UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~

March 31, 2018

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________ to ____________________________________________

Commission File Number 0-20797

RUSH ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Texas	~~Texas~~	74-1733016
	(State or other jurisdiction of	(I.R.S. Employer Identification No.)
	incorporation or organization)

555 I.H. 35 South, Suite 500

New Braunfels, Texas 78130

(Address of principal executive offices)

(Zip Code)

(830) 302-5200

(~~Registrant~~’sRegistrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X][X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☑	☑	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if a smaller reporting company)
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of ~~November 1, 2017.~~May 2, 2018.

~~Title of Class~~		Number of ~~Shares~~ ~~Outstanding~~
		Shares
Class		Outstanding
Class A Common Stock, $.01 Par Value		~~31,259,965~~ 30,593,549
Class B Common Stock, $.01 Par Value		~~8,575,658~~ 8,543,391

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

	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	66,262		$	28,092		$	21,039		$	14,479
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		117,054			118,149			51,056			38,724
Gain on sale of property and equipment		(76	)		(1,571	)
Loss on impairment of assets		−			8,247
Stock-based compensation expense related to stock options and employee stock purchases		12,036			9,426
Deferred income tax expense		8,609			3,355
Excess tax expense from stock-based compensation		−			808
Loss on sale of property and equipment, net								28			163
Stock-based compensation expense related to employee stock options and employee stock purchases								7,893			4,759
Provision for deferred income tax expense								755			1,408
Change in accounts receivable, net		(1,481	)		8,560			(7,140	)		(12,901	)
Change in inventories, net		(87,799	)		199,228
Change in inventories								5,706			(19,376	)
Change in prepaid expenses and other, net		1,156			24,163			(2,103	)		(609	)
Change in trade accounts payable		12,469			(10,298	)		12,912			1,690
Draws (payments) on floor plan notes payable – trade, net		26,439			(623	)
Draws on floor plan notes payable – trade, net								35,380			18,552
Change in customer deposits		4,558			(6,560	)		38			(2,201	)
Change in accrued expenses		11,048			5,783			(7,900	)		(7,163	)
Net cash provided by operating activities		170,275			386,759			117,664			37,525

Cash flows from investing activities:
Acquisition of property and equipment		(138,756	)		(159,546	)		(48,215	)		(39,209	)
Proceeds from the sale of property and equipment		3,905			9,427			2,231			1,600
Business acquisitions		−			(681	)
Proceeds from the sale of available for sale securities		325			450
Change in other assets		4,831			(4,520	)
Other								(1,098	)		5,160
Net cash used in investing activities		(129,695	)		(154,870	)		(47,082	)		(32,449	)

Cash flows from financing activities:
Draws (payments) on floor plan notes payable – non-trade, net		33,611			(142,229	)
(Payments) draws on floor plan notes payable – non-trade, net								(8,410	)		19,098
Proceeds from long-term debt		97,319			103,248			32,137			25,555
Principal payments on long-term debt		(108,526	)		(122,619	)		(46,278	)		(38,113	)
Principal payments on capital lease obligations		(9,280	)		(14,174	)		(3,224	)		(3,337	)
Proceeds from issuance of shares relating to employee stock options and employee stock purchases		20,096			4,826
Excess tax expense from stock-based compensation		−			(808	)
Issuance of shares relating to employee stock options and employee stock purchases								501			6,851
Common stock repurchased		(27,388	)		(33,282	)		(38,137	)		(7,560	)
Debt issuance costs		(523	)		−		˗				(523	)
Net cash provided by (used in) financing activities		5,309			(205,038	)
Net increase in cash and cash equivalents		45,889			26,851
Net cash (used in) provided by financing activities								(63,411	)		1,971
Net decrease in cash and cash equivalents								7,171			7,047
Cash and cash equivalents, beginning of period		82,026			64,847			124,541			82,026

Cash and cash equivalents, end of period	$	127,915		$	91,698		$	131,712		$	89,073

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	24,952		$	29,172		$	9,943		$	8,211
Income taxes, net of refunds	$	30,487		$	(12,993	)
Noncash investing activities:
Income taxes paid, net							$	1,500		$	6,201
Noncash investing and financing activities:
Assets acquired under capital leases	$	8,243		$	16,797		$	401		$	2,073

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

2–Other Assets

TheThe total capitalized costs of the Company’s SAP enterprise resource planning software ~~and SAP dealership management system~~platform (“ERP Platform”) of ~~$30.5~~$22.0 million, including capitalized interest, are recorded on the Consolidated Balance Sheet in Other Assets, net of accumulated amortization of ~~$19.1 million, at September 30, 2017. The SAP software is being amortized over a period of 15 years.~~

$31.1 million. Amortization expense relating to the ~~SAP~~ ~~software,~~ERP Platform, which is recognized in depreciation and amortization expense in the Consolidated ~~Statement~~Statements of Income and Comprehensive Income, was ~~$0.9~~$11.1 million for the three months ended ~~September 30, 2017~~ March 31, 2018 and ~~$0.9~~$0.9 million for the three months ended ~~September 30, 2016; it was $2.6 million for~~March 31, 2017.

In the ~~nine months ended September 30, 2017~~first quarter of 2018, as part of an assessment that involved a technical feasibility study of the current ERP Platform, the Company determined that a majority of the components of its ERP Platform will require replacement earlier than originally anticipated; in prior disclosures, the Company had referred to the ERP Platform separately as the SAP enterprise software and ~~$2.5 million for~~SAP dealership management system. In accordance with Accounting Standards Codification (“ASC”) Topic 350-40, in the ~~nine months ended September 30, 2016.~~first quarter of 2018, the Company adjusted the useful life of these components expected to be replaced so that the respective net book values of the components are fully amortized upon replacement. The Company ~~currently estimates~~expects to replace these components no later than May 2018. The Company began to amortize the remaining net book value of the components that are expected to be replaced on a straight-line basis in February 2018 and will continue through May 2018. In the first quarter of 2018, the Company recognized an additional $10.2 million of amortization expense ~~relating~~related to the ~~SAP software~~components of the ERP Platform that will be ~~approximately $3.4 million for each of~~replaced. The ERP Platform asset and related amortization are reflected in the ~~next five years.~~Truck Segment.

The ~~Company~~’sCompany’s only significant identifiable intangible assets, other than goodwill, are rights under franchise agreements with manufacturers. The fair value of the franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The carrying value of the Company’s manufacturer franchise rights was ~~$7.0~~$7.0 million at ~~both September 30, 2017~~ March 31, 2018 and December 31, ~~2016,~~ 2017, and is included in Other Assets on the accompanying consolidated balance sheets. 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 toa geographic region, the Company has determined that evaluating and including all locations acquired in the geographic region is the appropriate level for ~~the purpose~~purposes of testing franchise rights for impairment. Management reviews indefinite-lived manufacturer franchise rights for impairment annually during the fourth quarter, or more often if events or circumstances indicate that an impairment may have occurred. 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 within a particular region.~~franchises.

The significant estimates and assumptions used by management in assessing the recoverability of manufacturer franchise rights include estimated future cash flows, present value discount rate and other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s subjective judgment. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluations of manufacturer franchise rights can vary within a range of outcomes.

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No impairment write down ~~of manufacturer franchise rights~~ was required in ~~any~~the period presented. The Company cannot predict the occurrence of certain events that might adversely affect the reported value of manufacturer franchise rights in the future.

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, including product liability coverage, in amounts deemed adequate by management. To date, aggregate costs to us for claims, including product liability actions, have not been material. However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the ~~Company~~’sCompany’s financial condition or results of operations. The Company believes that there are no claims or litigation pending, the outcome of which could 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.

4 – Earnings Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Numerator:
Numerator for basic and diluted earnings per share – Net income available to common shareholders	$	29,784	$	14,880	$	66,262	$	28,092	$	21,039	$	14,479
Denominator:
Denominator–
Denominator for basic earnings per share – weighted average shares outstanding		39,825		39,617		39,560		40,138		39,665		39,409
Effect of dilutive securities– Employee and director stock options and restricted share awards		1,321		657		1,270		560
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions		41,146		40,274		40,830		40,698
Effect of dilutive securities– Employee stock options and restricted stock awards										1,427		1,292
Denominator for basic earnings per share – adjusted weighted average shares outstanding and assumed conversions shares outstanding										41,092		40,701
Basic earnings per common share	$	.75	$	.38	$	1.68	$	.70	$	.53	$	.37
Diluted earnings per common share and common share equivalents	$	.72	$	.37	$	1.62	$	.69	$	.51	$	.36

Options to purchase shares of common stock that were outstanding for the three ~~months and nine~~ months ended ~~September 30, 2017~~ March 31, 2018 and ~~2016~~2017 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Weighted average anti-dilutive options
406 2,287 599 2,444

March 31,

2018

March 31,

2017

Anti-dilutive options – weighted average

729

The Company has various financial instruments that it must measure at fair value on a recurring basis. 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.

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 at ~~September 30, 2017,~~ March 31, 2018, and December 31, ~~2016.~~ 2017. 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 its current credit standing and has categorized such debt within Level 2 of the hierarchy framework. The carrying amount approximates fair value.

If investments are deemed to be impaired, the Company determines whether the impairment is temporary or other than temporary. If the impairment is deemed to be temporary, the Company records an unrealized loss in other comprehensive income. If the impairment is deemed other than temporary, the Company records the impairment in the ~~Company~~’sCompany’s Consolidated Statements of Income and Comprehensive Income.

In prior years, the Company invested in interest-bearing short-term investments primarily consisting of investment-grade auction rate securities classified as available-for-sale and reported at fair value. These types of investments were designed to provide liquidity through an auction process that reset the applicable interest rates at predetermined periods ranging from 1 to 35 days. This reset mechanism was intended to allow existing investors to continue to own their respective interest in the auction rate security or to gain immediate liquidity by selling their interests at par.

Auctions for investment grade securities held by the Company have failed. However, a failed auction does not represent a default by the issuer. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop. The Company has the intent and ability to hold these auction rate securities until liquidity returns to the market. The Company does not believe that the lack of liquidity relating to its auction rate securities will have a material impact on its ability to fund operations.

As of ~~September 30,~~March 31, 2018 and December 31, 2017, the Company held auction rate securities with underlying tax-exempt municipal bonds that mature in 2030 and have a fair value and a cost basis of ~~$6.4 million. As of December 31, 2016, the tax-exempt municipal bonds had a fair value of $6.2 million and a cost basis of $6.7~~$6.4 million. The issuer redeemed ~~$150,000~~$150,000 of the auction rate securities during 2014, ~~$275,000~~$275,000 during 2015, ~~$450,000~~$450,000 during 2016 and ~~$325,000 during the second quarter of~~ $325,000 in 2017. These bonds have credit wrap insurance and a credit rating of A by a major credit rating agency.

The Company valued the auction rate securities at ~~September 30, 2017,~~ March 31, 2018 using a discounted cash flow model based on the characteristics of the individual securities, which the Company believes yields the best estimate of fair value. The first step in the valuation included a credit analysis of the security which considered various factors, including the credit quality of the issuer, the instrument’s position within the capital structure of the issuing authority and the composition of the authority’s assets, including the effect of insurance and/or government guarantees. Next, the future cash flows of the instruments were projected based on certain assumptions regarding the auction rate market significant to the valuation, including that the auction rate market will remain illiquid and auctions will continue to fail, causing the interest rate to be the maximum applicable rate. This assumption resulted in a discounted cash flow analysis being performed through 2019, the point at which the Company estimates the securities will be redeemed by the municipality. The projected cash flows were then discounted using the applicable yield curve plus a 225 basis point liquidity premium added to the applicable discount rate.

TheThe Company recorded a pre-tax impairment charge of ~~$1.0~~$1.0 million on these auction rate securities in 2011 and subsequent pre-tax increases in fair value of ~~$427,000~~$427,000 during 2014 and ~~$469,000~~$469,000 during 2017, which brought the ~~second quarter~~fair value of ~~2017.~~the auction rate securities back to their original cost basis. The Company ~~believes that the impairment is temporary and~~ had included the prior impairment in accumulated other comprehensive loss.

The ~~table below presents disclosures about the~~ auction rate securities ~~measured at~~have a fair value ~~on a recurring basis in~~of $6.4 million at March 31, 2018 and December 31, 2017 and were measured using Level 3 inputs of the ~~Company’s financial statements as follows (in thousands):~~fair value hierarchy.

During the first quarter of 2016, the Company instituted plans to consolidate its dealership network. ~~The~~In 2016, the Company recorded an impairment charge related to the value of the real estate in the affected locations ~~and excess real estate~~ in the amount of ~~$7.1 million~~$7.5 million. The Company also classified certain excess real estate as held for sale, which resulted in ~~the quarter ended March 31, 2016 and $0.4 million in the quarter ended June 30, 2016.~~an additional impairment charge.

The fair value measurements for the ~~Company~~’sCompany’s long-lived assets are based on Level 3 inputs. Fair values of the value of the real estate were determined based on evaluations by a ~~third-party~~third-party real estate broker that utilized its knowledge and historical experience in real estate markets and transactions.

During 2016, the Company sold four of the properties previously classified as held for sale with a fair value of ~~$6.1~~$6.1 million. During ~~the first quarter of~~ 2017, the Company sold ~~one property with a fair value~~three of ~~$1.0 million and during~~ the ~~second quarter of 2017, the Company sold two~~ properties with a collective fair value of ~~$1.2 million~~.$2.2 million. During the third quarter of 2017, the Company made the decision to put one of the properties previously classified as “held for sale” with a fair value of ~~$1.4~~$1.4 million back into service. ~~The~~In February 2018, the Company ~~is actively marketing~~ sold one of the properties with a fair value of $1.9 million. As of March 31, 2018, the remaining real estate associated with the restructuring activities is included in assets held for ~~sale.~~sale on the Consolidated Balance Sheets.

The following table presents long-lived assets classified as held for sale and measured and recorded at fair value on a nonrecurring basis (in thousands):

For further discussion of assets held for sale, see Note 10 – Restructuring Costs of the Notes to Consolidated Financial Statements. The losses in the above table were reported in selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income and were reported under the Truck Segment.

7 – Segment Information

The Company currently has one reportable business segment - the Truck Segment. The Truck Segment includes the ~~Company~~’sCompany’s operation of a nationwide network of commercial vehicle dealerships that provide an integrated ~~one-stop~~one-stop source for the commercial vehicle needs of its customers, including retail sales of new and used commercial vehicles; aftermarket parts, service and body shop facilities; and a wide array of 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 chief operating decision maker considers the entire Truck Segment, not individual dealerships or departments within ~~our~~its dealerships, when making decisions about resources to be allocated to the segment and assessing its performance.

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The Company also has revenues attributable to three other operating segments. These segments include a retail tire company, an insurance agency and a guest ranch operation and are included in the All Other column below. None of these segments has ever met any of the quantitative thresholds for determining reportable segments.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on income before income taxes, not including extraordinary items.

The following table contains summarized information about reportable segment ~~revenue,~~revenues, segment income or loss from continuing operations and segment assets for the periods ended ~~September 30, 2017,~~ March 31, 2018 and ~~2016~~2017 (in thousands):

	Truck Segment		All Other			Totals		Truck Segment		All Other			Totals

As of and for the three months ended September 30, 2017

As of and for the three months ended March 31, 2018
Revenues from external customers	$	1,253,429	$	4,030		$	1,257,459	$	1,236,652	$	4,129		$	1,240,781
Segment operating income									32,360		29			32,389
Segment income (loss) before taxes		45,590		(255	)		45,335		28,103		(20	)		28,083
Segment assets		2,721,463		37,527			2,758,990		2,864,504		34,700			2,899,204

For the nine months ended September 30, 2017

As of and for the three months ended March 31, 2017
Revenues from external customers	$	3,493,984	$	11,795		$	3,505,779	$	1,040,853	$	3,944		$	1,044,797
Segment income (loss) before taxes		102,599		(623	)		101,976

As of and for the three months ended September 30, 2016

Revenues from external customers	$	1,092,005	$	4,036		$	1,096,041
Segment operating income (loss)									24,994		(145	)		24,849
Segment income (loss) before taxes		24,505		(202	)		24,303		22,244		(186	)		22,058
Segment assets		2,662,872		32,623			2,695,495		2,603,945		35,616			2,639,561

For the nine months ended September 30, 2016

Revenues from external customers	$	3,181,842	$	11,501		$	3,193,343
Segment income (loss) before taxes		46,740		(686	)		46,054

8– Income Taxes

The Company had unrecognized income tax benefits totaling ~~$2.4~~$2.6 million as a component of accrued liabilities at ~~September 30, 2017~~ March 31, 2018 and December 31, ~~2016,~~ 2017, the total of which, if recognized, would impact the Company’s effective tax rate. An unfavorable settlement may require a charge to income tax expense and a favorable resolution would be recognized as a reduction to income tax expense. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. No amounts were accrued for penalties. The Company had approximately ~~$145,000~~$166,000 accrued for the payment of interest at ~~September 30, 2017~~ March 31, 2018 and December 31, ~~2016.~~2017.

On December 22, 2017, the United States Congress enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“the Tax Act”). The Tax Act included, among other items, a reduction of the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Tax Act made broad and complex changes to the U.S. tax code, some of which affected the Company’s 2017 year end results. Staff Accounting Bulletin No.118 (SAB 118) provided guidance that allowed registrants to provide a reasonable estimate of the effects of the Tax Act in their financial statements and adjust the reported impact in a measurement period not to exceed one year. At December 31, 2017, the Company made a reasonable estimate of the effects of the Tax Act on its existing deferred tax balances and recognized a provisional net tax benefit of $82.9 million. The provisional benefit recorded was primarily a result of the remeasurement of the Company’s deferred tax assets and liabilities at the tax rate in which they will reverse when they are recognized. The Company will continue to refine its calculations as additional analysis is completed. In addition, the Company’s estimates may also be affected as it gains a more thorough understanding of the Tax Act.

The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of ~~September 30, 2017,~~ March 31, 2018, the tax years ended December 31, ~~2013~~ 2014 through ~~2016,~~2017 remain subject to audit by federal tax authorities and the tax years ended December 31, ~~2012~~ 2013 through ~~2016,~~2017 remain subject to audit by state tax authorities.

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In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. ~~2016-09,~~2016-09, “Compensation – Stock Compensation (Topic ~~718)~~718),” which changed the accounting for certain aspects of share-based payments to employees. The Company adopted ~~the new~~this standard on January 1,2017. ~~The new guidance~~ ASU 2016-09 requires excess tax benefits and tax deficiencies to be recognized as income tax benefit or expense in the income statement and presented as an operating activity in the statement of cash flows when the awards are vested or are settled. The Company had a tax deficiency of $22,000 in the first quarter of 2018, which was recorded as an increase to income tax expense, and excess tax benefits of ~~$1.9~~$1.1 million ~~for~~in the ~~three months ended September 30,~~ first quarter of 2017, ~~and $3.9 million for the nine months ended September 30, 2017,~~ which was recorded as a reduction to income tax expense in the Consolidated Statement of Income and Comprehensive Income.

10 10– ~~Restructuring Costs~~New Accounting Pronouncements

During the quarter ended March 31, 2016, the Company instituted plans to consolidate its dealership network and incurred pre-tax expenses of approximately $8.1 million related to restructuring activities. The restructuring costs included $2.7 million associated with impairment charges to certain fixed assets and the value of the real estate underlying the affected locations, which was reported in selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income for the nine months ended September 30, 2016.Leases

In addition, the Company classified certain excess real estate as held for sale, which resulted in an impairment charge of $5.0 million, which was reported in selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income for the nine months ended September 30, 2016.

~~During~~February 2016, the Company sold four of the properties previously classified as held for sale with a fair value of $6.1 million. During the first quarter of 2017, the Company sold one of the properties with a fair value of $1.0 million and during the second quarter of 2017, the Company sold two of the properties with a collective fair value of $1.2 million. During the third quarter of 2017, the Company made the decision to put one of the properties previously classified as “held for sale” with a fair value of $1.4 million back into service. As of September 30, 2017, the remaining real estate associated with the restructuring activities is included in assets held for sale on the Consolidated Balance Sheets.

1~~1 – New Accounting Pronouncements~~

~~In March~~ ~~2016,~~ the FASB issued ASU No. 2016-09, which changed the accounting for certain aspects of share-based payments to employees. The Company adopted the new standard on January 1, 2017. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. The Company recorded excess tax benefits of $1.9 million in the three months ended September 30, 2017 and $3.9 million in the nine months ended September 30, 2017, which was recorded in the Consolidated Statements of Income and Comprehensive Income. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on its cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The Company did not elect to make an accounting policy change to recognize forfeitures as they occur and will continue to estimate forfeitures. The Company adopted the amendments related to ASU 2016-09 prospectively and prior periods have not been adjusted.

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~~In February~~ 2016 ~~the FASB issued ASU No. 2016-02,~~-02, “Leases ~~(Topic 842)~~(“Topic 842”),” which is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the assets and liabilities that arise from leases. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. The ~~new~~ standard ~~is effective for public companies for fiscal years beginning after December 15, 2018,~~requires lessees to classify leases as either finance or operating leases. This classification will determine whether the related expense will be recognized based on asset amortization and ~~interim periods within those years, with early adoption permitted. The Company is currently evaluating~~interest on the ~~effect that adopting this standard will have~~obligation or on ~~our financial statements and related disclosures.~~ a straight-line basis over the term of the lease.

The Company will adopt ~~ASU 2016-02~~Topic 842 on January 1, 2019.The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application. While the recognition of right-of-use assets and related liabilities will have a material effect on the Company’s Consolidated Balance Sheets, the Company does not expect a material impact on its Consolidated Statements of Operations and Comprehensive Income. The FASB also issued ASU No.2018-01, "Leases: Land Easement Practical Expedient for Transition to Topic 842," which provides guidance on specific transition issues. The Company is in the process of analyzing its lease portfolio and continues to evaluate the full impact of the new standards, including the impact on its business processes, systems, and internal controls.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. ~~2014-09,~~2014-09, “Revenue from Contracts with Customers (“Topic ~~606)~~606”),” which amended the accounting standards for revenue recognition. ~~ASU 2014-09~~Topic 606 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to when products are transferred to customers. ~~ASU 2014-09 will be effective~~The Company adopted Topic 606 on January 1, 2018 and is applying the modified retrospective method. There was not a material impact to revenues as a result of applying Topic 606 for the ~~Company beginning~~three months ended March 31,2018, and there have not been significant changes to our business processes, systems, or internal controls as a result of implementing the standard. Adoption of the new standard does not materially change the timing or amount of revenue recognized in ~~its first quarter~~the Company’s Consolidated Statements of ~~2018,~~Operations and early adoption is permitted. The ASU provides two transition methods: (i) retrospectively to each prior reporting period presented; or (ii) modified retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application.Comprehensive Income.

~~In 2016, the Company established a cross-functional team with representatives from its major revenue streams to review~~ ~~its current accounting policies and practices, assess the effect~~

Table of the standard on our revenue contracts and identify potential differences. The Company’s internal implementation team has substantially completed its initial review of the likely impacts that the application of the amendments in this ASU will have on its consolidated financial statements. Contents

The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains ~~control.~~control which is typically when the finished product is delivered to the customer. The ~~team has initially identified the~~ Company’s material revenue streams ~~to be~~have been identified as the following: the sale of new and used commercial ~~vehicles;~~vehicles, arrangement of associated commercial vehicle financing and insurance ~~contracts;~~contracts, the performance of commercial vehicle repair ~~services;~~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 ~~implementation team~~disaggregated revenue by revenue source for the three months ended March 31, 2018 (in thousands):

Commercial vehicle sales revenue	$	773,100
Parts revenue		223,354
Commercial vehicle repair service revenue		176,941
Finance revenue		2,336
Insurance revenue		2,405
Other revenue		5,121
Total revenue	$	1,183,257

All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time. The Company does not have any material contract assets or contract liabilities on the Balance Sheet as of March 31, 2018. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenue are related to the Truck Segment.

For the sale of new and 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 we expect 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 of 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 ~~preliminary stages~~form of ~~evaluating~~cash or a receivable from the ~~additional disclosure requirements of~~customer. We give our customers the ~~ASU, as well as~~right to return eligible parts, and we estimate the change, if any, to the Company’s underlying accounting and financial reporting systems and processes necessary to support the recognition and disclosure requirements. The Company expects to identify and implement the necessary changes, if any, during 2017. At this time,expected returns based on ~~this review,~~an analysis of historical experience and record 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 repairs. Since the Company does not ~~expect~~ have an enforceable right to payment while the ~~adoption~~repair is being performed, revenue is recognized when the repair is complete. After a customer's acceptance, the Company has no remaining obligations to ~~materially impact its consolidated financial statements.~~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 predominantly short-term in nature with a contract term of one month or less. For those contracts, the Company ~~will adopt ASU 2014-09 on January 1, 2018 and will use~~has utilized the ~~modified retrospective method.~~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.

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The Company receives commissions from third-party lenders for arranging customer financing for the purchase of commercial vehicles. This is deemed to be a single performance obligation which 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 generally, the Company 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.

The Company receives commissions from third-party insurance companies for arranging insurance coverage for customers. This is deemed to be a single performance obligation which 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 as 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.

Revenues from finance and insurance products are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from chargebacks if the contract term is not fulfilled. Chargebacks for commissions from financing companies represent the estimated amounts if a financing contract is terminated before the customer has made six monthly payments. Chargebacks for commissions from insurance companies represent the estimated amounts if an insurance contract is terminated before its contractual life. Chargeback reserve amounts are based on historical chargebacks and have historically been immaterial. The Company does not have right to retrospective commissions based on future profitability of finance and insurance contracts arranged.

Other revenue is mostly documentation fees related to the sale of a truck that are charged to the customer and recognized as other revenue when a truck is sold. We recognize the documentation fees at a point in time when the truck is transferred to the customer.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Form ~~10-Q~~10-Q (or otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, website postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”), notwithstanding that such statements are not specifically identified. Forward-looking statements include statements about the Company’s financial position, business strategy and plans and objectives of management of the Company for future operations. These forward-looking statements reflect the best judgments of the Company about the future events and trends based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements reflect our current view of the Company with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Please read Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, for a discussion of certain of those risks. Other unknown or unpredictable factors could also have a material adverse effect on future results. Although the Company believes that its expectations are reasonable as of the date of this Form 10-Q, it can give no assurance that such expectations will prove to be correct. The Company does not intend to update or revise any forward-looking statements unless securities laws require it to do so, and the Company undertakes no obligation to publicly release any revisions to forward-looking statements, whether because of new information, future events or otherwise.

The following comments should be read in conjunction with the ~~Company~~’sCompany’s consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Note Regarding Trademarks Commonly Used in the ~~Company~~’sCompany’s Filings

Peterbilt^® is a registered trademark of Peterbilt Motors Company. PACCAR^® is a registered trademark of PACCAR, Inc. PacLease^® is a registered trademark of PACCAR Leasing Corporation. Navistar^® is a registered trademark of Navistar International Corporation. International^® is a registered trademark of Navistar International Transportation Corp. Idealease is a registered trademark of Idealease, Inc. aka Idealease of North America, Inc. Blue Bird^® is a registered trademark of Blue Bird Investment Corporation. IC Bus^® is a registered trademark of IC Bus, LLC. Fuso^®is a registered trademark of Mitsubishi Fuso Truck and Bus Corporation. Hino^® is a registered trademark of Hino Motors, Ltd. Isuzu^® is a registered trademark of Isuzu Motors Limited. Ford Motor Credit Company^® is a registered trademark of Ford Motor Company. Ford^® is a registered trademark of Ford Motor Company. SAP^® is a registered trademark of SAP Aktiengesellschaft. ~~IBM~~^® ~~is a registered trademark of International Business Machines Corporation.~~ This report contains additional trade names or trademarks of other companies. Our use of such trade names or trademarks should not imply any endorsement or relationship with such companies.

Rush Enterprises, Inc. was incorporated in Texas in 1965 and consists of one reportable segment, the Truck ~~Segment, and conducts~~Segment. We conduct business through ~~its~~our subsidiaries. Our principal offices are located at 555 IH 35 South, Suite 500, New Braunfels, Texas 78130.

We are a full-service, integrated retailer of commercial vehicles and related services. The Truck Segment includes ~~the Company~~’sour operation of a nationwide network of commercial vehicle dealerships under the name “Rush Truck Centers.” Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, Mitsubishi Fuso, IC Bus or Blue Bird. Through our strategically located network of Rush Truck Centers, we provide one-stop service for the needs of our 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.

Our Rush Truck Centers are principally located in high traffic areas throughout the United States. Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 100 Rush Truck Centers in 21 states.

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

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. We believe the following accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Inventories are stated at the lower of cost or market value. Cost is determined by specific identification of new and used commercial ~~vehicles~~vehicle inventory and by the first-in, first-out method for tires, parts and accessories. As the market value of our 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 our inventory on hand. An allowance is provided when it is anticipated that cost will exceed net realizable value less a reasonable profit margin.

Goodwill is tested for impairment by reporting unit utilizing a two-step process at least annually, or more frequently when events or changes in circumstances indicate that the asset might be impaired. The first step requires us to compare the fair value of the reporting unit (we consider our Truck Segment to be a reporting unit for purposes of this analysis), which is the same as the segment, to the respective carrying value. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is greater than the fair value, there is an indication that impairment may exist and a second step is required. In the second step of the analysis, the implied fair value of the goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss.

We determine the fair value of our reporting unit using the discounted cash flow method. The discounted cash flow method uses various assumptions and estimates regarding revenue growth rates, future gross margins, future selling, general and administrative expenses and an estimated weighted average cost of capital. The analysis is based upon available information regarding expected future cash flows of each reporting unit discounted at rates consistent with the cost of capital specific to the reporting unit. This type of analysis contains uncertainties because it requires us to make assumptions and to apply judgment regarding our knowledge of our industry, information provided by industry analysts and our current business strategy in light of present industry and economic conditions. If any of these assumptions change, or fail to materialize, the resulting decline in our estimated fair value could result in a material impairment charge to the goodwill associated with the reporting unit.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we used to test for impairment losses on goodwill. However, if actual results are not consistent with our estimates or assumptions, or certain events occur that might adversely affect the reported value of goodwill in the future, we may be exposed to an impairment charge that could be material. ~~Such events may include, but are not limited to, strategic decisions made in response to economic and competitive conditions or the impact of the current economic environment.~~

Goodwill was tested for impairment during the fourth quarter of ~~2016~~2017 and no impairment was required. The fair value of our reporting unit exceeded the carrying value of its net assets. As a result, we were not required to conduct the second step of the impairment test. We do not believe our reporting unit is at risk of failing step one of the impairment test.

We are partially self-insured for a portion of the claims related to our property and casualty insurance programs, which requires us to make estimates regarding expected losses to be incurred. We engage a third-party administrator to assess any open claims and we adjust our accrual accordingly on a periodic basis. We are also partially self-insured for a portion of the claims related to our workers’ compensation and medical insurance programs. We use 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.

Changes in the frequency, severity and development of existing claims could influence our reserve for claims and financial position, results of operations and cash flows. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we used to calculate our self-insured liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

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 ~~state~~ 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.

Our income tax returns are periodically audited by tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions. In evaluating the exposures associated with our various tax filing positions, we adjust our 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.

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

Effective January 1, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers(“Topic 606”),” using the modified retrospective transition method. Under this method, we will recognize the cumulative effect of initially applying this accounting standard at the date of initial application. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) 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 entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and then assess whether each promised good or service is distinct. We then 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 10 – New Accounting Pronouncements of the Notes to Consolidated Financial Statements.

The following discussion and analysis includes our historical results of operations for the three months ended March 31, 2018 and ~~nine months ended September 30, 2017 and 2016.~~2017.

The following table sets forth ~~for the periods indicated~~ certain financial data as a percentage of total revenues:

The following table sets forth for the periods indicated the percent of gross profit by revenue source:

The following table sets forth the unit sales and revenues for new heavy-duty, new medium-duty, new light-duty and used commercial vehicles and ~~our~~the absorption ratio (revenue in millions):

Management uses several performance metrics to evaluate the performance of our commercial vehicle dealerships and considers Rush Truck Centers’ “absorption ratio” to be of critical importance. Absorption ratio is calculated by dividing the gross profit from the parts, service and body shop (collectively, “Aftermarket Products and Services”) departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory. When 100% absorption is achieved, all of the gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit. ~~In 1999, our commercial vehicle dealerships’ absorption ratio was approximately 80%. Since 1999, we have made a concerted effort to increase our absorption ratio.~~ Our commercial vehicle dealerships achieved a ~~120.9%~~120.0% absorption ratio for the ~~third~~first quarter of ~~2017 compared to a 112.6%~~2018 and 113.4% absorption ratio for the ~~third~~first quarter of ~~2016.~~2017.

Three Months Ended ~~September 30, 201~~March 31, 72018 Compared to Three Months Ended ~~September 30,~~March 31, ~~201~~20617

~~The growth in~~Our Aftermarket Products and Services revenues during the first quarter of 2018 benefited from widespread activity in the ~~third quarter was primarily~~market segments that we serve, especially in the ~~result~~general freight, refuse and construction market segments. We continue to make significant progress in growing our all-makes parts business through our expanded sales organization, enhanced technology offerings, increasing range of ~~strong general economic conditions~~product offerings and ~~our successful execution of certain strategic initiatives.~~improved inventory sourcing and management processes. We ~~expect~~believe our Aftermarket Products and Services revenues towill remain solid during the remainder of 2017, despite the seasonal decline we typically experience during the fourth quarter of the year. We remain focused on our long-term plans and strategic initiatives, which include expanding our all-makes parts and service business.strong throughout 2018.

We experienced another solid quarter in Class 8 new truck sales ~~were strong~~ during the ~~third~~first quarter of ~~2017~~2018, primarily due to ~~increased~~broad-based activity ~~from customers in the energy industry. Additionally, commercial vehicle sales activity remains solid in construction, refuse, over-the-road freight and the majority~~across virtually all of the ~~other industries~~market segments that we ~~support around the country. Used~~serve. We believe that economic confidence continues to drive high order intake and that a strong freight market is creating higher demand for Class 8 trucks. We continue to see normal depreciation rates for used commercial ~~vehicle inventory valuations have stabilized,~~vehicles, and we believe ~~that~~ our used commercial vehicle inventory is ~~priced~~positioned appropriately to support the needs of the market ~~dynamics and new commercial vehicle sales.~~ during 2018.

We ~~believe~~expect our Class 8 results in the second quarter to be fairly consistent with the first quarter and ~~medium-duty new~~for our commercial vehicle sales ~~will remain strong~~to accelerate in the ~~fourth~~second half of the year. Our medium-duty truck sales also remained healthy in the first quarter as a result of strong overall economic activity. Due to the timing of truck deliveries to large leasing and ~~into~~rental fleets over the next several months, as well as continued strength in the construction sector, we believe our medium-duty commercial vehicle sales and bus sales will grow during the second and third quarters of 2018.

Total r~~evenues~~revenues increased ~~$161.4~~$196.0 million, or ~~14.7%~~18.8%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017.

Our Aftermarket Products and Services revenues increased ~~$39.4~~$50.2 million, or ~~11.7%~~14.3%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016,~~2017. This increase was primarily ~~as a result~~due to strong general economic conditions and an increase in the number of ~~the factors described above.~~service technicians we employ. We expect our Aftermarket Products and Services revenues to ~~remain strong~~increase 9% to 10% in ~~the fourth quarter of~~2018, compared to 2017.

Revenues from sales of new and used commercial vehicles increased ~~$120.2~~$137.1 million, or ~~17.2%~~21.6%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016,~~2017, primarily as a result of broad-based activity across virtually all of the ~~factors described above.~~market segments that we serve.

We sold ~~3,647~~3,312 Class 8 heavy-duty trucks in the ~~third~~first quarter of ~~2017,~~2018, a ~~20.6%~~22.4% increase compared to ~~3,024~~2,706 Class 8 heavy-duty trucks ~~sold~~ in the ~~third~~first quarter of ~~2016.~~2017. According to A.C.T. Research Co., LLC (“A.C.T. Research”), a ~~commercial vehicle~~truck industry data and forecasting service provider, the U.S. Class 8 truck market increased ~~11.2%~~35.9% in the ~~third~~first quarter of ~~2017~~2018 compared to the ~~third~~first quarter of ~~2016.~~2017. A.C.T. Research currently forecasts U.S. retail sales of Class 8 trucks of approximately ~~190,000 units in 2017, 218,000~~254,000 units in 2018, ~~and 226,000~~247,000 units in 2019 and 185,000 units in 2020, compared to approximately 197,000 units in ~~2016.~~2017. Our share of the U.S. Class 8 truck sales market was approximately ~~5.5%~~6.6% in ~~2016.~~2017. We expect our U.S. Class 8 ~~truck~~commercial vehicle sales market share to ~~range~~decline to between ~~6.5%~~5.7% and ~~7.0%~~6.2% in ~~2017.~~2018 due to the 2018 forecast for the U.S. Class 8 truck market. In a robust Class 8 truck market, historically, our market share declines. This market share percentage would result in the sale of approximately ~~12,400~~14,400 to ~~13,300~~15,700 of Class 8 ~~trucks~~commercial vehicles in ~~2017~~2018, based on A.C.T. Research’s current U.S. retail sales estimate of ~~190,000~~254,000 units.

We sold ~~2,828~~2,705 Class 4 through 7 commercial vehicles, including 288 buses, in the first quarter of 2018, a 6.0% increase compared to 2,553 medium-duty commercial vehicles, including ~~466~~159 buses, in the ~~third~~first quarter of ~~2017, a 14.5% increase compared to 2,469 medium-duty commercial vehicles, including 416 buses, in the third quarter of 2016.~~2017. A.C.T. Research estimates that unit sales of Class 4 through 7 commercial vehicles in the U.S. increased approximately ~~9.0%~~6.2% in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017. A.C.T. Research currently forecasts U.S. retail sales of Class 4 through 7 medium-duty commercial vehicles of approximately ~~238,500 units in 2017, 242,000~~245,000 units in 2018, 252,000 units in 2019 and ~~249,000~~264,000 in ~~2019.~~2020. In ~~2016,~~2017, we achieved a ~~4.9%~~4.5% share of the ~~U.S.~~ Class 4 through 7 ~~commercial vehicle market.~~market in the U.S. We expect our market share to range between 4.5% and ~~5.0%~~5.5% of the U.S. Class 4 through 7 commercial vehicle sales in ~~2017.~~2018. This market share percentage would result in the sale of approximately ~~10,700~~11,000 to ~~11,900~~13,400 of Class 4 through 7 commercial vehicles in ~~2017~~2018, based on A.C.T. Research’s current U.S. retail sales estimates of ~~238,500~~245,000 units.

We sold ~~447~~431 light-duty vehicles in the ~~third~~first quarter of ~~2017,~~2018, a ~~14.5% decrease~~24.2% increase compared to ~~523~~347 light-duty vehicles ~~sold~~ in the ~~third~~first quarter of ~~2016.~~2017. We expect to sell approximately 1,700 light-duty vehicles in ~~2017.~~2018.

We sold ~~1,743~~1,859 used commercial vehicles in the ~~third~~first quarter of ~~2017, a 2.9% decrease~~2018, an 8.6% increase compared to ~~1,795~~1,711 used commercial vehicles in the ~~third~~first quarter of ~~2016.~~2017. We expect to sell approximately ~~6,200~~7,500 to ~~7,000~~8,500 used commercial vehicles in ~~2017.~~2018.

Commercial vehicle lease and rental revenues increased ~~$2.2~~$6.3 million, or ~~4.2%~~12.3%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017. We expect lease and rental ~~revenues~~revenue to increase ~~between 3.0% and 6.0%~~5% to 10% during ~~2017,~~2018, compared to ~~2016.~~2017.

Finance and insurance revenues ~~decreased 2.0%~~increased $0.8 million, or 20.7%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016. Traditionally,~~2017. We expect finance and insurance revenues to fluctuate proportionately with our new and used commercial vehicle ~~sales. However,~~sales in ~~2017 a significant portion of our sales have been to large fleet customers who do not finance trucks through us or our network of lenders.~~2018. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share toof our operating profits.

Other income increased $1.6 million, or 43.6% in the first quarter of 2018, compared to the first quarter of 2017. Other income consists primarily of the gain on sale realized on trucks from the lease and rental fleet, document fees related to commercial vehicle sales and income from Central California Truck and Trailer Sales, LLC (“CCTTS”), our joint venture that operates non-franchised used commercial vehicle sales facilities in California and Arizona.

Gross profit increased ~~$38.7~~$39.1 million, or ~~21.4%~~20.8%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017. Gross profit as a percentage of sales increased to ~~17.5%~~18.3% in the ~~third~~first quarter of ~~2017,~~2018, from ~~16.5%~~18.0% in the ~~third~~first quarter of ~~2016. This~~2017. The increase in gross profit as a percentage of sales is a result of increased gross margins in our Aftermarket Products and Services ~~business,~~operations, commercial vehicle sales and truck lease and rental sales.

Gross margins from our Aftermarket Products and Services operations increased to ~~36.8%~~36.4% in the ~~third~~first quarter of ~~2017, from 36.1%~~2018, compared to 35.9% in the ~~third~~first quarter of ~~2016.~~2017. Gross profit ~~for the~~from our Aftermarket Products and Services ~~departments~~operations increased to ~~$138.4~~$145.9 million in the ~~third~~first quarter of ~~2017,~~2018 from ~~$121.5~~$125.6 million in the ~~third~~first quarter of ~~2016.~~2017. Historically, gross margins on parts sales range from 27% to 28% and gross margins on service and body shop operations range from 67% to 68%. Gross profits from parts sales represented ~~57%~~57.4% of total gross profit for Aftermarket Products and Services operations in the ~~third~~first quarter of ~~2017~~2018 and ~~56%~~55.8% in the ~~third~~first quarter of ~~2016.~~2017. Service and body shop operations represented ~~43%~~42.6% of total gross profit for Aftermarket Products and Services operations in the ~~third~~first quarter of ~~2017~~2018 and ~~44%~~44.2% in the ~~third~~first quarter of ~~2016.~~2017. We expect blended gross margins on Aftermarket Products and Services operations to range from ~~36.3%~~approximately 36.0% to 36.5% ~~during 2017.~~in 2018.

Gross margins on Class 8 truck sales ~~increased~~decreased to ~~7.8%~~8.1% in the ~~third~~first quarter of ~~2017,~~2018, from ~~6.9%~~8.2% in the ~~third~~first quarter of ~~2016.~~2017. This ~~increase~~decrease is ~~attributable~~primarily due to the ~~sales~~ mix inof purchasers, with more over-the-road fleet customers purchasing Class 8 trucks during the ~~third~~first quarter of ~~2017, which consisted of increased sales to vocational customers that are traditionally associated with higher margins.~~2018. In ~~2017,~~2018, we expect overall gross margins from Class 8 ~~truck~~commercial vehicle sales of approximately ~~7.5%~~7.0% to 8.0%.

Gross margins on medium-duty commercial vehicle sales ~~decreased~~increased to ~~5.4%~~6.8% in the ~~third~~first quarter of ~~2017,~~2018, from 6.7% in the ~~third quarter of 2016. This decrease is attributable to the mix of products sold during the third~~first quarter of 2017. ~~For 2017,~~In 2018, we expect overall gross margins from ~~medium-duty~~Class 4 through 7 commercial vehicle sales of approximately ~~5.5%~~5.7% to ~~6.0%~~6.2%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Gross margins on used commercial vehicle sales increased to ~~11.9%~~11.2% in the ~~third~~first quarter of ~~2017,~~2018, from ~~4.8%~~8.6% in the ~~third~~first quarter of ~~2016.~~2017. This increase is primarily ~~related~~due to ~~the stabilization~~strong demand for used vehicles as a result of increased freight demand and advantageous acquisition costs of used ~~truck values in recent months.~~vehicle inventory. We expect margins on used commercial vehicles to range between ~~9.5%~~8.5% and ~~10.5%~~10.0% during ~~2017.~~2018.

Gross margins from truck lease and rental sales increased to ~~17.3%~~15.8% in the ~~third~~first quarter of ~~2017,~~2018, from ~~12.6%~~13.5% in the ~~third~~first quarter of ~~2016.~~2017. This increase is primarily related to increased rental fleet ~~utilization and improvement in the performance of our full service leases.~~utilization. We expect gross margins from lease and rental sales of approximately ~~15.5%~~16.0% to ~~16.5%~~17.5% during ~~2017.~~2018. Our policy is to depreciate our lease and rental fleet using a straight line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term. 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.

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

Selling, General and Administrative (“SG&A”) expenses increased ~~$17.0~~$21.3 million, or ~~11.9%~~14.1%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016. In~~2017. This increase is primarily related to the ~~third~~increase in employee benefits and payroll taxes that we normally recognize during the first quarter of ~~2017,~~each year and increased commissions resulting from increased sales of commercial vehicles and aftermarket services. SG&A expenses ~~equaled 12.7%~~as a percentage of total ~~revenue.~~revenues decreased to 13.8% in 2018, from 14.4% in 2017. SG&A expenses as a percentage of total revenues have recently ranged from 12.1% to 14.7%. In general, when new and used commercial vehicle revenues decrease as a percentage of total revenues, SG&A expenses as a percentage of total revenues will be at, or exceed, the higher end of this range. For ~~2017,~~2018, we expect SG&A expenses as a percentage of total revenues to range from ~~13.4%~~13.5% to ~~14.2%~~14.5% and the selling portion of SG&A expenses to be approximately 25.0% to 30.0% of new and used commercial vehicle gross profit.

Depreciation and amortization expense ~~decreased $0.6~~increased $10.4 million, or ~~4.4%~~83.4%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017. This increase is primarily related to the additional amortization expense of $10.2 million related to the replacement of our ERP Platform components. See Note 11 – Long-Lived Asset of the Notes to Consolidated Financial Statements.

Net interest expense ~~decreased $0.2~~increased $1.5 million, or ~~5.6%~~54.3%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017. This increase is primarily related to the increase in the LIBOR rate over the last year and increased inventory levels, compared to the first quarter of 2017. Net interest expense in ~~2017~~2018 will depend on inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan arrangements.

As a result of the factors described above, income from continuing operations before income taxes increased ~~$21.0~~$6.0 million, or ~~86.5%~~27.3%, in the ~~third~~first quarter of ~~2017,~~2018, compared to the ~~third~~first quarter of ~~2016.~~2017.

Income taxes increased ~~$6.1~~$2.0 million, or ~~65.0%~~26.7%, in the ~~third~~first quarter of 2018, compared to the first quarter of 2017. In the first quarter of 2018, we recorded $22,000 of tax expense related to an excess tax deficiency of equity compensation which increased income tax expense. In the first quarter of 2017, ~~compared~~we recorded a $1.1 million tax benefit related to ~~the third quarter of 2016, as a result of the factors described above. ASU 2016-09~~ ~~“Compensation – Stock Compensation (Topic 718)”~~ ~~requires~~ excess tax benefits ~~and tax deficiencies to be recorded in the income statement when~~of equity ~~awards issued pursuant to our equity~~ compensation ~~plans vest or are settled. We recorded a $1.9 million tax benefit in the third quarter of 2017,~~ which reduced income tax expense. We provided for taxes at a ~~38.75%~~25.0% effective rate in the ~~third~~first quarter of ~~2017~~2018 and 39.00% in the ~~third~~first quarter of ~~2016.~~2017. We expect our effective tax rate to be approximately ~~38.5%~~25% to ~~39.0%~~26% of pretax income in ~~2017.~~

~~Nine Months Ended September 30,~~ ~~2017~~ ~~Compared to Nine Months Ended September 30,~~ ~~2016~~

~~Unless otherwise stated below, our variance explanations and future expectations with regard to the items discussed in this section are set forth in the discussion~~ ~~of the Three Months Ended September 30, 2017, Compared to Three Months Ended September 30, 2016.~~

~~Total revenues increased $312.4 million, or 9.8%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Aftermarket Products and Services revenues increased $85.5 million, or 8.5%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Revenues from sales of new and used commercial vehicles~~ ~~increased $226.7 million, or 11.3%, in the first nine months of 2017, compared to the first nine months of 2016.~~

We sold 9,705 heavy-duty trucks during the first nine months of 2017, a 17.0% increase compared to 8,295 heavy-duty trucks in the first nine months of 2016. According to A.C.T. Research, U.S. Class 8 truck sales decreased 9.5% in the first nine months of 2017, compared to the first nine months of 2016.

We sold 8,454 medium-duty commercial vehicles, including 827 buses, during the first nine months of 2017, a 1.2% decrease compared to 8,554 medium-duty commercial vehicles, including 849 buses, in the first nine months of 2016. A.C.T. Research estimates that unit sales of Class 4 through 7 commercial vehicles, including buses, in the U.S increased approximately 5.2% in the first nine months of 2017, compared to the first nine months of 2016.

~~We sold 1,267 light-duty commercial vehicles during the first nine months of 2017, a 2.2% decrease compared to 1,296 light-duty commercial vehicles in the first nine months of 2016.~~

~~We sold 5,197 used commercial vehicles during the first nine months of 2017, a 1.6% decrease compared to 5,280 used commercial vehicles in the first nine months of 2016.~~

~~Truck lease and rental revenues increased $3.4 million, or 2.2%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Finance and insurance revenues decreased $1.1 million, or 7.8%, in the first nine months of 2017, compared to the first nine months of 2016.~~

Gross profit increased $72.0 million, or 13.2%, in the first nine months of 2017, compared to the first nine months of 2016. Gross profit as a percentage of sales increased to 17.6% in the first nine months of 2017, from 17.1% in the first nine months of 2016.

Gross margins from our Aftermarket Products and Services operations increased to 36.5% in the first nine months of 2017, from 36.2% in the first nine months of 2016. Gross profit for the Aftermarket Products and Services departments was $398.6 million in the first nine months of 2017, compared to $364.4 million in the first nine months of 2016. Gross profits from parts sales represented 57% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2017 and 56% in the first nine months of 2016. Service and body shop operations represented 43% of total gross profit for Aftermarket Products and Services operations in the first nine months of 2017 and 44% in the first nine months of 2016.

~~Gross margins on Class 8 truck sales increased to 8.0% in the first nine months of 2017, from 7.0% in the first nine months of 2016.~~

~~Gross margins on medium-duty commercial vehicle sales decreased to 5.9% in the first nine months of 2017, from 6.1% in the first nine months of 2016.~~

~~Gross margins on used commercial vehicle sales increased to 10.7% in the first nine months of 2017, from 8.0% in the first nine months of 2016.~~

~~Gross margins from truck lease and rental sales increased to 15.9% in the first nine months of 2017, from 12.1% in the first nine months of 2016.~~

SG&A expenses increased $18.2 million, or 4.0%, in the first nine months of 2017, compared to the first nine months of 2016. SG&A expenses as a percentage of sales were 13.4% in the first nine months of 2017, and 14.1% in the first nine months of 2016.

~~Depreciation and amortization expense decreased $1.1 million, or 2.9%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Net interest expense decreased $2.6 million, or 22.8%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Income before income taxes increased $55.9 million, or 121.4%, in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Income taxes~~ increased $17.8 million, or 98.8% in the first nine months of 2017, compared to the first nine months of 2016. We provided for taxes at a 38.75% rate in the first nine months of 2017, compared to a rate of 39.0% in the first nine months of 2016.2018.

Our short-term cash requirements are primarily for working capital, inventory financing, the renovation and expansion of existing facilities and the construction or purchase of new facilities. Historically, these cash requirements have been met through the retention of profits, borrowings under our floor plan arrangements and bank financings. As of ~~September 30, 201~~7,March 31, 2018, we had working capital of approximately ~~$180.3~~$195.1 million, including ~~$127.9~~$131.7 million in cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months. From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under our ~~floor plan~~ credit agreement with BMO Harris Bank N.A. (“BMO Harris”) (the “Floor Plan Credit Agreement”), and the resulting interest earned is recognized as an offset to our gross interest expense under the Floor Plan Credit Agreement.

We have a secured line of credit that provides for a maximum borrowing of $17.5 million. There were no advances outstanding under this secured line of credit at ~~September 30, 2017,~~March 31, 2018, however, ~~$11.9~~$11.7 million was pledged to secure various letters of credit related to self-insurance products, leaving ~~$5.6~~$5.8 million available for future borrowings as of ~~September 30, 2017.~~March 31, 2018.

On March 21, 2017, we entered into a working capital facility with BMO Harris (the “Working Capital Facility”). The Working Capital Facility includes up to $100 million of revolving credit loans to the Company for working capital, capital expenditures and other general corporate purposes. The amount of the borrowings under the Working Capital Facility are subject to borrowing base limitations based on the value of our eligible parts inventory and company vehicles. The Working Capital Facility includes a $20 million letter of credit sublimit. Borrowings under the Working Capital Facility ~~bears~~bear interest at rates based on LIBOR or the Base Rate (as such terms are defined in the Working Capital Facility), plus an applicable margin determined based on outstanding borrowing under the Working Capital Facility. In addition, we are required to pay a commitment fee on the amount unused under the Working Capital Facility. The Working Capital Facility expires on the earlier of (i) March 21, 2020 and (ii) the date on which all commitments under the Floor Plan Working Capital Facility shall have terminated, whether as a result of the occurrence of the Commitment Termination Date (as defined in the Floor Plan Working Capital Facility) or otherwise. There were no advances outstanding under the Working Capital Facility as of ~~September 30, 2017.~~March 31, 2018.

Our long-term real estate debt,, floor plan financing agreements and the Working Capital Facility require us to satisfy various financial ratios such as the debt-to-worth ratio, leverage ratio and the fixed charge coverage ratio and certain requirements for tangible net worth and GAAP net worth. As of ~~September 30, 2017,~~March 31, 2018, we were in compliance with all debt covenants related to debt secured by real estate, lease and rental units, our floor plan credit agreements and the Working Capital Facility. We do not anticipate any breach of the covenants in the foreseeable future.

We expect to purchase or lease ~~trucks~~commercial vehicles worth approximately ~~$150.0~~$165.0 million to $1~~75.0~~$190.0 million for our leasing operations during ~~2017,~~2018, depending on customer demand, all of which will be financed. We also expect to make capital expenditures for recurring items such as computers, shop tools and equipment and vehicles of approximately $20.0 million to $25.0 million during ~~2017.~~2018.

We are currently constructing facilities in Denton, Texas, Springfield, Illinois and Dayton, Ohio with remaining contract costs of $12.2 million. The construction projects will continue through 2018.

On November 30, ~~2016,~~2017, we announced that our Board of Directors authorized the repurchase, from time to time, of up to an aggregate of $40.0 million shares of Class A Common Stock ~~and~~and/or Class B Common Stock. On March 14, 2018, we announced that our Board of Directors approved an increase of $35.0 million to our existing stock purchase program, up to an aggregate of $75.0 million of our shares of Class A Common Stock and/or Class B Common Stock. Repurchases, if any, will be made at times and in amounts as we deem appropriate and may be made through open market transactions at prevailing market prices, privately negotiated transactions or by other means in accordance with federal securities laws. The actual timing, number and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including market conditions, stock price and other factors, including those related to the ownership requirements of our dealership agreements with Peterbilt. The stock repurchase program expires on November ~~30, 2017,~~29, 2018, and may be suspended or discontinued at any time.~~Through September 30, 2017, we had purchased $30.9 million under this stock repurchase program.~~

We anticipate funding the capital expenditures for the improvement and expansion of existing facilities and recurring expenses through our operating cash flows. We have the ability to fund the construction or purchase of new facilities through our operating cash flows or by financing.

We have no other material commitments for capital expenditures as of ~~September 30, 2017.~~March 31, 2018. However, we will continue to purchase vehicles for our lease and rental operations and authorize capital expenditures for the improvement or expansion of our existing dealership facilities and construction or purchase of new facilities based on market opportunities.

Cash and cash equivalents increased by ~~$45.9~~$7.2 million during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, and ~~decreased~~increased by ~~$26.9~~$7.0 million during the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The major components of these changes are discussed below.

Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During the first ~~nine months~~quarter of ~~2017,~~2018, operating activities resulted in net cash provided by operations of ~~$170.3~~$117.7 million. Net cash provided by operating activities primarily consisted of ~~$66.3~~$21.0 million in net income, as well as non-cash adjustments related to depreciation and amortization of ~~$117.1~~$51.1 million, deferred income tax of $0.8 million and stock-based compensation of ~~$12.0 million and $8.6 million of deferred income tax.~~$7.9 million. Cash ~~provided by~~used in operating activities included an aggregate of $33.3 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $23.5 million from increases in accounts payable and accrued liabilities, $4.6 million from an increase in customer deposits and $26.4 million from the net increase in floor plan, trade, which were offset by cash outflows of $87.8 million from increases in inventory. The majority of commercial vehicle inventory is financed through our floor plan credit agreements.

During the first nine months of 2016, operating activities resulted in net cash provided by operations of $386.8 million. Net cash provided by operating activities primarily consisted of $28.1 million in net income, as well as non-cash adjustments related to depreciation and amortization of $118.1 million, impairment of assets of $8.2 million, and stock-based compensation, including tax benefit, of $10.2 million. Cash provided by operating activities included an aggregate of $220.3$36.9 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were primarily cash inflows of ~~$8.6~~$35.4 million from the net increase in floor plan (trade), $5.7 million from the decrease in ~~accounts receivable, $199.2 million from reductions in inventory levels, $24.2~~inventories and $5.0 million from the ~~decrease in other assets,~~ net ~~which were offset by cash outflows of $4.5 million from decreases~~increase in accounts payable and accrued liabilities, ~~and $6.6~~which was offset by $7.1 million from ~~a decrease~~the increase in ~~customer deposits.~~accounts receivable. The majority of our commercial vehicle inventory is financed through our floor plan credit agreements.

During the first quarter of 2017, operating activities resulted in net cash provided by operations of $37.5 million. Net cash provided by operating activities primarily consisted of $14.5 million in net income, as well as non-cash adjustments related to depreciation and amortization of $38.7 million, deferred income taxes of $1.4 million and stock-based compensation of $4.8 million. Cash used in operating activities included an aggregate of $22.0 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities primarily were cash inflows of $18.6 million from the net increase in floor plan (trade) which was offset by $12.9 million from the increase in accounts receivable, $19.4 million from the increase in inventories, $2.2 million from the decrease in customer deposits and $5.5 million from the net decrease in accounts payable and accrued liabilities.

In June 2012, we entered into a wholesale financing agreement with Ford Motor Credit Company that provides for the financing of, and is collateralized by, our Ford new vehicle inventory. This wholesale financing agreement bears interest at a rate of Prime plus 150 basis points minus certain incentives and ~~rebates; however, the prime rate is defined to be a minimum of 3.75%.~~rebates. As of ~~September 30, 2017,~~March 31, 2018, the interest rate on the wholesale financing agreement was ~~5.25%~~6.25% before considering the applicable incentives. As of ~~September 30, 2017,~~March 31, 2018, we had an outstanding balance of approximately ~~$88.8~~$97.7 million under the Ford Motor Credit Company wholesale financing agreement.

During the first ~~nine months~~quarter of ~~2017,~~2018, cash used in investing activities was ~~$129.7~~$47.1 million. Cash flows used in investing activities ~~consists~~consist primarily of cash used for capital expenditures. Capital expenditures ~~totaled $138.8~~of $48.2 million ~~during the first nine months of 2017 and~~ consisted primarily of $5.1 million for purchases of property and equipment and improvements to our existing dealership ~~facilities. Property~~facilities and ~~equipment purchases during the first nine months of 2017 included $103.6~~$43.1 million for additional units for the rental and leasing operations, which were directly offset by borrowings of long-term debt. We expect to purchase or lease ~~trucks~~commercial vehicles worth approximately ~~$150.0~~$165.0 million to ~~$175.0~~$190.0 million for our ~~rental and~~ leasing operations in ~~2017,~~2018, depending on customer demand, all of which will be financed. During ~~2017,~~2018, we expect to make capital expenditures for recurring items such as computers, shop equipment and vehicles of $20.0 million to $25.0 million.

During the first ~~nine months~~quarter of ~~2016,~~2017, cash used in investing activities was ~~$154.9~~$32.4 million. Cash flows used in investing activities consist primarily of cash used for capital expenditures. Capital expenditures of ~~$159.5~~$39.2 million ~~during the first nine months of 2016~~ consisted primarily of $11.3 million for purchases of property and equipment and improvements to our existing dealership ~~facilities. Property~~facilities and ~~equipment purchases during the first nine months of 2016 included $106.3~~$27.9 million for additional units for the rental and leasing operations, which were directly offset by borrowings of long-term ~~debt~~debt.

Cash flows from financing activities include borrowings and repayments of long-term debt and net proceeds of floor plan notes payable, – non-trade. During the first ~~nine months~~quarter of 2018, we used $63.4 million in net cash flow from financing activities. Cash outflows were primarily related to $49.5 million used for principal repayments of long-term debt and capital lease obligations, $8.4 million from net payments of floor plan (non-trade) and $38.1 million used for the repurchase of common stock. These cash outflows were offset by cash inflows related to borrowings of $32.1 million of long-term debt. The borrowings of long-term debt were related to purchasing units for the rental and leasing operations.

During the first quarter of 2017, we generated ~~$5.3~~$2.0 million in net cash flow from financing ~~activities,~~activities. Cash outflows were primarily related to ~~$33.6~~$41.5 million from net draws on floor plan notes payable, non-trade, borrowings of $97.3 million of long-term debt and $20.1 million from the issuance of shares related to equity compensation plans. These cash inflows were partially offset by $117.8 millionused for principal repayments of long-term debt and capital lease obligations and ~~$27.4~~$7.6 million ~~to purchase 837,494 shares~~used for repurchase of ~~Rush Class B common stock. The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.~~

During the first nine months of 2016, we used $205.0 million in net cash from financing activities, primarily related to $142.2 million from net payments on floor plan notes payable, non-trade, $136.8 million for principal repayments of long-term debt and capital lease obligations and $33.3 million to purchase 934,171 shares of Rush Class A Common Stock and 657,567 shares of Rush Class B common stock. These cash outflows were ~~partially~~ offset by cash inflows related to $19.1 million from net draws on floor plan (non-trade), borrowings of ~~$103.2~~$25.6 million of long-term debt and ~~$4.8~~$6.9 million from the issuance of shares related to equity compensation plans. The borrowings of long-term debt were ~~primarily~~ related to purchasing units for the rental and leasing operations.

Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 days or less from the date the commercial vehicles are invoiced from the factory. We financed the majority of all new commercial vehicle inventory and the loan value of our used commercial vehicle inventory under the Floor Plan Credit Agreement. The Floor Plan Credit Agreement includes an aggregate loan commitment of $875.0 million. Borrowings under the Floor Plan Credit Agreement bear interest at an annual rate equal to (A) the greater of (i) zero and (ii) three month LIBOR rate, determined on the last day of the prior month, plus (B) 1.51% and are payable monthly. In addition, we are required to pay a monthly working capital fee equal to 0.16% per annum multiplied by the amount of voluntary prepayments of new and used inventory loans. Loans under the Floor Plan Credit Agreement for the purchase of used inventory are limited to $150.0 million. We may terminate the Floor Plan Credit Agreement at any time, although if we do so we must pay a prepayment processing fee equal ~~to: (i) 2.0%~~to 1.0% of the aggregate revolving loan commitments if such termination occurs on or ~~before January 1, 2018; (ii) 1.0% of the aggregate revolving loan commitments if such termination occurs after January 1, 2018 and on or~~ prior to July 1, ~~2018; and (iii)~~2018 or $500,000 if such termination occurs after July 1, 2018 and prior to June 30, 2019, subject to specified limited exceptions. On ~~September 30, 2017,~~March 31, 2018, we had approximately ~~$578.8~~$650.7 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were ~~$532.8~~$652.4 million during the ~~nine months~~quarter ended ~~September 30, 2017. Periodically, we~~March 31, 2018. We utilize our excess cash on hand to pay down our outstanding borrowings under the Floor Plan Credit Agreement, and the resulting interest earned is recognized as an offset to our gross interest expense under the Floor Plan Credit Agreement.

Navistar Financial Corporation and Peterbilt offer trade terms that provide an ~~interest-free~~interest-free inventory stocking period for certain new commercial vehicles. This interest-free period is generally 15 days. If the commercial vehicle is not sold within the interest-free period, we then finance the commercial vehicle under the Floor Plan Credit Agreement.

On ~~September 30, 201~~7,March 31, 2018, our backlog of commercial vehicle orders was approximately ~~$1,005.8~~$1,358.3 million, as compared to a backlog of commercial vehicle orders of approximately ~~$836.4~~$1,036.2 million on ~~September 30, 2016.~~March 31, 2017. Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each particular type of commercial vehicle ordered by a customer at our Rush Truck Centers by the recent average selling price for that type of commercial vehicle. We include only confirmed orders in our backlog. However, such orders are subject to cancellation. In the event of order cancellation, we have no contractual right to the total revenues reflected in our backlog. The delivery time for a custom-ordered commercial vehicle varies depending on the truck specifications and demand for the particular model ordered. We sell the majority of our new heavy-duty commercial vehicles by customer special order and we sell the majority of our medium- and light-duty commercial vehicles out of inventory. Orders from a number of our major fleet customers are included in our backlog as of ~~September 30, 2017~~March 31, 2018, and we expect to fill the majority of our backlog orders during ~~the next twelve months.~~2018.

Our Truck Segment is moderately seasonal. Seasonal effects on new commercial vehicle sales related to the seasonal purchasing patterns of any single customer type are mitigated by the diverse geographic locations of our dealerships and our diverse customer base, including regional and national fleets, local and state governments, corporations and ~~owner operators.~~owner-operators. However, commercial vehicle parts and service operations historically have experienced higher sales volumes in the second and third quarters.

Our business is dependent on a number of factors ~~relating to~~including general economic conditions, ~~including~~ fuel prices, interest rate fluctuations, credit availability, ~~economic recessions,~~ environmental and other government regulations and customer business cycles. Unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on these general economic conditions. According to data published by A.C.T. Research, in recent years, total U.S. retail sales of new Class 8 commercial vehicles have ranged from a low of approximately 97,000 in 2009, to a high of approximately ~~291,000~~253,000 in ~~2006.~~2015. Through geographic expansion, concentration on higher margin Aftermarket Products and Services and diversification of our customer base, we have attempted to reduce the negative impact of adverse general economic conditions or cyclical trends affecting the Class 8 commercial vehicle industry on our earnings.

Other than operating leases, we do not have any obligation under any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, that has or is reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

We are subject to ~~a wide range of~~ federal, state and local environmental laws and regulations ~~including those~~ governing the following: discharges into the air and water; the operation and removal of underground and aboveground storage tanks; the use, handling, storage and disposal of hazardous substances, petroleum and other materials; and the investigation and remediation of environmental impacts. As with commercial vehicle dealerships generally, and ~~Aftermarket Products~~vehicle service, parts and ~~Services~~body shop operations in particular, our business involves the generation, use, storage, handling and contracting for recycling or disposal of hazardous materials or wastes and other environmentally sensitive materials. We have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

Our operations involving the use, handling, storage and disposal of hazardous and nonhazardous materials are subject to the requirements of the federal Resource Conservation and Recovery Act, or RCRA, and comparable state statutes. Pursuant to these laws, federal and state environmental agencies have established approved methods for handling, storage, treatment, transportation and disposal of regulated substances ~~and wastes~~ with which we must comply. Our business also involves the operation and use of aboveground and underground storage tanks. These storage tanks are subject to periodic testing, containment, upgrading and removal under RCRA and comparable state statutes. Furthermore, investigation or remediation may be necessary in the event of leaks or other discharges from current or former underground or aboveground storage tanks.

We may also have liability in connection with materials that were sent to ~~third-party~~third-party recycling, treatment, or disposal facilities under the federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, and comparable state statutes. These statutes impose liability for investigation and remediation of environmental impacts without regard to fault or the legality of the conduct that contributed to the impacts. Responsible parties under these statutes may include the owner or operator of the site where impacts occurred and companies that disposed, or arranged for the disposal, of the hazardous substances released at these sites. These responsible parties also may be liable for damages to natural resources. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other materials into the environment.

The federal Clean Water Act and comparable state statutes ~~prohibit discharges into regulated waters without the necessary permits,~~ require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans. Water quality protection programs govern certain discharges from some of our operations. Similarly, the federal Clean Air Act and comparable state statutes regulate emissions of various air emissions through permitting programs and the imposition of standards and other requirements.

The Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety Administration (“NHTSA”), on behalf of the U.S. Department of Transportation, issued ~~final~~ rules ~~on September 15, 2011~~ associated with reducing greenhouse gas (“GHG”) emissions and improving the fuel efficiency of medium and heavy-duty trucks and buses ~~beginning in model year 2014 and being phased in through model year 2018.~~ ~~On June 19, 2015, the EPA and NHTSA proposed further GHG and fuel efficiency standards that would apply to medium and heavy-duty vehicles and buses and would be phased in between~~for model years 2021 through 2027. ~~On August 16, 2016, the EPA and NHTSA issued final rules that largely adopted their June 19, 2015 proposal.~~ We do not believe that ~~the foregoing adopted standards~~these rules will negatively impact our business, however, future legislation or other new regulations that may be adopted to address GHG emissions or fuel efficiency standards may negatively impact our business. Additional regulations could result in increased compliance costs, additional operating restrictions or changes in demand for our products and services, which could have a material adverse effect on our business, financial condition and results of operations.

We do not believe that we ~~do not~~ currently have any material environmental liabilities ~~and~~or that compliance with environmental laws and regulations will ~~not, individually or in the aggregate,~~ have a material adverse effect on our results of operations, financial condition or cash flows. However, soil and groundwater impacts are known to exist at some of our ~~current properties.~~dealerships. Further, environmental laws and regulations are complex and subject to change. In addition, in connection with acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. In connection with our dispositions, or prior dispositions made by companies we acquire, we may retain exposure for environmental costs and liabilities, some of which may be material. Compliance with current or amended, or new or more stringent, laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and those expenditures could be material.

Market risk represents the risk of loss that may impact the financial position, results of operations, or cash flows of the Company due to adverse changes in financial market prices, including interest rate risk, and other relevant market rate or price risks.

We are exposed to ~~some~~ market risk through interest rates related to our floor plan financing agreements, the Working Capital Facility, variable rate real estate debt and discount rates related to finance sales. The majority of floor plan debt and variable rate real estate debt is based on LIBOR. As of ~~September 30, 2017,~~March 31, 2018, we had floor plan borrowings and variable interest rate real estate debt of approximately ~~$806.1~~$897.0 million. Assuming an increase or decrease in LIBOR of 100 basis points, annual interest expense could correspondingly increase or decrease by approximately ~~$8.1~~$9.0 million.

In the past, we invested in interest-bearing short-term investments consisting of investment-grade auction rate securities classified as available-for-sale. Auctions for investment grade securities held by us have failed. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop. As of ~~September 30, 2017,~~March 31, 2018, we hold auction rate securities, with underlying tax-exempt municipal bonds that mature in 2030, that have a fair value of $6.4 million. Given the current market conditions in the auction rate securities market, if we determine that the fair value of these securities temporarily decreases by an additional 10%, our equity could correspondingly decrease by approximately $640,000. If it is determined that the fair value of these securities is other-than-temporarily impaired by 10%, we could record a loss on our Consolidated Statements of Income ~~and Comprehensive Income~~ of approximately $640,000. For further discussion of the risks related to our auction rate securities, see Note 6 – Financial Instruments and Fair Value of the Notes to Consolidated Financial Statements.

The Company, under the supervision and with the participation of management, including the Company’s principal executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the principal executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017~~March 31, 2018 to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to Company management, including the principal executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the three months ended ~~September 30, 2017~~March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are involved in litigation arising out of our operations in the ordinary course of business. We maintain liability insurance, including product liability coverage, in amounts deemed adequate by management. To date, aggregate costs to us for claims, including product liability actions, have not been material. However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on our financial condition or results of operations. We believe that there are no claims or litigation pending, the outcome of which could have a material adverse effect on our 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 our financial condition or results of operations for the fiscal period in which such resolution occurred.

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A, Part I of our ~~2016~~2017 Annual Report on Form 10-K (the ~~“2016~~“2017 Annual Report”) describes some of the risks and uncertainties associated with our business that have the potential to materially affect our business, financial condition or results of operations.

There has been no material change in our risk factors disclosed in our ~~2016~~2017 Annual Report.

We did not make any unregistered sales of equity securities during the ~~third~~first quarter of ~~2017.~~2018.

A summary of the ~~Company~~’sCompany’s stock repurchase activity for the ~~third~~first quarter of ~~2017~~2018 is as follows:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements

	Consolidated Balance Sheets - ~~September 30, 2017~~March 31, 2018 (unaudited) and December 31, ~~2016~~2017	3

	Consolidated Statements of Income and Comprehensive Income - For the Three ~~and~~ ~~Nine~~ Months Ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (unaudited)	4

	Consolidated Statements of Cash Flows - For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13 14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	26







PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	27

SIGNATURES		28

	September 30,			December 31,			March 31,			December 31,
	2017			2016			2018			2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	127,915		$	82,026		$	131,712		$	124,541
Accounts receivable, net		153,526			156,199			185,936			183,875
Note receivable affiliate		14,320			10,166			16,993			11,914
Inventories, net		960,962			840,304			1,044,710			1,033,294
Prepaid expenses and other		7,330			8,798			13,809			11,969
Assets held for sale		10,319			13,955			7,645			9,505
Total current assets		1,274,372			1,111,448			1,400,805			1,375,098
Investments		6,375			6,231			6,375			6,375
Property and equipment, net		1,133,309			1,135,805			1,151,646			1,159,595
Goodwill, net		290,191			290,191			291,391			291,391
Other assets, net		54,743			59,372			48,987			57,680
Total assets	$	2,758,990		$	2,603,047		$	2,899,204		$	2,890,139

Liabilities and shareholders’ equity
Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable	$	706,995		$	646,945		$	805,531		$	778,561
Current maturities of long-term debt		142,675			130,717			143,401			145,139
Current maturities of capital lease obligations		15,314			14,449			17,399			17,119
Liabilities directly associated with assets held for sale		–			783
Trade accounts payable		111,100			97,844			123,786			107,906
Customer deposits		22,976			18,418			27,388			27,350
Accrued expenses		95,022			83,974			88,232			96,132
Total current liabilities		1,094,082			993,130			1,205,737			1,172,207
Long-term debt, net of current maturities		450,121			472,503			453,986			466,389
Capital lease obligations, net of current maturities		64,972			70,044			60,706			66,022
Other long-term liabilities		9,575			7,214			11,040			9,837
Deferred income taxes, net		206,123			197,331			136,066			135,311
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2017 and 2016		–			–
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 31,183,787 Class A shares and 8,606,623 Class B shares outstanding in 2017; and 30,007,088 Class A shares and 9,245,447 Class B shares outstanding in 2016		452			438
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2018 and 2017								–			–
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 30,582,509 Class A shares and 8,623,472 Class B shares outstanding in 2018; and 31,345,116 Class A shares and 8,469,427 Class B shares outstanding in 2017								457			454
Additional paid-in capital		341,245			309,127			356,435			348,044
Treasury stock, at cost: 934,171 class A shares and 4,487,985 class B shares in 2017 and 934,171 class A shares and 3,650,491 class B shares in 2016		(114,270	)		(86,882	)
Treasury stock, at cost: 1,768,354 class A shares and 4,697,592 class B shares in 2018 and 934,171 class A shares and 4,625,181 class B shares in 2017								(158,819	)		(120,682	)
Retained earnings		706,690			640,428			833,596			812,557
Accumulated other comprehensive loss, net of tax		–			(286	)
Total shareholders’ equity		934,117			862,825
Total liabilities and shareholders’ equity	$	2,758,990		$	2,603,047
Total shareholders’ equity								1,031,669			1,040,373
Total liabilities and shareholders’ equity							$	2,899,204		$	2,890,139

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018			2017

Revenues:
New and used commercial vehicle sales	$	819,028	$	698,838	$	2,230,969	$	2,004,236	$	773,100		$	635,953
Aftermarket products and services sales		375,835		336,459		1,092,540		1,007,063
Parts and service sales										400,295			350,106
Lease and rental		54,630		52,452		158,922		155,491		57,524			51,244
Finance and insurance		4,771		4,870		13,092		14,206		4,741			3,929
Other		3,195		3,422		10,256		12,347		5,121			3,565
Total revenue		1,257,459		1,096,041		3,505,779		3,193,343		1,240,781			1,044,797
Cost of products sold:
New and used commercial vehicle sales		754,762		653,992		2,061,135		1,868,983		710,914			588,120
Aftermarket products and services sales		237,452		214,916		693,910		642,678
Parts and service sales										254,444			224,466
Lease and rental		45,197		45,817		133,707		136,618		48,428			44,304
Total cost of products sold		1,037,411		914,725		2,888,752		2,648,279		1,013,786			856,890
Gross profit		220,048		181,316		617,027		545,064		226,995			187,907
Selling, general and administrative expense		159,281		142,280		469,037		450,812		171,670			150,403
Depreciation and amortization expense		12,438		13,014		37,374		38,482		22,908			12,492
Gain on sale of assets		107		1,566		76		1,571
Loss on sale of assets										(28	)		(163	)
Operating income		48,436		27,588		110,692		57,341		32,389			24,849
Interest expense, net		3,101		3,285		8,716		11,287		4,306			2,791
Income before taxes		45,335		24,303		101,976		46,054		28,083			22,058
Provision for income taxes		15,551		9,423		35,714		17,962		7,044			7,579
Net income	$	29,784	$	14,880	$	66,262	$	28,092	$	21,039		$	14,479

Earnings per common share:
Basic	$	.75	$	.38	$	1.68	$	.70	$	.53		$	.37
Diluted	$	.72	$	.37	$	1.62	$	.69	$	.51		$	.36

Weighted average shares outstanding:
Basic		39,825		39,617		39,560		40,138		39,665			39,409
Diluted		41,146		40,274		40,830		40,698		41,092			40,701

Comprehensive income	$	29,784	$	14,889	$	66,548	$	28,111	$	21,039		$	14,479

	Cost Basis Amount		Gross Unrealized Loss In Accumulated OCI		Fair Value
September 30, 2017
Investment in auction rate securities	$	6,375	˗		$	6,375

December 31, 2016
Investment in auction rate securities	$	6,700	$	469	$	6,231

	Available for Sale Securities
Balance at December 31, 2016	$	(286	)
Change in fair value		286
Balance at September 30, 2017	$	−

	Available for Sale Securities
Balance as of December 31, 2017	$	−
Change in fair value		−
Income tax expense		−
Balance at March 31, 2018	$	−

	Available for Sale Securities
Balance at December 31, 2015	$	(305	)
Change in fair value		19
Balance at September 30, 2016	$	(286	)

	Available for Sale Securities
Balance as of December 31, 2016	$	(286	)
Change in fair value		−
Income tax expense		−
Balance at March 31, 2017	$	(286	)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Revenue

New and used commercial vehicle sales		65.1	%		63.8	%		63.6	%		62.8	%		62.3	%		60.9	%
Aftermarket products and services sales		29.9			30.7			31.2			31.5
Lease and rental sales		4.3			4.8			4.5			4.9
Parts and service sales														32.3			33.5
Lease and rental														4.6			4.9
Finance and insurance		0.4			0.4			0.4			0.4			0.4			0.4
Other		0.3			0.3			0.3			0.4			0.4			0.3
Total revenues		100.0			100.0			100.0			100.0			100.0			100.0
Cost of products sold		82.5			83.5			82.4			82.9			81.7			82.0
Gross profit		17.5			16.5			17.6			17.1			18.3			18.0
Selling, general and administrative		12.6			13.0			13.4			14.1			13.8			14.4
Depreciation and amortization		1.0			1.2			1.0			1.2			1.9			1.2
Gain on sale of assets		0.0			0.1			0.0			0.0
Gain (loss) on sale of assets														0.0			0.0
Operating income		3.9			2.4			3.2			1.8			2.6			2.4
Interest expense, net		0.3			0.3			0.3			0.4			0.3			0.3
Income before income taxes		3.6			2.1			2.9			1.4			2.3			2.1
Provision for income taxes		1.2			0.9			1.0			0.6			0.6			0.7
Net income		2.4	%		1.2	%		1.9	%		0.8	%		1.7	%		1.4	%

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Gross Profit:
New and used commercial vehicle sales		29.2	%		24.7	%		27.5	%		24.8	%		27.4	%		25.4	%
Aftermarket products and services sales		62.9			67.0			64.6			66.9
Parts and service sales														64.3			66.9
Lease and rental		4.3			3.7			4.1			3.4			4.0			3.7
Finance and insurance		2.2			2.7			2.1			2.6			2.1			2.1
Other		1.4			1.9			1.7			2.3			2.2			1.9
Total gross profit		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Period	Total Number of Shares Purchased (1)(2)(3)		Average Price Paid Per Share (1)			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
July 1 – July 31, 2017		1,306	$	35.91	(4)		1,306	$	10,265,854
August 1 – August 31, 2017		12,300		37.32	(5)		12,300		9,806,398
September 1 – September 30, 2017		17,626		38.18	(6)		17,626		9,132,996
Total		31,232					31,232		9,132,996

Exhibit Number	Exhibit Title

3.1	Restated Articles of Incorporation of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 3.1 of the ~~Company~~’sCompany’s Quarterly Report on Form 10-Q (File No. 000-20797) for the quarter ended June 30, 2008) ~~https://www.sec.gov/Archives/edgar/data/1012019/000110465908051789/a08-18770_1ex3d1.htm~~
3.2	Rush Enterprises, Inc. Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 of the ~~Company~~’sCompany’s Current Report on Form 8-K (File No. 000-20797) filed May 21, 2013) ~~https://www.sec.gov/Archives/edgar/data/1012019/000143774913006455/rusha20130517_8kex3-1.htm~~
31.1*	Certification of CEO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of CFO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~.2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change
Vehicle unit sales:
New heavy-duty vehicles		3,647			3,024			20.6	%		9,705			8,295			17.0	%		3,312			2,706			22.4	%
New medium-duty vehicles		2,828			2,469			14.5	%		8,454			8,554			-1.2	%		2,705			2,553			6.0	%
New light-duty vehicles		447			523			-14.5	%		1,267			1,296			-2.2	%		431			347			24.2	%
Total new vehicle unit sales		6,922			6,016			15.1	%		19,426			18,145			7.1	%		6,448			5,606			15.0	%

Used vehicles		1,743			1,795			-2.9	%		5,197			5,280			-1.6	%		1,859			1,711			8.6	%

Vehicle revenues:
Vehicle revenues:
New heavy-duty vehicles	$	515.1		$	411.2			25.3	%	$	1,344.9		$	1,108.4			21.3	%	$	472.1		$	361.4			30.6	%
New medium-duty vehicles		210.7			187.2			12.6	%		613.2			611.5			0.3	%		199.2			189.3			5.2	%
New light-duty vehicles		16.3			20.4			-20.1	%		48.1			49.1			-2.0	%		16.6			13.6			22.1	%
Total new vehicle revenue	$	742.1		$	618.8			19.9	%	$	2,006.2		$	1,769.0			13.4	%	$	687.9		$	564.3			21.9	%

Used vehicle revenue	$	73.7		$	74.6			-1.2	%	$	214.7		$	220.7			-2.7	%	$	80.6		$	68.8			17.2	%

Other vehicle revenues:⁽¹⁾	$	3.2		$	5.4			-40.7	%	$	10.1		$	14.5			-30.3	%
Other vehicle revenues:⁽¹⁾																			$	4.6		$	2.9			58.6	%

Absorption ratio:		120.9	%		112.6	%		7.4	%		118.8	%		109.7	%		8.3	%
Dealership absorption ratio:																				120.0	%		113.4	%		5.8	%