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

For the quarterly period ended September 30, ~~2017~~2019

☐	~~( )~~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		74-1733016
	(State or other jurisdiction of		~~(I.R.S.~~ (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]☑ 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~~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.~~2019.

	Number of Shares
Title of Class		~~Number of~~ ~~Shares~~ Outstanding
Class A Common Stock, $.01 Par Value		~~31,259,965~~27,882,992
Class B Common Stock, $.01 Par Value	8,261,903

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	~~8,575,658~~ Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	RUSHA	NASDAQ Global Select Market
Class B Common Stock, $0.01 par value	RUSHB	NASDAQ Global Select Market

Table of Contents

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2019			2018
	(Unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	127,915		$	82,026		$	86,117		$	131,726
Accounts receivable, net		153,526			156,199			220,378			190,650
Note receivable affiliate		14,320			10,166			12,310			12,885
Inventories, net		960,962			840,304			1,385,132			1,339,923
Prepaid expenses and other		7,330			8,798			24,419			10,491
Assets held for sale		10,319			13,955			419			2,269
Total current assets		1,274,372			1,111,448			1,728,775			1,687,944
Investments		6,375			6,231
Property and equipment, net		1,133,309			1,135,805			1,261,370			1,184,053
Operating lease right-of-use assets, net								56,372			–
Goodwill, net		290,191			290,191			292,142			291,391
Other assets, net		54,743			59,372			66,595			37,962
Total assets	$	2,758,990		$	2,603,047		$	3,405,254		$	3,201,350

Liabilities and shareholders’ equity
Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable	$	706,995		$	646,945		$	1,051,241		$	1,023,019
Current maturities of long-term debt		142,675			130,717			158,722			161,955
Current maturities of capital lease obligations		15,314			14,449
Liabilities directly associated with assets held for sale		–			783
Current maturities of finance lease obligations								20,995			19,631
Current maturities of operating lease obligations								9,787			–
Trade accounts payable		111,100			97,844			137,781			127,451
Customer deposits		22,976			18,418			33,553			36,183
Accrued expenses		95,022			83,974			106,768			125,056
Total current liabilities		1,094,082			993,130			1,518,847			1,493,295
Long-term debt, net of current maturities		450,121			472,503			462,646			439,218
Capital lease obligations, net of current maturities		64,972			70,044
Finance lease obligations, net of current maturities								57,077			49,483
Operating lease obligations, net of current maturities								46,899			–
Other long-term liabilities		9,575			7,214			19,621			11,118
Deferred income taxes, net		206,123			197,331			162,911			141,308
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 2019 and 2018								–			–
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 27,806,319 Class A shares and 8,283,916 Class B shares outstanding in 2019; and 28,709,636 Class A shares and 8,290,277 Class B shares outstanding in 2018								463			458
Additional paid-in capital		341,245			309,127			390,359			370,025
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: 4,995,651 Class A shares and 5,262,911 Class B shares in 2019 and 3,791,751 Class A shares and 5,030,787 Class B shares in 2018								(300,041	)		(245,842	)
Retained earnings		706,690			640,428			1,046,538			942,287
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
Accumulated other comprehensive income								(66	)		–
Total shareholders’ equity								1,137,253			1,066,928
Total liabilities and shareholders’ equity							$	3,405,254		$	3,201,350

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

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016		2017		2016		2019		2018			2019			2018

Revenues:
New and used commercial vehicle sales	$	819,028	$	698,838	$	2,230,969	$	2,004,236	$	1,070,868	$	878,845		$	2,933,952		$	2,508,970
Aftermarket products and services sales		375,835		336,459		1,092,540		1,007,063		454,785		426,845			1,341,305			1,250,080
Lease and rental		54,630		52,452		158,922		155,491		62,949		60,825			183,973			177,342
Finance and insurance		4,771		4,870		13,092		14,206		5,863		5,053			18,874			15,286
Other		3,195		3,422		10,256		12,347		4,800		4,568			14,039			14,070
Total revenue		1,257,459		1,096,041		3,505,779		3,193,343		1,599,265		1,376,136			4,492,143			3,965,748
Cost of products sold:
New and used commercial vehicle sales		754,762		653,992		2,061,135		1,868,983		997,946		808,634			2,717,484			2,311,156
Aftermarket products and services sales		237,452		214,916		693,910		642,678		284,328		268,521			830,153			788,148
Lease and rental		45,197		45,817		133,707		136,618		52,223		49,924			153,316			147,015
Total cost of products sold		1,037,411		914,725		2,888,752		2,648,279		1,334,497		1,127,079			3,700,953			3,246,319
Gross profit		220,048		181,316		617,027		545,064		264,768		249,057			791,190			719,429
Selling, general and administrative expense		159,281		142,280		469,037		450,812		192,482		177,405			573,644			527,729
Depreciation and amortization expense		12,438		13,014		37,374		38,482		14,033		12,794			40,552			57,395
Gain on sale of assets		107		1,566		76		1,571
Gain (loss) on sale of assets										70		(209	)		(12	)		159
Operating income		48,436		27,588		110,692		57,341		58,323		58,649			176,982			134,464
Other income										1,577		-			2,316			-
Interest expense, net		3,101		3,285		8,716		11,287		7,690		4,468			23,120			13,268
Income before taxes		45,335		24,303		101,976		46,054		52,210		54,181			156,178			121,196
Provision for income taxes		15,551		9,423		35,714		17,962		13,106		12,516			38,349			29,103
Net income	$	29,784	$	14,880	$	66,262	$	28,092	$	39,104	$	41,665		$	117,829		$	92,093

Earnings per common share:
Basic	$	.75	$	.38	$	1.68	$	.70	$	1.07	$	1.06		$	3.21		$	2.33
Diluted	$	.72	$	.37	$	1.62	$	.69	$	1.05	$	1.03		$	3.13		$	2.27

Weighted average shares outstanding:
Basic		39,825		39,617		39,560		40,138		36,545		39,309			36,744			39,480
Diluted		41,146		40,274		40,830		40,698		37,351		40,388			37,625			40,635

Dividends declared per common share									$	0.13	$	0.12		$	0.37		$	0.12

Comprehensive income	$	29,784	$	14,889	$	66,548	$	28,111	$	39,159	$	41,665		$	117,763		$	92,093

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

	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net income	$	66,262		$	28,092		$	117,829		$	92,093
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		117,054			118,149			129,618			142,648
Gain on sale of property and equipment		(76	)		(1,571	)
Loss on impairment of assets		−			8,247
Loss (gain) on sale of property and equipment								12			(159	)
Stock-based compensation expense related to stock options and employee stock purchases		12,036			9,426			15,803			15,850
Deferred income tax expense		8,609			3,355
Excess tax expense from stock-based compensation		−			808
Provision for deferred income tax expense								21,603			12,125
Change in accounts receivable, net		(1,481	)		8,560			(29,153	)		6,172
Change in inventories, net		(87,799	)		199,228			5,709			(200,662	)
Change in prepaid expenses and other, net		1,156			24,163			(13,928	)		1,241
Change in trade accounts payable		12,469			(10,298	)		9,848			26,238
Draws (payments) on floor plan notes payable – trade, net		26,439			(623	)
(Payments) draws on floor plan notes payable – trade, net								(14,148	)		87,548
Change in customer deposits		4,558			(6,560	)		(2,630	)		13,219
Change in accrued expenses		11,048			5,783			(18,715	)		6,710
Other, net								(227	)		-
Net cash provided by operating activities		170,275			386,759			221,621			203,023
Cash flows from investing activities:
Acquisition of property and equipment		(138,756	)		(159,546	)		(230,595	)		(176,221	)
Proceeds from the sale of property and equipment		3,905			9,427			2,100			5,822
Proceeds from the sale of available for sale securities								-			6,375
Business acquisitions		−			(681	)		(10,168	)		-
Proceeds from the sale of available for sale securities		325			450
Purchase of equity method investment and call option								(22,499	)		-
Change in other assets		4,831			(4,520	)		2,412			(1,803	)
Net cash used in investing activities		(129,695	)		(154,870	)		(258,750	)		(165,827	)
Cash flows from financing activities:
Draws (payments) on floor plan notes payable – non-trade, net		33,611			(142,229	)
Draws on floor plan notes payable – non-trade, net								42,370			124,485
Proceeds from long-term debt		97,319			103,248			162,039			115,216
Draws on line of credit								135,000			-
Principal payments on long-term debt		(108,526	)		(122,619	)		(141,844	)		(127,354	)
Principal payments on capital lease obligations		(9,280	)		(14,174	)
Principal payments on finance lease obligations								(7,508	)		(9,511	)
Payments on line of credit								(135,000	)		-
Proceeds from issuance of shares relating to employee stock options and employee stock purchases		20,096			4,826			4,536			3,764
Excess tax expense from stock-based compensation		−			(808	)
Payments of cash dividends								(13,578	)		(4,692	)
Common stock repurchased		(27,388	)		(33,282	)		(53,764	)		(58,076	)
Debt issuance costs		(523	)		−			(731	)		-
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								(8,480	)		43,832
Net (decrease) increase in cash and cash equivalents								(45,609	)		81,028
Cash and cash equivalents, beginning of period		82,026			64,847			131,726			124,541
Cash and cash equivalents, end of period	$	127,915		$	91,698		$	86,117		$	205,569
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	24,952		$	29,172		$	43,909		$	31,002
Income taxes, net of refunds	$	30,487		$	(12,993	)	$	41,197		$	15,990
Noncash investing activities:
Assets acquired under capital leases	$	8,243		$	16,797
Assets acquired under finance leases							$	24,754		$	3,241
Common stock repurchased							$	435			-
Guaranty agreement							$	5,025			-

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

The interim consolidated financial statements included herein have been prepared by Rush Enterprises, Inc. and its subsidiaries (collectively referred to as the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All adjustments have been made to the accompanying interim consolidated financial statements, which, in the opinion of the Company’s management, are necessary for a fair presentation of its operating results. All adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is recommended that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016.~~ 2018. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

The total capitalized costs of the Company’s SAP enterprise resource planning software ~~and SAP dealership management system~~platform (“ERP Platform”) of ~~$30.5~~$9.4 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.~~

Assets. 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~~$0.5 million for the three months ended September 30, ~~2017~~ 2019 and ~~$0.9~~$0.5 million for the three months ended September 30, ~~2016; it was $2.6~~2018, and $1.4 million for the nine months ended September 30, ~~2017~~ 2019 and ~~$2.5~~$21.2 million for the nine months ended September 30, ~~2016.~~ 2018. The Company ~~currently~~ estimates that amortization expense relating to the ~~SAP software~~ERP Platform will be approximately ~~$3.4~~$1.9 million for each of the next five years.

In the first quarter of 2018, as part of an assessment that involved a technical feasibility study of the then current ERP Platform, the Company determined that a majority of the components of this ERP Platform would require replacement earlier than originally anticipated; in prior disclosures, the Company had referred to the ERP Platform separately as the SAP enterprise software and SAP dealership management system. In accordance with Accounting Standards Codification (“ASC”) Topic 350-40, in the first quarter of 2018, the Company adjusted the useful life of these components that were replaced so that the respective net book values of the components were fully amortized upon replacement in May 2018. The Company amortized the remaining net book value of the components that were replaced on a straight-line basis in February 2018 through May 2018. The Company recorded amortization expense of $19.9 million in the nine months ended September 30, 2018 related to the components of the ERP Platform that were replaced. The ERP Platform asset and related amortization are reflected in the 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 million at ~~both~~ September 30, ~~2017~~ 2019 and December 31, ~~2016,~~ 2018, and is included in Other Assets on the accompanying ~~consolidated balance sheets.~~Consolidated Balance Sheet. The Company has determined that manufacturer franchise rights have an indefinite life, as there are no economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers’ brand names. Furthermore, to the extent that any agreements evidencing manufacturer franchise rights have expiration dates, the Company expects that it will be able to renew those agreements in the ordinary course of business. Accordingly, the Company does not amortize manufacturer franchise rights.

Due to the fact that manufacturer franchise rights are specific 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.

NoNaN 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.

On February 25, 2019, the Company acquired a 50% equity interest in Rush Truck Centres of Canada Limited (“RTC Canada”), which acquired the operating assets of Tallman Group, the largest International Truck dealer in Canada. The Company was also granted a call option in the purchase agreement that provides the Company with the right to acquire the remaining 50% equity interest in RTC Canada until the close of business on February 25, 2024. The value of the Company’s call option was $3.6 million as of September 30, 2019, and is reported in Other Assets on the Consolidated Balance Sheet.

On April 25, 2019, the Company entered into a Guaranty Agreement (“Guaranty”) with Bank of Montreal (“BMO”), pursuant to which the Company agreed to guaranty up to CAD250 million (the “Guaranty Cap”) of certain credit facilities entered into by and between Tallman Truck Centre Limited (“TTCL”) and BMO. TTCL is a subsidiary of RTC Canada, of which the Company owns a 50% equity interest. Interest, fees and expenses incurred by BMO to enforce its rights with respect to the guaranteed obligations and its rights against the Company under the Guaranty are not subject to the Guaranty Cap. In exchange for the Guaranty, TTCL is receiving a reduced rate of interest on its credit facilities with BMO. The Guaranty was valued at $5.0 million as of September 30, 2019 and is included in the investment in RTC Canada. As of September 30, 2019, the Company’s investment in RTC Canada is $25.2 million. The Company’s equity income in RTC Canada is included in Other income on the Consolidated Statements of Income and Comprehensive Income.

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.

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

Options to purchase shares of common stock that were outstanding for the three months and nine months ended September 30, ~~2017~~ 2019 and ~~2016~~2018 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):

The Company accounts for stock-based compensation in accordance with ~~Accounting Standards Codification (“ASC”) 718-10, “Compensation~~ASC 718-10,“Compensation – Stock Compensation,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock options, restricted stock unit awards and employee stock purchases related to the ~~Company’s employee stock purchase plan~~Employee Stock Purchase Plan based on estimated fair values. ~~The Company adopted~~ ~~Accounting Standards Update (“ASU”) No. 2016-09, “~~~~Compensation – Stock Compensation (Topic 718~~) ~~on January 1, 2017.~~ 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.

Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options and included in selling, general and administrative expense,, was ~~$3.4 million for the three months ended September 30, 2017, and~~ $2.7 million for the three months ended September 30, ~~2016.~~ 2019, and $2.0 million for the three months ended September 30, 2018. Stock-based compensation expense for the nine months ended September 30, ~~2017, was $12.0 million~~ 2019 and ~~for the~~ nine months ended September 30, ~~2016,~~ 2018, was ~~$9.4~~$15.8 million.

As of September 30, ~~2017,~~ 2019, the Company had ~~$9.0~~$9.3 million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of ~~3.0~~2.4 years and ~~$7.6~~$9.8 million of unrecognized compensation cost related to non-vested restricted stock units and non-vested restricted stock awards to be recognized over a weighted-average period of ~~1.7~~1.4 years.

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 aton 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 aton 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,~~ 2019, and December 31, ~~2016.~~ 2018. 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~~’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, 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 million. The issuer redeemed $150,000 of the auction rate securities during 2014, $275,000 during 2015, $450,000 during 2016 and $325,000 during the second quarter of 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, 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.

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

~~The table below presents disclosures about the auction rate securities measured at fair value on a recurring basis in the Company’s financial statements as follows (in thousands):~~

During the first quarter of 2016, the Company instituted plans to consolidate its dealership network. 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 in the quarter ended March 31, 2016 and $0.4 million in the quarter ended June 30, 2016.

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

During 2016, the Company sold four properties with a fair value of $6.1 million. During the first quarter of 2017, the Company sold one property with a fair value 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. 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. The Company is actively marketing the remaining real estate held for sale.

~~The following table presents long-lived assets 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.

The Company currently has ~~one~~1 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~~collision center 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.

The Company also has revenues attributable to ~~three~~3 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,~~ 2019 and ~~2016~~2018 (in thousands):

The Company had unrecognized income tax benefits totaling ~~$2.4~~$2.4 million as a component of accrued liabilities at September 30, ~~2017~~ 2019 and December 31, ~~2016,~~ 2018, 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~~$139,000 accrued for the payment of interest at September 30, ~~2017~~ 2019 and December 31, ~~2016.~~2018. NaN amounts were accrued for penalties.

The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12twelve months. As of September 30, ~~2017,~~ 2019, the tax years ended December 31, ~~2013~~ 2017 through ~~2016,~~2018 remain subject to audit by federal tax authorities and the tax years ended December 31, ~~2012~~ 2014 through ~~2016,~~2018 remain subject to audit by state tax authorities.

~~In March~~ ~~2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, “~~~~Compensation – Stock Compensation (Topic 718),~~~~” which changed the accounting for certain aspects of share-based payments to employees.~~ The Company adopted ~~the new standard~~ASU 2016-09 on January 1, ~~2017. The new guidance~~2017, which 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 ~~recorded~~recognized a tax benefit for an equity compensation excess tax ~~benefits~~benefit of ~~$1.9 million for the three months ended September 30, 2017, and $3.9 million for the nine months ended September 30, 2017, which was recorded as a reduction to income tax expense~~$405,000 in the ~~Consolidated Statement~~third quarter of ~~Income~~2019 and ~~Comprehensive Income.~~$92,000 in the third quarter of 2018. The Company recognized a tax benefit for an equity compensation excess tax benefit of $467,000 in the firstnine months of 2019 and $249,000 in the firstnine months of 2018.

~~The following tables show the components of accumulated other comprehensive loss, net of tax (in thousands):~~

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.

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 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.

~~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.

~~In February 2016, the FASB issued ASU No. 2016-02, “~~~~Leases (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, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the effect that adopting this standard will have on our financial statements and related disclosures. The Company will adopt ASU 2016-02 on January 1, 2019.

~~In May 2014, the FASB issued ASU No. 2014-09, “~~~~Revenue from Contracts with Customers~~~~(Topic 606)~~,” which amended the accounting standards for revenue recognition. ASU 2014-09 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 for the Company beginning in its first quarter of 2018, 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.

~~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 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. 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 disaggregated revenue by revenue source for the three months and nine months ended September 30, 2019 and 2018 (in thousands):

In June 2016, the FASB issued ASU No.2016-13,"Financial Instruments - Credit Losses (Topic 326)," which modifies the measurement of expected credit losses of certain financial instruments. Credit losses on trade and other receivables, held-to-maturity debt securities, and other instruments will reflect the Company's current estimate of the expected credit losses and will generally result in the earlier recognition of allowance for losses. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the ~~additional disclosure requirements~~impact of ~~the ASU, as well as the change, if any,~~and approach to ~~the Company’s underlying~~adopting this new accounting guidance 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, based on this review, the Company does not expect the adoption of this standard to ~~materially~~have a material impact on its consolidated financial statements. ~~The Company will adopt ASU 2014-09 on January 1, 2018 and will use the modified retrospective method.~~

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

Certain statements contained in this Form 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,~~2018, 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 business through its 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~~’sCompany’s operation of a 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 2122 states.

Our business strategy consists of providing solutions to the commercial vehicle industry through our network of commercial vehicle dealerships. We offer an integrated approach to meeting customer needs by providing service, parts and collision ~~repair~~repairs 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~~net realizable 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~~2018 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 would 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. 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 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) we satisfy 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 transfer 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. We then assess whether each promised good or service is distinct and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The following discussion and analysis includes our historical results of operations for the three months and nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

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

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 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~~collision center (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 quarter of ~~2017~~2019 compared to a ~~112.6%~~122.4% absorption ratio for the third quarter of ~~2016.~~2018.

Three Months Ended September 30, 20179 Compared to Three Months Ended September 30, 20168

Aftermarket Products and Services revenues totaled $454.8 million in the third quarter of 2019, up 6.5% from the third quarter of 2018. We believe aftermarket market activity will remain steady in the fourth quarter, subject to typical seasonal softness through the winter months.

Our new Class 8 truck sales outpaced the market during the third quarter of 2019 and were up 29.9%, compared to the third quarter of 2018. We expect our fourth quarter new Class 8 truck sales to be down compared to the third quarter, as we believe the peak of the current truck sales cycle occurred in the third quarter. We also expect new Class 8 truck sales to decline significantly in 2020, compared to 2019.

Our new Class 4 through 7 commercial vehicle sales outpaced the market during the third quarter of 2019 and were up 36.3%, compared to the third quarter of 2018. Due to the timing of large fleet deliveries in the second and third quarters of 2019, we anticipate our new Class 4 through 7 commercial vehicle sales may be down in the fourth quarter of 2019, compared to the third quarter.

During the third quarter of 2019, we repurchased 425,107 shares of common stock for approximately $16.1 million and paid a cash dividend of $4.8 million. Additionally, on October 22, 2019, our Board of Directors declared a cash dividend of $0.13 per share of Class A and Class B Common Stock, to be paid on December 10, 2019, to all shareholders of record as of November 8, 2019.

Total revenues increased $223.1 million, or 16.2%, in the third quarter of 2019, compared to the third quarter of 2018.

Our Aftermarket Products and Services revenues increased $27.9 million, or 6.5%, in the third quarter of 2019, compared to the third quarter of 2018. The growth in Aftermarket Products and Services revenues induring the third quarter was primarily ~~the result of strong general economic conditions and~~driven by our successful execution of certain strategic initiatives. We expect Aftermarket Products and Services revenues to remain solid during the remainder of 2017, despite the seasonal decline we typically experience during the fourth quarter of the year. We remain focusedcontinued success executing on our long-term ~~plans and~~aftermarket strategic initiatives, ~~which include expanding~~including our ~~all-makes~~efforts to increase the number of service technicians we employ and expand our parts ~~and service business.~~

~~Class 8 new truck~~ sales ~~were strong during the third quarter of 2017 primarily due to increased activity from customers in the energy industry~~. Additionally, commercial vehicle sales activity remains solid in construction, refuse, over-the-road freight and the majority of the other industries we support around the country. Used commercial vehicle inventory valuations have stabilized, and we believe that our used commercial vehicle inventory is priced appropriately to support market dynamics and new commercial vehicle sales. We believe our Class 8 and medium-duty new commercial vehicle sales will remain strong in the fourth quarter and into 2018.

~~Total revenues increased $161.4 million, or 14.7%, in the third quarter of 2017, compared to the third quarter of 2016.~~

~~Our~~ ~~Aftermarket Products and Services revenues increased $39.4 million, or 11.7%, in the third quarter of 2017, compared to the third quarter of 2016, primarily as a result of the factors described above.~~efforts. We expect our Aftermarket Products and Services revenues to ~~remain strong~~increase 7% to 8% in ~~the fourth quarter of 2017.~~2019, compared to 2018.

Revenues from sales of new and used commercial vehicles increased ~~$120.2~~$192.0 million, or ~~17.2%~~21.8%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016,~~2018, primarily ~~as a result of~~driven by vocational and large fleet deliveries throughout the ~~factors described above.~~market segments that we support.

We sold ~~3,647~~4,318 heavy-duty trucks in the third quarter of ~~2017,~~2019, a ~~20.6%~~29.9% increase compared to ~~3,024~~3,325 heavy-duty trucks sold in the third quarter of ~~2016.~~2018. 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%~~12.2% in the third quarter of ~~2017~~2019, compared to the third quarter of ~~2016.~~2018. A.C.T. Research currently forecasts U.S. retail sales of new Class 8 trucks of approximately ~~190,000 units in 2017, 218,000 units in 2018, and 226,000~~277,300 units in 2019, 204,000 units in 2020 and 211,500 units in 2021, compared to approximately ~~197,000~~255,828 units sold in ~~2016.~~2018. Our share of the U.S. new Class 8 truck sales market was approximately ~~5.5%~~5.7% in ~~2016.~~2018. We expect our U.S. new Class 8 truck sales market share to ~~range~~be between ~~6.5%~~5.5% and ~~7.0%~~5.6% in ~~2017.~~2019. This market share percentage would result in the sale of approximately ~~12,400~~15,300 to ~~13,300~~15,600 of new Class 8 trucks in ~~2017~~2019, based on A.C.T. Research’s current U.S. retail sales estimate of ~~190,000~~277,300 units.

We sold ~~2,828~~4,566 medium-duty commercial vehicles, including ~~466~~527 buses, in the third quarter of ~~2017, a 14.5%~~2019, an 36.3% increase compared to ~~2,469~~3,349 medium-duty commercial vehicles, including ~~416~~446 buses, in the third quarter of ~~2016.~~2018. A.C.T. Research estimates that unit sales of new Class 4 through 7 commercial vehicles in the U.S. increased approximately ~~9.0%~~7.2% in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018. A.C.T. Research currently forecasts U.S. retail sales of new Class 4 through 7 medium-duty commercial vehicles of approximately ~~238,500~~266,000 units in ~~2017, 242,000~~2019, 257,400 units in ~~2018,~~2020 and ~~249,000~~256,800 in ~~2019.~~2021, compared to approximately 258,300 units sold in 2018. In ~~2016,~~2018, we achieved a ~~4.9%~~5.0% share of the ~~U.S.~~new Class 4 through 7 commercial vehicle ~~market. We~~market in the U.S. In 2019, we expect our market share to range between ~~4.5%~~5.3% and ~~5.0%~~5.5% of the U.S. new Class 4 through 7 commercial vehicle ~~sales in 2017.~~market. This market share percentage would result in the sale of approximately ~~10,700~~14,100 to ~~11,900~~14,600 of new Class 4 through 7 commercial vehicles in ~~2017~~2019, based on A.C.T. Research’s current U.S. retail sales estimates of ~~238,500~~266,000 units.

We sold ~~447~~525 light-duty vehicles in the third quarter of ~~2017,~~2019, a ~~14.5%~~7.4% decrease compared to ~~523~~567 light-duty vehicles sold in the third quarter of ~~2016.~~2018. We expect to sell approximately ~~1,700~~2,400 light-duty vehicles in ~~2017.~~2019.

We sold ~~1,743~~1,868 used commercial vehicles in the third quarter of ~~2017,~~2019, a ~~2.9%~~15.0% decrease compared to ~~1,795~~2,197 used commercial vehicles in the third quarter of ~~2016.~~2018. We expect to sell approximately ~~6,200 to 7,000~~8,000 used commercial vehicles in ~~2017.~~2019.

Commercial vehicle lease and rental revenues increased ~~$2.2~~$2.1 million, or ~~4.2%~~3.5%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018. We expect lease and rental revenues to increase ~~between 3.0% and 6.0%~~3% to 5% during ~~2017,~~2019, compared to ~~2016.~~2018.

Finance and insurance revenues ~~decreased 2.0%~~increased $0.8 million, or 16.0%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016. Traditionally,~~2018. 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.~~2019. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share toof our operating profits.

Gross profit increased ~~$38.7~~$15.7 million, or ~~21.4%~~6.3%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018. Gross profit as a percentage of sales ~~increased~~decreased to ~~17.5%~~16.6% in the third quarter of ~~2017,~~2019, from ~~16.5%~~18.1% in the third quarter of ~~2016.~~2018. This ~~increase~~decrease in gross profit as a percentage of sales is a result of ~~increased gross margins~~a change in our product sales mix. Commercial vehicle sales, a lower margin revenue item, increased as a percentage of total revenues to 67.0% in the third quarter of 2019, from 63.9% in the third quarter of 2018. Aftermarket Products and Services ~~business, commercial vehicle sales and truck lease and rental sales.~~revenues, a higher margin revenue item, decreased as a percentage of total revenues to 28.4% in the third quarter of 2019, from 31.0% in the third quarter of 2018.

Gross margins from our Aftermarket Products and Services operations increased to ~~36.8%~~37.5% in the third quarter of ~~2017,~~2019, from ~~36.1%~~37.1% in the third quarter of ~~2016.~~2018. This increase is primarily related to the continued execution of our long-term strategic initiatives in our parts operations, including parts sourcing and pricing. Gross profit for the Aftermarket Products and Services departments increased to ~~$138.4~~$170.5 million in the third quarter of ~~2017,~~2019, from ~~$121.5~~$158.3 million in the third quarter of ~~2016.~~2018. Historically, gross margins on parts sales range from 27% to 28% and gross margins on service and ~~body shop~~collision center operations range from 67% to 68%. Gross profits from parts sales represented ~~57%~~60% of total gross profit for Aftermarket Products and Services operations in the third quarter of ~~2017~~2019 and ~~56%~~58% in the third quarter of ~~2016.~~2018. Service and ~~body shop~~collision center operations represented ~~43%~~40% of total gross profit for Aftermarket Products and Services operations in the third quarter of ~~2017~~2019 and ~~44%~~42% in the third quarter of ~~2016.~~2018. We expect blended gross margins on Aftermarket Products and Services operations to ~~range from 36.3%~~be approximately 37.5% to ~~36.5% during 2017.~~38.0% in 2019.

Gross margins on new Class 8 truck sales ~~increased~~decreased to 7.1% in the third quarter of 2019, from 7.8% in the third quarter of 2017, from 6.9% in the third quarter of 2016. This increase is attributable to the sales mix in the third quarter of 2017, which consisted of increased sales to vocational customers that are traditionally associated with higher margins.2018. In ~~2017,~~2019, we expect overall gross margins from new Class 8 truck sales of approximately 7.5% to 8.0%.

Gross margins on ~~medium-duty~~new Class 4 through 7 commercial vehicle sales decreased to ~~5.4%~~5.2% in the third quarter of ~~2017,~~2019, from ~~6.7%~~6.5% in the third quarter of ~~2016.~~2018. This decrease is ~~attributable~~primarily due to the mix of ~~products sold~~purchasers during the third quarter of ~~2017. For 2017,~~2019. In 2019, we expect overall gross margins from ~~medium-duty~~new Class 4 through 7 commercial vehicle sales of approximately ~~5.5%~~5.2% to ~~6.0%~~5.5%, but this will largely depend upon the mix of purchasers and types of vehicles ~~sold.~~sold in the fourth quarter.

Gross margins on used commercial vehicle sales ~~increased~~decreased to ~~11.9%~~9.8% in the third quarter of ~~2017,~~2019, from ~~4.8%~~12.9% in the third quarter of ~~2016.~~2018. This ~~increase~~decrease is primarily ~~related~~due to ~~the stabilization~~increased availability of quality used ~~truck values in recent months.~~commercial vehicles as a result of increased new commercial vehicle sales. We expect margins on used commercial vehicles to range between 8.5% and 9.5% ~~and 10.5%~~ during ~~2017.~~2019.

Gross margins from truck lease and rental sales ~~increased~~decreased to ~~17.3%~~17.0% in the third quarter of ~~2017,~~2019, from ~~12.6%~~17.9% in the third quarter of ~~2016.~~2018. This ~~increase~~decrease 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%~~17.0% during ~~2017.~~2019. Our policy is to depreciate our lease and rental fleet using a ~~straight line~~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~~us realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.

Finance and insurance revenues and other 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~~$15.1 million, or ~~11.9%~~8.5%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016. In~~2018. This increase is primarily related to increased commissions resulting from increased sales of commercial vehicles and Aftermarket Products and Services. SG&A expenses as a percentage of total revenues decreased to 12.0% in the third quarter of ~~2017, SG&A expenses equaled 12.7%~~2019, from 12.9% in the third quarter of ~~total revenue.~~2018. Annual SG&A expenses as a percentage of total revenues have recently ranged from ~~12.1%~~12.4% to ~~14.7%~~13.9%. In general, when new and used commercial vehicle revenues ~~decrease~~increase as a percentage of total revenues, SG&A expenses as a percentage of total revenues will be at ~~or exceed,~~ the ~~higher~~lower end of this range. For ~~2017,~~2019, we expect SG&A expenses as a percentage of total revenues to range from ~~13.4%~~12.5% to ~~14.2%~~13.0% 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 $1.2 million, or ~~4.4%~~9.7%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018.

Net interest expense ~~decreased $0.2~~increased $3.2 million, or ~~5.6%~~72.1%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018. This increase is a result of increased inventory levels, compared to the third quarter of 2018. Net interest expense in ~~2017~~2019 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 before income taxes ~~increased $21.0~~decreased $2.0 million, or ~~86.5%~~3.6%, in the third quarter of ~~2017,~~2019, compared to the third quarter of ~~2016.~~2018.

Income taxes increased ~~$6.1~~$0.6 million, or ~~65.0%~~4.7%, in the third quarter of ~~2017,~~2019, compared 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 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.2018. We provided for taxes at a ~~38.75%~~26.25% effective rate in the third quarter of ~~2017~~2019 and 23.25% in the third quarter of ~~2016.~~2018. In the third quarter of 2019, we recorded a $405,000 tax benefit related to excess tax benefits of equity compensation, which reduced income tax expense. In the third quarter of 2018, we recorded a $80,000 tax benefit related to excess tax benefits of equity compensation, which reduced income tax expense. We expect our effective tax rate to be approximately ~~38.5%~~25% to ~~39.0%~~26% of pretax income in ~~2017.~~2019.

Nine Months Ended September 30, ~~2017~~2019 Compared to Nine Months Ended September 30, ~~2016~~2018

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,~~2019 Compared to Three Months Ended September 30, ~~2016.~~2018.

Total r~~evenues~~revenues increased ~~$312.4~~$526.4 million, or ~~9.8%~~13.3%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

Aftermarket Products and Services revenues increased ~~$85.5~~$91.2 million, or ~~8.5%~~7.3%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

~~Revenues from sales~~Sales of new and used commercial vehicles increased ~~$226.7~~$425.0 million, or ~~11.3%~~16.9%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

We sold ~~9,705~~11,995 new Class 8 heavy-duty trucks during the first nine months of ~~2017,~~2019, a ~~17.0%~~21.7% increase compared to ~~8,295~~9,855 new Class 8 heavy-duty trucks in the first nine months of ~~2016.~~2018. According to A.C.T. Research, new U.S. Class 8 truck sales ~~decreased 9.5%~~increased 18.5% in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

We sold ~~8,454~~11,046 new Class 4 through 7 medium-duty commercial vehicles, including ~~827~~985 buses, during the first nine months of ~~2017,~~2019, a ~~1.2% decrease~~16.0% increase compared to ~~8,554~~9,528 new Class 4 through 7 medium-duty commercial vehicles, including ~~849~~1,133 buses, in the first nine months of ~~2016.~~2018. A.C.T. Research estimates that unit sales of new Class 4 through 7 commercial vehicles, including buses, in the U.S increased approximately 5.2% in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

We sold ~~1,267~~1,783 light-duty commercial vehicles during the first nine months of ~~2017,~~2019, a ~~2.2% decrease~~6.3% increase compared to ~~1,296~~1,677 light-duty commercial vehicles in the first nine months of ~~2016.~~2018.

We sold ~~5,197~~5,809 used commercial vehicles during the first nine months of ~~2017,~~2019, a ~~1.6%~~4.9% decrease compared to ~~5,280~~6,111 used commercial vehicles in the first nine months of ~~2016.~~2018.

Truck lease and rental revenues increased ~~$3.4~~$6.6 million, or ~~2.2%~~3.7%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

Finance and insurance revenues ~~decreased $1.1~~increased $3.6 million, or ~~7.8%~~23.5%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

Gross profit increased ~~$72.0~~$71.8 million, or ~~13.2%~~10.0%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018. Gross profit as a percentage of sales ~~increased~~decreased to 17.6% in the first nine months of ~~2017,~~2019, from ~~17.1%~~18.1% in the first nine months of ~~2016.~~2018.

Gross margins from our Aftermarket Products and Services operations increased to ~~36.5%~~38.1% in the first nine months of ~~2017,~~2019, from ~~36.2%~~37.0% in the first nine months of ~~2016.~~2018. Gross profit for the Aftermarket Products and Services departments was ~~$398.6~~$511.2 million in the first nine months of ~~2017,~~2019, compared to ~~$364.4~~$461.9 million in the first nine months of ~~2016.~~2018. Gross profits from parts sales represented ~~57%~~60% of total gross profit for Aftermarket Products and Services operations in the first nine months of ~~2017~~2019 and ~~56%~~58% in the first nine months of ~~2016.~~2018. Service and ~~body shop~~collision center operations represented ~~43%~~40% of total gross profit for Aftermarket Products and Services operations in the first nine months of ~~2017~~2019 and ~~44%~~42% in the first nine months of ~~2016.~~2018.

Gross margins on new Class 8 truck sales ~~increased to~~were 8.0% in the first nine months of ~~2017, from 7.0%~~both 2019 and 2018.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales decreased to 5.3% in the first nine months of ~~2016.~~

~~Gross margins on medium-duty commercial vehicle sales decreased to 5.9%~~2019, from 6.2% in the first nine months of ~~2017, from 6.1% in the first nine months~~2018.

Gross margins on used commercial vehicle sales ~~increased~~decreased to ~~10.7%~~9.5% in the first nine months of ~~2017,~~2019, from ~~8.0%~~12.1% in the first nine months of ~~2016.~~2018.

Gross margins from truck lease and rental sales ~~increased~~decreased to ~~15.9%~~16.7% in the first nine months of ~~2017,~~2019, from ~~12.1%~~17.1% in the first nine months of ~~2016.~~2018.

SG&A expenses increased ~~$18.2~~$45.9 million, or ~~4.0%~~8.7%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018. SG&A expenses ~~as a percentage~~equaled 12.8% of ~~sales were 13.4%~~total revenue in the first nine months of ~~2017,~~2019, and ~~14.1%~~13.3% in the first nine months of ~~2016.~~2018.

Depreciation and amortization expense decreased ~~$1.1~~$16.8 million, or ~~2.9%~~29.3%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018. This decrease is primarily related to the additional amortization expense related to the replacement of our ERP Platform components in the first nine months of 2018.

Net interest expense ~~decreased $2.6~~increased $9.9 million, or ~~22.8%~~74.3%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

Income before income taxes increased ~~$55.9~~$35.0 million, or ~~121.4%~~28.9%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018.

Income taxes increased ~~$17.8~~$9.2 million, or ~~98.8%~~31.8%, in the first nine months of ~~2017,~~2019, compared to the first nine months of ~~2016.~~2018. In the first nine months of 2019, we recorded a $467,000 tax benefit related to excess tax benefits of equity compensation, which reduced income tax expense. In the first nine months of 2018, we recorded a $249,000 million tax benefit related to excess tax benefits of equity compensation, which reduced income tax expense. We provided for taxes at a ~~38.75%~~24.9% rate in the first nine months of ~~2017, compared to~~2019 and a 24.25% 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~~7,2019, we had working capital of approximately ~~$180.3~~$209.9 million, including ~~$127.9~~$86.1 million in cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months. 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~~(“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,~~2019, however, ~~$11.9~~$11.6 million was pledged to secure various letters of credit related to self-insurance products, leaving ~~$5.6~~$5.9 million available for future borrowings as of September 30, ~~2017.~~2019.

~~On March 21, 2017, we entered into~~We have a working capital facility (“the Working Capital Facility”) with BMO Harris ~~(the “Working Capital Facility”). The Working Capital Facility~~that includes up to $100 million of revolving credit loans available to ~~the Company~~us 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.~~2019.

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,~~2019, 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~~$180.0 million to $1~~75.0~~$190.0 million for our leasing operations during ~~2017,~~2019, 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~~$30.0 million to ~~$25.0~~$35.0 million during ~~2017.~~2019.

~~On November 30, 2016,~~During the third quarter of 2019, we ~~announced that~~paid a cash dividend of $4.8 million. Additionally, on October 22, 2019, our Board of Directors ~~authorized~~declared a cash dividend of $0.13 per share of Class A and Class B Common Stock, to be paid on December 10, 2019, to all shareholders of record as of November 8, 2019. The total dividend disbursement is estimated at approximately $4.8 million. We expect to continue paying cash dividends on a quarterly basis. However, there is no assurance as to future dividends because the declaration and payment of such dividends is subject to the business judgment of our Board of Directors and will depend on historic and projected earnings, capital requirements, covenant compliance and financial conditions and such other factors as our Board of Directors deem relevant.

On October 31, 2018, our Board of Directors approved a stock repurchase program authorizing management to repurchase, from time to time, of up to an aggregate of ~~$40.0~~$150.0 million of our shares of Class A Common Stock ~~and~~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. As of September 30, 2019, we had repurchased $120.1 million of our shares of common stock under the stock repurchase program. The current stock repurchase program expires on ~~November 30, 2017,~~December 31, 2019, 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.~~2019. 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~~decreased by ~~$45.9~~$46.9 million during the nine months ended September 30, ~~2017,~~2019 and ~~decreased~~increased by ~~$26.9~~$81.0 million during the nine months ended September 30, ~~2016.~~2018. 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 of ~~2017,~~2019, operating activities resulted in net cash provided by operations of ~~$170.3~~$221.6 million. Net cash ~~provided by~~used in operating activities primarily consisted of ~~$66.3~~$117.8 million in net income, as well as non-cash adjustments related to depreciation and amortization of ~~$117.1~~$129.6 million, stock-based compensation of ~~$12.0~~$15.8 million and ~~$8.6 million of~~the provision for deferred income ~~tax.~~tax expense of $21.6 million. Cash provided by operating activities included an aggregate of ~~$33.3~~$63.0 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of ~~$23.5~~$9.8 million from increases in accounts payable and $5.7 million from the decrease in inventory, which was offset by cash outflows of $29.2 million from the increase in accounts receivable, $13.9 million from the increase in other assets, $14.1 million from the net decrease in floor plan, trade, $18.7 million from the decrease in accrued liabilities ~~$4.6~~and $2.6 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.~~deposits. The majority of our commercial vehicle inventory is financed through our floor plan credit agreements.

During the first nine months of ~~2016,~~2018, operating activities resulted in net cash provided by operations of ~~$386.8~~$203.0 million. Net cash provided by operating activities primarily consisted of ~~$28.1~~$92.1 million in net income, as well as non-cash adjustments related to depreciation and amortization of ~~$118.1~~$142.6 million, ~~impairment~~stock-based compensation of ~~assets of $8.2~~$15.9 million and ~~stock-based compensation, including tax benefit,~~$12.1 million of ~~$10.2 million.~~deferred income tax. Cash provided by operating activities included an aggregate of ~~$220.3~~$59.1 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~~$32.9 million from increases in accounts payable and accrued liabilities, $13.2 million from an increase in customer deposits and $87.5 million from the ~~decrease~~net increase in ~~accounts receivable, $199.2 million from reductions in inventory levels, $24.2 million from the decrease in other assets, net,~~floor plan, trade, which were offset by cash outflows of ~~$4.5~~$200.7 million from ~~decreases~~increases in ~~accounts payable and accrued liabilities, and $6.6 million from a decrease in customer deposits. The majority of commercial vehicle inventory is financed through our floor plan credit agreements.~~inventory.

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,~~2019, the interest rate on the wholesale financing agreement was ~~5.25%~~6.5% before considering the applicable ~~incentives.~~incentives that we are qualified to receive. As of September 30, ~~2017,~~2019, we had an outstanding balance of approximately ~~$88.8~~$124.9 million under the Ford Motor Credit Company wholesale financing agreement.

During the first nine months of ~~2017,~~2019, cash used in investing activities was ~~$129.7~~$258.8 million. Cash flows used in investing activities consists primarily of cash used for capital expenditures. Capital expenditures ~~totaled $138.8~~were $230.6 million during the first nine months of ~~2017~~2019 and consisted primarily of purchases of property and equipment and improvements to our existing dealership facilities. Property and equipment purchases during the first nine months of ~~2017~~2019 included ~~$103.6~~$163.9 million for additional units for the rental and leasing operations, which were directly offset by borrowings of long-term debt. Business acquisitions of $10.2 million consisted of the purchase of a Ford dealership in Ceres, California, and a used truck dealership in Jacksonville, Florida, including the real estate associated with each dealership. In addition, we purchased an equity method investment for $22.5 million for 50% of the equity interest in RTC Canada. We expect to purchase or lease ~~trucks~~commercial vehicles worth approximately ~~$150.0~~$180.0 million to ~~$175.0~~$190.0 million for our ~~rental and~~ leasing operations in ~~2017,~~2019, depending on customer demand, all of which will be financed. During ~~2017,~~2019, we expect to make capital expenditures for recurring items such as computers, shop equipment and vehicles of ~~$20.0~~$30.0 million to ~~$25.0~~$35.0 million.

During the first nine months of ~~2016,~~2018, cash used in investing activities was ~~$154.9~~$165.8 million. Cash flows used in investing activities consists primarily of cash used for capital expenditures. Capital expenditures ~~of $159.5~~totaled $176.2 million during the first nine months of ~~2016~~2018 and consisted primarily of 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~~$120.8 million for ~~additional units~~purchases of lease and rental vehicles 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 of ~~2017, we generated $5.3 million~~2019, financingactivities resulted in net cash ~~from~~used in financing ~~activities,~~of $8.5 million, primarily related to ~~$33.6~~$42.4 million from net draws on floor plan notes payable, non-trade, borrowings of ~~$97.3~~$162.0 million of long-term debt, $135.0 million from draws on a line of credit and ~~$20.1~~$4.5 million from the issuance of shares related to equity compensation plans. These cash inflows were partially offset by ~~$117.8~~$149.4 million used for principal repayments of long-term debt and capital lease obligations, $53.8 million used for repurchases of common stock, $135.0 million for payments on a line of credit and ~~$27.4~~$13.6 million ~~to purchase 837,494 shares~~used for payment of ~~Rush Class B common stock.~~cash dividends. The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

During the first nine months of ~~2016,~~2018, we ~~used $205.0~~generated $43.8 million in net cash from financing activities, primarily related to ~~$142.2~~$124.5 million from net ~~payments~~draws on floor plan notes payable, non-trade, ~~$136.8~~borrowings of $115.2 million of long-term debt and $3.8 million from the issuance of shares related to equity compensation plans. These cash inflows were partially offset by $136.9 million for principal repayments of long-term debt and capital lease obligations and ~~$33.3~~$58.1 million to purchase ~~934,171~~1,391,541 shares of Rush Class A ~~Common Stock~~ and ~~657,567 shares of Rush~~ Class B common stock. ~~These~~Additionally, during the first nine months of 2018, the Company paid cash ~~outflows were partially offset by borrowings~~dividends of ~~$103.2 million of long-term debt, and $4.8 million from the issuance of shares related to equity compensation plans.~~$4.7 million. The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

Most of our commercial vehicle inventory 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~~finance 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.~~$1.0 billion. Borrowings under the Floor Plan Credit Agreement bear interest at an annual rate equal to (A) the greater of (i) zero and (ii) ~~three~~one month LIBOR rate, determined on the last day of the prior month, plus (B) ~~1.51%~~1.25% 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 commercial vehicle inventory are limited to $150.0 million and loans for working capital purposes are limited to $200.0 million. ~~We may terminate the~~The Floor Plan Credit Agreement expires June 30, 2022, although BMO Harris has the right to terminate at any time ~~although if~~upon 360 days written notice and we do so we must pay a prepayment processing fee equal to: (i) 2.0% 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) $500,000 if such termination occurs after July 1, 2018 and prior to June 30, 2019,may terminate at any time, subject to specified limited exceptions. On September 30, ~~2017,~~2019, we had approximately ~~$578.8~~$853.2 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were ~~$532.8~~$860.9 million during the nine months ended September 30, ~~2017. Periodically, we~~2019. 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 to 60 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~~7,2019, our backlog of commercial vehicle orders was approximately ~~$1,005.8~~$1,259.7 million, compared to a backlog of commercial vehicle orders of approximately ~~$836.4~~$2,089.4 million on September 30, ~~2016.~~2018. 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~~2019 and we expect to fill ~~the majority of~~ our backlog orders during the ~~next twelve months.~~remainder of 2019 and the first half of 2020.

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~~255,711 in ~~2006.~~2018. 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 prior to the adoption of Topic 842 on January 1, 2019, 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~~collision center 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,~~2019, we had floor plan borrowings of $1,051.2 million and variable interest rate real estate debt of approximately ~~$806.1~~$60.3 million. Assuming an increase or decrease in LIBOR of 100 basis points, annual interest expense could correspondingly increase or decrease by approximately ~~$8.1~~$11.1 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, 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~~2019 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~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting.~~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~~2018 Annual Report on Form 10-K (the ~~“2016~~“2018 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~~2018 Annual Report.

WeThe Company did not make any unregistered sales of equity securities during the third quarter of ~~2017.~~2019.

A summary of the ~~Company~~’sCompany’s stock repurchase activity for the third quarter of ~~2017~~2019 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~~2019 (unaudited) and December 31, ~~2016~~2018	3

	Consolidated Statements of Income and Comprehensive Income - For the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	4

	Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13 16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25 28

Item 4.	Controls and Procedures	26 28



PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	26 29

Item 1A.	Risk Factors	26 29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26 29

Item 3.	Defaults Upon Senior Securities	27 30

Item 4.	Mine Safety Disclosures	27 30

Item 5.	Other Information	27 30

Item 6.	Exhibits	27 30

SIGNATURES		28 31

	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

	Truck Segment		All Other			Totals		Truck Segment		All Other			Total

As of and for the three months ended September 30, 2017
As of and for the three months ended September 30, 2019

Revenues from external customers	$	1,253,429	$	4,030		$	1,257,459	$	1,595,285	$	3,980		$	1,599,265
Segment operating income (loss)									58,642		(319	)		58,323
Segment income before taxes									51,250		960			52,210
Segment assets									3,364,895		40,359			3,405,254

For the nine months ended September 30, 2019

Revenues from external customers								$	4,479,972	$	12,171		$	4,492,143
Segment operating income									176,963		19			176,982
Segment income before taxes									155,024		1,154			156,178

As of and for the three months ended September 30, 2018

Revenues from external customers								$	1,371,472	$	4,664		$	1,376,136
Segment operating income (loss)									58,665		(16	)		58,649
Segment income (loss) before taxes		45,590		(255	)		45,335		54,250		(69	)		54,181
Segment assets		2,721,463		37,527			2,758,990		3,152,204		37,599			3,189,803

For the nine months ended September 30, 2017
For the nine months ended September 30, 2018

Revenues from external customers	$	3,493,984	$	11,795		$	3,505,779	$	3,952,396	$	13,352		$	3,965,748
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 income (loss) before taxes		24,505		(202	)		24,303
Segment assets		2,662,872		32,623			2,695,495

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
Segment operating income									134,151		313			134,464
Segment income before taxes									121,037		159			121,196

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

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Numerator:
Numerator for basic and diluted earnings per share – Net income available to common shareholders	$	29,784	$	14,880	$	66,262	$	28,092	$	39,104	$	41,665	$	117,829	$	92,093
Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		39,825		39,617		39,560		40,138		36,545		39,309		36,744		39,480
Effect of dilutive securities– Employee and director stock options and restricted share awards		1,321		657		1,270		560
Effect of dilutive securities – Employee and director stock options and restricted share awards										806		1,079		881		1,155
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions		41,146		40,274		40,830		40,698		37,351		40,388		37,625		40,635
Basic earnings per common share	$	.75	$	.38	$	1.68	$	.70	$	1.07	$	1.06	$	3.21	$	2.33
Diluted earnings per common share and common share equivalents	$	.72	$	.37	$	1.62	$	.69	$	1.05	$	1.03	$	3.13	$	2.27

	Three Months Ended				Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Commercial vehicle sales revenue	$	1,070,868	$	878,845	$	2,933,952	$	2,508,970
Parts revenue		258,513		239,401		760,495		699,823
Commercial vehicle repair service revenue		196,272		187,444		580,810		550,257
Finance revenue		3,570		2,628		11,223		7,826
Insurance revenue		2,293		2,425		7,651		7,460
Other revenue		4,800		4,568		14,039		14,070
Total	$	1,536,316	$	1,315,311	$	4,308,170	$	3,788,406

		Three Months Ended		Nine Months Ended
Component	Classification	September 30, 2019		September 30, 2019
Operating lease cost	SG&A expense	$	3,524	$	10,102
Finance lease cost – amortization of right-of-use assets	Depreciation and amortization		3,614		10,477
Finance lease cost – interest on lease liabilities	Interest expense		910		2,386
Short-term lease cost	SG&A expense		32		566

	Nine Months Ended
	September 30, 2019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	12,488
Financing cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	7,508
Non-cash activity:
Operating lease right-of-use assets obtained in exchange for lease obligations	$	56,372

	September 30, 2019
Weighted-average remaining lease term (in months)	70
Weighted-average discount rate		4.5	%

	Finance Leases			Operating Leases
2019^(a)	$	7,810		$	3,391
2020		22,559			12,025
2021		17,928			10,097
2022		14,114			8,974
2023		8,850			7,611
2024 and beyond		14,996			31,424
Total lease payments	$	86,257		$	73,522
Less: Imputed interest		(8,185	)		(16,836	)
Present value of lease liabilities	$	78,072		$	56,686

2019^(a)	$	33,641
2020		119,913
2021		92,496
2022		68,141
2023		46,656
Thereafter		41,986
Total	$	402,833

	Common Stock																	Accumulated
	Shares Outstanding						$0.01 Par		Additional Pain-In			Treasury			Retained			Other Comprehensive
(in thousands)	Class A			Class B			Value		Capital			Stock			Earnings			Income			Total

Balance, December 31, 2018		28,710			8,290		$	458	$	370,025		$	(245,842	)	$	942,287		$	–		$	1,066,928

Stock options exercised and stock awards		59			–			1		1,230			–			–			–			1,231
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			–		8,836			–			–			–			8,836
Vesting of restricted share awards		–			226			2		(2,317	)		–			–			–			(2,315	)
Issuance of common stock under employee stock purchase plan		57			–			1		1,680			–			–			–			1,681
Common stock repurchases		(639	)		(53	)		–		–			(26,048	)		–			–			(26,048	)
Dividend Class A common stock		–			–			–		–			–			(3,389	)		–			(3,389	)
Dividend Class B common stock		–			–			–		–			–			(991	)		–			(991	)
Other comprehensive income		–			–			–		–			–			–			384			384
Net income		–			–			–		–			–			37,104			–			37,104
Balance, March 31, 2019		28,187			8,463		$	462	$	379,454		$	(271,890	)	$	975,011		$	384		$	1,083,421
Stock options exercised and stock awards		87			–			–		1,745			–			–			–			1,745
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			–		4,258			–			–			–			4,258
Vesting of restricted share awards		–			–			–		(517	)		–			–			–			(517	)
Issuance of common stock under employee stock purchase plan		–			–			–		–			–			–			–			–
Common stock repurchases		(251	)		(67	)		–		–			(12,062	)		–			–			(12,062	)
Dividend Class A common stock		–			–			–		–			–			(3,387	)		–			(3,387	)
Dividend Class B common stock		–			–			–		–			–			(1,050	)		–			(1,050	)
Other comprehensive income		–			–			–		–			–			–			(505	)		(505	)
Net income		–			–			–		–			–			41,621			–			41,621
Balance, June 30, 2019		28,023			8,396		$	462	$	384,940		$	(283,952	)	$	1,012,195		$	(121	)	$	1,113,524
Stock options exercised and stock awards		36			–			–		904			–			–			–			904
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			–		2,709			–			–			–			2,709
Vesting of restricted share awards		–			–			–		–			–			–			–			–
Issuance of common stock under employee stock purchase plan		60			–			1		1,806			–			–			–			1,807
Common stock repurchases		(313	)		(112	)		–		–			(16,089	)		–			–			(16,089	)
Dividend Class A common stock		–			–			–		–			–			(3,637	)		–			(3,637	)
Dividend Class B common stock		–			–			–		–			–			(1,124	)		–			(1,124	)
Other comprehensive income		–			–			–		–			–			–			55			55
Net income		–			–			–		–			–			39,104			–			39,104
Balance, September 30, 2019		27,806			8,284		$	463	$	390,359		$	(300,041	)	$	1,046,538		$	(66	)	$	1,137,253

Balance as of December 31, 2018	$	-
Foreign currency translation adjustment		384
Balance at March 31, 2019	$	384
Foreign currency translation adjustment		(505	)
Balance at June 30, 2019	$	(121	)
Foreign currency translation adjustment		55
Balance at September 30, 2019		(66	)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Revenue
New and used commercial vehicle sales		65.1	%		63.8	%		63.6	%		62.8	%		67.0	%		63.9	%		65.3	%		63.3	%
Aftermarket products and services sales		29.9			30.7			31.2			31.5			28.4			31.0			29.9			31.5
Lease and rental sales		4.3			4.8			4.5			4.9			3.9			4.4			4.1			4.5
Finance and insurance		0.4			0.4			0.4			0.4			0.4			0.4			0.4			0.4
Other		0.3			0.3			0.3			0.4			0.3			0.3			0.3			0.3
Total revenues		100.0			100.0			100.0			100.0			100.0			100.0			100.0			100.0
Cost of products sold		82.5			83.5			82.4			82.9			83.4			81.9			82.4			81.9
Gross profit		17.5			16.5			17.6			17.1			16.6			18.1			17.6			18.1
Selling, general and administrative		12.6			13.0			13.4			14.1			12.0			12.9			12.8			13.3
Depreciation and amortization		1.0			1.2			1.0			1.2			0.9			0.9			0.9			1.5
Gain on sale of assets		0.0			0.1			0.0			0.0			0.0			0.0			0.0			0.0
Operating income		3.9			2.4			3.2			1.8			3.7			4.3			3.9			3.3
Other income														0.1						0.1
Interest expense, net		0.3			0.3			0.3			0.4			0.5			0.3			0.5			0.3
Income before income taxes		3.6			2.1			2.9			1.4			3.3			4.0			3.5			3.0
Provision for income taxes		1.2			0.9			1.0			0.6			0.8			1.0			0.9			0.7
Net income		2.4	%		1.2	%		1.9	%		0.8	%		2.5	%		3.0	%		2.6	%		2.3	%

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~~and CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~.
101.INS*	~~XBRL Instance Document.~~2002.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

			RUSH ENTERPRISES, INC.



~~Date:~~	~~November 9, 2017~~	~~By:~~	~~/S/ W.M. “RUSTY” RUSH~~
			~~W.M. “Rusty” Rush~~
			~~President, Chief Executive Officer and~~
			~~Chairman of the Board~~
			~~(Principal Executive Officer)~~



~~Date:~~	~~November 9, 2017~~	~~By:~~	~~/S/ STEVEN L. KELLER~~
			~~Steven L. Keller~~
			~~Chief Financial Officer and Treasurer~~
			~~(Principal Financial and Accounting Officer)~~

~~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’s Quarterly Report on Form 10-Q (File No. 000-20797) for the quarter ended June 30, 2008)~~

~~3.2~~		~~Rush Enterprises, Inc. Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 21, 2013)~~

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.~~

~~101.INS~~*		~~XBRL Instance Document.~~
~~101.SCH~~*		~~XBRL Taxonomy Extension Schema Document.~~
~~101.CAL~~*Date: November 8, 2019	By:	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~/s/ W.M. “RUSTY” RUSH
~~101.DEF~~*		~~XBRL Taxonomy Extension Definition Linkbase Document.~~W.M. “Rusty” Rush President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)


~~101.LAB~~*		~~XBRL Taxonomy Extension Label Linkbase Document~~.
~~101.PRE~~*		~~XBRL Taxonomy Extension Presentation Linkbase Document~~.
Date: November 8, 2019	By:	/s/ STEVEN L. KELLER
		Steven L. Keller Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)