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~~June 30, ~~2017~~2021

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

incorporation or organization)

(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 company ☐

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

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

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

Yes ~~[ ]~~☐ No ~~[X]~~☑

Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of ~~November 1, 2017.~~July 29, 2021.

Title of Class

Number of Shares

~~Shares~~

Outstanding

Class A Common Stock, $.01 Par Value

~~31,259,965~~43,164,420

Class B Common Stock, $.01 Par Value

12,522,176

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

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

~~INDEX~~

INDEX

PART I. FINANCIAL INFORMATION			Page~~Page~~

~~Item 1.~~	~~Financial Statements~~

	Item 1.	~~Consolidated Balance Sheets - September 30, 2017 (unaudited) and December 31, 2016~~Financial Statements	3

		Consolidated Balance Sheets - June 30, 2021 (unaudited) and December 31, 2020	3

		Consolidated Statements of Income and Comprehensive Income - For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	4

		Consolidated Statements of Shareholders’ Equity – For the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	5

		Consolidated Statements of Cash Flows - For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	57

		Notes to Consolidated Financial Statements (unaudited)	68

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2528

	Item 4.	Controls and Procedures	2628


PART II. OTHER INFORMATION

~~PART II. OTHER INFORMATION~~

Item 1.	Legal Proceedings	2629

	Item 1A.	Risk Factors	2629

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2629

	Item 3.	Defaults Upon Senior Securities	2730

	Item 4.	Mine Safety Disclosures	2730

	Item 5.	Other Information	2730

	Item 6.	Exhibits	~~Exhibits~~	2730

SIGNATURES			2831

Table of Contents

PART I. FINANCIAL INFORMATION

I~~TEM~~ITEM 1. Financial Statements.

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2021 AND DECEMBER 31, 2020

(In Thousands, Except Shares)

	September 30,			December 31,			June 30,			December 31,
	2017			2016			2021			2020
	(Unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	127,915		$	82,026		$	315,911		$	312,048
Accounts receivable, net		153,526			156,199			160,435			172,481
Note receivable affiliate		14,320			10,166
Inventories, net		960,962			840,304			813,773			858,291
Prepaid expenses and other		7,330			8,798			16,161			14,906
Assets held for sale		10,319			13,955
Total current assets		1,274,372			1,111,448			1,306,280			1,357,726
Investments		6,375			6,231
Property and equipment, net		1,133,309			1,135,805			1,179,312			1,203,719
Operating lease right-of-use assets, net								62,025			60,577
Goodwill, net		290,191			290,191			292,142			292,142
Other assets, net		54,743			59,372			72,365			71,229
Total assets	$	2,758,990		$	2,603,047		$	2,912,124		$	2,985,393

Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable	$	706,995		$	646,945		$	470,877		$	511,786
Current maturities of long-term debt		142,675			130,717			120,593			141,672
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								26,006			26,373
Current maturities of operating lease obligations								10,950			10,196
Trade accounts payable		111,100			97,844			124,124			110,728
Customer deposits		22,976			18,418			50,484			74,209
Accrued expenses		95,022			83,974			125,777			151,830
Total current liabilities		1,094,082			993,130			928,811			1,026,794
Long-term debt, net of current maturities		450,121			472,503			332,165			387,982
Capital lease obligations, net of current maturities		64,972			70,044
Finance lease obligations, net of current maturities								91,209			90,740
Operating lease obligations, net of current maturities								52,321			51,155
Other long-term liabilities		9,575			7,214			35,582			34,246
Deferred income taxes, net		206,123			197,331			111,837			126,439
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 2021 and 2020								0			0
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 43,104,231 Class A shares and 12,560,943 Class B shares outstanding in 2021; and 42,503,925 Class A shares and 12,470,308 Class B shares outstanding in 2020								560			551
Additional paid-in capital		341,245			309,127			456,785			437,646
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: 12,999 Class A shares and 327,824 Class B shares in 2021; and 10,335 Class A shares and 73,437 Class B shares in 2020								(13,585	)		(2,879	)
Retained earnings		706,690			640,428			915,003			831,850
Accumulated other comprehensive loss, net of tax		–			(286	)
Total shareholders’ equity		934,117			862,825
Accumulated other comprehensive income								1,436			869
Total shareholders’ equity								1,360,199			1,268,037
Total liabilities and shareholders’ equity	$	2,758,990		$	2,603,047		$	2,912,124		$	2,985,393

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016		2017		2016		2021			2020		2021		2020

Revenues:
Revenues
New and used commercial vehicle sales	$	819,028	$	698,838	$	2,230,969	$	2,004,236	$	797,269		$	559,062	$	1,544,988	$	1,348,616
Aftermarket products and services sales		375,835		336,459		1,092,540		1,007,063		445,526			377,553		861,263		805,531
Lease and rental		54,630		52,452		158,922		155,491
Lease and rental sales										61,396			57,290		119,623		118,071
Finance and insurance		4,771		4,870		13,092		14,206		7,407			4,960		13,872		9,427
Other		3,195		3,422		10,256		12,347		4,417			3,647		8,075		7,530
Total revenue		1,257,459		1,096,041		3,505,779		3,193,343		1,316,015			1,002,512		2,547,821		2,289,175
Cost of products sold:
Cost of products sold
New and used commercial vehicle sales		754,762		653,992		2,061,135		1,868,983		719,768			521,494		1,396,860		1,250,033
Aftermarket products and services sales		237,452		214,916		693,910		642,678		277,078			237,196		538,920		508,611
Lease and rental		45,197		45,817		133,707		136,618
Lease and rental sales										48,387			51,491		96,445		103,699
Total cost of products sold		1,037,411		914,725		2,888,752		2,648,279		1,045,233			810,181		2,032,225		1,862,343
Gross profit		220,048		181,316		617,027		545,064		270,782			192,331		515,596		426,832
Selling, general and administrative expense		159,281		142,280		469,037		450,812		184,734			156,195		359,689		341,269
Depreciation and amortization expense		12,438		13,014		37,374		38,482		13,421			14,516		27,147		28,846
Gain on sale of assets		107		1,566		76		1,571		164			1,381		256		1,481
Operating income		48,436		27,588		110,692		57,341		72,791			23,001		129,016		58,198
Interest expense, net		3,101		3,285		8,716		11,287
Other income										1,746			1,720		2,665		2,961
Interest (income) expense, net										(212	)		2,209		295		6,978
Income before taxes		45,335		24,303		101,976		46,054		74,749			22,512		131,386		54,181
Provision for income taxes		15,551		9,423		35,714		17,962
Income tax provision										16,705			5,696		28,009		14,258
Net income	$	29,784	$	14,880	$	66,262	$	28,092	$	58,044		$	16,816	$	103,377	$	39,923

Earnings per common share:
Basic	$	.75	$	.38	$	1.68	$	.70	$	1.04		$	0.31	$	1.85	$	0.73
Diluted	$	.72	$	.37	$	1.62	$	.69	$	1.00		$	0.30	$	1.79	$	0.72

Weighted average shares outstanding:
Basic		39,825		39,617		39,560		40,138		56,009			54,436		55,819		54,581
Diluted		41,146		40,274		40,830		40,698		57,956			55,351		57,846		55,670

Dividends declared per common share									$	0 .18		$	0.09	$	0.36	$	0.17

Comprehensive income	$	29,784	$	14,889	$	66,548	$	28,111	$	58,356		$	17,741	$	103,944	$	38,918

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

(In Thousands)

(Unaudited)

Nine Months Ended

September 30,

2017

2016

Cash flows from operating activities:

Net income
$ 66,262 $ 28,092
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
117,054 118,149
Gain on sale of property and equipment
(76 ) (1,571 )
Loss on impairment of assets
− 8,247
Stock-based compensation expense related to stock options and employee stock purchases
12,036 9,426
Deferred income tax expense
8,609 3,355
Excess tax expense from stock-based compensation
− 808
Change in accounts receivable, net
(1,481 ) 8,560
Change in inventories, net
(87,799 ) 199,228
Change in prepaid expenses and other, net
1,156 24,163
Change in trade accounts payable
12,469 (10,298 )
Draws (payments) on floor plan notes payable – trade, net
26,439 (623 )
Change in customer deposits
4,558 (6,560 )
Change in accrued expenses
11,048 5,783
Net cash provided by operating activities
170,275 386,759
Cash flows from investing activities:

Acquisition of property and equipment
(138,756 ) (159,546 )
Proceeds from the sale of property and equipment
3,905 9,427
Business acquisitions
− (681 )
Proceeds from the sale of available for sale securities
325 450
Change in other assets
4,831 (4,520 )
Net cash used in investing activities
(129,695 ) (154,870 )
Cash flows from financing activities:

Draws (payments) on floor plan notes payable – non-trade, net
33,611 (142,229 )
Proceeds from long-term debt
97,319 103,248
Principal payments on long-term debt
(108,526 ) (122,619 )
Principal payments on capital lease obligations
(9,280 ) (14,174 )
Proceeds from issuance of shares relating to employee stock options and employee stock purchases
20,096 4,826
Excess tax expense from stock-based compensation
− (808 )
Common stock repurchased
(27,388 ) (33,282 )
Debt issuance costs
(523 ) −
Net cash provided by (used in) financing activities
5,309 (205,038 )
Net increase in cash and cash equivalents
45,889 26,851
Cash and cash equivalents, beginning of period
82,026 64,847
Cash and cash equivalents, end of period
$ 127,915 $ 91,698
Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest
$ 24,952 $ 29,172
Income taxes, net of refunds
$ 30,487 $ (12,993 )
Noncash investing activities:

Assets acquired under capital leases
$ 8,243 $ 16,797

Common Stock

Accumulated

Shares
Outstanding

$0.01
Par

Additional
Paid-In

Treasury

Retained

Other
Comprehensive

Class A Class B Value Capital Stock Earnings Income Total

Balance, December 31, 2020
42,504 12,470 $ 551 $ 437,646 $ (2,879 ) $ 831,850 $ 869 $ 1,268,037
Stock options exercised and stock awards
298 0 3 5,416 0 0 0 5,419
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan
– – 0 11,520 0 0 0 11,520
Vesting of restricted share awards
0 345 3 (6,780 ) 0 0 0 (6,777 )
Issuance of common stock under employee stock purchase plan
86 0 1 1,988 0 0 0 1,989
Common stock repurchases
(3 ) (155 ) 0 0 (6,483 ) 0 0 (6,483 )
Dividend Class A common stock
– – – – – (7,684 ) – (7,684 )
Dividend Class B common stock
– – – – – (2,380 ) – (2,380 )
Other comprehensive income
– – 0 0 0 0 255 255
Net income
– – 0 0 0 45,333 0 45,333
Balance, March 31, 2021
42,885 12,660 $ 558 $ 449,790 $ (9,362 ) $ 867,119 $ 1,124 $ 1,309,229
Stock options exercised and stock awards
219 0 2 3,926 0 0 0 3,928
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan
– – 0 3,683 0 0 0 3,683
Vesting of restricted share awards
– – 0 (614 ) 0 0 0 (614 )
Common stock repurchases
0 (99 ) 0 0 (4,223 ) 0 0 (4,223 )
Dividend Class A common stock
– – – – – (7,735 ) – (7,735 )
Dividend Class B common stock
– – – – – (2,425 ) – (2,425 )
Other comprehensive income
– – 0 0 0 0 312 312
Net income
– – 0 0 0 58,044 0 58,044
Balance, June 30, 2021
43,104 12,561 $ 560 $ 456,785 $ (13,585 ) $ 915,003 $ 1,436 $ 1,360,199
5
Table of Contents

Common Stock

Accumulated

Shares
Outstanding

$0.01
Par

Additional
Paid-In

Treasury

Retained

Other
Comprehensive

Class A Class B Value Capital Stock Earnings Income (Loss) Total

Balance, December 31, 2019
41,930 12,360 $ 465 $ 397,267 $ (304,129 ) $ 1,065,553 $ 337 $ 1,159,493
Stock options exercised and stock awards
110 0 1 1,421 0 0 0 1,422
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan
– – 0 8,553 0 0 0 8,553
Vesting of restricted share awards
0 337 2 (2,416 ) 0 0 0 (2,414 )
Issuance of common stock under employee stock purchase plan
92 0 1 1,900 0 0 0 1,901
Common stock repurchases
(833 ) (81 ) 0 0 (19,902 ) 0 0 (19,902 )
Dividend Class A common stock
– – – – – (3,646 ) – (3,646 )
Dividend Class B common stock
– – – – – (1,108 ) – (1,108 )
Other comprehensive income
– – 0 0 0 0 (1,930 ) (1,930 )
Net income
– – 0 0 0 23,107 0 23,107
Balance, March 31, 2020
41,299 12,616 $ 469 $ 406,725 $ (324,031 ) $ 1,083,906 $ (1,593 ) $ 1,165,476
Stock options exercised and stock awards
294 0 2 4,529 0 0 0 4,531
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan
– – 0 3,586 0 0 0 3,586
Vesting of restricted share awards
– – 0 (28 ) 0 0 0 (28 )
Dividend Class A common stock
– – – – – (3,581 ) – (3,581 )
Dividend Class B common stock
– – 0 0 0 (1,165 ) 0 (1,165 )
Other comprehensive income
– – 0 0 0 0 925 925
Net income
– – 0 0 0 16,816 0 16,816
Balance, June 30, 2020
41,593 12,616 $ 471 $ 414,812 $ (324,031 ) $ 1,095,976 $ (668 ) $ 1,186,560

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

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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

Six Months Ended

June 30,

2021

2020

Cash flows from operating activities:

Net income
$ 103,377 $ 39,923
Adjustments to reconcile net income to net cash provided by operating activities-

Depreciation and amortization
84,891 89,897
Gain on sale of property and equipment, net
(256 ) (1,481 )
Stock-based compensation expense related to employee equity awards and employee stock purchases
15,203 12,139
Deferred income tax expense
(14,602 ) (10,437 )
Change in accounts and notes receivable, net
12,046 21,027
Change in inventories, net
76,772 358,945
Change in prepaid expenses and other, net
(1,255 ) 5,246
Change in trade accounts payable
12,376 (36,147 )
Payments on floor plan notes payable – trade, net
– (32,609 )
Change in customer deposits
(23,725 ) (25,086 )
Change in accrued expenses
(26,243 ) (1,207 )
Other, net
(881 ) (2,000 )
Net cash provided by operating activities
237,703 418,210
Cash flows from investing activities:

Acquisition of property and equipment
(84,352 ) (82,236 )
Proceeds from the sale of property and equipment
327 5,342
Other
1,146 2,515
Net cash used in investing activities
(82,879 ) (74,379 )
Cash flows from financing activities:

Payments on floor plan notes payable – non-trade, net
(40,909 ) (238,781 )
Proceeds from long-term debt
52,325 119,348
Principal payments on long-term debt
(129,221 ) (160,704 )
Principal payments on finance lease obligations
(6,361 ) (5,768 )
Proceeds from issuance of shares relating to employee stock options and employee stock purchases
3,945 5,412
Payments of cash dividends
(19,922 ) (9,500 )
Common stock repurchased
(10,818 ) (19,902 )
Net cash used in financing activities
(150,961 ) (309,895 )
Net increase in cash and cash equivalents
3,863 33,936
Cash and cash equivalents, beginning of period
312,048 181,620
Cash and cash equivalents, end of period
$ 315,911 $ 215,556
Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest
$ 13,213 $ 22,559
Income taxes, net of refunds
$ 67,766 $ 165
Noncash activities:

Assets acquired under finance leases
$ 15,019 $ 26,492
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited~~(Unaudited)

1– Principles of Consolidation and Basis of Presentation

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.~~ 2020. 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.

Stock Split
On September 15, 2020, the Board of Directors of the Company declared a 3-for-2 stock split of the Company’s Class A common stock and Class B common stock, to be effected in the form of a stock dividend. On October 12, 2020, the Company distributed one additional share of stock for every two shares of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of September 28, 2020. All share and per share data in this Form 10-Q have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period presented.
COVID-19 Risks and Uncertainties
In March 2020, the World Health Organization made the assessment that COVID-19 could be characterized as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company’s nationwide network of commercial vehicle dealerships are classified as “essential businesses” and have remained operational across the Company’s dealership network. While the COVID-19 pandemic is not over, business conditions have improved significantly since the second quarter of 2020. The Company is unable to predict the impact that the COVID-19 pandemic will have on its future business and operating results due to numerous uncertainties, including the duration and severity of the outbreak.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). In January 2021, the FASB issued Accounting Standards Update No.2021-01,Reference Rate Reform (Topic 848): Scope, which clarified the scope and application of the original guidance. The guidance in these standards applies to contract accounting, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met and provides optional expedients and exceptions for a limited time to ease the potential burden in accounting for reference rate reform. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. ASU 2020-04 is effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. LIBOR benchmarking is utilized in the Company’s working capital and floorplan facilities. The Company is in the process of completing its evaluation of the impact, if any, that the adoption of this standard will have on its Consolidated Financial Statements.
2–Other Assets

The total capitalized costs of the Company’s SAP enterprise software and SAP dealership management system of $30.5 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.
~~Amortization expense relating to the SAP~~ software, which is recognized in depreciation and amortization expense in the Consolidated Statement of Income and Comprehensive Income, was $0.9 million for the three months ended September 30, 2017 and $0.9 million for the three months ended September 30, 2016; it was $2.6 million for the nine months ended September 30, 2017 and $2.5 million for the nine months ended September 30, 2016. The Company currently estimates that amortization expense relating to the SAP software will be approximately $3.4 million for each of the next five years.Franchise Rights

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~~as of June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, 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.

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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~~write-down 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.
Equity Method Investment and Call Option
On February 25, 2019, the Company acquired 50% of the 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 June 30, 2021, 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. The Company owned a 50% equity interest in TTCL, which was the sole owner of RTC Canada. Later in 2019, RTC Canada and TTCL were amalgamated into RTC Canada. 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, RTC Canada is receiving a reduced rate of interest on its credit facilities with BMO. The Guaranty was valued at $5.3 million as of June 30, 2021 and $5.2 million as of December 31, 2020, and is included in the investment in RTC Canada. As of June 30, 2021, the Company’s investment in RTC Canada is $33.7 million. The Company’s equity income in RTC Canada is included in Other income on the Consolidated Statements of Income.
ERP Platform
The total capitalized costs of the Company’s SAP enterprise resource planning software platform (“the ERP Platform”) of $6.1 million are recorded on the Consolidated Balance Sheet in Other Assets. Amortization expense relating to the ERP Platform, which is recognized in depreciation and amortization expense in the Consolidated Statements of Income and Comprehensive Income, was $0.4 million for the three months ended June 30, 2021 and $0.5 million for the three months ended June 30, 2020, and $0.9 million for the six months ended June 30, 2021 and $1.0 million for the six months ended June 30, 2020. The Company estimates that amortization expense relating to the ERP Platform will be approximately $1.5 million in 2021 and $1.2 million per year for the next four years.

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3– Commitments and Contingencies

From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability insurance, including product liability coverage, in amounts deemed adequate by management. To date, aggregate costs to usthe Company 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.

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4– Earnings Per Share

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,

Six Months Ended
June 30,

2017

2016

2017

2016

2021

2020

2021

2020

Numerator:

Numerator for basic and diluted earnings per share – Net income available to common shareholders
$ 29,784 $ 14,880 $ 66,262 $ 28,092 $ 58,044 $ 16,816 $ 103,377 $ 39,923
Denominator:

Denominator for basic earnings per share – weighted average shares outstanding
39,825 39,617 39,560 40,138 56,009 54,436 55,819 54,581
Effect of dilutive securities– Employee and director stock options and restricted share awards
1,321 657 1,270 560
Effect of dilutive securities – Employee stock options and restricted stock awards
1,947 915 2,027 1,089
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions
41,146 40,274 40,830 40,698 57,956 55,351 57,846 55,670
Basic earnings per common share
$ .75 $ .38 $ 1.68 $ .70 $ 1.04 $ 0.31 $ 1.85 $ 0.73
Diluted earnings per common share and common share equivalents
$ .72 $ .37 $ 1.62 $ .69 $ 1.00 $ 0.30 $ 1.79 $ 0.72

Options to purchase shares of common stock that were outstanding for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021, and ~~2016 that~~2020, which were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Weighted average anti-dilutive stock options
626 2,506 379 2,149

5 – Stock Options and Restricted Stock Awards

Valuation and Expense Information

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~~the Company’s employees and directors, including employee stock options, restricted stock unit awards, restricted stock 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~~$3.7 million for the three months ended ~~September~~June 30, ~~2017,~~ 2021, and ~~$2.7~~$3.6 million for the three months ended ~~September~~June 30, ~~2016.~~ 2020. Stock-based compensation expense, included in selling, general and administrative expense, was $15.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, and was ~~$12.0~~$12.1 million ~~and~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2016, was $9.4 million.~~ 2020.
As of ~~September~~June 30, ~~2017,~~ 2021, the Company had ~~$9.0~~$11.3 million of unrecognized compensation ~~expense~~cost related to non-vested employee stock options to be recognized over a weighted-average period of ~~3.0~~2.5 years and ~~$7.6~~$12.8 million of unrecognized compensation cost related to non-vested restricted stock ~~units~~awards to be recognized over a weighted-average period of ~~1.7~~1.5 years.

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6– Financial Instruments and Fair Value

The Company ~~has various~~ measures certain financial ~~instruments that it must measure~~assets and liabilities at fair value on a recurring basis. The Company also applies the provisions of fair value measurement to various nonrecurring measurements for its financial and nonfinancial assets and liabilities. Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three levels of the fair value hierarchy:
~~Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that~~ ~~the Company has the ability to access at the measurement date.~~
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
~~Level 3 includes unobservable inputs that reflect~~ the Company’s assumptions about what factors market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.
Financial instruments consist primarily of cash, accounts receivable, accounts payable and floor plan notes payable. The carrying values of the Company’s financial instruments approximate fair value due either to their short-term nature or existence of variable interest rates, which approximate market rates. Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments ~~at September~~as of June 30, ~~2017,~~ 2021, and December 31, ~~2016.~~ 2020. 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,~~rates, 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~~the Company’s current credit ~~standing and has categorized such debt within Level 2 of the hierarchy framework.~~standing. The carrying amount of such debt 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.~~
~~Auction Rate Securities~~
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.
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~~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):~~
At September 30, 2017 At December 31, 2016

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Investment in auction rate securities
$ - $ - $ 6,375 $ - $ - $ 6,231

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
~~Long-Lived Assets~~
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):~~
Description

Fair Value Measurements Using
Significant Unobservable Inputs
September 30,
2017

Loss
during the
Three Months
Ended
September 30,
2017

Loss
during the
Three Months
Ended
September 30,
2016

Loss
during the
Nine Months
Ended
September 30,
2017

Loss
during the
Nine Months
Ended
September 30,
2016

Long-lived assets held for sale
$ 10,319 $ − $ − $ − $ (7,481 )
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~~For further discussion of assets held for sale, see Note 10~~ 7– Restructuring Costs of the Notes to Consolidated Financial Statements. The losses in the above table were reported in selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income and were reported under the Truck Segment.

7 – Segment Information

The Company currently has ~~one~~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~~June 30, ~~2017,~~ 2021 and ~~2016~~2020 (in thousands):

Truck
Segment

All Other

Totals

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

Revenues from external customers
$ 1,253,429 $ 4,030 $ 1,257,459
Segment income (loss) before taxes
45,590 (255 ) 45,335
Segment assets
2,721,463 37,527 2,758,990

For the nine months ended September 30, 2017

Revenues from external customers
$ 3,493,984 $ 11,795 $ 3,505,779
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

	Truck Segment		All Other			Total
As of and for the three months ended June 30, 2021
Revenues from external customers	$	1,311,678	$	4,337		$	1,316,015
Segment operating income		72,163		628			72,791
Segment income before taxes		74,191		558			74,749
Segment assets		2,863,087		49,037			2,912,124
For the six months ended June 30, 2021
Revenues from external customers	$	2,539,790	$	8,031		$	2,547,821
Segment operating income		128,113		903			129,016
Segment income before taxes		130,623		763			131,386

As of and for the three months ended June 30, 2020
Revenues from external customers	$	998,739	$	3,773		$	1,002,512
Segment operating income		22,678		323			23,001
Segment income before taxes		22,260		252			22,512
Segment assets		3,021,241		43,360			3,064,601
For the six months ended June 30, 2020
Revenues from external customers	$	2,282,118	$	7,057		$	2,289,175
Segment operating income		58,129		69			58,198
Segment income before taxes		54,253		(72	)		54,181

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8– Income Taxes

The Company had unrecognized income tax benefits totaling ~~$2.4~~$3.3 million as a component of accrued liabilities ~~at September~~as of June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, 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~~$150,000 accrued for the payment of interest ~~at September~~as of June 30, ~~2017~~ 2021 and December 31, ~~2016.~~2020. NaN amounts were accrued for penalties.

The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of ~~September~~June 30, ~~2017,~~ 2021, the tax years ended December 31, ~~2013~~ 2017 through ~~2016, remain~~2020 remained subject to audit by federal tax authorities, and the tax years ended December 31, ~~2012~~ 2016 through ~~2016, remain~~2020, remained subject to audit by state tax authorities.

9– Revenue

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, which is typically when the finished product is delivered to the customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

The following table summarizes the Company’s disaggregated revenue by revenue source for the three months and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Commercial vehicle sales revenue	$	797,269	$	559,062	$	1,544,988	$	1,348,616
Parts revenue		263,491		211,804		503,927		448,402
Commercial vehicle repair service revenue		182,035		165,749		357,336		357,129
Finance revenue		4,549		2,523		8,453		4,879
Insurance revenue		2,858		2,437		5,419		4,548
Other revenue		4,417		3,647		8,075		7,530
Total	$	1,254,619	$	945,222	$	2,428,198	$	2,171,104

All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time. The Company did not have any material contract assets or contract liabilities on the balance sheet as of June 30, 2021. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of the Company’s other revenues are related to the Truck Segment.

10– Leases

Lease of Vehicles as Lessor

The Company leases commercial vehicles that the Company owns to customers primarily over periods of one to ten years. The Company does not separate lease and nonlease components. Nonlease components typically consist of maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option for the lessee to purchase the commercial vehicle at the end of the lease term.

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

Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales revenue upon lease commencement. The receivable for sales-type leases was $5.2 million as of June 30, 2021, and was $5.6 million as of December 31, 2020, and is reflected in Other Assets on the Consolidated Balance Sheet.

Table of Contents

~~In March~~ ~~2016,~~Lease and rental income during 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 on January 1, 2017. The new guidance requires excess tax benefits~~three 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 excess tax benefits of $1.9 million for the threesix months ended ~~September~~June 30, ~~2017,~~ 2021 and ~~$3.9 million for~~June 30, 2020 consisted of the ~~nine months ended September 30, 2017, which was recorded as a reduction to income tax expense in the Consolidated Statement of Income and Comprehensive Income.~~following (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Minimum rental payments	$	52,948	$	50,195	$	103,653	$	103,368
Nonlease payments		8,449		7,095		15,971		14,703
Total	$	61,397	$	57,290	$	119,624	$	118,071

9 11– Accumulated Other Comprehensive Income ~~(Loss)~~

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

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 )

Balance as of December 31, 2020	$	869
Foreign currency translation adjustment		255
Balance as of March 31, 2021	$	1,124
Foreign currency translation adjustment		312
Balance as of June 30, 2021	$	1,436

The equity method investment in RTC Canada was valued using the exchange rate of one US Dollar equals 1.2398 Canadian dollars as of June 30, 2021. The adjustment is reflected in Other Assets on the Consolidated Balance Sheet.

10 12– ~~Restructuring Costs~~ Accounts Receivable and Allowance for Credit Losses

~~During~~The Company establishes an allowance for credit losses to present the ~~quarter ended March 31, 2016,~~net amount of accounts receivable expected to be collected. Under Topic 326: Measurement of Credit Losses on Financial Instruments, the Company ~~instituted~~is required to remeasure expected credit losses for financial instruments held on the reporting date based on historical experience, current conditions and reasonable forecasts.

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

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

	Balance December 31, 2020		Provision for the Six Months Ended June 30, 2021			Write offs Against Allowance, net of Recoveries			Balance June 30, 2021

Commercial vehicle receivables	$	172	$	(40	)	$	−		$	132
Manufacturers’ receivables		136		571			(578	)		129
Leasing, parts and service receivables		1,278		525			(637	)		1,166
Other receivables		19		6			(7	)		18
Total	$	1,605	$	1,062		$	(1,222	)	$	1,445

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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, as well as statements regarding the effects COVID-19 may have on our business and financial results. 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 ~~consolidate~~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, 2020, 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’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’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. 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. 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.

General

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 our 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, 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 22 states.

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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 repairs in addition to new and used commercial vehicle sales and leasing, plus financial services, vehicle upfitting, CNG fuel systems and vehicle telematics 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 ~~incurred pre-tax~~opening new dealerships to enable us to better serve our customers.

Stock Split

On September 15, 2020, our Board of Directors declared a 3-for-2 stock split of our Class A common stock and Class B common stock, to be effected in the form of a stock dividend. On October 12, 2020, we distributed one additional share of stock for every two shares of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of September 28, 2020. All share and per share data in this Form 10-Q have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period presented.

TheCOVID-19PandemicandItsImpact on Our Business

Our dealership network has remained operational since the beginning of the COVID-19 pandemic. While the COVID-19 pandemic is not over, business conditions have improved significantly since the second quarter of 2020. However, supply chain issues resulting from the pandemic continue to impact our aftermarket sales and new commercial vehicle availability. Based on current market conditions and the steps we have taken to reduce expenses, we continue to believe the worst of the pandemic’s effect on our business is behind us. All of our businesses, except commercial vehicle service, are back to pre-pandemic levels.

Commercial Vehicle Sales

All of the commercial vehicle manufacturers that we represent resumed operations following any COVID-19 related shutdowns in 2020. However, supply chain delays related to manufacturing components have forced some of the manufacturers we represent to temporarily cease production at times and may limit the commercial vehicle industry’s ability to meet commercial vehicle sales demand throughout 2021.

Aftermarket Products and Services

With respect to our parts, service and collision center (collectively, “Aftermarket Products and Services”) departments, with some minor exceptions, our parts supply chain has remained relatively uninterrupted to-date and our parts sales are back to pre-pandemic levels. We believe that the investments we made over the years with respect to our aftermarket strategic initiatives enabled us to mitigate the impact of the COVID-19 pandemic on our Aftermarket Products and Service business.

Rental and Leasing Operations

With respect to our rental and leasing operations, in 2020, we allowed certain credit-worthy customers serving industries that were dramatically impacted by the COVID-19 pandemic to skip up to three months of lease payments and either extend the lease term by three months or increase the remaining payments to keep the same lease term. These customers have resumed payments. Our rental and leasing operations are back to pre-pandemic levels.

Liquidity

As of June 30, 2021, our total net liquidity was approximately $421.5 million, including $315.9 million in cash and $105.6 million available under our various credit agreements, excluding our floor plan credit agreements. Our working capital facility (“the Working Capital Facility”) with BMO Harris Bank N.A. (“BMO Harris”) includes up to $100.0 million of revolving credit loans that are available to us for working capital, capital expenditures and other general corporate purposes. We currently have no outstanding draws on this line of credit. For further discussion of our liquidity, see the Liquidity and Capital Resources discussion set forth herein.

Outlook

A.C.T. Research Co., LLC (“A.C.T. Research”), a commercial vehicle industry data and forecasting service provider, currently forecasts new U.S. Class 8 retail truck sales to be 259,000 units in 2021, which would represent a 32.4% increase compared to 2020. While demand for new commercial vehicles is currently strong, we believe that component supply chain issues could push the timing of new commercial vehicle deliveries well into 2022, which would negatively impact A.C.T. Research’s forecasts.

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We expect our market share of new Class 8 truck sales to range between 4.8% and 5.3% in 2021. This market share percentage would result in the sale of approximately ~~$8.1 million related~~12,500 to ~~restructuring activities.~~13,800 of new Class 8 trucks in 2021, based on A.C.T. Research’s current U.S. retail sales estimate of 259,000 units.

With respect to new U.S. Class 4-7 retail commercial vehicle sales, A.C.T. Research currently forecasts sales to be 257,500 units in 2021, which would represent an 11.0% increase compared to 2020. We expect our market share of new Class 4 through 7 commercial vehicle sales to range between 4.3% and 5.0% in 2021. This market share percentage would result in the sale of approximately 11,000 to 12,800 of new Class 4 through 7 commercial vehicles in 2021, based on A.C.T. Research’s current U.S. retail sales estimates of 257,500 units.

We expect to sell approximately 1,600 light-duty vehicles and approximately 7,000 to 7,500 used commercial vehicles in 2021. We expect lease and rental revenue to increase 6% to 9% during 2021, compared to 2020.

While parts supply chain constraints are expected to negatively impact the Aftermarket Products and Services industry for the remainder of 2021, we do not believe these constraints will have a significant overall effect on our Aftermarket Products and Services revenues due to our ability to mitigate supply chain issues with our parts inventory management system. We believe our Aftermarket Products and Services revenues will increase 8% to 10% in 2021, compared to 2020.

Critical Accounting Policies and Estimates

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 ~~restructuring costs included $2.7 million associated with impairment charges~~preparation of these consolidated financial statements requires us to ~~certain fixed~~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

Inventories are stated at the lower of cost or net realizable value. Cost is determined by specific identification of new and used commercial vehicle inventory 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

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 ~~real estate underlying~~reporting unit (we consider our Truck Segment to be a reporting unit for purposes of this analysis), which is the ~~affected locations, which was reported in~~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 ~~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~~resulting decline in anour estimated fair value could result in a material impairment charge ~~of $5.0 million, which was reported in selling, general and administrative expenses in~~to 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 estategoodwill associated with the ~~restructuring activities is included in assets held for sale on the Consolidated Balance Sheets.~~

1~~1 – New Accounting Pronouncements~~

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

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~~In February 2016,~~We do not believe there is a reasonable likelihood that there will be a material change in the ~~FASB issued ASU No. 2016-02, “~~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.

Goodwill was tested for impairment during the fourth quarter of 2020 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.

~~Leases (Topic 842),~~Insurance Accruals”

We are partially self-insured for a portion of the claims related to our property and casualty insurance programs, which ~~is intended~~requires us to ~~increase the transparency~~make estimates regarding expected losses to be incurred. We engage a third-party administrator to assess any open claims and ~~comparability among organizations by recognizing lease assets and lease liabilities~~we adjust our accrual accordingly on ~~the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition~~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.

Accounting for Income Taxes

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

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 ~~recognize on~~make assumptions and to apply judgment to estimate the ~~balance sheet~~exposures associated with our various filing positions. Our effective income tax rate is also affected by changes in tax law, the ~~assets~~level of earnings and ~~liabilities for leases with lease terms~~the results of ~~more than 12 months. The new standard is~~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 require use of our cash and result in an increase in our effective ~~for public companies for fiscal years beginning after December 15, 2018,~~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 ~~interim periods within those years, with early adoption permitted. The Company is currently evaluating the effect~~changes to reserves that ~~adopting this standard will have on our financial statements and~~we consider appropriate, as well as related ~~disclosures. The Company will adopt ASU 2016-02 on~~interest.

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Revenue Recognition

Effective January 1, ~~2019.~~

~~In May 2014, the FASB issued~~2018, we adopted ASU ~~No.~~ 2014-09, “~~Revenue from Contracts with Customers~~Insurance Accruals~~(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. The team has initially identified the Company’s material revenue streams to be the sale of new and used commercial vehicles; arrangement of associated commercial vehicle financing and insurance contracts; the performance of commercial vehicle repair services; and the sale of commercial vehicle parts. The Company’s implementation team is in the preliminary stages of evaluating the additional disclosure requirements of the ASU, as well as the change, if any, to the Company’s underlying accounting and financial reporting systems and processes necessary to support the recognition and disclosure requirements. The Company expects to identify and implement the necessary changes, if any, during 2017. At this time, based on this review, the Company does not expect the adoption to materially impact its consolidated financial statements. The Company will adopt ASU 2014-09 on January 1, 2018 and will use the modified retrospective method.

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I~~TEM~~ ~~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, 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’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’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. B~~~~lue 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.

~~General~~

We are partially self-insured for a ~~full-service, integrated retailer~~portion of ~~commercial vehicles~~the claims related to our property and ~~related services. The Truck Segment includes the Company~~’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, andcasualty insurance ~~products.~~

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 in addition to new and used commercial vehicle sales and leasing, plus financial services, vehicle upfitting, CNG fuel systems, vehicle telematics products, chrome accessories and tires. 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 in our existing areas of operations.

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~~Critical Accounting Policies and Estimates~~

~~Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements,~~programs, 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 regarding expected losses to be incurred. We engage a third-party administrator to assess any open claims and ~~assumptions that affect the reported amounts of assets and liabilities at the date~~we adjust our accrual accordingly on a periodic basis. We are also partially self-insured for a portion of the ~~consolidated financial statements~~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 ~~reported amounts~~remaining portion of ~~revenues and expenses during the reporting period. There can be no assurance~~claims that ~~actual results will not differ from those estimates. We believe the following accounting policies affect our more significant judgments and estimates used~~have been reported.

Changes in the ~~preparation~~frequency, severity and development of existing claims could influence our ~~consolidated~~reserve for claims and financial ~~statements.~~

~~Inventories~~

~~Inventories are stated at the lower~~position, results of ~~cost or market value. Cost is determined by specific identification of new~~operations and used commercial vehicles 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~~

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.

flows. 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.~~calculate our self-insured liabilities. 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~~losses or gains that could be material. ~~Such events~~

Accounting for Income Taxes

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

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 ~~include, but are not limited~~be exposed to ~~strategic decisions made~~losses or gains that could be material. An unfavorable tax settlement would generally require use of our cash and result in ~~response to economic and competitive conditions or~~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 ~~the current economic environment.~~reserve provisions and changes to reserves that we consider appropriate, as well as related interest.

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Revenue Recognition

~~Goodwill was tested for impairment during the fourth quarter of 2016 and no impairment was required. The fair value of our reporting unit exceeded the carrying value of its net assets. As a result,~~Effective January 1, 2018, 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.~~

adopted ASU 2014-09, “Insurance Accruals

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.

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Accounting for Income Taxes

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

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Revenue Recognition

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.

Leases

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

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

We lease commercial vehicles that we own to customers. Lease and rental revenue is recognized over the period of the related lease or rental agreement. Variable rental revenue is recognized when it is earned.

Allowance for Credit Losses

All trade receivables are reported on the consolidated balance sheet at their cost basis adjusted for any write-offs and net of allowances for credit losses. We maintain allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of our receivables after considering current market conditions and estimates for supportable forecasts, when appropriate. The estimate is a result of our ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in each of our receivable portfolios (commercial vehicle receivables, manufacturers’ receivables, parts and service receivables, leasing receivables and other trade receivables). For trade receivables, we use the probability of default and our historical loss experience rates by portfolio and apply them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances by portfolio requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The allowances take into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, collection experience, current economic conditions, estimates for supportable forecasts (when appropriate) and credit risk characteristics.

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Results of Operations

The following discussion and analysis includes our historical results of operations for the three months and ~~nine~~six months periods ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020.

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Revenue
New and used commercial vehicle sales		65.1	%		63.8	%		63.6	%		62.8	%		60.6	%		55.8	%		60.6	%		58.9	%
Aftermarket products and services sales		29.9			30.7			31.2			31.5			33.8			37.7			33.8			35.2
Lease and rental sales		4.3			4.8			4.5			4.9			4.7			5.7			4.7			5.2
Finance and insurance		0.4			0.4			0.4			0.4			0.6			0.5			0.6			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			79.4			80.8			79.8			81.4
Gross profit		17.5			16.5			17.6			17.1		20.6			19.2			20.2				18.6
Selling, general and administrative		12.6			13.0			13.4			14.1			14.0			15.6			14.1			14.9
Depreciation and amortization		1.0			1.2			1.0			1.2			1.0			1.4			1.1			1.3
Gain on sale of assets		0.0			0.1			0.0			0.0
Gain (loss) on sale of assets														0.0			0.1			0.0			0.1
Operating income		3.9			2.4			3.2			1.8			5.6			2.3			5.0			2.5
Interest expense, net		0.3			0.3			0.3			0.4
Other income														0.0			0.2			0.1			0.1
Interest (income) expense, net														0.0			0.2			0.0			0.3
Income before income taxes		3.6			2.1			2.9			1.4			5.6			2.3			5.1			2.3
Provision for income taxes		1.2			0.9			1.0			0.6			1.2			0.5			1.1			0.6
Net income		2.4	%		1.2	%		1.9	%		0.8	%		4.4	%		1.7	%		4.0	%		1.7	%

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Gross Profit:
New and used commercial vehicle sales		29.2	%		24.7	%		27.5	%		24.8	%		28.6	%		19.5	%		28.7	%		23.1	%
Aftermarket products and services sales		62.9			67.0			64.6			66.9			62.2			73.0			62.5			69.6
Lease and rental		4.3			3.7			4.1			3.4
Lease and rental sales														4.8			3.0			4.5			3.4
Finance and insurance		2.2			2.7			2.1			2.6			2.8			2.6			2.7			2.2
Other		1.4			1.9			1.7			2.3			1.6			1.9			1.6			1.7
Total gross profit		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

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

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
	2017			2016			% Change			2017			2016			% Change			2021			2020			% Change			2021			2020			% Change
Vehicle unit sales:
New heavy-duty vehicles		3,647			3,024			20.6	%		9,705			8,295			17.0	%		2,954			1,866			58.3	%		5,949			4,944			20.3	%
New medium-duty vehicles		2,828			2,469			14.5	%		8,454			8,554			-1.2	%		2,825			2,333			21.1	%		5,159			5,597			-7.8	%
New light-duty vehicles		447			523			-14.5	%		1,267			1,296			-2.2	%		472			254			85.8	%		867			521			66.4	%
Total new vehicle unit sales		6,922			6,016			15.1	%		19,426			18,145			7.1	%		6,251			4,453			40.4	%		11,975			11,062			8.3	%
Used vehicles		1,743			1,795			-2.9	%		5,197			5,280			-1.6	%		2,094			1,768			18.4	%		4,018			3,326			20.8	%

Vehicle revenues:
Vehicle revenue:
New heavy-duty vehicles	$	515.1		$	411.2			25.3	%	$	1,344.9		$	1,108.4			21.3	%	$	434.9		$	287.7			51.2	%	$	884.9		$	758.5			16.7	%
New medium-duty vehicles		210.7			187.2			12.6	%		613.2			611.5			0.3	%		226.2			191.8			18.0	%		414.4			435.7			-4.9	%
New light-duty vehicles		16.3			20.4			-20.1	%		48.1			49.1			-2.0	%		21.4			11.2			90.6	%		39.8			22.7			75.2	%
Total new vehicle revenue	$	742.1		$	618.8			19.9	%	$	2,006.2		$	1,769.0			13.4	%	$	682.5		$	490.7			39.1	%	$	1,339.1		$	1,216.9			10.0	%
Used vehicle revenue	$	73.7		$	74.6			-1.2	%	$	214.7		$	220.7			-2.7	%	$	112.6		$	66.9			68.4	%	$	200.9		$	126.6			58.7	%

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

Absorption ratio:		120.9	%		112.6	%		7.4	%		118.8	%		109.7	%		8.3	%
Other vehicle revenue:⁽¹⁾																			$	2.2		$	1.5			45.6	%	$	5.0		$	5.1			-2.8	%
Dealership absorption ratio:																				129.1	%		110.2	%		17.2	%		125.9	%		112.3	%		12.1	%

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

Key Performance Indicator

Absorption Ratio

~~Absor~~~~ption Ratio~~

Management uses several performance metrics to evaluate the performance of our commercial vehicle dealerships and considers Rush Truck Centers’ “absorption ratio” to be of critical importance. Absorption ratio is calculated by dividing the gross profit from ~~the parts, service and body shop (collectively, “Aftermarket~~our Aftermarket Products and ~~Services”)~~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%~~129.1% absorption ratio for the ~~third~~second quarter of ~~2017 compared to~~2021 and a ~~112.6%~~110.2% absorption ratio for the ~~third~~second quarter of ~~2016.~~2020.

Three Months Ended ~~September~~June 30, ~~201~~72021 Compared to Three Months Ended ~~September~~June 30, ~~201~~6

The growth in Aftermarket Products and Services revenues in the third quarter was primarily the result of strong general economic conditions and 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 focused on our long-term plans and strategic initiatives, which include expanding our all-makes 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 2018.2020

Revenues

Total r~~evenues~~revenues increased ~~$161.4~~$313.5 million, or ~~14.7%~~31.3%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016.~~2020.

Our Aftermarket Products and Services revenues increased ~~$39.4~~$68.0 million, or ~~11.7%~~18.0%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016,~~2020. This increase was primarily ~~as a result~~due to the overall continued recovery of the ~~factors described above. We expect our Aftermarket Products and Services revenues to remain strong in the fourth quarter of 2017.~~national economy.

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Revenues from sales of new and used commercial vehicles increased ~~$120.2~~$238.2 million, or ~~17.2%~~42.6%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016,~~2020. This increase was also primarily ~~as a result~~due to continued recovery of the ~~factors described above.~~national economy, which has led to strong freight rates throughout the country and strong demand for commercial vehicles.

We sold ~~3,647 heavy-duty~~2,954 new Class 8 trucks in the ~~third~~second quarter of ~~2017,~~2021, a ~~20.6%~~58.3% increase compared to ~~3,024 heavy-duty~~1,866 new Class 8 trucks ~~sold~~ in the ~~third~~second quarter of ~~2016.~~2020. Our new Class 8 truck sales were up significantly in the second quarter of 2021 due to strong demand from a wide variety of market segments, including vocational, construction and over-the-road customers. According to A.C.T. Research, ~~Co., LLC (“A.C.T. Research”), a commercial vehicle industry data and forecasting service provider,~~retail sales in the U.S. Class 8 truck market increased ~~11.2%~~63.3% in the ~~third~~second quarter of ~~2017~~2021, compared to the ~~third~~second quarter of ~~2016. A.C.T. Research currently forecasts U.S. retail sales~~2020.

Table of Class 8 trucks of approximately 190,000 units in 2017, 218,000 units in 2018, and 226,000 units in 2019, compared to approximately 197,000 units in 2016. Our share of the U.S. Class 8 truck sales market was approximately 5.5% in 2016. We expect our U.S. Class 8 truck sales market share to range between 6.5% and 7.0% in 2017. This market share percentage would result in the sale of approximately 12,400 to 13,300 Class 8 trucks in 2017 based on A.C.T. Research’s current U.S. retail sales estimate of 190,000 units.

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We sold ~~2,828~~2,825 new Class 4 through 7 commercial vehicles, including 230 buses, in the second quarter of 2021, a 21.1% increase compared to 2,333 new medium-duty commercial vehicles, including ~~466~~204 buses, in the ~~third~~second quarter of ~~2017, a 14.5% increase compared~~2020. Our second quarter 2021 Class 4 through 7 commercial vehicle sales were up primarily due to ~~2,469 medium-duty~~the overall continued economic recovery as well as increased commercial ~~vehicles, including 416 buses, in the third quarter of 2016.~~vehicle sales to our lease and rental and food service customers. A.C.T. Research estimates that unit sales of new Class 4 through 7 commercial vehicles in the U.S. increased approximately ~~9.0%~~26.1% in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of 2016. A.C.T. Research currently forecasts U.S. retail sales of Class 4 through 7 commercial vehicles of approximately 238,500 units in 2017, 242,000 units in 2018, and 249,000 in 2019. In 2016, we achieved a 4.9% share of the U.S. Class 4 through 7 commercial vehicle market. We expect our market share to range between 4.5% and 5.0% of the U.S. Class 4 through 7 commercial vehicle sales in 2017. This market share percentage would result in the sale of approximately 10,700 to 11,900 of Class 4 through 7 commercial vehicles in 2017 based on A.C.T. Research’s current U.S. retail sales estimates of 238,500 units.2020.

We sold ~~447~~472 light-duty vehicles in the ~~third~~second quarter of ~~2017, a 14.5% decrease~~2021, an 85.8% increase compared to ~~523~~254 light-duty vehicles sold in the ~~third~~second quarter of ~~2016. We expect to sell approximately 1,700 light-duty vehicles in 2017.~~2020.

We sold ~~1,743~~2,094 used commercial vehicles in the ~~third~~second quarter of ~~2017, a 2.9% decrease~~2021, an 18.4% increase compared to ~~1,795~~1,768 used commercial vehicles sold in the ~~third~~second quarter of ~~2016.~~2020. The increase in used truck sales in the second quarter of 2021 was primarily due to increased demand for used trucks because supply constraints are limiting new commercial vehicle production. We ~~expect to sell approximately 6,200 to 7,000~~believe used ~~commercial vehicles in 2017.~~truck values will decrease when new truck production increases; however, we believe demand for used trucks will remain strong through 2021.

Commercial vehicle lease and rental revenues increased ~~$2.2~~$4.1 million, or ~~4.2%~~7.2%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016. We expect lease and~~2020. The increase is primarily due to increased rental ~~revenues to increase between 3.0% and 6.0% during 2017, compared to 2016.~~fleet utilization.

Finance and insurance revenues ~~decreased 2.0%~~increased $2.4 million, or 49.3%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016. Traditionally,~~2020. 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.~~2021. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share toof our operating profits.

Gross Profit

Gross profit increased ~~$38.7~~$78.5 million, or ~~21.4%~~40.8%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016.~~2020. Gross profit as a percentage of sales increased to ~~17.5%~~20.6% in the ~~third~~second quarter of ~~2017,~~2021, from ~~16.5%~~19.2% in the ~~third~~second quarter of ~~2016.~~2020. This increase in gross profit as a percentage of sales is a result of widespread increased gross margins ~~in our~~from new and used commercial vehicle sales, Aftermarket Products and Services ~~business, commercial vehicle~~ sales and ~~truck~~ lease and rental sales.

Gross margins from our Aftermarket Products and Services operations increased to ~~36.8%~~37.8% in the ~~third~~second quarter of ~~2017,~~2021, from ~~36.1%~~37.2% in the ~~third~~second quarter of ~~2016.~~2020. Gross profit ~~for the~~from our Aftermarket Products and Services ~~departments~~operations increased to ~~$138.4~~$168.4 million in the ~~third~~second quarter of ~~2017,~~2021, from ~~$121.5~~$140.4 million in the ~~third~~second quarter of ~~2016.~~2020. 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%~~61% to ~~68%~~65%. Gross profits from parts sales represented ~~57%~~61% of total gross profit ~~for~~from Aftermarket Products and Services operations in the ~~third~~second quarter of ~~2017~~2021 and ~~56%~~60% in the ~~third~~second quarter of ~~2016.~~2020. Service and ~~body shop~~collision center operations represented ~~43%~~39% of total gross profit ~~for~~from Aftermarket Products and Services operations in the ~~third~~second quarter of ~~2017~~2021 and ~~44%~~40% in the ~~third~~second quarter of ~~2016.~~2020. We expect blended gross margins on Aftermarket Products and Services operations to range from ~~36.3%~~37.0% to ~~36.5% during 2017.~~38.0% in 2021.

Gross margins on new Class 8 truck sales increased to ~~7.8%~~9.1% in the ~~third~~second quarter of ~~2017,~~2021, from ~~6.9%~~7.3% in the ~~third~~second quarter of ~~2016.~~2020. This increase is ~~attributable~~primarily due to strong demand for Class 8 trucks and the ~~sales~~ mix inof purchasers during the ~~third~~second quarter of ~~2017, which consisted of increased sales to vocational customers that are traditionally associated with higher margins.~~2021. In ~~2017,~~2021, we expect overall gross margins from ~~Class 8~~new heavy-duty truck sales of approximately ~~7.5%~~8.0% to ~~8.0%~~9.0%.

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Gross margins on ~~medium-duty~~new Class 4 through 7 commercial vehicle sales ~~decreased~~increased to ~~5.4%~~7.4% in the ~~third~~second quarter of ~~2017,~~2021, from ~~6.7%~~6.1% in the ~~third~~second quarter of ~~2016.~~2020. This ~~decrease~~increase is ~~attributable~~primarily due to the mix of ~~products sold~~purchasers during the ~~third~~second quarter of ~~2017.~~2021. For ~~2017,~~2021, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately ~~5.5%~~6.5% to ~~6.0%~~7.5%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Gross margins on used commercial vehicle sales increased to ~~11.9%~~17.4% in the ~~third~~second quarter of ~~2017,~~2021, from ~~4.8%~~5.4% in the ~~third~~second quarter of ~~2016.~~2020. This increase isin margins in the second quarter of 2021 was primarily ~~related~~due to the ~~stabilization~~increase in used truck values due to strong demand for used commercial vehicles. The lower margins that we recognized in 2020 were due to weak demand for used trucks in early 2020 caused by the beginning of the COVID-19 pandemic and the write-down of used truck inventory values ~~in recent months.~~to account for extremely weak market conditions at that time. We expect margins on used commercial vehicles to ~~range between 9.5% and 10.5% during 2017.~~be approximately 12% to 16% for the remainder of 2021.

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Gross margins from truck lease and rental sales increased to ~~17.3%~~21.2% in the ~~third~~second quarter of ~~2017,~~2021, from ~~12.6%~~10.1% in the ~~third~~second quarter of ~~2016.~~2020. This increase is primarily related to increased rental fleet ~~utilization and improvement in the performance of our full service leases. We expect gross margins from lease and rental sales of approximately 15.5% to 16.5% during 2017.~~utilization. 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,~~revenues, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses increased ~~$17.0~~$28.5 million, or ~~11.9%~~18.3%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016. In~~2020. This increase resulted from increased personnel expense and increased selling expense, compared to 2020. SG&A expenses as a percentage of total revenues decreased to 14.0% in the ~~third~~second quarter of ~~2017, SG&A expenses equaled 12.7%~~2021, from 15.6% in the second quarter of ~~total revenue.~~2020. Annual SG&A expenses as a percentage of total revenues have ~~recently~~ ranged from ~~12.1%~~12.4% to ~~14.7%. In general, when new and used commercial vehicle revenues decrease as a percentage of total revenues, SG&A expenses as a percentage of total revenues will be at, or exceed,~~14.0% over the ~~higher end of this range.~~last five years. For ~~2017,~~2021, we expect SG&A expenses as a percentage of total revenues to range from ~~13.4%~~13.0% to ~~14.2%~~14.0%, due to the increase in revenues from sales of new and used commercial vehicles and Aftermarket Products and Services. For 2021, we expect 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

Depreciation and amortization expense decreased ~~$0.6~~$1.1 million, or ~~4.4%~~7.5%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016.~~2020.

Interest (Income) Expense, Net

Net interest (income) expense decreased ~~$0.2~~$2.4 million, or ~~5.6%~~109.6%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016. Net~~2020. This decrease was primarily due to the decrease in floorplan liability related to lower commercial vehicle inventory levels, the product mix of our commercial vehicle inventory and the reduction in our real estate debt. During the second quarter of 2021, a higher portion of our vehicle inventory was from commercial vehicle manufacturers that were offering more favorable floorplan terms than in the second quarter of 2020. The Company also paid off its remaining real estate debt of approximately $40.0 million in April of 2021. We expect net interest expense in ~~2017~~2021 to decrease compared to 2020, but the amount of the decrease will depend on commercial vehicle inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan ~~arrangements.~~arrangements, which limits our interest expense.

Income before Income Taxes

As a result of the factors described above, income before income taxes increased ~~$21.0~~$52.2 million, or ~~86.5%~~232.0%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second quarter of ~~2016.~~2020.

Income Taxes

Income taxes increased ~~$6.1~~$11.0 million, or ~~65.0%~~193.3%, in the ~~third~~second quarter of ~~2017,~~2021, compared to the ~~third~~second 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.2020. We provided for taxes at a ~~38.75%~~22.3% effective rate in the ~~third~~second quarter of ~~2017~~2021 and 25.3% in the ~~third~~second quarter of ~~2016.~~2020. We expect our effective tax rate to be approximately ~~38.5%~~23.0% to ~~39.0%~~25.0% of pretax income in ~~2017.~~2021.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021, Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2020

Unless otherwise stated below, our variance explanations and future expectations with ~~regard~~regards to the items discussed in this section are set forth in the discussion of the ~~Three~~“Three Months Ended ~~September~~June 30, ~~2017,~~2021, Compared to Three Months Ended ~~September~~June 30, ~~2016.~~2020.”

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~~Revenues~~

Total r~~evenues~~revenues increased ~~$312.4~~$258.6 million, or ~~9.8%~~11.3%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020. Sales of new and used commercial vehicles increased $196.4 million, or 14.6%, in the first six months of 2021, compared to the first six months of 2020.

Aftermarket Products and Services revenues increased ~~$85.5~~$55.7 million, or ~~8.5%~~6.9%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~

~~Revenues from sales of new and used commercial vehicles~~ ~~increased $226.7 million, or 11.3%, in the first nine months of 2017, compared to the first nine months of 2016.~~2020.

We sold ~~9,705 heavy-duty trucks during the first nine months of 2017, a 17.0% increase compared to 8,295~~5,949 new Class 8 heavy-duty trucks in the first ~~nine~~six months of ~~2016.~~2021, a 20.3% increase compared to 4,944 new Class 8 heavy-duty trucks in the first six months of 2020. According to A.C.T. Research, retail sales in the U.S. Class 8 truck ~~sales decreased 9.5%~~market increased 34.9% in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

We sold ~~8,454~~5,159 new Class 4 through 7 medium-duty commercial vehicles, including ~~827~~370 buses, ~~during~~in the first ~~nine~~six months of ~~2017,~~2021. This represented a ~~1.2%~~7.8% decrease compared to ~~8,554~~5,597 new Class 4 through 7 medium-duty commercial vehicles, including ~~849~~420 buses, in the first ~~nine~~six months of ~~2016.~~2020. The decrease in sales for the first six months of 2021, compared to the first six months of 2020, is largely the result of robust sales of new Class 4 through 7 medium-duty commercial vehicle sales throughout our dealership network in the first quarter of 2020. A.C.T. Research estimates that unit sales of new Class 4 through 7 commercial vehicles ~~including buses,~~ in the ~~U.S~~U.S. increased approximately ~~5.2%~~19.6% in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

We sold ~~1,267~~867 new light-duty ~~commercial vehicles during the first nine months of 2017, a 2.2% decrease compared to 1,296 light-duty commercial~~ vehicles in the first ~~nine~~six months of ~~2016.~~2021, a 66.4% increase compared to 521 new light-duty vehicles sold in the first six months of 2020.

We sold ~~5,197 used commercial vehicles during the first nine months of 2017, a 1.6% decrease compared to 5,280~~4,018 used commercial vehicles in the first ~~nine~~six months of ~~2016.~~2021, a 20.8% increase compared to 3,326 used commercial vehicles in the first six months of 2020.

Truck lease and rental revenues increased ~~$3.4~~$1.6 million, or ~~2.2%~~1.3%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

Finance and insurance revenues ~~decreased $1.1~~increased $4.4 million, or ~~7.8%~~47.2%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020. The increase in finance and insurance revenues was due to sales of finance and insurance products to a higher percentage of new and used commercial vehicle purchasers in the first six months of 2021.

Gross Profit

Gross profit increased ~~$72.0~~$88.8 million, or ~~13.2%~~20.8%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020. Gross profit as a percentage of sales ~~increased to 17.6%~~was 20.2% in the first ~~nine~~six months of ~~2017, from 17.1%~~2021 and 18.6% in the first ~~nine~~six months of ~~2016.~~2020.

Gross margins from ~~our~~ Aftermarket Products and Services operations increased to ~~36.5%~~37.4% in the first ~~nine~~six months of ~~2017,~~2021, from ~~36.2%~~36.9% in the first ~~nine~~six months of ~~2016.~~2020. Gross profit for ~~the~~ Aftermarket Products and Services ~~departments~~ was ~~$398.6~~$322.3 million in the first ~~nine~~six months of ~~2017,~~2021, compared to ~~$364.4~~$296.9 million in the first ~~nine~~six months of ~~2016.~~2020. Gross ~~profits~~profit from parts sales represented ~~57%~~60% of the total gross profit for Aftermarket Products and Services operations in the first ~~nine~~six months of ~~2017~~2021 and ~~56% in the first nine months of 2016.~~2020. Service and ~~body shop~~collision center operations represented ~~43%~~40% of the total gross profit for Aftermarket Products and Services operations in the first ~~nine~~six months of ~~2017~~2021 and ~~44% in the first nine months of 2016.~~2020.

Gross margins on new Class 8 heavy-duty truck sales increased to ~~8.0%~~9.0% in the first ~~nine~~six months of ~~2017,~~2021, from ~~7.0%~~8.3% in the first ~~nine~~six months of ~~2016.~~2020.

Gross margins on new Class 4 through 7 medium-duty commercial vehicle sales ~~decreased~~increased to ~~5.9%~~7.3% in the first ~~nine~~six months of ~~2017,~~2021, from 6.1% in the first ~~nine~~six months of ~~2016.~~2020.

Gross margins on used commercial vehicle sales increased to ~~10.7%~~17.7% in the first ~~nine~~six months of ~~2017,~~2021, from ~~8.0%~~5.5% in the first ~~nine~~six months of ~~2016.~~2020.

Gross margins from truck lease and rental sales increased to ~~15.9%~~19.4% in the first ~~nine~~six months of ~~2017,~~2021, from ~~12.1%~~12.2% in the first ~~nine~~six months of ~~2016.~~2020.

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

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Selling, General and Administrative Expenses

SG&A expenses increased ~~$18.2~~$18.4 million, or ~~4.0%~~5.4%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020. SG&A expenses ~~as a percentage~~equaled 14.1% of ~~sales were 13.4%~~total revenue in the first ~~nine~~six months of ~~2017, and 14.1%~~2021, compared to 14.9% in the first ~~nine~~six months of ~~2016.~~2020.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased ~~$1.1~~$1.7 million, or ~~2.9%~~5.9%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

Interest (Income) Expense, Net

Net interest expense decreased ~~$2.6~~$6.7 million, or ~~22.8%~~95.8%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

Income before Income Taxes

Income before income taxes increased ~~$55.9~~$77.2 million, or ~~121.4%~~142.5%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020.

Provision for Income Taxes

Income taxes increased ~~$17.8~~$13.8 million, or ~~98.8%~~96.4%, in the first ~~nine~~six months of ~~2017,~~2021, compared to the first ~~nine~~six months of ~~2016.~~2020. We provided for taxes at a ~~38.75%~~21.3% rate in the first ~~nine~~six months of ~~2017, compared to~~2021 and a 26.3% rate ~~of 39.0%~~ in the first ~~nine~~six months of ~~2016.~~2020.

Liquidity and Capital Resources

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~~June 30, ~~201~~7,2021, we had working capital of approximately ~~$180.3~~$377.5 million, including ~~$127.9~~$315.9 million in cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months. From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under our floor plan credit agreement with BMO Harris ~~Bank N.A. (“BMO Harris”)~~ (the “Floor Plan Credit Agreement”), and the resulting interest earned is recognized as an offset to our gross interest expense under the Floor Plan Credit Agreement.

We have a secured line of credit that provides for a maximum borrowing of $17.5 million. There were no advances outstanding under this secured line of credit ~~at September~~on June 30, ~~2017,~~2021, however, ~~$11.9~~$12.0 million was pledged to secure various letters of credit related to self-insurance products, leaving $5.6 million available for future borrowings as of ~~September~~June 30, ~~2017.~~2021.

~~On March 21, 2017, we entered into a~~ ~~working capital facility with BMO Harris (the “Working Capital Facility”).~~ The Working Capital Facility with BMO Harris includes up to ~~$100~~$100.0 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~~June 30, 2022 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~~June 30, ~~2017.~~2021.

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~~generally accepted accounting principles net worth. As of ~~September~~June 30, ~~2017,~~2021, 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.

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We expect to purchase or lease ~~trucks~~commercial vehicles worth approximately $150.0 million to $1~~75.0~~$180.0 million for our leasing operations during ~~2017,~~2021, depending on customer demand, ~~all~~most 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.~~2021.

During the second quarter of 2021, we paid a cash dividend of $10.0 million. Additionally, on July 20, 2021, our Board of Directors declared a cash dividend of $0.19 per share of Class A and Class B Common Stock, to be paid on September 10, 2021, to all shareholders of record as of August 10, 2021. The total dividend disbursement is estimated at approximately $10.6 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 ~~November 30, 2016,~~December 8, 2020, we announced that our Board of Directors ~~authorized the~~approved a new stock repurchase program authorizing management to repurchase, from time to time, of up to an aggregate of ~~$40.0~~$100.0 million of our shares of Class A Common Stock ~~and~~and/or Class B Common Stock. In connection with the adoption of the new stock repurchase plan, we terminated the prior stock repurchase plan, which was scheduled to expire on December 31, 2020. Repurchases, if any, will be made at times and in amounts as we deem appropriate and may be made through open market transactions at prevailing market prices, privately negotiated transactions or by other means in accordance with federal securities laws. The actual timing, number and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including market conditions, stock price and other factors, including those related to the ownership requirements of our dealership agreements with Peterbilt. As of June 30, 2021, we had repurchased $12.5 million of our shares of common stock under the current stock repurchase program. The current stock repurchase program expires on ~~November 30, 2017,~~December 31, 2021, 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~~June 30, ~~2017.~~2021. 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 Flows

Cash and cash equivalents increased by ~~$45.9~~$3.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 and ~~decreased~~increased by ~~$26.9~~$33.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The major components of these changes are discussed below.

Cash Flows from Operating Activities

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~~six months of ~~2017,~~2021, operating activities resulted in net cash provided by operations of ~~$170.3~~$237.7 million. Net cash provided by operating activities primarily consisted of ~~$66.3~~$103.4 million in net income, as well as non-cash adjustments related to depreciation and amortization of ~~$117.1~~$84.9 million, stock-based compensation of ~~$12.0~~$15.2 million and ~~$8.6 million of~~the benefit for deferred income ~~tax.~~tax expense of $14.6 million. Cash provided by operating activities included an aggregate of ~~$33.3~~$50.0 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of ~~$23.5~~$76.8 million from ~~increases~~the decrease in inventories, $12.0 million from the decrease in accounts receivable and $12.4 million from the increase in accounts payable, ~~and accrued liabilities, $4.6 million from an increase in customer deposits and $26.4 million from the net increase in floor plan, trade,~~ which ~~were~~was offset by cash outflows of ~~$87.8~~$1.3 million from ~~increases~~the increase in ~~inventory.~~other assets, $26.2 million from the decrease in accrued liabilities and $23.7 million from the decrease in customer deposits. The majority of our commercial vehicle inventory is financed through our floor plan credit agreements.

During the first ~~nine~~six months of ~~2016,~~2020, operating activities resulted in net cash provided by operations of ~~$386.8~~$418.2 million. Net cash provided by operating activities primarily consisted of ~~$28.1~~$39.9 million in net income, as well as non-cash adjustments related to depreciation and amortization of ~~$118.1~~$89.9 million, ~~impairment~~stock-based compensation of ~~assets of $8.2~~$12.1 million and ~~stock-based compensation, including~~the benefit for deferred income tax ~~benefit,~~expense of ~~$10.2~~$10.4 million. Cash provided by operating activities included an aggregate of ~~$220.3~~$290.1 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~~$358.9 million from the decrease in inventories, $21.0 million from the decrease in accounts receivable ~~$199.2 million from reductions in inventory levels, $24.2~~and $5.2 million from the decrease in other assets, ~~net,~~ which ~~were~~was offset by cash outflows of ~~$4.5~~$36.1 million from ~~decreases~~the decrease in accounts payable, ~~and~~$32.6 million from the net decrease in floor plan, trade, $1.2 million from the decrease in accrued liabilities and ~~$6.6~~$25.1 million from athe decrease in customer deposits. ~~The majority of commercial vehicle inventory is financed through our floor plan credit agreements.~~

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%. As of September 30, 2017, the interest rate on the wholesale financing agreement was 5.25% before considering the applicable incentives. As of September 30, 2017, we had an outstanding balance of approximately $88.8 million under the Ford Motor Credit Company wholesale financing agreement.

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Cash Flows from Investing Activities

During the first ~~nine~~six months of ~~2017,~~2021, cash used in investing activities was ~~$129.7~~$82.9 million. Cash flows used in investing activities ~~consists~~consist primarily of cash used for capital expenditures. Capital expenditures ~~totaled $138.8~~were $84.4 million during the first ~~nine~~six months of ~~2017~~2021 and consisted primarily of purchases of property and equipment and improvements to our existing dealership facilities. Property and equipment purchases during the first ~~nine~~six months of ~~2017~~2021 included ~~$103.6~~$64.7 million for additional units for the rental and leasing operations, the majority of which were directly offset by borrowings of long-term debt. We expect to purchase or lease trucks worth approximately $150.0 million to $175.0 million for our rental and leasing operations in 2017, depending on customer demand, all of which will be financed. During 2017, we expect to make capital expenditures for recurring items such as computers, shop equipment and vehicles of $20.0 million to $25.0 million.

During the first ~~nine~~six months of ~~2016,~~2020, cash used in investing activities was ~~$154.9~~$74.4 million. Cash flows used in investing activities consist primarily of cash used for capital expenditures. Capital expenditures ~~of $159.5~~were $82.2 million during the first ~~nine~~six months of ~~2016~~2020 and consisted primarily of purchases of property and equipment and improvements to our existing dealership facilities. Property and equipment purchases during the first ~~nine~~six months of ~~2016~~2020 included ~~$106.3~~$57.8 million for additional units for the rental and leasing operations, the majority of which were directly offset by borrowings of long-term ~~debt~~debt.

Cash Flows from Financing Activities

Cash flows from financing activities include borrowings and repayments of long-term debt and net proceeds of floor plan notes payable, – non-trade. During the first ~~nine~~six months of ~~2017, we generated $5.3 million~~2021, financingactivities resulted in net cash ~~from~~used in financing ~~activities,~~of $151.0 million, primarily related to ~~$33.6 million from net draws on floor plan notes payable, non-trade, borrowings~~cash inflows of ~~$97.3 million of long-term debt and $20.1~~$3.9 million from the issuance of shares related to equity compensation ~~plans.~~plans and borrowings of $52.3 million of long-term debt. These cash inflows were ~~partially~~ offset by ~~$117.8~~$40.9 million from net payments on floor plan notes payable, non-trade, $135.6 million used for principal repayments of long-term debt and capital lease obligations, $10.8 million used for repurchases of common stock and ~~$27.4~~$19.9 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~~six months of ~~2016, we used $205.0 million~~2020, financingactivities resulted in net cash ~~from~~used in financing ~~activities,~~of $309.9 million, primarily related to ~~$142.2~~cash inflows of $5.4 million from the issuance of shares related to equity compensation plans and borrowings of $119.3 million of long-term debt. These cash inflows were offset by $238.8 million from net payments on floor plan notes payable, non-trade, ~~$136.8~~$166.5 million used for principal repayments of long-term debt and capital lease obligations, $19.9 million used for repurchases of common stock and ~~$33.3~~$9.5 million ~~to purchase 934,171 shares~~used for payment of ~~Rush Class A Common Stock and 657,567 shares of Rush Class B common stock. These~~ cash ~~outflows were partially offset by borrowings of $103.2 million of long-term debt, and $4.8 million from the issuance of shares related to equity compensation plans.~~dividends. 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~~June 30, ~~2017,~~2021, we had approximately ~~$578.8~~$388.6 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were ~~$532.8~~$403.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017. Periodically, we~~2021. 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.

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Backlog

On ~~September~~June 30, ~~201~~7,2021, our backlog of commercial vehicle orders was approximately ~~$1,005.8~~$2,258.9 million, as compared to a backlog of commercial vehicle orders of approximately ~~$836.4~~$1,057.1 million on ~~September~~June 30, ~~2016.~~2020. 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~~June 30, ~~2017~~2021, and we expect to fill ~~the majority of~~ our backlog orders during the ~~next twelve months.~~remainder of 2021 and 2022.

Seasonality

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

Cyclicality

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~~110,000 in ~~2009,~~2010, to a high of approximately ~~291,000~~281,440 in ~~2006.~~2019. 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.

~~Off-Balance Sheet Arrangements~~

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

Environmental Standards and Other Governmental Regulations

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.

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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~~For example, in June 2020, the California Air Resources Board adopted a final rule that is intended to phase out the sale of diesel-powered commercial vehicles over time by requiring a certain percentage of each manufacturer’s commercial vehicles sold within the state to be “zero-emission vehicles,” or “near-zero emission vehicles,” starting in model year 2024. In addition, in July 2020, a group of fifteen U.S. states and the District of Columbia entered into a joint memorandum of understanding that commits each of them to work together to advance and accelerate the market for electric Class 3 through 8 commercial vehicles. Three of the states that signed are states where we operate new commercial vehicle dealerships: California, Colorado and North Carolina. The signatories to the memorandum all agreed on a goal of ensuring that 100% of new Class 3 through 8 commercial vehicles are zero emission, with an interim target of 30% zero emission by 2030. Attaining these goals would likely require the adoption of new laws and regulations ~~could result in increased compliance costs, additional operating restrictions or changes in demand for our products~~ and ~~services, which could~~we cannot predict at this time whether such laws and regulations would have ~~a material~~an adverse ~~effect~~impact on our ~~business, financial condition and results of operations.~~business.

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~~which could ~~be material.~~materially adversely affect our results of operations, financial condition or cash flows. In addition, such laws could affect demand for the products that we sell.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

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~~June 30, ~~2017,~~2021, we had floor plan borrowings ~~and variable interest rate real estate debt~~ of approximately ~~$806.1~~$470.9 million. Assuming an increase or decrease in LIBOR of 100 basis points, annual interest expense could correspondingly increase or decrease by approximately ~~$8.1~~$4.7 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.

~~Table of Contents~~

ITEM 4. Controls and Procedures.

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~~June 30, ~~2017~~2021 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.

Table of Contents

There has been no change in our internal control over financial reporting that occurred during the three months ended ~~September~~June 30, ~~2017~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

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.

ITEM 1A. Risk Factors.

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~~2020 Annual Report on Form 10-K (the ~~“2016~~“2020 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~~2020 Annual Report.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

WeThe Company did not make any unregistered sales of equity securities during the ~~third~~second quarter of ~~2017.~~2021.

A summary of the ~~Company~~’sCompany’s stock repurchase activity for the ~~third~~second quarter of ~~2017~~2021 is as follows:

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
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)

April 1 – April 30, 2021
32,804 $ 44.43 (4) 32,804 $ 90,227,831
May 1 – May 31, 2021
28,039 43.99 (5) 28,039 88,993,435
June 1 – June 30, 2021
38,132 40.10 (6) 38,132 87,463,235
Total
98,975 98,975
~~______________~~
(1)
The calculation of the average price paid per share does not give effect to any fees, commissions or other costs associated with the repurchase of such shares.
(2)
The ~~calculation of~~shares represent Class B Common Stock repurchased by the ~~average price paid per share does not give effect to any fees, commissions or other costs associated with the repurchase of such shares.~~Company.
~~(2)~~
~~The shares represent Class B Common Stock repurchased by the Company.~~
(3)
~~The Company repurchased shares under~~On December 8, 2020, we announced the approval of a new stock repurchase program ~~announced on November 30, 2016, which authorized the~~authorizing management to repurchase, offrom time to time, up to ~~$40.0~~an aggregate of $100.0 million of ~~its~~our shares of Class A Common Stock and/or Class B Common ~~Stock and will expire on November 30, 2017.~~Stock.
(4)
Represents ~~1,306~~32,804 shares of Class B Common Stock at an average price paid per share of ~~$35.91.~~$44.43.
(5)
Represents ~~12,300~~28,039 shares of Class B Common Stock at an average price paid per share of ~~$37.32.~~$43.99.
(6)
Represents ~~17,626~~38,132 shares of Class B Common Stock at an average price paid per share of ~~$38.18.~~$40.10.

26
29
Table of Contents

ITEM 3. Defaults Upon Senior Securities.

Not Applicable

ITEM 4. Mine Safety Disclosures.

Not Applicable

ITEM 5. Other Information.

Not Applicable

ITEM 6. ~~Exhibits.~~Exhibits

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~~
3.3
First Amendment to Amended and Restated Bylaws of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 24, 2021)
31.1*
Certification of CEO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of CFO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~.2002.
101.INS*101.INS
XBRL Instance ~~Document.~~Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document
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 Inline XBRL and contained in Exhibit 101)

*
~~filed~~Filed herewith
**
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of ~~1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of~~ 1934.

27
30
Table of Contents

~~SIGNATURES~~SIGNATURES

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.

RUSH ENTERPRISES, INC.

Date: August 6, 2021
~~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)~~
Chairman of the Board
(Principal Executive Officer)
Date: August 6, 2021
By:
/S/ STEVEN L. KELLER
~~Date:~~
~~November 9, 2017~~ ~~By:~~
~~/S/ STEVEN L. KELLER~~
Steven L. Keller
Chief Financial Officer and Treasurer
~~(Principal Financial and Accounting Officer)~~

28
~~Table of Contents~~
~~EXHIBIT INDEX~~
~~Exhibit~~
~~Number~~
~~Exhibit~~
~~Title~~
(Principal Financial and Accounting Officer)
~~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~~*
~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
~~101.DEF~~*
~~XBRL Taxonomy Extension Definition Linkbase Document.~~
~~101.LAB~~*
~~XBRL Taxonomy Extension Label Linkbase Document~~.
~~101.PRE~~*
~~XBRL Taxonomy Extension Presentation Linkbase Document~~.

*
~~filed herewith~~
**
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
31

	Nine Months Ended
	September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	66,262		$	28,092
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		117,054			118,149
Gain on sale of property and equipment		(76	)		(1,571	)
Loss on impairment of assets		−			8,247
Stock-based compensation expense related to stock options and employee stock purchases		12,036			9,426
Deferred income tax expense		8,609			3,355
Excess tax expense from stock-based compensation		−			808
Change in accounts receivable, net		(1,481	)		8,560
Change in inventories, net		(87,799	)		199,228
Change in prepaid expenses and other, net		1,156			24,163
Change in trade accounts payable		12,469			(10,298	)
Draws (payments) on floor plan notes payable – trade, net		26,439			(623	)
Change in customer deposits		4,558			(6,560	)
Change in accrued expenses		11,048			5,783
Net cash provided by operating activities		170,275			386,759
Cash flows from investing activities:
Acquisition of property and equipment		(138,756	)		(159,546	)
Proceeds from the sale of property and equipment		3,905			9,427
Business acquisitions		−			(681	)
Proceeds from the sale of available for sale securities		325			450
Change in other assets		4,831			(4,520	)
Net cash used in investing activities		(129,695	)		(154,870	)
Cash flows from financing activities:
Draws (payments) on floor plan notes payable – non-trade, net		33,611			(142,229	)
Proceeds from long-term debt		97,319			103,248
Principal payments on long-term debt		(108,526	)		(122,619	)
Principal payments on capital lease obligations		(9,280	)		(14,174	)
Proceeds from issuance of shares relating to employee stock options and employee stock purchases		20,096			4,826
Excess tax expense from stock-based compensation		−			(808	)
Common stock repurchased		(27,388	)		(33,282	)
Debt issuance costs		(523	)		−
Net cash provided by (used in) financing activities		5,309			(205,038	)
Net increase in cash and cash equivalents		45,889			26,851
Cash and cash equivalents, beginning of period		82,026			64,847
Cash and cash equivalents, end of period	$	127,915		$	91,698
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	24,952		$	29,172
Income taxes, net of refunds	$	30,487		$	(12,993	)
Noncash investing activities:
Assets acquired under capital leases	$	8,243		$	16,797

	Common Stock																	Accumulated
	Shares Outstanding						$0.01 Par		Additional Paid-In			Treasury			Retained			Other Comprehensive
	Class A			Class B			Value		Capital			Stock			Earnings			Income		Total

Balance, December 31, 2020		42,504			12,470		$	551	$	437,646		$	(2,879	)	$	831,850		$	869	$	1,268,037
Stock options exercised and stock awards		298			0			3		5,416			0			0			0		5,419
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			0		11,520			0			0			0		11,520
Vesting of restricted share awards		0			345			3		(6,780	)		0			0			0		(6,777	)
Issuance of common stock under employee stock purchase plan		86			0			1		1,988			0			0			0		1,989
Common stock repurchases		(3	)		(155	)		0		0			(6,483	)		0			0		(6,483	)
Dividend Class A common stock		–			–			–		–			–			(7,684	)		–		(7,684	)
Dividend Class B common stock		–			–			–		–			–			(2,380	)		–		(2,380	)
Other comprehensive income		–			–			0		0			0			0			255		255
Net income		–			–			0		0			0			45,333			0		45,333
Balance, March 31, 2021		42,885			12,660		$	558	$	449,790		$	(9,362	)	$	867,119		$	1,124	$	1,309,229
Stock options exercised and stock awards		219			0			2		3,926			0			0			0		3,928
Stock-based compensation related to stock options, restricted shares and employee stock purchase plan		–			–			0		3,683			0			0			0		3,683
Vesting of restricted share awards		–			–			0		(614	)		0			0			0		(614	)
Common stock repurchases		0			(99	)		0		0			(4,223	)		0			0		(4,223	)
Dividend Class A common stock		–			–			–		–			–			(7,735	)		–		(7,735	)
Dividend Class B common stock		–			–			–		–			–			(2,425	)		–		(2,425	)
Other comprehensive income		–			–			0		0			0			0			312		312
Net income		–			–			0		0			0			58,044			0		58,044
Balance, June 30, 2021		43,104			12,561		$	560	$	456,785		$	(13,585	)	$	915,003		$	1,436	$	1,360,199

	Six Months Ended
	June 30,
	2021			2020
Cash flows from operating activities:
Net income	$	103,377		$	39,923
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		84,891			89,897
Gain on sale of property and equipment, net		(256	)		(1,481	)
Stock-based compensation expense related to employee equity awards and employee stock purchases		15,203			12,139
Deferred income tax expense		(14,602	)		(10,437	)
Change in accounts and notes receivable, net		12,046			21,027
Change in inventories, net		76,772			358,945
Change in prepaid expenses and other, net		(1,255	)		5,246
Change in trade accounts payable		12,376			(36,147	)
Payments on floor plan notes payable – trade, net		–			(32,609	)
Change in customer deposits		(23,725	)		(25,086	)
Change in accrued expenses		(26,243	)		(1,207	)
Other, net		(881	)		(2,000	)
Net cash provided by operating activities		237,703			418,210
Cash flows from investing activities:
Acquisition of property and equipment		(84,352	)		(82,236	)
Proceeds from the sale of property and equipment		327			5,342
Other		1,146			2,515
Net cash used in investing activities		(82,879	)		(74,379	)
Cash flows from financing activities:
Payments on floor plan notes payable – non-trade, net		(40,909	)		(238,781	)
Proceeds from long-term debt		52,325			119,348
Principal payments on long-term debt		(129,221	)		(160,704	)
Principal payments on finance lease obligations		(6,361	)		(5,768	)
Proceeds from issuance of shares relating to employee stock options and employee stock purchases		3,945			5,412
Payments of cash dividends		(19,922	)		(9,500	)
Common stock repurchased		(10,818	)		(19,902	)
Net cash used in financing activities		(150,961	)		(309,895	)
Net increase in cash and cash equivalents		3,863			33,936
Cash and cash equivalents, beginning of period		312,048			181,620
Cash and cash equivalents, end of period	$	315,911		$	215,556
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	13,213		$	22,559
Income taxes, net of refunds	$	67,766		$	165
Noncash activities:
Assets acquired under finance leases	$	15,019		$	26,492

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2021		2020		2021		2020
Numerator:
Numerator for basic and diluted earnings per share – Net income available to common shareholders	$	29,784	$	14,880	$	66,262	$	28,092	$	58,044	$	16,816	$	103,377	$	39,923
Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		39,825		39,617		39,560		40,138		56,009		54,436		55,819		54,581
Effect of dilutive securities– Employee and director stock options and restricted share awards		1,321		657		1,270		560
Effect of dilutive securities – Employee stock options and restricted stock awards										1,947		915		2,027		1,089
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions		41,146		40,274		40,830		40,698		57,956		55,351		57,846		55,670
Basic earnings per common share	$	.75	$	.38	$	1.68	$	.70	$	1.04	$	0.31	$	1.85	$	0.73
Diluted earnings per common share and common share equivalents	$	.72	$	.37	$	1.62	$	.69	$	1.00	$	0.30	$	1.79	$	0.72

	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

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

Revenues from external customers	$	1,253,429	$	4,030		$	1,257,459
Segment income (loss) before taxes		45,590		(255	)		45,335
Segment assets		2,721,463		37,527			2,758,990

For the nine months ended September 30, 2017

Revenues from external customers	$	3,493,984	$	11,795		$	3,505,779
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

	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	)

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~~
3.3	First Amendment to Amended and Restated Bylaws of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 24, 2021)
31.1*	Certification of CEO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of CFO pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~.2002.
101.INS*101.INS	XBRL Instance ~~Document.~~Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document
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 Inline XBRL and contained in Exhibit 101)

			RUSH ENTERPRISES, INC.




Date: August 6, 2021	~~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)~~
		Chairman of the Board
		(Principal Executive Officer)

Date: August 6, 2021	By:	/S/ STEVEN L. KELLER
~~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~~
	(Principal Financial and Accounting Officer)
~~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~~*		~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
~~101.DEF~~*		~~XBRL Taxonomy Extension Definition Linkbase Document.~~
~~101.LAB~~*		~~XBRL Taxonomy Extension Label Linkbase Document~~.
~~101.PRE~~*		~~XBRL Taxonomy Extension Presentation Linkbase Document~~.