option is reasonably certain to be exercised.

 ●

 The lease term is for a major part of the remaining economic life of the underlying asset.

 ●

 The present value of the lease payments equals or exceeds the fair value of the underlying asset.

 ●

 The underlying asset is of such a specialized nature that only the lessee can use it without major modifications.

 ●

 The lessor expects to have no alternative use for the leased asset at the end of the lease.

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 The Company applied the practical expedients permitted under Topic 842, which among other things, allowed it to retain its existing assessment of whether an arrangement is, or contains, a lease and whether such lease is classified as an operating or finance lease. The Company made an accounting policy election that keeps leases with an initial term of twelve months or less off the balance sheet and results in recognizing those lease payments in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.

 The Company leases certain commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a lease at its inception. For leases with terms greater than twelve months, the Company records the related asset and obligation at the present value of lease payments over the term. Many of the Company’s leases include renewal options and/or termination options that are factored into its determination of lease payments when appropriate. The Company has elected not to account for lease and nonlease components as a single combined lease component as lessee. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

 Lease of Vehicles as Lessee 

 The Company leases commercial vehicles as the lessee under finance leases and operating leases. The lease terms vary from one year to ten years. These vehicles are then subleased or rented by the Company to customers under various agreements. The Company received sublease income under non-cancelable subleases of $ 54.3 million for the year ended December 31, 2024, and $ 50.0 million for the year ended December 31, 2023.

 The Company usually guarantees the residual value of vehicles under operating lease and finance lease arrangements. As of December 31, 2024, the Company guaranteed commercial vehicle residual values of approximately $ 69.8 million under operating lease and finance lease arrangements.

 Lease of Facilities as Lessee 

 The Company’s facility leases are classified as operating and finance leases and primarily reflect its use of dealership facilities and office space. The lease terms vary from one year to 83 years, some of which include options to extend the lease term, and some of which include options to terminate the lease within one year. The Company considers these options in determining the lease term used to establish its right-of-use assets and lease liabilities.

 The Company leases facilities in Ontario, Canada from entities owned by the noncontrolling interest holder of RTC Canada. In 2024, the Company recorded approximately $ 2.0 million in operating lease expense related to these leases.

 Lease Costs and Supplemental Information 

 Components of lease cost are as follows (in thousands):

 Year Ended

 Component

 Classification

 December 31,

 2024

 December 31,

 2023

 Operating lease cost

 SG&A expense

 $ 
 15,630 
 
 $ 
 14,924 
 
 Operating lease cost

 Lease and rental cost of products sold

 9,102 
 
 5,981 
 
 Finance lease cost – amortization of right-of-use assets

 Lease and rental cost of products sold

 26,525 
 
 24,655 
 
 Finance lease cost – interest on lease liabilities

 Lease and rental cost of products sold

 5,454 
 
 5,454 
 
 Short-term lease cost

 SG&A expense

 133 
 
 191 
 
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 Table of Contents 

 Supplemental cash flow information and non-cash activity related to operating and finance leases are as follows (in thousands):

 Year Ended

 December 31,

 2024

 December 31,

 2023

 Operating cash flow information:

 Cash paid for amounts included in the measurement of lease liabilities

 $ 
 30,187 
 
 $ 
 26,359 
 
 Financing cash flow information:

 Cash paid for amounts included in the measurement of lease liabilities

 $ 
 16,839 
 
 $ 
 17,693 
 
 Non-cash activity:

 Operating lease right-of-use assets obtained in exchange for lease obligations

 $ 
 18,339 
 
 $ 
 40,093 
 
 Weighted-average remaining lease term and discount rate for operating and finance leases as of December 31, 2024, are as follows:

 Finance Leases

 Operating Leases

 Weighted-average remaining lease term (in months)

 38 

 99 

 Weighted-average discount rate

 4.7 
 % 
 
 4.9 
 % 
 
 Maturities of lease liabilities by fiscal year for finance leases and operating leases as of December 31, 2024, are as follows (in thousands):

 Finance

 Leases

 Operating

 Leases

 2025

 $ 
 43,603 
 
 $ 
 21,082 
 
 2026

 32,510 
 
 20,345 
 
 2027

 24,226 
 
 19,536 
 
 2028

 19,998 
 
 17,399 
 
 2029

 13,978 
 
 15,074 
 
 2030 and beyond

 11,647 
 
 49,538 
 
 Total lease payments

 $ 
 145,962 
 
 $ 
 142,974 
 
 Less: Imputed interest

 ( 15,251 
 ) 
 
 ( 29,234 
 ) 
 
 Present value of lease liabilities

 $ 
 130,711 
 
 $ 
 113,740 
 
 Lease of Vehicles as Lessor 

 The Company leases commercial vehicles that the Company owns to customers primarily over periods of one to ten years. The Company applied the practical expedient permitted within Topic 842 that allows it not to separate lease and nonlease components. Nonlease components typically consist of maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option for the lessee to purchase the commercial vehicle.

 The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.

 Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales revenue upon lease commencement. The receivable for sales-type leases as of December 31, 2024, in the amount of $ 4.7 million is reflected in Other Assets on the Consolidated Balance Sheet.

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 Minimum rental revenue to be received for non-cancelable leases and subleases in effect as of December 31, 2024, are as follows (in thousands):

 2025

 $ 
 202,852 
 
 2026

 168,183 
 
 2027

 136,892 
 
 2028

 101,339 
 
 2029

 64,276 
 
 Thereafter

 36,119 
 
 Total

 $ 
 709,661 
 
 Rental income during the year ended December 31, 2024, and 2023, consisted of the following (in thousands):

 2024

 2023

 Minimum rental payments

 $ 
 310,052 
 
 $ 
 306,897 
 
 Nonlease payments

 44,887 
 
 46,883 
 
 Total

 $ 
 354,939 
 
 $ 
 353,780 
 
 11.

 SHARE BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS :

 Employee Stock Purchase Plan 

 The Company’s 2004 Employee Stock Purchase Plan, as amended and restated (the “Employee Stock Purchase Plan”), allows eligible employees to contribute up to $ 10,625 of their base earnings every six months toward the semi-annual purchase of the Company’s Class A common stock. The employee’s purchase price is 85 % of the lesser of the closing price of the Class A common stock on the first business day or the last business day of the semi-annual offering period, as reported by The NASDAQ Global Select Market. Employees may purchase shares having a fair market value of up to $ 25,000 (measured as of the first day of each semi-annual offering period) for each calendar year. On May 16, 2023, the Company’s shareholders approved the amendment and restatement of the Employee Stock Purchase Plan to increase the number of shares of Class A common stock authorized for issuance thereunder by 600,000 shares. Under the Employee Stock Purchase Plan, there are approximately 886,509 shares remaining of the 4,650,000 shares of the Company’s Class A common stock that were reserved for issuance. The Company issued 195,540 shares under the Employee Stock Purchase Plan during the year ended December 31, 2024, and 208,854 shares during the year ended December 31, 2023. Of the 7,391 employees eligible to participate, approximately 2,262 elected to participate in the plan as of December 31, 2024.

 Non-Employee Director Stock Option Plan 

 The Rush Enterprises, Inc. 2006 Non-Employee Director Stock Option Plan, as amended and restated (the “Director Plan”), reserved 1,125,000 shares of Class A common stock for issuance upon exercise of any awards granted under the plan. The Director Plan is designed to attract and retain highly qualified non-employee directors. Currently, each non-employee director receives a grant of the Company’s Class A common stock equivalent to a compensation value of $ 145,000 ; provided however, that directors may elect to receive up to 40 % of the value of such grant in cash. In 2024, three non-employee directors each received a grant of 3,230 shares of the Company’s Class A common stock, three non-employee directors each received a grant of 1,938 shares of the Company’s Class A common stock and $ 58,000 cash and one non-employee director received a grant of 2,261 shares of the Company’s Class A common stock and $ 43,499 cash, for total compensation equivalent to $ 145,000 each. In 2023, three non-employee directors each received a grant of 4,116 shares of the Company’s Class A common stock, two non-employee directors each received a grant of 2,469 shares of the Company’s Class A common stock and $ 58,000 cash and one non-employee director received a grant of 2,880 shares of the Company’s Class A common stock and $ 43,500 cash, for total compensation equivalent to $ 145,000 each. One director who was appointed to the Company’s Board of Directors in October of 2024 received 1,501 shares of the Company’s Class A common stock at the time of appointment, for total compensation equivalent to $ 72,500 . Under the Director Plan, there are approximately 162,533 shares remaining for issuance of the 1,125,000 shares of the Company’s Class A common stock that were reserved for issuance. The Company granted 17,765 shares of Class A common stock under the Director Plan during the year ended December 31, 2024, and 21,667 shares of Class A common stock under the Director Plan during the year ended December 31, 2023.

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 Table of Contents 

 Employee Incentive Plans 

 In May 2007, the Board of Directors and shareholders adopted the Rush Enterprises, Inc. 2007 Long-Term Incentive Plan (the “2007 Incentive Plan”). The 2007 Incentive Plan provides for the grant of stock options (which may be nonqualified stock options or incentive stock options for tax purposes), stock appreciation rights issued independent of or in tandem with such options (“SARs”), restricted stock awards and performance awards. The 2007 Incentive Plan was amended and restated on May 20, 2014, May 16, 2017, May 12, 2020, and May 16, 2023. The number of shares available for issuance under the plan include 21,600,000 shares of Class A common stock and 9,000,000 shares of Class B common stock.

 The aggregate number of shares of common stock subject to stock options or SARs that may be granted to any one participant in any year under the 2007 Incentive Plan is 150,000 shares of Class A common stock or 150,000 shares of Class B common stock. Each option granted pursuant to the 2007 Incentive Plan has a ten -year term from the grant date and vests in three equal annual installments beginning on the third anniversary of the grant date. The Company has 21,600,000 shares of Class A common stock and 9,000,000 shares of Class B common stock reserved for issuance under the Company’s 2007 Incentive Plan. As of December 31, 2024, approximately 3,189,695 shares of Class A common stock and 2,283,175 shares of Class B common stock are available for issuance under the Company’s 2007 Incentive Plan. The Company issues new shares of its Class A or Class B common stock upon the exercise of stock options or vesting of restricted stock awards. During the year ended December 31, 2024, the Company granted to employees 538,700 options to purchase Class A common stock and 398,525 restricted Class B common stock awards under the 2007 Incentive Plan. During the year ended December 31, 2023, the Company granted to employees 790,673 options to purchase Class A common stock and 551,138 shares of restricted Class B common stock awards under the 2007 Incentive Plan. Restricted stock awards are issued when granted but are subject to vesting requirements.

 Valuation and Expense Information 

 Stock-based compensation expense related to stock options, restricted stock awards and employee stock purchases was $ 30.4 million for the year ended December 31, 2024, $ 30.4 million for the year ended December 31, 2023, and $ 25.3 million for the year ended December 31, 2022. Cash received from options exercised and shares purchased under all share-based payment arrangements was $ 25.4 million for the year ended December 31, 2024, $ 18.0 million for the year ended December 31, 2023, and $ 13.3 million for the year ended December 31, 2022.

 The following table presents a summary of the Company’s stock option activity and related information for the year ended December 31, 2024:

 Weighted

 Weighted

 Average

 Average

 Remaining

 Aggregate

 Exercise

 Contractual

 Intrinsic

 Options

 Shares

 Price

 Life (in Years)

 Value

 Balance of Outstanding Options at January 1, 2024

 5,822,298 
 
 $ 
 22.76 
 
 Granted

 538,700 
 
 49.24 
 
 Exercised

 ( 1,225,271 
 ) 
 
 15.10 
 
 Forfeited

 ( 43,875 
 ) 
 
 36.02 
 
 Balance of Outstanding Options at December 31, 2024

 5,091,852 
 
 $ 
 27.31 
 
 5.8 
 
 $ 
 139,915,484 
 
 Expected to vest after December 31, 2024

 2,839,866 
 
 $ 
 34.85 
 
 7.4 
 
 $ 
 56,636,789 
 
 Vested and exercisable at December 31, 2024

 2,239,878 
 
 $ 
 17.64 
 
 3.8 
 
 $ 
 83,208,675 
 
 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of the Company’s Class A common stock on December 31, 2024, which was $ 54.79 . The total intrinsic value of options exercised was $ 47.3 million during the year ended December 31, 2024, $ 19.8 million during the year ended December 31, 2023, and $ 11.6 million during the year ended December 31, 2022.

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 Table of Contents 

 The following table presents a summary of the status of the number of shares underlying the Company’s non-vested stock options as of December 31, 2024, and changes during the year ended December 31, 2024:

 Weighted

 Average

 Number of

 Grant Date

 Non-vested Shares

 Shares

 Fair Value

 Non-vested at January 1, 2024

 3,304,171 
 
 $ 
 8.95 
 
 Granted

 538,700 
 
 17.13 
 
 Vested

 ( 946,022 
 ) 
 
 6.16 
 
 Forfeited

 ( 43,875 
 ) 
 
 11.81 
 
 Non-vested at December 31, 2024

 2,852,974 
 
 $ 
 11.37 
 
 The total fair value of vested options was $ 5.8 million during the year ended December 31, 2024, $ 5.8 million during the year ended December 31, 2023, and $ 5.9 million during the year ended December 31, 2022. The weighted-average grant date fair value of options granted was $ 17.13 per share during the year ended December 31, 2024, $ 11.82 per share during the year ended December 31, 2023, and $ 11.21 per share during the year ended December 31, 2022.

 Stock Awards 

 The Company granted restricted stock awards to certain of its employees under the 2007 Incentive Plan and unrestricted stock awards to its non-employee directors under the Director Plan during the year ended December 31, 2024. The restricted stock awards granted to employees vest in three equal installments on the first, second and third anniversary of the grant date and are forfeited in the event the recipient’s employment or relationship with the Company is terminated prior to vesting, except as a result of retirement or under certain circumstances associated with a change of control or involuntary termination, as further described in the Company’s executive transition plan. The fair value of the restricted stock awards granted to the Company’s employees is amortized to expense on a straight-line basis over the restricted stock’s vesting period. The shares granted to non-employee directors are expensed on the grant date.

 The following table presents a summary of the Company’s non-vested restricted stock awards at December 31, 2024:

 Weighted

 Average

 Weighted

 Remaining

 Aggregate

 Average

 Contractual

 Intrinsic

 Grant Date

 Stock Awards and Units

 Shares

 Life (in Years)

 Value

 Fair Value

 Outstanding non-vested shares at January 1, 2024

 1,074,392 
 
 $ 
 34.64 
 
 Granted

 416,290 
 
 50.64 
 
 Vested

 ( 547,963 
 ) 
 
 33.44 
 
 Forfeited

 ( 7,500 
 ) 
 
 41.72 
 
 Outstanding non-vested at December 31, 2024

 935,219 
 
 8.4 
 
 $ 
 50,913,322 
 
 $ 
 42.08 
 
 Expected to vest after December 31, 2024

 934,378 
 
 8.4 
 
 $ 
 50,867,536 
 
 $ 
 42.08 
 
 The total fair value of the shares issued upon the vesting of restricted and unrestricted stock awards during the year ended December 31, 2024, was $ 9.2 million. The weighted-average grant date fair value of stock awards granted was $ 50.64 per share during the year ended December 31, 2024, $ 36.97 per share during the year ended December 31, 2023, and $ 33.33 per share during the year ended December 31, 2022.

 As of December 31, 2024, the Company had $ 12.4 million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of 2.1 years and $ 13.5 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.3 years.

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 Table of Contents 

 Defined Contribution Plan 

 The Company has a defined contribution plan (the “Rush 401k Plan”) that is available to all U.S. based employees. Each employee who has completed 30 days of continuous service is entitled to enter the Rush 401k Plan on the first day of the following month. Participating employees may contribute from 1 % to 50 % of their total gross compensation. However, certain highly compensated employees are limited to a maximum contribution of 15 % of total gross compensation. The Company’s policy is for the first 10 % of an employee’s contribution, the Company contributes an amount equal to 20 % of the employees’ contributions for those employees with less than five years of service and an amount equal to 40 % of the employees’ contributions for those employees with more than five years of service. The Company incurred expenses related to the Rush 401k Plan of approximately $ 14.0 million during the year ended December 31, 2024, $ 13.3 million during the year ended December 31, 2023, and $ 12.1 million during the year ended December 31, 2022.

 Deferred Compensation Plan 

 On November 6, 2010, the Board of Directors of the Company adopted the Rush Enterprises, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) pursuant to which certain employees and directors may elect to defer a portion of their annual compensation. The Deferred Compensation Plan was amended and restated effective May 18, 2021, in order to bring the plan into conformance with current “best” practices. The Company established a rabbi trust to finance obligations under the Deferred Compensation Plan with corporate-owned variable life insurance contracts. Participants are 100 % vested in their respective deferrals and the earnings thereon. The first deferral election period began on January 1, 2011. The Company’s liability related to the Deferred Compensation Plan was $ 28.1 million on December 31, 2024, and $ 24.8 million on December 31, 2023. The related cash surrender value of the life insurance contracts was $ 24.4 million on December 31, 2024, and $ 18.0 million on December 31, 2023.

 The Company currently does not provide any post-retirement benefits, nor does it provide any post-employment benefits.

 12.

 EARNINGS PER SHARE :

 Basic earnings per share (“EPS”) were computed by dividing income from continuing operations by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversions of potentially dilutive options and restricted stock awards that were outstanding during the period.

 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 the Company after payment of its 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.

 The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for income from continuing operations (in thousands, except per share amounts):

 2024

 2023

 2022

 Numerator-

 Numerator for basic and diluted earnings per share −

 Net income available to common shareholders

 $ 
 304,153 
 
 $ 
 347,055 
 
 $ 
 391,382 
 
 Denominator-

 Denominator for basic earnings per share – weighted average shares outstanding

 79,058 
 
 81,089 
 
 83,100 
 
 Effect of dilutive securities−

 Employee and director stock options and restricted share awards

 2,759 
 
 2,631 
 
 2,627 
 
 Denominator for diluted earnings per share − adjusted weighted average shares outstanding and assumed conversions

 81,818 
 
 83,720 
 
 85,727 
 
 Basic earnings per common share

 $ 
 3.85 
 
 $ 
 4.28 
 
 $ 
 4.71 
 
 Diluted earnings per common share and common share equivalents

 $ 
 3.72 
 
 $ 
 4.15 
 
 $ 
 4.57 
 
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 Options to purchase shares of common stock that were outstanding for the years ended December 31, 2024, 2023 and 2022 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

 2024

 2023

 2022

 Anti-dilutive options – weighted average

 532 
 
 1,282 
 
 1,271 
 
 13.

 INCOME TAXES: 

 The tax provisions are summarized as follows (in thousands):

 Year Ended December 31,

 2024

 2023

 2022

 Income before income taxes:

 Domestic

 $ 
 392,253 
 
 $ 
 455,288 
 
 $ 
 502,141 
 
 Foreign

 5,562 
 
 6,773 
 
 7,186 
 
 Total

 397,815 
 
 462,061 
 
 509,327 
 
 Current provision

 Federal

 $ 
 62,358 
 
 $ 
 87,270 
 
 $ 
 93,942 
 
 State

 9,975 
 
 16,864 
 
 16,516 
 
 Foreign

 702 
 
 2,265 
 
 2,523 
 
 Total

 73,035 
 
 106,399 
 
 112,981 
 
 Deferred provision (benefit)

 Federal

 15,283 
 
 7,617 
 
 7,975 
 
 State

 3,752 
 
 505 
 
 ( 565 
 ) 
 
 Foreign

 775 
 
 ( 521 
 ) 
 
 ( 3,149 
 ) 
 
 Total

 19,810 
 
 7,601 
 
 4,261 
 
 Provision for income taxes

 $ 
 92,845 
 
 $ 
 114,000 
 
 $ 
 117,242 
 
 A reconciliation of taxes based on the federal statutory rates and the provisions (benefits) for income taxes are summarized as follows (in thousands):

 Year Ended December 31,

 2024

 2023

 2022

 Amount

 Rate

 Amount

 Rate

 Amount

 Rate

 Income taxes at the federal statutory rate

 $ 
 83,540 
 
 21.0 
 % 
 
 $ 
 97,032 
 
 21.0 
 % 
 
 $ 
 106,959 
 
 21.0 
 % 
 
 State income taxes, net of federal benefit (a) 

 10,030 
 
 2.5 
 
 14,120 
 
 3.1 
 
 12,708 
 
 2.5 
 
 Tax effect of permanent differences

 ( 1,212 
 ) 
 
 ( 0.3 
 ) 
 
 1,357 
 
 0.3 
 
 ( 488 
 ) 
 
 ( 0.1 
 ) 
 
 Foreign tax rate differential

 271 
 
 0.1 
 
 266 
 
 0.0 
 
 ( 2134 
 ) 
 
 ( 0.4 
 ) 
 
 Other, net

 216 
 
 0.0 
 
 1,225 
 
 0.3 
 
 197 
 
 0.0 
 
 Provision for income taxes

 $ 
 92,845 
 
 23.3 
 % 
 
 $ 
 114,000 
 
 24.7 
 % 
 
 $ 
 117,242 
 
 23.0 
 % 
 
 (a) State taxes in Texas, California and Illinois made up the majority (greater than 50 percent) of the tax effect in this category 

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 Table of Contents 

 The following summarizes the components of net deferred income tax liabilities included in the balance sheet (in thousands):

 December 31,

 2024

 2023

 Deferred income tax (assets) liabilities:

 Inventory

 $ 
 ( 5,547 
 ) 
 
 $ 
 ( 5,215 
 ) 
 
 Accounts receivable

 ( 517 
 ) 
 
 ( 436 
 ) 
 
 Vehicle finance lease obligations

 ( 30,696 
 ) 
 
 ( 31,178 
 ) 
 
 Finance and operating leases - Liability

 ( 27,522 
 ) 
 
 ( 29,446 
 ) 
 
 Stock options

 ( 8,790 
 ) 
 
 ( 8,785 
 ) 
 
 Accrued liabilities

 ( 5,604 
 ) 
 
 ( 4,653 
 ) 
 
 State net operating loss carry forward

 ( 1,689 
 ) 
 
 ( 1,111 
 ) 
 
 State tax credit

 29 
 
 ( 34 
 ) 
 
 Other

 ( 6,108 
 ) 
 
 ( 6,167 
 ) 
 
 Finance and operating leases - Asset

 26,970 
 
 29,031 
 
 Fixed assets and intangibles

 238,390 
 
 217,565 
 
 Net deferred income tax liability

 $ 
 178,916 
 
 $ 
 159,571 
 
 As of December 31, 2024, the Company had approximately $ 39.2 million in state net operating loss carry forwards that expire from 2030 to 2043, which result in a deferred tax asset of approximately $ 1.7 million. The Company has evaluated whether its state net operating losses are realizable and has not recorded a valuation allowance against them. The valuation allowance did not change over the prior year ending December 31, 2023.

 The Company had unrecognized income tax benefits totaling $ 8.0 million as a component of accrued liabilities as of December 31, 2024, and $ 6.7 million as of 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. During the years ended December 31, 2024, 2023 and 2022, the Company recognized approximately $ 197,700 , $ 86,200 , and $ 22,800 in interest expense. No amounts were accrued for penalties. The Company had approximately $ 530,000 , $ 389,000 and $ 302,000 of interest accrued as of December 31, 2024, 2023 and 2022, respectively.

 Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $ 26.1 million at December 2024 and $ 22.9 million at December 2023. Those earnings are considered to be indefinitely reinvested. Upon repatriation of those earnings in the form of dividends or otherwise, the Company may be subject to state and local taxes, and/or withholding taxes payable to the various foreign countries. The Company expects to be able to take a 100 % dividends received deduction to offset any U.S. federal income tax liability on the distribution of untaxed earnings and profits.

 The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of December 31, 2024, the tax years ended December 31, 2021 through 2024 remained subject to audit by federal tax authorities and the tax years ended December 31, 2020 through 2024, remained subject to audit by state tax authorities.

 The table below presents the reconciliation of the change in the unrecognized tax benefits (in thousands):

 2024

 2023

 2022

 Unrecognized tax benefits at beginning of period

 $ 
 6,771 
 
 $ 
 5,377 
 
 $ 
 4,309 
 
 Gross increases – tax positions in current year

 1,937 
 
 2,582 
 
 2,025 
 
 Reductions due to lapse of statute of limitations

 ( 645 
 ) 
 
 ( 1,188 
 ) 
 
 ( 957 
 ) 
 
 Unrecognized tax benefits at end of period

 $ 
 8,063 
 
 $ 
 6,771 
 
 $ 
 5,377 
 
 14.

 COMMITMENTS AND CONTINGENCIES :

 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. 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 December 31, 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.

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 Table of Contents 

 15.

 ACQUISITIONS: 

 The following acquisitions, unless otherwise noted, were considered business combinations accounted for under ASC 805 “Business Combinations.” Pro forma information is not included in accordance with ASC 805 since no acquisitions were considered material individually or in the aggregate.

 On July 15, 2024, the Company acquired certain assets of Nebraska Peterbilt, which included real estate and a Peterbilt commercial vehicle franchise in Grand Island and North Platte, Nebraska, along with commercial vehicle and parts inventory. The transaction was valued at approximately $ 16.5 million, with the purchase price paid in cash.

 On December 4, 2023, the Company acquired certain assets of Freeway Ford Truck Sales, Inc., which included real estate and a Ford commercial vehicle franchise in Chicago, Illinois, along with commercial vehicle and parts inventory. The transaction was valued at approximately $ 16.3 million, with the purchase price paid in cash.

 On November 7, 2022, the Company acquired certain assets of Scheppers International Truck Center, Inc., which included real estate and an International truck franchise in Jefferson City, Missouri, along with commercial vehicle and parts inventory. The transaction was valued at approximately $ 6.8 million, with the purchase price paid in cash.

 On May 2, 2022, the Company completed the acquisition of an additional 30 % equity interest in RTC Canada, resulting in an 80 % controlling interest in RTC Canada. The acquisition was accounted for as an acquisition achieved in stages under ASC 805, Business Combinations . The acquisition-date fair value of the previous 50 % equity interest was $ 44.7 million, resulting in a gain of $ 7.0 million included in the line-item Other income (expense) on the Consolidated Statements of Income in the year ended December 31, 2022. The Company also recognized a reversal of deferred tax liabilities of $ 2.2 million and $ 0.6 million related to reclassification of the foreign currency translation adjustment related to the remeasurement of the Company’s previous equity method investment in RTC Canada.

 As of May 2, 2022, the Company established a noncontrolling interest related to the minority holders. The fair value of the 20 % noncontrolling interest in RTC Canada is estimated to be $ 17.8 million. The fair value of the noncontrolling interest was estimated using a combination of the income approach and a market approach. Since RTC Canada is a private company, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820, Fair Value Measurement . The fair value estimates are based on: (i) a discount rate of 11 %; (ii) a terminal value based on a long-term sustainable growth rate of 3 %; (iii) financial multiples of companies in the same industry as RTC Canada; and (iv) adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest in RTC Canada.

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 Table of Contents 

 The purchase price was allocated based on the fair values of the assets and liabilities at the date of acquisition as follows (in thousands):

 Cash

 $ 
 4,310 
 
 Accounts receivable

 19,072 
 
 Inventory

 56,255 
 
 Property and equipment, including real estate

 80,196 
 
 Floor plan notes payable

 ( 30,501 
 ) 
 
 Trade payables

 ( 19,978 
 ) 
 
 Customer deposits

 ( 1,980 
 ) 
 
 Accrued liabilities

 ( 7,875 
 ) 
 
 Notes payable

 ( 69,545 
 ) 
 
 Goodwill

 44,174 
 
 Franchise rights

 3,906 
 
 Other

 3,422 
 
 Equity investment in RTC Canada

 ( 37,309 
 ) 
 
 Noncontrolling interest

 ( 17,828 
 ) 
 
 Gain on equity method investment

 ( 6,958 
 ) 
 
 Total

 $ 
 19,361 
 
 The goodwill of $ 44.2 million for the RTC Canada acquisition is primarily attributable to the synergies expected to arise after obtaining a controlling interest in the entity.

 Prior to May 2, 2022, the Company accounted for its 50 % equity interest in RTC Canada as an equity-method investment. After the Company’s acquisition of the additional 30 % equity interest on May 2, 2022, operations of RTC Canada are included in the accompanying consolidated financial statements.

 16.

 SEGMENTS :

 The Company reports information based on operating segments identified in accordance with how the chief operating decision maker (“CODM”) evaluates business performance and allocates resources. As of the reporting period, the Company operates with one CODM: W.M. “Rusty” Rush, the Chief Executive Officer, President and Chairman of the Board.

 As of the reporting period, T he Company currently has one reportable business segment - the Truck Segment. The Truck Segment includes the Company’s operation of a network of commercial vehicle dealerships in the United States and Ontario, Canada that provide an integrated one-stop source for the commercial vehicle needs of its customers, including retail sales of new and used commercial vehicles; aftermarket parts sales, service and collision center facilities; vehicle upfitting and financial services, including the financing of new and used commercial vehicle purchases, insurance products and truck leasing and rentals. The commercial vehicle dealerships are deemed a single reporting unit because they have similar economic characteristics. The Company’s CODM considers the entire Truck Segment, not individual dealerships or departments within its dealerships, when making decisions about resources to be allocated to the segment and assessing its performance.

 In addition to the Truck Segment, the Company generates revenue from two additional operating segments: Retail Tire Sales and Insurance Services. These operating segments do not meet the quantitative thresholds for separate reporting as specified under the guidance of ASU 2023-07. Therefore, they are consolidated under the “All Other” category in the segment disclosures below. These segments share accounting policies consistent with the summary of significant accounting policies.

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 Table of Contents 

 There were no material intersegment sales for the years ended December 31, 2024, 2023, or 2022.

 Truck 

 All 

 Segment 

 Other 

 Totals 

 2024 

 Revenues from external customers

 $ 
 7,788,842 
 
 $ 
 15,904 
 
 $ 
 7,804,746 
 
 Cost of products sold

 6,271,327 
 
 2,003 
 
 6,273,330 
 
 Controllable expenses

 952,973 
 
 5,953 
 
 958,926 
 
 Allocated expenses

 96,159 
 
 8,240 
 
 104,400 
 
 Segment operating income (loss) 

 $ 
 468,383 
 
 $ 
 ( 292 
 ) 
 
 $ 
 468,090 
 
 Other Income

 583 
 
 – 
 
 583 
 
 Interest income

 1,166 
 
 – 
 
 1,166 
 
 Interest expense

 71,658 
 
 366 
 
 72,024 
 
 Income taxes

 92,845 
 
 – 
 
 92,845 
 
 Net income (loss) 
 
 $ 
 305,628 
 
 $ 
 ( 658 
 ) 
 
 $ 
 304,970 
 
 Segment assets

 4,561,583 
 
 55,964 
 
 4,617,547 
 
 Goodwill

 424,933 
 
 2,560 
 
 427,493 
 
 Capital expenditures

 432,400 
 
 647 
 
 433,047 
 
 Depreciation and amortization

 68,031 
 
 518 
 
 68,549 
 
 Truck 

 All 

 Segment 

 Other 

 Totals 

 2023 

 Revenues from external customers

 $ 
 7,909,230 
 
 $ 
 15,794 
 
 $ 
 7,925,024 
 
 Cost of products sold

 6,329,629 
 
 2,305 
 
 6,331,934 
 
 Controllable expenses

 789,109 
 
 4,907 
 
 794,016 
 
 Allocated expenses

 278,117 
 
 8,576 
 
 286,693 
 
 Segment operating income (loss) 

 $ 
 512,375 
 
 $ 
 6 
 
 $ 
 512,381 
 
 Other Income

 2,597 
 
 – 
 
 2,597 
 
 Interest income

 777 
 
 – 
 
 777 
 
 Interest expense

 53,324 
 
 370 
 
 53,694 
 
 Income taxes

 114,000 
 
 – 
 
 114,000 
 
 Net income (loss) 

 $ 
 348,437 
 
 $ 
 ( 364 
 ) 
 
 $ 
 348,061 
 
 Segment assets

 4,308,264 
 
 55,977 
 
 4,364,241 
 
 Goodwill

 418,148 
 
 2,560 
 
 420,708 
 
 Capital expenditures

 367,942 
 
 939 
 
 368,881 
 
 Depreciation and amortization

 59,373 
 
 457 
 
 59,830 
 
 Truck 

 All 

 Segment 

 Other 

 Totals 

 2022 

 Revenues from external customers

 $ 
 7,084,849 
 
 $ 
 16,821 
 
 $ 
 7,101,670 
 
 Cost of products sold

 5,611,521 
 
 2,990 
 
 5,614,511 
 
 Controllable expenses

 790,854 
 
 4,016 
 
 794,870 
 
 Allocated expenses

 177,059 
 
 9,117 
 
 186,176 
 
 Segment operating income (loss) 

 $ 
 505,415 
 
 698 
 
 506,113 
 
 Other Income

 22,338 
 
 – 
 
 22,338 
 
 Interest income

 639 
 
 – 
 
 639 
 
 Interest expense

 19,389 
 
 374 
 
 19,763 
 
 Income taxes

 117,242 
 
 – 
 
 117,242 
 
 Net income (loss) 

 $ 
 391,761 
 
 $ 
 324 
 
 $ 
 392,085 
 
 Segment assets

 3,769,007 
 
 52,059 
 
 3,821,066 
 
 Goodwill

 413,803 
 
 2,560 
 
 416,363 
 
 Capital expenditures

 242,503 
 
 557 
 
 243,060 
 
 Depreciation and amortization

 55,354 
 
 311 
 
 55,665 
 
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 Table of Contents 

 17.

 REVENUE :

 The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales 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. 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 years ended December 31, 2024, December 31, 2023, and December 31, 2022 (in thousands):

 2024

 2023

 2022

 Commercial vehicle sales revenue

 $ 
 4,888,823 
 
 $ 
 4,957,969 
 
 $ 
 4,351,370 
 
 Parts revenue

 1,440,452 
 
 1,493,903 
 
 1,436,981 
 
 Commercial vehicle repair service revenue

 1,075,568 
 
 1,068,238 
 
 935,458 
 
 Finance revenue

 8,942 
 
 11,665 
 
 16,992 
 
 Insurance revenue

 13,049 
 
 12,606 
 
 12,749 
 
 Other revenue

 22,973 
 
 26,863 
 
 25,863 
 
 Total

 $ 
 7,449,807 
 
 $ 
 7,571,244 
 
 $ 
 6,779,413 
 
 The Company’s performance obligations are 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 December 31, 2024, or December 31, 2023. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and most other revenues are related to the Truck Segment.

 For the sale of new and used commercial vehicles, revenue is recognized at a point in time when control is transferred to the customer, which is when delivery of the commercial vehicle occurs. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the commercial vehicle. When control is transferred to the customer, the Company has an unconditional right to payment and a receivable is recorded for any consideration not received.

 The Company controls the commercial vehicle before it is transferred to the customer and it obtains all the remaining benefits from the commercial vehicle relating to the sale, ability to pledge the asset or hold the asset. The Company is a principal in all commercial vehicle transactions. The Company retains inventory risk, determines the selling price to the customer and delivers the commercial vehicle to the customer. The Company generally pays a commission to internal sales representatives for the sale of a commercial vehicle. The Company will continue to expense the commission and recognize it concurrently with the respective commercial vehicle sale revenue upon delivery of the commercial vehicle to a customer.

 Revenue from the sale of parts is recognized when the Company transfers control of the goods to the customer and consideration has been received in the form of cash or a receivable from the customer. The Company provides its customers the right to return certain eligible parts, estimates the expected returns based on an analysis of historical experience and records an allowance for estimated returns, which has historically not been material.

 Revenue from the sale of commercial vehicle repair service is recognized when the service performed by the Company on a customer’s vehicle is complete and the customer accepts the repair. Because the Company does not have an enforceable right to payment while the repair is being performed, revenue is recognized when the repair is complete. After a customer’s acceptance, the Company has no remaining obligations to transfer goods or services to the customer and consideration has been received in the form of cash or a receivable from the customer.

 Any remaining performance obligations represent service orders for which work has not been completed. The Company’s service contracts are predominately short-term in nature with a contract term of one month or less. For those contracts, the Company has utilized the practical expedient in Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

 The Company receives commissions from third-party lenders for arranging customer financing for the purchase of commercial vehicles. The receipt of such commissions is deemed to be a single performance obligation that is satisfied when a financing agreement is executed and accepted by the financing provider. Once the contract has been accepted by the financing provider, the Company’s performance obligation has been satisfied and the Company generally has no further obligations under the contract. The Company is the agent in this transaction, as it does not have control over the acceptance of the customer’s financing arrangement by the financing provider. Consideration paid to the Company by the financing provider is based on the agreement between the Company and the financing provider.

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 The Company receives commissions from third-party insurance companies for arranging insurance coverage for customers. The receipt of such commissions is deemed to be a single performance obligation that is satisfied when the insurance coverage is bound. The Company has no further obligations under the contract. The Company is the agent in this transaction because it does not have control over the insurance coverage provided by the insurance carrier. Consideration paid to the Company by the insurance provider is based on the agreement between the Company and the insurance provider.

 The Company records revenues from finance and insurance products at the net commission amount, which includes estimates of chargebacks that can occur if the underlying contract is not fulfilled. Chargeback amounts for commissions from financing companies are estimated assuming financing contracts are terminated before the customer has made six monthly payments. Chargeback amounts for commissions from insurance companies are estimated assuming insurance contracts are terminated before the underlying insurance contractual term has expired. Chargeback reserve amounts are based on historical chargebacks and have historically been immaterial. The Company does not have any right to retrospective commissions based on future profitability of finance and insurance contracts arranged.

 Other revenue consists mostly of documentation fees that are charged to customers in connection with the sale of a commercial vehicle and recognized as other revenue when a truck is sold. The Company recognizes the documentation fees at the point in time when the commercial vehicle is delivered to the customer.

 18.

 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) :

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

 Balance as of December 31, 2022

 $ 
 ( 4,130 
 ) 
 
 Foreign currency translation adjustment

 1,967 
 
 Balance as of December 31, 2023

 ( 2,163 
 ) 
 
 Foreign currency translation adjustment

 ( 7,130 
 ) 
 
 Balance as of December 31, 2024

 $ 
 ( 9,293 
 ) 
 
 The functional currency of the Company’s foreign subsidiary, RTC Canada, is its local currency. Results of operations of RTC Canada are translated in USD using the average exchange rates monthly during the year. The assets and liabilities of RTC Canada are translated into USD using the exchange rates in effect on the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders’ equity in accumulated other comprehensive loss and the statement of comprehensive income.

 The Company reclassified the foreign currency translation adjustment related to its previously held equity investment in RTC Canada into net income upon its acquisition of a majority equity interest according to ASC 830-30, Foreign Currency Matters. 

 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

 None.
RUSH ENTERPRISES INC \TX\ 10-K

Item 8. Financial Statements and Supplementary Data
