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(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSANT 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
(State or other jurisdiction of incorporation or organization)
74-1733016
(I.R.S. Employer Identification No.)
555 IH 35 South, New Braunfels, TX
(Address of principal executive offices)
78130
(Zip Code)
Registrant’s telephone number, including area code: (830) 302-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, $0.01 par value
Class B Common Stock, $0.01 par value
Trading Symbol(s)
RUSHA
RUSHB
Name of each exchange on which registered
NASDAQ Global Select Market
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐ No ☑
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ 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 ☐
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. ☐
Emerging growth company ☐
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Indicate by check mark if the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2022 was approximately $2,038,811,607 based upon
the last sales price on June 30, 2022 on The NASDAQ Global Select MarketSM of $48.20 for the registrant’s Class A common stock and $49.61 for the
registrant’s Class B common stock. Shares of common stock held by each executive officer and director and by each shareholder affiliated with a director
or an executive officer have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
The registrant had 42,307,824 shares Class A common stock and 12,066,301 shares of Class B common stock outstanding on February 14, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant’s definitive proxy statement for the registrant’s 2023 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 2022, are incorporated by reference into Part III of this Form 10-K.
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Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
RUSH ENTERPRISES, INC.
Index to Form 10-K
Year ended December 31, 2022
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part I
Part II
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Part III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Part IV
Item 15
Item 16
Exhibits, Financial Statement Schedules
Form 10-K Summary
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No.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K (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” 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-K, 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.
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® is a registered trademark of Ford Motor Company. Cummins® is a
registered trademark of Cummins, Inc. 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.
Item 1. Business
PART I
References herein to “the Company,” “Rush Enterprises,” “we,” “our” or “us” mean Rush Enterprises, Inc., a Texas corporation, and its
subsidiaries unless the context requires otherwise.
Access to Company Information
We electronically file annual reports, quarterly reports, proxy statements and other reports and information statements with the SEC. You may read
and copy any of the materials that we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. You may
obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available to you on the SEC’s website at
www.sec.gov.
We make certain of our SEC filings available, free of charge, through our website, including annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and all amendments to these reports. These filings are available as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the SEC. Our website address is www.rushenterprises.com. The information contained on our website,
or on other websites linked to our website, is not incorporated into this report or otherwise made part of this report.
4
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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 and 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 and Ontario, Canada. Since commencing
operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 125 franchised Rush Truck Centers in 23 states. In 2019, we
purchased a 50% equity interest in an entity in Canada, Rush Truck Centres of Canada Limited (“RTC Canada”) and on May 2, 2022, we purchased an
additional 30% equity interest in RTC Canada that increased our equity interest to 80%. RTC Canada currently owns and operates 15 International
dealership locations in Ontario. Prior to acquiring the additional 30%, we accounted for the equity interest in RTC Canada using the equity method of
accounting. Now, the operating results of RTC Canada are consolidated in the Consolidated Statements of Operations, the Statements of Comprehensive
Income, the Consolidated Balance Sheets and commercial vehicle unit sales data as of May 2, 2022.
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 through our joint venture with Cummins 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 opening new
dealerships in our existing areas of operation to enable us to better serve our customers.
Rush Truck Centers. Our Rush Truck Centers are located in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois,
Indiana, Kansas, Kentucky, Missouri, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia and Ontario,
Canada. The following chart reflects our franchises and parts, service and collision repair operations by location as of February 15, 2023:
Rush Truck Center Location
Commercial Vehicle Franchise(s)
Truck
Sales
Parts
and
Service
Collision
Center
Alabama
Birmingham
Mobile
Arizona
Flagstaff
Phoenix
Phoenix East
Tucson
Yuma
Arkansas
Jonesboro
Lowell
North Little Rock
Pine Bluff
Russellville
California
Ceres
Fontana Heavy-Duty
Fontana Medium-Duty
Fontana Vocational
None
Peterbilt
Peterbilt
Peterbilt, Hino
Peterbilt
Peterbilt, Hino
Peterbilt
International, IC Bus
International, Isuzu, IC Bus, Dennis Eagle
International, IC Bus, Dennis Eagle
International, IC Bus, Dennis Eagle
International, IC Bus, Dennis Eagle
Ford
Peterbilt
Peterbilt, Hino, Isuzu
None
5
Yes
Yes
No
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
No
No
No
Yes
Yes
No
No
No
Yes
No
No
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Rush Truck Center Location
Long Beach
Los Angeles
San Diego
Sylmar
Victorville
Whittier
Colorado
Colorado Springs
Denver
Greeley
Pueblo
Florida
Haines City
Jacksonville
Jacksonville East
Lake City
Miami
Orlando Heavy-Duty
Orlando Light & Medium-Duty
Orlando North
Orlando South
Tampa
Georgia
Atlanta
Atlanta Bus Center
Augusta
Columbus
Doraville
Gainesville
Macon
Smyrna
Tifton
Valdosta
Idaho
Boise
Idaho Falls
Lewiston
Twin Falls
Illinois
Bloomington
Carol Stream
Champaign
Chicago
Effingham
Elk Grove
Huntley
Joliet
Quincy
Springfield
Indiana
Gary
Indianapolis
Kansas
Olathe
Salina
Topeka
Wichita
Commercial Vehicle Franchise(s)
Peterbilt
Peterbilt
Peterbilt, Hino, Ford
Peterbilt
Peterbilt
Ford, Isuzu
Truck
Sales
No
Yes
Yes
Yes
Yes
Yes
Parts
and
Service
Yes
Yes
Yes
Yes
Yes
Yes
Collision
Center
No
Yes
No
No
No
No
Peterbilt
Peterbilt, Ford, Isuzu
Peterbilt
Peterbilt
Peterbilt
Peterbilt, Hino
Peterbilt
Peterbilt
None
Peterbilt, Isuzu
Ford
Isuzu
Isuzu
Peterbilt
International, Hino, Isuzu, IC Bus
IC Bus
International, IC Bus
International, Isuzu, IC Bus
International, Hino, Isuzu, IC Bus
International, IC Bus
International
International, Hino, Isuzu, IC Bus
International, IC Bus
International
International, Hino, IC Bus
International, IC Bus
International
International
International, Hino
International
International
International
International
Hino, Isuzu
International
International
International
International
International
International
Hino, Isuzu, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
6
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
Yes
No
No
No
No
No
No
No
No
Yes
Yes
No
No
No
No
Yes
Yes
Yes
No
No
No
No
Yes
No
Yes
No
No
No
No
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Rush Truck Center Location
Kentucky
Bowling Green
Missouri
Cape Girardeau
Jefferson City
Joplin
Kansas City
Kansas City Used Trucks
St. Joseph
St. Louis
St. Peters
Springfield
West Plains
Nevada
Las Vegas
New Mexico
Albuquerque
Farmington
Las Cruces
North Carolina
Asheville
Charlotte
Hickory
Ohio
Akron
Cincinnati
Cleveland
Columbus
Dayton
Lima
Oklahoma
Ardmore
Oklahoma City
Tulsa
Pennsylvania
Greencastle
Tennessee
Memphis
Memphis Used Trucks
Nashville
Texas
Abilene
Amarillo
Arlington
Austin
Austin North
Beaumont
Brownsville
College Station
Corpus Christi
Cotulla
Dalhart
Commercial Vehicle Franchise(s)
Peterbilt
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
None
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
International, Isuzu, Dennis Eagle
International, Dennis Eagle
Peterbilt
Peterbilt
Peterbilt
Peterbilt
International
International, Hino, Isuzu
International
International, IC Bus
International, IC Bus, Isuzu, Ford
International, IC Bus
International, IC Bus, Isuzu(1)
International, IC Bus, Isuzu
International, IC Bus
Peterbilt
Peterbilt, Hino, Ford, Isuzu
Peterbilt, Hino
None
International, Isuzu, Dennis Eagle
None
Peterbilt
Peterbilt
Peterbilt
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino, Isuzu, Blue Bird, Micro Bird,
Elkhart
Peterbilt
Peterbilt
Peterbilt, Elkhart
Peterbilt
Peterbilt, Hino, Isuzu, Blue Bird, Elkhart
Peterbilt
Peterbilt
Truck
Sales
Parts
and
Service
Collision
Center
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
No
Yes
Yes
No
Yes
No
Yes
No
No
No
No
No
No
No
No
No
No
No
(1) Our Isuzu franchise is operated out of our Rush Truck Leasing - Columbus location.
7
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Rush Truck Center Location
Dallas Heavy-Duty
Dallas Medium-Duty
Dallas Light & Medium-Duty
Dallas South
El Paso
Fort Worth
Houston
Houston Medium-Duty
Laredo
Lubbock
Lufkin
Odessa
Pharr
Wichita Falls
San Antonio
Sealy
Texarkana
Tyler
Victoria
Waco
Wichita Falls
Utah
Ogden
Salt Lake City
Springville
St. George
Virginia
Chester
Richmond
Ontario, Canada
Belleville
Cornwall
Kemptville
Kingston
Markham
Mississauga
Oshawa
Ottawa East
Ottawa West
Pembroke
Sault Saint Marie
St. Catharines
Sudbury
Timmins
Commercial Vehicle Franchise(s)
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino, Blue Bird, Micro Bird, Elkhart
Ford, Isuzu
Peterbilt
Peterbilt, Hino, Isuzu
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt
Peterbilt, Hino, Blue Bird, Micro Bird, Elkhart
Peterbilt
Peterbilt, Hino, Blue Bird, Micro Bird, Elkhart
Peterbilt, Isuzu, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino, Isuzu, Blue Bird, Micro Bird,
Elkhart
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt
Peterbilt, Hino, Isuzu, Blue Bird, Micro Bird,
Elkhart
Peterbilt
International, IC Bus
International, IC Bus
International
International
International, Hino
International
International, IC Bus
None
International, IC Bus
International, IC Bus
International, IC Bus
International, IC Bus
International, IC Bus
International, IC Bus
None
International, IC Bus
International, IC Bus
International, IC Bus
International, IC Bus
International, IC Bus
8
Truck
Sales
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Parts
and
Service
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Collision
Center
Yes
No
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
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Leasing and Rental Services. Through certain of our Rush Truck Centers and several stand-alone Rush Truck Leasing locations, we provide a
broad line of product selections for lease or rent, including Class 4 through Class 8 commercial vehicles, heavy-duty cranes and refuse vehicles. Our lease
and rental fleets are offered to customers on a daily, monthly or long-term basis. Substantially all of our long-term leases also contain a service provision,
whereby we agree to service the vehicle through the life of the lease. The following chart reflects our leasing brands by location:
Rush Truck Leasing
Location
Alabama
Birmingham
Arizona
Phoenix
Arkansas
North Little Rock
Lowell
California
Fontana
Pico Rivera
San Diego
Sylmar
Colorado
Denver
Florida
Orlando
Tampa
Jacksonville
Georgia
Augusta
Macon
Idaho
Boise
Idaho Falls
Illinois
Carol Stream
Chicago
Effingham
Huntley
Joliet
Springfield
Indiana
Indianapolis
Gary
Kansas
Kansas City
Salina
Wichita
Missouri
Joplin
St. Louis
St. Peters
Springfield
New Mexico
Albuquerque
Nevada
Las Vegas
North Carolina
Asheville
Charlotte
Brand
PacLease
PacLease
Idealease
Idealease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
PacLease
PacLease
Idealease
Idealease
9
Standalone or in a
Rush Truck Center
In RTC
Standalone
In RTC
Standalone
Standalone
Standalone
Standalone
In RTC
Standalone
Standalone
In RTC
Standalone
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
Standalone
In RTC
In RTC
In RTC
In RTC
Standalone
In RTC
Standalone
Standalone
Standalone
Standalone
Table of Contents
Rush Truck Leasing
Location
Ohio
Cincinnati
Cleveland
Columbus
Dayton
Oklahoma
Oklahoma City
Tennessee
Memphis
Nashville
Texas
Austin
El Paso
Arlington
Houston
Houston NW
Odessa
San Antonio
Tyler
Virginia
Richmond
Norfolk
Utah
Salt Lake City
Ontario, Canada
Markham
Mississauga
Oshawa
Ottawa
St. Catharines
Sudbury
Brand
Idealease
Idealease
Idealease
Idealease
PacLease
Idealease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Standalone or in a
Rush Truck Center
Standalone
Standalone
Standalone
In RTC
In RTC
Standalone
In RTC
Standalone
In RTC
In RTC
Standalone
Standalone
Standalone
In RTC
Standalone
Standalone
Standalone
Standalone
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In addition to the locations in the above table, Rush Truck Leasing also provides full-service maintenance on customers’ vehicles at several of our
customers’ facilities.
Financial and Insurance Products. At our Rush Truck Centers, we offer third‑party financing to assist customers in purchasing new and used
commercial vehicles. Additionally, we sell, as agent through our insurance agency, a complete line of property and casualty insurance, including collision
and liability insurance on commercial vehicles, cargo insurance and credit life insurance.
Other Businesses. Perfection Equipment offers installation of equipment, equipment repair, parts installation, and paint and body repair at our
location in Oklahoma City. Perfection Equipment specializes in up-fitting trucks used by oilfield service providers and other specialized service providers.
Custom Vehicle Solutions operates at locations in Denton, Texas and Greencastle, Pennsylvania. Custom Vehicle Solutions provides new vehicle
pre-delivery inspections, truck modifications, natural gas fuel system installations, body and chassis upfitting and component installation.
The House of Trucks operates at locations in Dallas, Texas and Chicago, Illinois. The House of Trucks sells used commercial vehicles, new and
used trailers and offers third-party financing and insurance products.
Our World Wide Tires store operates in Houston, Texas. World Wide Tires primarily sells tires for use on commercial vehicles.
Effective January 2022, we sold 50% of our equity interest in Momentum Fuel Technologies to a subsidiary of Cummins, Inc. and we are now
operating the business, Cummins Clean Fuel Technologies, as a joint venture with Cummins. The joint venture manufactures compressed natural gas fuel
systems and related component parts for commercial vehicles at its facility in Roanoke, Texas.
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Industry
See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Industry” for a description of our
industry and the markets in which we operate.
Our Business Strategy
Operating Strategy. Our strategy is to operate an integrated dealership network that provides service solutions to the commercial vehicle industry
throughout the United States and Ontario, Canada. Our strategy includes the following key elements:
● Management by Dealership Units. At each of our dealerships, we operate one or more of the following departments: new commercial vehicle
sales, used commercial vehicle sales, financial services, parts, service or a collision center. Our general managers measure and manage the
operations of each dealership according to the specific departments operating at that location. We believe that this system enhances the
profitability of all aspects of a dealership and increases our overall operating margins. Operating goals for each department at each of our
dealerships are established annually and managers are rewarded for performance relative to these goals.
● One-Stop Centers. We have developed our larger commercial vehicle dealerships as “one-stop centers” that offer an integrated approach to
meeting customer needs. We provide service, including collision repairs, parts, new and used commercial vehicles sales, leasing and rental,
plus financial services including finance and insurance. We believe that this full-service strategy helps to mitigate cyclical economic
fluctuations because our parts, service and collision center operations (referred to herein collectively as “Aftermarket Products and Services”)
at our dealerships generally tend to be less volatile than our new and used commercial vehicle sales.
● Aftermarket Products and Services. Our aftermarket capabilities include a wide range of services and products, including a fleet of mobile
service units, mobile technicians who work in our customers’ facilities, technology solutions, including vehicle telematics support, a
proprietary line of parts and accessories, and factory-certified service for assembly services for specialized bodies and equipment. We believe
that offering a variety of Aftermarket Products and Services at our dealerships and other locations allows us to meet the expanding needs of
our customers. We continually strive to leverage our dealership network to offer more products and services to our customers.
● Branding Program. We employ a branding program at all of our dealerships through distinctive signage and uniform marketing programs to
take advantage of our existing name recognition and to communicate the standardized high quality of our products and reliability of our
services throughout our dealership network.
Growth Strategy. Through our strategic expansion and acquisition initiatives, we have grown to operate a large, multistate/international, full-
service network of commercial vehicle dealerships. As described below, we intend to continue to grow our business by expanding our product and service
offerings through acquisitions in new geographic areas and by opening new locations to enable us to better serve our customers.
● Expansion of Product and Service Offerings. We intend to continue to expand our product lines within our existing locations by adding
product categories and service capabilities that are both complementary to our existing product lines and well suited to our operating model.
We will continue to take advantage of technological advances that will provide us with the opportunity to offer vehicle owners more
aftermarket options and the ability to maximize the performance of vehicles in their fleets using telematics and other technologies.
● Expansion Into New Geographic Areas. We plan to continue to expand our dealership network by acquiring existing dealerships or opening
new locations in areas where we do not already have locations. We believe the geographic diversity of our Rush Truck Center network has
significantly expanded our customer base while reducing the effects of local economic cycles.
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● Open New Rush Truck Centers in Existing Areas of Operation. We continually evaluate opportunities to increase our market presence by
adding new Rush Truck Centers within our current franchises’ areas of operation.
Management of Our Dealerships
Rush Truck Centers
Our Rush Truck Centers are responsible for sales of new and used commercial vehicles, as well as related Aftermarket Products and Services.
Aftermarket Products and Services. Revenues from Aftermarket Products and Services accounted for approximately $2,372.4 million, or 33.4%,
of our total revenues for 2022, and 61.7% of our gross profit. Rush Truck Centers carry a wide variety of commercial vehicle parts in inventory. Certain
Rush Truck Centers also feature fully equipped service and collision center facilities, the combination and configuration of which varies by location,
capable of handling a broad range of repairs on most commercial vehicles. Each Rush Truck Center with a service department is a warranty service center
for the commercial vehicle manufacturers represented at that location, if any, and most are also authorized service centers for other vehicle component
manufacturers, including Cummins, Eaton, Caterpillar and Allison. We also have mobile service technicians and technicians who staff our customers’
facilities upon request.
Our service departments perform warranty and non-warranty repairs on commercial vehicles. The cost of warranty work is generally reimbursed
by the applicable manufacturer at retail commercial rates. Warranty-related parts and service revenues accounted for approximately $135.0 million, or
1.9%, of our total revenues for 2022. Additionally, we provide a wide array of services, including assembly services for specialized commercial vehicle
bodies and commercial vehicle mounted equipment. Our goal is to provide our customers with any service that they need related to their commercial
vehicles.
As part of our leasing and rental operations, we also enter into contracts to provide full-service maintenance on certain customers’ vehicles. We
had 1,839 vehicles under contract maintenance as of December 31, 2022. The full-service maintenance revenues and retail service revenues are included as
Aftermarket Products and Services revenues on our Consolidated Statements of Income.
New Commercial Vehicle Sales. New commercial vehicle sales represent the largest portion of our revenues, accounting for approximately
$3,798.5 million, or 53.5%, of our total revenues in 2022. Of this total, new Class 8 heavy-duty truck sales accounted for approximately $2,715.3 million,
or 38.2%, of our total revenues for 2022, and 71.5% of our new commercial vehicle revenues for 2022.
Our Rush Truck Centers that sell new and used Class 8 heavy-duty trucks manufactured by Peterbilt or International may also sell medium-duty
and light-duty commercial vehicles. Certain Rush Truck Centers sell medium-duty commercial vehicles manufactured by Peterbilt, Hino, Isuzu, Ford,
International or Dennis Eagle, buses manufactured by Blue Bird, IC Bus or Elkhart and light-duty commercial vehicles manufactured by Ford (see Part I,
Item 1, “General – Rush Truck Centers” for information on which brands we sell at each Rush Truck Center). New medium-duty commercial vehicle sales,
excluding new bus sales, accounted for approximately $830.9 million, or 11.7%, of our total revenues for 2022, and 21.9% of our new commercial vehicle
revenues for 2022. New bus sales accounted for approximately $128.2 million, or 1.8%, of our total revenues for 2022, and 3.4% of our new commercial
vehicle revenues for 2022. New light-duty commercial vehicle sales accounted for approximately $104.0 million, or 1.5%, of our total revenues for 2022,
and 2.7% of our new commercial vehicle revenues for 2022.
A significant portion of our new commercial vehicle sales are to customers with large fleets of commercial vehicles. Because of the size and
geographic scope of our Rush Truck Center network, our strong relationships with our fleet customers and our ability to manage large quantities of used
commercial vehicle trade-ins, we are able to successfully market and sell to fleet customers nationwide. We believe that we have a competitive advantage
over many dealerships because we can absorb multi-unit trade-ins often associated with fleet sales and effectively disperse the used commercial vehicles
for resale throughout our dealership network. We believe that the broad range of products and services we offer to purchasers of commercial vehicles at the
time of purchase and post-purchase results in a high level of customer loyalty.
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Used Commercial Vehicle Sales. Used commercial vehicle sales accounted for approximately $552.9 million, or 7.8%, of our total revenues for
2022. We sell used commercial vehicles at most of our Rush Truck Centers and also at our non-franchised used commercial vehicle facilities. We believe
that we are well positioned to market used commercial vehicles due to our ability to recondition them for resale utilizing the service and collision center
departments of our Rush Truck Centers and our ability to move used commercial vehicles between our dealerships as customer demand warrants. The
majority of our used commercial vehicle inventory consists of commercial vehicles taken as trade-ins from new commercial vehicle customers or retired
from our lease and rental fleet, but we also supplement our used commercial vehicle inventory by purchasing used commercial vehicles from third parties
for resale, as market conditions warrant.
Vehicle Leasing and Rental. Vehicle leasing and rental revenues accounted for approximately $322.3 million, or 4.5%, of our total revenues for
2022. At our Rush Truck Leasing locations, we engage in full-service commercial vehicle leasing and rental through our PacLease and Idealease
franchises. As of December 31, 2022, we had 9,957 commercial vehicles in our lease and rental fleet. Generally, we sell commercial vehicles that have
been retired from our lease and rental fleet through our used commercial vehicles sales operations. Historically, we have realized gains on the sale of used
lease and rental fleet inventory.
New and Used Commercial Vehicle Financing and Insurance. The sale of financial and insurance products accounted for approximately
$29.7 million, or 0.4%, of our total revenues for 2022. Finance and insurance revenues have minimal direct costs and therefore, contribute a
disproportionate share to our operating profits.
Many of our Rush Truck Centers have personnel responsible for arranging third-party financing for our product offerings. Generally, commercial
vehicle finance contracts involve an installment contract, which is secured by the commercial vehicle financed and requires a down payment, with the
remaining balance generally financed over a two-year to seven-year period. The majority of these finance contracts are sold to third parties without
recourse to us. We provide an allowance for repossession losses and early repayment penalties that we may incur under these finance contracts.
We sell, as agent, a complete line of property and casualty insurance to commercial vehicle owners. Our agency, which operates at locations
around the United States outside of our Rush Truck Centers, is licensed to sell commercial vehicle liability, collision and comprehensive, workers’
compensation, cargo, and credit life insurance coverage offered by a number of leading insurance companies. Our renewal rate in 2022 was approximately
80%. We also have licensed insurance agents at several of our Rush Truck Centers.
Human Capital Management
On December 31, 2022, we employed 7,418 people in the U.S. and 621 in Canada. Of these employees, less than 1.3% of our workforce was
classified as part-time. We do not regularly use independent contractors in our business operations. We strive to provide our employees with the security of
long-term employment, competitive compensation and benefits, a consistent work schedule and opportunities to improve their skills and advance within the
Company.
Core Values. Our core values define our culture and reflect who we are and the way we interact with our customers, suppliers, co-workers and
shareholders. Our core values are productivity, fairness, excellence and positive attitude and are described below.
● Productivity means constantly striving toward efficiency and success in all interactions and activities while working with a common purpose and
sense of urgency.
● Fairness characterizes our honesty, integrity, truthfulness, dependability and reliability in everything we do.
● Excellence means doing it better than everyone else does. Excellence is reflected in our first-class facilities, quality products and services,
motivated and talented employees, superior results for the customer and consistency throughout our organization.
● Positive Attitude means approaching every day with excitement and passion for the work and dedication to our customers with positive intensity.
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Each of these core values is embodied in our code of conduct, which we call our Rush Driving Principles. Employees are required to attend
training on the Rush Driving Principles and certify that they have read and understand such principles on an annual basis. We believe that our core values
are the foundation of a strong and ethical culture that is a strength for us, and we intend to continue building upon that culture to improve performance
across our business.
Employee Recruitment. We strive to attract the best talent from a variety of sources to meet the current and future needs of our business. We have
established relationships with multiple trade schools and universities across the country, which we utilize as a source for entry-level talent. Additionally, we
believe it is incumbent upon all our managers to continuously monitor their local markets for experienced individuals who might be successful additions to
our organization.
Compensation Programs and Employee Benefits. Our compensation programs are designed to provide a compensation package that will attract,
retain, motivate and reward employees who must operate in a highly competitive, fast-paced environment. In general, our compensation programs consist
of a base salary or hourly rate, commissions for employees in front-line customer facing roles, cash performance bonuses for certain employees, equity
incentive awards for senior leaders, vacation leave, sick leave and other forms of paid time off.
We are committed to fair pay. In 2020, the Company established a minimum hourly wage of $15.00 an hour. Our employees receive a base level of
monthly or hourly compensation that we believe is commensurate with their expertise, skills, knowledge, experience and location.
We provide our full-time employees with comprehensive benefit options that allow our employees and their families to live healthier and more
secure lives. Some examples of our wide-ranging benefits offered are: medical insurance, prescription drug benefits, dental insurance, vision insurance,
hospital indemnity insurance, accident insurance, critical illness insurance, smoking cessation assistance program, life insurance, disability insurance,
health savings accounts and flexible spending accounts.
We also provide our employees with an opportunity to participate in the ownership of the Company by offering an employee stock purchase plan
that allows employees to contribute a portion of their base earnings every six months toward the semi-annual purchase of the Company’s Class A common
stock. Employees participating in the stock purchase plan receive a 15% discount on the purchase price of the stock, with such discount based on lesser of
the closing price of the Class A common stock on the first business day or the last business day of the semi-annual offering period. In addition, we provide
our employees with an opportunity to save for retirement by participating in our 401k plan, which has a Company-matching component that is based on
years of service.
Training and Development. Our training and development programs are designed to facilitate the development and advancement of talent from
within our organization to ensure we continuously fill our ranks with qualified employees for critical positions in the organization. These programs also
seek to provide our employees with the career development skills they desire and further our employee retention efforts. Members of our Learning and
Development team collaborate with employees from our various operations teams to identify our strategic training needs and prioritize the development of
appropriate training content related to systems, processes, new hire and professional development.
Our Rush Foundational Leader Program is focused on developing key management and leadership skills. The Rush Foundational Leader Program
consists of a series of courses ranging from basic management skills, including promoting a culture of diversity and inclusion, to more advanced leadership
concepts and skills that are designed for managers throughout our organization. As a continuation of our leadership development initiatives, we have
launched our High Impact Leadership series, which focuses on building more advanced leadership skills such as motivating employees through
meaningful feedback and inclusive leadership and communication. We also have a New Graduate Management Trainee Program that identifies and recruits
new talent from universities across the country and provides on-the-job training for them to fill various roles within our dealership network. In addition, we
have established a program called Growing Rush Outstanding Women ("GROW"), which enables women to continue their professional development
through educational opportunities.
To enhance and develop the technical skills of entry-level service and body shop technicians, we established a formal mentorship program lead by
experienced service and body shop technicians who serve as mentors to newly hired, entry level service and body shop technicians. We believe that this
program increases the technicians’ likelihood of career success. This formal mentorship program also helps us identify top performers and we believe it
improves employee performance and retention for participants in the program.
Ethics and Compliance. We are committed to the highest standards of corporate conduct. We maintain an Ethics and Compliance Program that is
designed to meet external requirements, as well as our core values and code of conduct embodied in the Rush Driving Principles. A central component of
our Ethics and Compliance Program is the continuous training and education of our employees on general ethics and compliance training topics. We also
regularly reinforce our commitment to ethics and integrity in communications with our employees.
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Employee Engagement and Retention. We conduct an annual comprehensive employee engagement survey designed to measure organizational
culture and engagement. The purpose of the survey is to monitor overall employee engagement with the goal of identifying actions that can be taken to
continuously improve our employee engagement, which we believe leads to increased employee retention. Data collected in each annual employee
engagement survey is maintained and used to track our progress against our internal goals. Additionally, we have formal “listening groups” that provide
additional engagement channels for feedback from our dealerships to senior management throughout the year.
Management continually monitors employee turnover data, which is supplemented with additional data from exit surveys to assist in determining
the reasons for voluntary employee terminations. In 2022, our overall turnover rate was 30.38%, compared to 27.49% in 2021. The turnover rate of our
service and body shop technicians is also monitored closely by management, as the retention of skilled service and body shop technicians is critical to the
success of the Company. Demand for service and body shop technicians across the country is very high, and turnover in this role is also traditionally high
for commercial vehicle dealers. In 2022, our turnover rate for service and body shop technicians was 38.7%, compared to 36.67% in 2021.
Health and Safety. Promoting a safe and healthy workplace is our highest priority and is embodied in our core values. We utilize a mixture of
leading and lagging indicators to assess the health and safety performance of our operations. Lagging indicators include the OSHA Total Recordable
Incident Rate ("TRIR") and the Lost Time (or Lost Workday) Incident Rate ("LTIR") based upon the number of incidents per 100 employees (or per
200,000 work hours). Leading indicators include training completion rates, tracking of local safety committee meeting minutes, and recording of near
misses, as well as other proactive actions taken to ensure employee safety. In 2022, we had a TRIR of 4.03, compared to 3.87 in 2021 and a LTIR of 0.62 in
2022, compared to 0.71 in 2021.
Labor Relations. We have entered into collective bargaining agreements covering certain employees in Chicago, Illinois, which will expire on
May 10, 2025, Joliet, Illinois, which will expire on May 3, 2026 and Carol Stream, Illinois, which will expire on May 6, 2023. There have been no strikes,
work stoppages or slowdowns during the negotiations of the foregoing collective bargaining agreements or at any time in the Company’s history, although
no assurances can be given that such actions will not occur. We believe that our relations with the labor unions that represent these employees are generally
good.
Sales and Marketing
Our established history of operations in the commercial vehicle business has resulted in a strong customer base that is diverse in terms of
geography, industry and scale of operations. Our customers include national and regional truck fleets, corporations, local and state governments and owner-
operators. During 2022, no single customer accounted for more than 10% of our sales by dollar volume. We generally promote our products and related
services through direct customer contact by our sales personnel and advertising.
Facility Management
Personnel. Each of our facilities is typically managed by a general manager who oversees the operations, personnel and the financial performance
of the location, subject to the direction of a regional manager and personnel at our corporate headquarters. Additionally, each full-service Rush Truck
Center is typically staffed by department managers, sales representatives and other employees, as appropriate, given the services offered. The sales staff of
each Rush Truck Center is compensated on a salary plus commission, or a commission only basis, while department managers receive a combination of
salary and performance bonus. We believe that our employees are among the highest paid in the industry, which enables us to attract and retain qualified
personnel.
Compliance with Policies and Procedures. Each Rush Truck Center is audited regularly for compliance with corporate policies and procedures.
These internal audits objectively measure dealership performance with respect to corporate expectations in the management and administration of sales,
commercial vehicle inventory, parts inventory, parts sales, service sales, collision center sales, corporate policy compliance and environmental and safety
compliance matters.
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Purchasing and Suppliers. Because of our size and the corresponding cost savings we provide, we benefit from volume purchases at favorable
prices that permit us to achieve a competitive pricing position in the industry. We purchase our commercial vehicle inventory and proprietary parts and
accessories directly from the applicable vehicle manufacturer, wholesale distributors, or other sources that provide the most favorable pricing. Most
purchasing commitments are negotiated by personnel at our corporate headquarters. Historically, we have been able to negotiate favorable pricing levels
and terms, which enable us to offer competitive prices for our products.
Commercial Vehicle Inventory Management. We utilize our management information systems to monitor the inventory level of commercial
vehicles at each of our dealerships and transfer new and used commercial vehicle inventory among Rush Truck Centers as needed.
Parts Distribution and Inventory Management. We utilize a parts inventory distribution and management system that allows for the prompt
transfer of parts inventory among various Rush Truck Centers. The transfer of inventory reduces delays in delivery, helps maximize inventory turns and
assists in controlling problems created by overstock and understock situations. Our network is linked to our major suppliers for purposes of ordering parts
and managing parts inventory levels. Automated reordering and communication systems allow us to maintain proper parts inventory levels and permit us to
have parts inventory delivered to our locations, or directly to customers, typically within 24 hours of an order being placed.
Recent Acquisitions
On February 25, 2019, we acquired 50% of the equity interest in RTC Canada, which acquired the operating assets of Tallman Group, the largest
International Truck dealer in Canada. On May 2, 2022, we acquired an additional 30% equity interest for approximately $20.0 million. Prior to acquiring
our additional equity interest, we accounted for the equity interest in RTC Canada using the equity method of accounting. Subsequent to the Company’s
acquisition of the additional 30% equity interest on May 2, 2022, the operating results of RTC Canada are consolidated in the Consolidated Statements of
Income, the Consolidated Statements of Comprehensive Income and the Consolidated Balance Sheets.
On December 13, 2021, we completed the acquisition of certain of the assets of Summit Truck Group, LLC and certain of its subsidiaries and
affiliates (collectively, “Summit”), which included full-service commercial vehicle dealerships and Idealease franchises in Arkansas, Kansas, Missouri,
Tennessee and Texas. The acquisition included Summit’s dealerships representing International, IC Bus, Idealease, Isuzu and other commercial vehicle
manufacturers for a purchase price of approximately $205.3 million, excluding the real property associated with the transaction. We financed
approximately $102.0 million of the purchase price under our floor plan and lease and rental truck financing arrangements and the remainder was paid in
cash. In addition, we purchased certain real estate owned by Summit for a purchase price of approximately $57.0 million, which was paid in cash.
See Note 15 – Acquisitions in the Notes to the Financial Statements for further discussion.
Competition
There is, and will continue to be, significant competition both within our current markets and in new markets we may enter. We anticipate that
competition between us and other dealership groups will continue to increase in our current markets and on a national level based on the following:
● the ability to keep customers’ vehicles operational, which is dependent on the accessibility of dealership locations and the ability to attract and
retain service technicians;
● the number of dealership locations representing the manufacturers that we represent and other manufacturers, which impacts
manufacturers’ ability to provide more consistent, higher quality service in a timely manner across their dealership networks;
● price, value, quality and design of the products sold; and
● our attention to customer service (including technical service).
Our dealerships compete with dealerships representing other manufacturers, including commercial vehicles manufactured by Mack, Freightliner,
Kenworth and Volvo. We believe that our dealerships are able to compete with other franchised dealerships, independent service centers, parts wholesalers,
commercial vehicle wholesalers, rental service companies and industrial auctioneers in distributing our products and providing service because of the
following: the overall quality and reputation of the products we sell; the “Rush” brand name recognition and reputation for quality service; the geographic
scope of our dealership network; the breadth of commercial vehicles offered in our dealership network; and our ability to provide comprehensive
Aftermarket Products and Services, as well as financing, insurance and other customer services.
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Dealership Agreements
Peterbilt. We have entered into nonexclusive dealership agreements with Peterbilt that authorize us to act as a dealer of Peterbilt heavy- and
medium-duty trucks. Our Peterbilt areas of responsibility currently encompass areas in the states of Alabama, Arizona, California, Colorado, Florida,
Kentucky, Nevada, New Mexico, Oklahoma, Tennessee and Texas. These dealership agreements currently have terms expiring in May 2023. Our
dealership agreements with Peterbilt may be terminated by Peterbilt in the event that the aggregate voting power of W.M. “Rusty” Rush, certain other
members of the Rush family and certain executives of the Company decreases below 22%. Sales of new Peterbilt commercial vehicles accounted for
approximately 31.9% of our total revenues for 2022.
International. We have entered into nonexclusive dealership agreements with Navistar that authorize us to act as a dealer of International heavy-
and medium-duty trucks and, in certain markets, IC buses. Our Navistar areas of responsibility currently encompass areas in the states of Arkansas,
Georgia, Idaho, Illinois, Indiana, Kansas, Missouri, North Carolina, Ohio, Tennessee, Utah and Virginia. These dealership agreements currently have terms
expiring between May 2023 and December 2027. Sales of new International commercial vehicles accounted for approximately 13.6% of our total revenues
for 2022.
Other Commercial Vehicle Suppliers. In addition to our dealership agreements with Peterbilt and Navistar, various Rush Truck Centers have
entered into dealership agreements with other commercial vehicle manufacturers, including Blue Bird, and Micro Bird, which currently have terms expiring
between August 2023 and August 2024 and Ford, Hino, Isuzu and Dennis Eagle, which have perpetual terms. Sales of new non‑Peterbilt and non-
International commercial vehicles accounted for approximately 8.0% of our total revenues for 2022.
All of our dealership agreements impose certain operational obligations and financial requirements upon us and the relevant dealerships. In
addition, each of our dealership agreements requires the consent of the relevant manufacturer for the sale or transfer of a franchise.
Any termination or nonrenewal of our dealership agreements must follow certain guidelines established by both state and federal legislation
designed to protect motor vehicle dealers from arbitrary termination or nonrenewal of franchise agreements. The federal Automobile Dealers Day in Court
Act and certain other similar state laws generally provide that the termination or nonrenewal of a motor vehicle dealership agreement must be done in
“good faith” and upon a showing of “good cause” by the manufacturer for such termination or nonrenewal, as such terms have been defined by statute and
interpreted in case law.
Floor Plan Financing
Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 days or less from the date the
commercial vehicles are invoiced from the factory. On September 14, 2021, we entered into our floor plan credit agreement with BMO Harris Bank N.A.
(“BMO Harris”) (the “Floor Plan Credit Agreement”) and the lenders signatory thereto. The Floor Plan Credit Agreement includes an aggregate loan
commitment of $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)
one month London Interbank Offered Rate (“LIBOR”), determined on the last day of the prior month, plus (B) 1.10% and are payable monthly. Loans
under the Floor Plan Credit Agreement for the purchase of used inventory are limited to $150.0 million and loans for working capital purposes are limited
to $200.0 million. The Floor Plan Credit Agreement expires September 14, 2026, although BMO Harris has the right to terminate at any time upon 360
days written notice and we may terminate at any time, subject to specified limited exceptions. On December 31, 2022, we had approximately $762.9
million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were $638.6
million during the year ended December 31, 2022. 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.
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On July 15, 2022, RTC Canada entered into that certain Amended and Restated BMO Wholesale Financing and Security Agreement (the “RTC
Canada Floor Plan Agreement”) with Bank of Montreal (“BMO”). Pursuant to the terms of the Agreement, BMO agreed to make up to $116.7 million
CAD of revolving credit loans to finance RTC Canada’s purchase of new and used vehicle inventory. Loans to purchase used vehicle inventory are limited
to twenty percent (20%) of the credit limit available at such time. RTC Canada may borrow, repay and reborrow loans from time to time until the maturity
date, provided, however, that the outstanding principal amount on any date shall not exceed the credit limits set forth above with respect to new and used
vehicles. Advances under the RTC Canada Floor Plan Agreement bear interest per annum, payable on the first business day of each calendar month, at the
Canadian Offered Dollar Rate (“CDOR”), plus 0.90% and in the case of an advance required to be made in USD dollars, at LIBOR, plus 1.10%. The RTC
Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2022, we had approximately $44.6 million outstanding under the RTC
Canada Floor Plan Agreement.
Lease and Rental Fleet Financing
On September 14, 2021, we entered into a credit agreement with the lenders signatory thereto (the “WF Lenders”) and Wells Fargo Bank, National
Association (“WF”), as Administrative Agent (in such capacity, the “WF Agent”) which was amended effective November 30, 2022 (collectively, the “WF
Credit Agreement”). Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $175.0 million of revolving credit
loans for certain of our capital expenditures, including commercial vehicle purchases for our Idealease leasing and rental fleet, and general working capital
needs. We expect to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles
for our Idealease lease and rental fleet. We may borrow, repay and reborrow amounts pursuant to the WF Credit Agreement from time to time until the
maturity date. Borrowings under the WF Credit Agreement bear interest per annum, payable on each interest payment date, as defined in the WF Credit
Agreement, at (A) the daily simple, secured overnight financing rate (“SOFR”) plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or
(B) on or after the term SOFR transition date, the term SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio. The WF Credit
Agreement expires on September 14, 2024, although, upon the occurrence and during the continuance of an event of default, the WF Agent has the right to,
or upon the request of the required lenders must, terminate the commitments and declare all outstanding principal and interest due and payable. We may
terminate the commitments at any time. On December 31, 2022, we had approximately $40.5 million outstanding under the WF Credit Agreement.
On October 1, 2021, the Company entered into that certain Amended and Restated Inventory Financing and Purchase Money Security Agreement
with PACCAR Leasing Company (“PLC”), a division of PACCAR Financial Corp. (the “PLC Agreement”). Pursuant to the terms of the PLC Agreement,
PLC agreed to make up to $300.0 million of revolving credit loans to finance certain of our capital expenditures, including commercial vehicle purchases
and other equipment to be leased or rented through our PacLease franchises. We may borrow, repay and reborrow amounts pursuant to the PLC Agreement
from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the borrowing base.
Advances under the PLC Agreement bear interest per annum, payable on the fifth day of the following month, at our option, at either (A) the prime rate,
minus 1.55%, provided that the floating rate of interest is subject to a floor of 0%, or (B) a fixed rate, to be determined between us and PLC in each
instance of borrowing at a fixed rate. The PLC Agreement expires on October 1, 2025, although either party has the right to terminate the PLC Agreement
at any time upon 180 days written notice. If we terminate the PLC Agreement prior to October 1, 2025, then all payments will be deemed to be voluntary
prepayments subject to a potential prepayment premium. On December 31, 2022, we had approximately $185.0 million outstanding under the PLC
Agreement.
On May 31, 2022, RTC Canada entered into that certain BMO Revolving Lease and Rental Credit Agreement (the “RTC Canada Revolving Credit
Agreement”) with BMO. Pursuant to the terms of the RTC Canada Revolving Credit Agreement, BMO agreed to make up to $120.0 million CAD of
revolving credit loans to finance certain of RTC Canada’s capital expenditures, including commercial vehicle purchases and other equipment to be leased or
rented through RTC Canada’s Idealease franchise, with an additional $20.0 million available upon the request of RTC Canada and consent of BMO.
Advances under the RTC Canada Revolving Credit Agreement bear interest per annum, payable on the first business day of each calendar month, at
CDOR, plus 1.35%. The RTC Canada Revolving Credit Agreement expires September 14, 2026. On December 31, 2022, we had approximately $49.9
million outstanding under the RTC Canada Revolving Credit Agreement.
Product Warranties
The manufacturers we represent provide retail purchasers of their products with a limited warranty against defects in materials and workmanship,
excluding certain specified components that are separately warranted by the suppliers of such components. We provide a warranty on our proprietary line of
parts and related service and the fuel systems manufactured by our joint venture entity, Cummins Clean Fuel Technologies, and that were previously
manufactured by Momentum Fuel Technologies. We also provide an extended warranty beyond the manufacturer’s warranty on new Blue Bird school
buses that we sell in Texas, as required by state law.
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We generally sell used commercial vehicles in “as is” condition without a manufacturer’s warranty, although manufacturers sometimes will
provide a limited warranty on their used products if such products have been properly reconditioned prior to resale or if the manufacturer’s warranty on
such product is transferable and has not expired. Although we do not provide any warranty on used commercial vehicles, we offer for sale third-party
warranties.
Trademarks
The trademarks and trade names of the manufacturers we represent, which are used in connection with our marketing and sales efforts, are subject
to limited licenses included in our dealership agreements with each manufacturer. The licenses are for the same periods as our dealership agreements. These
trademarks and trade names are widely recognized and are important in the marketing of our products. Each licensor engages in a continuous program of
trademark and trade name protection. We hold registered trademarks from the U.S. Patent and Trademark Office for the following names used in this
document: “Rush Enterprises” and “Rush Truck Center.”
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. However, Aftermarket Products and Services operations historically have
experienced higher sales volumes in the second and third quarters.
Backlog
On December 31, 2022, our backlog of commercial vehicle orders was approximately $4,216.0 million, compared to a backlog of commercial
vehicle orders of approximately $3,267.0 million on December 31, 2021. This increase in our backlog is primarily due to the Summit acquisition and the
consolidation of RTC Canada into our operating results, in addition to continuing production constraints experienced by the manufacturers we represent.
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 December 31, 2022, and we
expect to fill the majority of our backlog orders during 2023, assuming that the manufacturers we represent can meet their current production schedule. Our
current backlog continues to be much higher than normal. Given the potential for industry headwinds in the coming months caused by lower spot rates and
higher interest rates, which could negatively impact industry demand for new commercial vehicles moving forward, we believe that the longer it takes to
fill our backlog, the greater the risk that a significant amount of commercial vehicle orders currently reflected in our backlog could be cancelled.
Environmental Standards and Other Governmental Regulations
We are subject to federal, state and local environmental laws and regulations 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 vehicle service,
parts and 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.
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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 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 recycling, treatment, or disposal facilities under the federal
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, and comparable state statutes. These statutes impose liability for
investigation and remediation of environmental impacts without regard to fault or the legality of the conduct that contributed to the impacts. Responsible
parties under these statutes may include the owner or operator of the site where impacts occurred and companies that disposed, or arranged for the disposal,
of the hazardous substances released at these sites. These responsible parties also may be liable for damages to natural resources. In addition, it is not
uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of
hazardous substances or other materials into the environment.
The federal Clean Water Act and comparable state statutes 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 rules associated with reducing greenhouse gas (“GHG”) emissions and improving the fuel efficiency of medium and
heavy-duty trucks and buses for current model years through 2027. In addition, in August 2021, the President of the United States issued an executive
order intended to increase fuel efficiency, further reduce GHG emissions and speed up the development of “zero-emission” vehicles. The executive order
calls for the EPA and the Secretary of Transportation to adopt new rules and regulations for commercial vehicles starting as early as model year 2027.
Similarly, in June 2020, 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; two additional states have since signed. Six of the states that signed are states where we operate new commercial vehicle dealerships:
California, Colorado, Nevada, New Mexico, North Carolina and Virginia. The signatories to the memorandum all agreed on a goal of ensuring that 100%
of new Class 3 through 8 commercial vehicles are zero emission by 2050, with an interim target of 30% zero emission vehicles by 2030. Attaining these
goals would likely require the adoption of new laws and regulations and we cannot predict at this time whether such laws and regulations would have an
adverse impact on our business. Additional regulations could result in increased compliance costs, additional operating restrictions or changes in demand
for our products and services, which could have a material adverse effect on our business, financial condition and results of operations.
We do not believe that we currently have any material environmental liabilities or that compliance with environmental laws and regulations will
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 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, which could 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.
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Item 1A. Risk Factors
An investment in our common stock is subject to certain risks inherent to our business. In addition to the other information contained in this Form
10-K, we recommend that you carefully consider the following risk factors in evaluating our business. If any of the following risks actually occur, our
financial condition and results of operations could be materially adversely affected. If this were to happen, the value of our common stock could decline
significantly, and you could lose all or part of your investment. This report is qualified in its entirety by these risk factors.
Risks Related to Our Business Operations
We are dependent upon PACCAR for the supply of Peterbilt trucks and parts, the sale of which generates the majority of our revenues.
At certain Rush Truck Centers, we operate as a dealer of Peterbilt trucks and parts pursuant to dealership agreements with Peterbilt, a division of
PACCAR. We have no control over the management or operation of Peterbilt or PACCAR. During 2022, the majority of our revenues resulted from sales of
trucks purchased from Peterbilt and parts purchased from PACCAR Parts. Due to our dependence on PACCAR and Peterbilt, we believe that our long-term
success depends, in large part, on the following:
● our ability to maintain our dealership agreements with Peterbilt;
● the manufacture and delivery of competitively-priced, technologically current, high-quality Peterbilt trucks in quantities sufficient to meet our
requirements;
● the overall success of PACCAR and Peterbilt;
● PACCAR’s continuation of its Peterbilt division; and
● the maintenance of goodwill associated with the Peterbilt brand, which can be adversely affected by decisions made by PACCAR, Peterbilt and
the owners of other Peterbilt dealerships.
A negative change in any of the preceding, or a change in control of PACCAR, could have a material adverse effect on our operations, revenues
and profitability.
We are dependent upon Navistar for the supply of International trucks and parts and IC buses and parts, the sale of which generate a significant portion of
our revenues.
At certain Rush Truck Centers, we operate as a dealer of International trucks and parts and IC buses and parts pursuant to dealership agreements
with International and IC Bus, each of which are divisions of Navistar. We have no control over the management or operation of International, IC Bus or
Navistar. During 2022, a significant portion of our revenues resulted from sales of trucks purchased from International, buses purchased from IC Bus and
parts purchased from Navistar. Due to our dependence on Navistar, International and IC Bus, we believe that our long-term success depends, in large part,
on the following:
● our ability to maintain our dealership agreements with International and IC Bus;
● the manufacture and delivery of competitively-priced, technologically current, high-quality International trucks and IC buses in quantities
sufficient to meet our requirements;
● the overall success of Navistar; and
● the maintenance of goodwill associated with the International and IC Bus brands, which can be adversely affected by decisions made by Navistar
and the owners of other International and IC Bus dealerships.
A negative change in any of the preceding, or a change in control of Navistar, could have a material adverse effect on our operations, revenues and
profitability.
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Our dealership agreements may be terminable upon a change of control and we cannot control whether our controlling shareholder and management
maintain their current ownership positions.
We have entered into nonexclusive dealership agreements with Peterbilt that authorize us to act as a dealer of Peterbilt trucks. Peterbilt may
terminate our dealership agreements in the event of a change of control of the Company or if we violate any number of provisions in the dealership
agreements. Under our Peterbilt dealership agreements, the following constitute a change of control: (i) with respect to the election of directors, the
aggregate voting power held by W.M. “Rusty” Rush, Scott Anderson, Steven Keller and Corey Lowe, along with certain other persons who no longer work
for the Company (collectively, the “Dealer Principals”) decreases below 22% (the Dealer Principals, excluding those who no longer work for the Company,
controlled approximately 44.0% of the aggregate voting power with respect to the election of directors as of December 31, 2022); or (ii) any person or
entity other than the Dealer Principals and their respective associates, or any person or entity who has been approved in writing by PACCAR, owns
common stock with a greater percentage of the voting power with respect to the election of our directors than the Dealer Principals and their respective
associates, in the aggregate, or any person other than Mr. Rush, Robin M. Rush or any person who has been approved in writing by PACCAR holds the
office of Chairman of the Board, President or Chief Executive Officer of the Company. We have no control over the transfer or disposition of Mr. Rush’s,
or his estate’s, common stock. If Mr. Rush were to sell his Class B common stock or bequest his Class B common stock to a person or entity other than the
Dealer Principals, or if his estate is required to liquidate its Class B common stock this it owns, directly or indirectly, to pay estate taxes or otherwise, the
change of control provisions of the Peterbilt dealership agreements may be triggered, which would give Peterbilt the right to terminate our dealership
agreements. If our dealership agreements with Peterbilt are terminated, we will lose the right to purchase Peterbilt products and operate as an authorized
Peterbilt dealer, which would have a material adverse effect on our operations, revenues and profitability.
Our dealership agreements are non-exclusive and have relatively short terms, which could result in nonrenewal or imposition of less favorable terms upon
renewal.
Our dealership agreements generally do not provide us with exclusive dealerships in any of the areas of responsibility assigned in each dealer
agreement. The manufacturers we represent could elect to create additional dealers in our areas of responsibility in the future, subject to restrictions
imposed by state laws. While dealership agreements typically restrict dealers from operating franchised sales or service facilities outside their areas of
responsibility, such agreements do not restrict sales or marketing activity outside the areas of responsibility. Accordingly, we engage in sales and other
marketing activities outside our assigned areas of responsibility and other dealers engage in similar activities within our areas of responsibility.
Our dealership agreements with the manufacturers we represent have current terms expiring between May 2023 and December 2027. Upon
expiration of each agreement, we must negotiate a renewal. Management expects that, consistent with in some cases decades of past practice, each of our
dealership agreements will be renewed or otherwise extended before its termination date, provided that we do not breach any of the material terms of such
agreement.
Management attempts to mitigate the risk that any manufacturer would not renew a dealership agreement by providing superior representation of
each brand that we represent in each of our areas of responsibility. We deliver superior representation to our manufacturers by continuously investing
substantial capital into our dealership locations, marketing and personnel. Senior members of our management team also communicate with management of
the manufacturers that we represent on a regular basis, which we believe allows us to identify any potentially problematic issues as early as possible so that
we can begin working on mutually agreeable solutions. In addition to the proactive steps that management takes, the risks that our dealership agreements
will not be renewed are also mitigated by dealer protection laws that exist in each of the states that our dealerships are located. Many of these state dealer
franchise laws restrict manufacturers’ ability to refuse to renew dealership agreements or to impose new terms upon renewal. However, to the extent such
laws did allow for nonrenewal or the imposition of new terms, the relatively short terms would give manufacturers the opportunity to exercise such rights.
Any nonrenewal or imposition of less favorable terms upon renewal could have an adverse impact on our business and in the case of the Peterbilt or
Navistar dealership agreements, would have an adverse impact on our business.
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Our growth strategies may be unsuccessful if we are unable to successfully execute our strategic initiatives or identify and complete future acquisitions.
Over the past few years, we have spent significant resources and efforts attempting to grow and enhance our Aftermarket Products and Services
business and increase profitability through new business process management initiatives. These efforts require timely and continued investment in
technology, facilities, personnel and financial and management systems and controls. We may not be successful in implementing all of the processes that
are necessary to support any of our growth initiatives, which could result in our expenses increasing disproportionately to our incremental revenues,
causing our operating margins and profitability to be adversely affected.
Historically, we have achieved a significant portion of our growth through acquisitions and we will continue to consider potential acquisitions on a
selective basis. There can be no assurance that we will be able to identify suitable acquisition opportunities in the future or that we will be able to
consummate any such transactions on terms and conditions acceptable to us. Moreover, there can be no assurance that we will obtain manufacturers’
consents to acquisitions of additional franchises.
In the long-term, technological advances in the commercial vehicle industry, including drivetrain electrification or other alternative fuel technologies,
could have a material adverse effect on our business.
The commercial vehicle industry is predicted to experience change over the long-term. We see these changes beginning to occur, as certain of the
manufacturers we represent now have vehicles with electric drivetrains available for purchase. Technological advances, including with respect to drivetrain
electrification or other alternative fuel technologies, could potentially have a material adverse effect on our parts and service business, as such vehicles are
currently being described as potentially requiring less service and having fewer parts. The effect of these technological advances on our business is still
uncertain, as there are many factors that are unknowable at this time, including when the infrastructure to support widespread adoption of such vehicles will
be in place and when such vehicles may be commercially available at price points that would lead to their widespread adoption. Regardless of where the
industry goes with respect to alternative fuel vehicles, we believe that, due to the geographic reach of our dealership network, relationships with both the
manufacturers we represent and our customers and our access to capital, we are well-positioned to serve our customers’ evolving needs.
Similarly, although we are aware of ongoing efforts to facilitate the development of autonomous commercial vehicles, the eventual timing of the
availability of autonomous commercial vehicles is uncertain due to regulatory requirements and additional technological requirements. The effect of
autonomous commercial vehicles on the commercial vehicle industry is uncertain and could include changes in the level of new and used commercial
vehicles sales, the price of new commercial vehicles, and the role of franchised dealers, any of which could materially adversely affect our business,
financial condition and results of operations.
COVID-19 has disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance.
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. While our Rush Truck Centers have remained operational throughout the
COVID-19 pandemic, the pandemic remains a fluid and evolving situation. Some of the potential impacts to our business that we believe are directly
related to the COVID-19 pandemic and that we are currently monitoring include, but are not limited to:
● The impact that the pandemic will have on our workforce availability;
● The impact that the pandemic will have on the supply chains of the commercial vehicle manufacturers and parts manufacturers that we represent.
We have been informed by the commercial vehicle manufacturers that we represent that production of commercial vehicles in 2023 will be
allocated to all of their dealers based on historical purchases. While we do not expect our allocation of commercial vehicles to be less than the
number of commercial vehicles we sold in 2022, there is still concern that component manufacturers’ supply chain issues may limit certain of our
commercial vehicle manufacturers’ ability to meet demand throughout the year; and
● The impact of the pandemic on global capital markets, which depending on future developments, could impact our capital resources and liquidity
in the future.
The potential impacts that we list above, and other impacts of the COVID-19 pandemic, are likely to also have the effect of heightening many of the other
risk factors described herein.
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Climate change concerns may impact our business in the future; natural disasters and adverse weather events can disrupt our business.
The concerns over climate change may impact our business in the future. Our current business model depends on our ability to sell, and provide
services to, commercial vehicles primarily powered by diesel and gasoline internal combustion engines, which result in greenhouse gas emissions. While
the manufacturers we represent have made substantial progress in reducing the amount of greenhouse gas emissions that result from internal combustion
engines, it is widely accepted that alternative fuel vehicles are necessary to address climate change. Reductions in the sale and use of commercial vehicles
powered by internal combustion engines creates risks to our historical business operations and we cannot predict the future costs to our business resulting
from these developments. However, we also believe that an industry transition away from internal combustion engines presents significant opportunities for
us. Due in large part to the geographic reach of our dealership network, relationships with both the manufacturers we represent and our customers and our
access to capital, we believe we are well-positioned to serve our customers’ evolving needs and help them reduce their greenhouse gas emissions by
helping them integrate more alternative fuel vehicles into their fleets and providing various services related thereto.
Scientific evidence suggests that a warming climate potentially results in an environment more prone to natural disasters, such as hurricanes and
flooding. To date, we have seen increases in our cost to insure against such risks, which costs could continue to increase should this trend continue. Some
of our dealerships are located in regions of the United States where natural disasters and severe weather events (such as hurricanes, earthquakes, fires,
floods, tornadoes and hail storms) may disrupt our operations, which may adversely impact our business, results of operations, financial condition and cash
flows. In addition to business interruption, our business is subject to substantial risk of property loss due to the significant concentration of property at
dealership locations. Although we have substantial insurance to mitigate this risk, we may be exposed to uninsured or underinsured losses that could have a
material adverse effect on our business, financial condition, results of operations or cash flows.
Risks Related to Financial and Economic Matters
We may be required to obtain additional financing to maintain adequate inventory levels.
Our business requires new and used commercial vehicle inventories held for sale to be maintained at dealer locations in order to facilitate
immediate sales to customers on demand. We generally purchase new and used commercial vehicle inventories with the assistance of floor plan financing
agreements. Our primary floor plan financing agreement, the Floor Plan Credit Agreement, expires on September 14, 2026, and may be terminated without
cause upon 360 days’ notice. In the event that our floor plan financing becomes insufficient to satisfy our future requirements or our floor plan providers
are unable to continue to extend credit under our floor plan agreements, we would need to obtain similar financing from other sources. There is no
assurance that such additional floor plan financing or alternate financing could be obtained on commercially reasonable terms.
Changes in interest rates could have a negative adverse effect on our profitability.
Our Floor Plan Credit Agreement, RTC Canada Floor Plan Agreement, WF Credit Agreement, PLC Agreement and RTC Canada Revolving
Credit Agreement are each subject to variable interest rates. Therefore, our interest expense rises when interest rates increase. Currently, our outstanding
borrowings under our Floor Plan Credit Agreement and certain other loan agreements are borrowed at LIBOR plus an applicable margin. Although LIBOR
is no longer being used to price new loans, LIBOR quotes will be available for existing credit agreements until June 30, 2023. In the event that LIBOR
quotes are no longer available, SOFR will replace LIBOR in certain of our credit agreements which currently use LIBOR, including our Floor Plan Credit
Agreement. It is unclear how increased regulatory oversight and changes in the method for determining benchmark interest rates may affect our results of
operations or financial conditions. However, any rise in interest rates generally may also have the effect of depressing demand in the interest rate sensitive
aspects of our business, particularly new and used commercial vehicle sales, because many of our customers finance such purchases. As a result, a rise in
interest rates may have the effect of simultaneously increasing our costs and reducing our revenues, which could negatively affect our business, financial
condition and results of operations. See “Quantitative and Qualitative Disclosures about Market Risk” for a discussion regarding our interest rate
sensitivity.
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The dollar amount of our backlog, as stated at any given time, is not necessarily indicative of our future earnings.
As of December 31, 2022, our backlog of new commercial vehicle orders was approximately $4,216.0 million. 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 only include 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.
Reductions in backlog due to cancellation by a customer or for other reasons will adversely affect, potentially to a material extent, the revenue and
profit we actually receive from orders projected in our backlog. If we were to experience significant cancellations of orders in our backlog, our financial
condition could be adversely affected.
Our current backlog is the largest it has ever been in our Company’s history. Given the potential for industry headwinds in the coming months
caused by lower spot rates and higher interest rates, which could negatively impact industry demand for new commercial vehicles moving forward, we
believe that the longer it takes to fill our backlog, the greater the risk that a significant amount of commercial vehicle orders currently reflected in our
backlog could be cancelled.
Impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.
We have a substantial amount of goodwill on our balance sheet as a result of acquisitions we have completed. Approximately 99% of this goodwill
is concentrated in our Truck Segment. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and
liabilities as of the acquisition date. Goodwill is not amortized, but instead is evaluated for impairment at least annually, or more frequently if potential
interim indicators exist that could result in impairment. In testing for impairment, if the carrying value of a reporting unit exceeds its current fair value as
determined based on the discounted future cash flows of the reporting unit, the goodwill is considered impaired and is reduced to fair value via a non-cash
charge to earnings. Events and conditions that could result in impairment include weak economic activity, adverse changes in the regulatory environment,
any matters that impact the ability of the manufacturers we represent to provide us with commercial vehicles or parts, issues with our franchise rights, or
other factors leading to reductions in expected long-term sales or profitability. Determination of the fair value of a reporting unit includes developing
estimates that are highly subjective and incorporate calculations that are sensitive to minor changes in underlying assumptions. Changes in these
assumptions or a change in the Company’s reportable segments could result in an impairment charge in the future, which could have a significant adverse
impact on our reported earnings. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting
Policies and Estimates — Goodwill” for more information regarding the potential impact of changes in assumptions.
Our business is subject to a number of economic risks
New and used commercial vehicle retail sales tend to experience periods of decline when general economic conditions worsen. We may
experience sustained periods of decreased commercial vehicle sales in the future. Any decline or change of this type could materially affect our business,
financial condition and results of operations. In addition, adverse regional economic and competitive conditions in the geographic markets in which we
operate could materially adversely affect our business, financial condition and results of operations. Our commercial vehicle sales volume therefore may
differ from industry sales fluctuations.
Economic conditions and the other factors described above also may materially adversely impact our sales of parts and repair services, and finance
and insurance products.
We depend on relationships with the manufacturers we represent and component suppliers for sales incentives, discounts and similar programs which are
material to our operations.
We depend on the manufacturers we represent and component suppliers for sales incentives, discounts, warranties and other programs that are
intended to promote the sales of their commercial vehicles or our use of their components in the vehicles we sell. Most of the incentives and discounts are
individually negotiated and not always the same as those made available to commercial vehicle manufacturers or our competitors. These incentives and
discounts are material to our operations. A reduction or discontinuation of a commercial vehicle manufacturer’s or component supplier’s incentive program
could have a material adverse effect on our profitability.
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We are dependent on the ongoing success of the manufacturers we represent and adverse conditions affecting the manufacturers we represent may
negatively impact our revenues and profitability.
The success of each of our dealerships is dependent on the manufacturers represented at each dealership. Our ability to sell new vehicles that
satisfy our customers’ demands and replacement parts is dependent on the ability of the manufacturers we represent to produce and deliver new vehicles
and replacement parts to our dealerships. Additionally, our dealerships perform warranty work for vehicles under manufacturer product warranties, which
are billed to the appropriate vehicle manufacturer or component supplier as opposed to invoicing our customer. We generally have significant receivables
from vehicle manufacturers and component suppliers for warranty and service work performed for our customers. In addition, we rely on vehicle
manufacturers and component suppliers to varying extents for product training, marketing materials, and other items for our stores. Our business, results of
operations, and financial condition could be materially adversely affected as a result of any event that has a material adverse effect on the vehicle
manufacturers or component suppliers we represent.
The manufacturers we represent may be adversely impacted by economic downturns, significant declines in the sales of their new vehicles, labor
strikes or similar disruptions (including within their major suppliers), rising raw materials costs, rising employee benefit costs, adverse publicity that may
reduce consumer demand for their products (including due to bankruptcy), product defects, vehicle recall campaigns, litigation, poor product mix or
unappealing vehicle design, governmental laws and regulations, or other adverse events. Our results of operations, financial condition or cash flows could
be adversely affected if one or more of the manufacturers we represent are impacted by any of the foregoing adverse events.
Actions taken in response to continued operational losses by manufacturers we represent, including bankruptcy or reorganizations, could have a
material adverse effect on our sales volumes and profitability. In addition, such actions could lead to the impairment of one or more of our franchise rights,
inventories, fixed assets and other related assets, which in turn could have a material adverse effect on our financial condition and results of operations.
Actions taken in response to continued operational losses by manufacturers we represent, including bankruptcy or reorganizations, could also eliminate or
reduce such manufacturers’ indemnification obligations to our dealerships, which could increase our risk in products liability actions.
Risks Related to Legal and Regulatory Matters
If state dealer laws are repealed or weakened, our dealerships will be more susceptible to termination, nonrenewal or renegotiation of their dealership
agreements.
We depend on our vehicle dealership agreements for a substantial portion of our revenues and profitability. State dealer laws generally provide that
a manufacturer may not terminate or refuse to renew a dealership agreement unless it has first provided the dealer with written notice setting forth good
cause and stating the grounds for termination or nonrenewal. Vehicle manufacturers’ lobbying efforts may lead to the repeal or revision of state motor
vehicle dealer laws. If motor vehicle dealer laws are repealed or amended in the states in which we operate dealerships, the manufacturers we represent
may be able to terminate our vehicle dealership agreements without providing advance notice, an opportunity to cure or a showing of good cause. Without
the protection of state dealer laws, or if such laws are weakened, we will be subject to higher risk of termination or nonrenewal of our vehicle dealership
agreements. Termination or nonrenewal of our vehicle dealership agreements would have a material adverse effect on our operations, revenues and
profitability.
Our dealerships are subject to federal, state and local environmental regulations that may result in claims and liabilities, which could be material.
We are subject to federal, state and local environmental laws and regulations 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 contamination. As with commercial vehicle dealerships generally, and service, parts and 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. Any non-compliance with these laws and regulations could result in significant fines, penalties and
remediation costs which could adversely affect our results of operations, financial condition or cash flows.
We may also have liability in connection with materials that were sent to third party recycling, treatment, or disposal facilities under federal and
state statutes. Applicable laws may make us responsible for liability relating to the investigation and remediation of contamination without regard to fault
or the legality of the conduct that contributed to the contamination. In connection with our 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 dispositions of businesses, or dispositions
previously made by companies we acquire, we may retain exposure for environmental costs and liabilities, some of which may be material.
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Further, environmental laws and regulations are complex and subject to change. For example, in August 2021, the President of the United States
issued an executive order intended to increase fuel efficiency, further reduce GHG emissions and speed up the development of “zero-emission” vehicles.
The executive order calls for the EPA and the Secretary of Transportation to adopt new rules and regulations for commercial vehicles starting as early as
model year 2027. Similarly, in June 2020, 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 and two additional states have since signed. Six of the states that signed are states where we sell new commercial
vehicles: California, Colorado, New Mexico, North Carolina and Virginia. The signatories to the memorandum all agreed on a goal of ensuring that 100%
of new Class 3 through 8 commercial vehicles are zero emission by 2050, with an interim target of 30% zero emission by 2030. Attaining these goals
would likely require the adoption of new laws and regulations and we cannot predict at this time whether such laws and regulations would have an adverse
impact on our business. 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 which could 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.
Disruptions to our information technology systems and breaches in data or system security could adversely affect our business.
We rely upon our information technology systems to manage all aspects of our business, including processing and recording sales to, and
payments from, customers, managing inventory, communicating with manufacturers and vendors, processing employee payroll and benefits and financial
reporting. Any inability to manage these systems, including with respect to matters related to system and data security, privacy, reliability, compliance,
performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our
business. In addition, in the ordinary course of business, we collect and store sensitive data and information, including our proprietary business information
and that of our customers, suppliers and business partners, as well as personally identifiable information about our employees and customers. Despite the
security measures we have in place, our facilities and systems, and those of our third-party service providers, could be vulnerable to cyberattacks and other
security breaches, computer viruses, lost or misplaced data, programming errors, human errors or other events, and such incidents can remain undetected
for a period of time despite our best efforts to detect and respond to them in a timely manner.
We have, from time to time, experienced threats to our data and systems, including malware, ransomware and computer virus attacks. We are
continuously developing and enhancing our controls, processes, and practices designed to protect our systems, computers, software, data, and networks
from attack, damage, or unauthorized access. This continued development and enhancement requires us to expend significant additional resources.
However, we may not anticipate or combat all types of future attacks until after they have been launched. If any of these breaches of security occur, we will
be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees
and engage third-party experts and consultants.
Any cyberattack, security breach or other event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential
information of personal identifiable information of employees or customers, whether by us directly or our third-party service providers, could adversely
affect our business operations, sales, reputation with current and potential customers, associates or vendors and employees and result in litigation or
regulatory actions, all of which could have a material adverse effect on our business and reputation.
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We are exposed to a variety of claims relating to our business and the liability associated with such claims may exceed the level of our insurance coverage.
In the course of our business, we are exposed to claims for personal injury, death or property damage resulting from: (i) our customers’ use of
commercial vehicles that we sell, service, lease or rent; (ii) our customers’ purchase of other products that we design, manufacture, sell or install, such as
commercial vehicle parts, custom vehicle modifications and CNG fuel systems; and (iii) injuries caused by motor vehicle accidents that our service or
delivery personnel are involved in. In addition, we have employees who work remotely from time to time at certain customers’ locations that are
considered inherently dangerous, such as oil or gas well drilling sites, commercial construction sites and manufacturing facilities. We could also be subject
to potential litigation associated with compliance with various laws and governmental regulations at the federal, state or local levels, such as those relating
to vehicle and highway safety, health and workplace safety, security and employment-related claims.
We carry comprehensive liability insurance, subject to deductibles and self-insured retentions, at levels we believe are sufficient to
mitigate existing and future claims. However, we may be exposed to claims for which coverage is not afforded or the damages exceed the limits of our
insurance coverage or multiple claims causing us to incur significant out-of-pocket costs before reaching the deductible amount, all of which could
adversely affect our financial condition and results of operations. In addition, the cost of such insurance policies may increase significantly upon renewal of
those policies as a result of general rate increases for the type of insurance we carry as well as our historical experience and experience in our industry.
Although we have not experienced any material losses that were not covered by insurance, our existing or future claims may exceed the coverage level of
our insurance, and such insurance may not continue to be available on economically reasonable terms, or at all. If we are required to pay significantly
higher premiums for insurance, are not able to maintain insurance coverage at affordable rates or if we must pay amounts in excess of claims covered by
our insurance, we could experience higher costs that could adversely affect our financial condition and results of operations. In fact, due to the rising costs
of premiums over the last couple of years, we have been increasing our use of self-insurance programs and increasing the amounts of our deductibles.
We have operations in Canada. As a result, we may incur losses from the impact of foreign currency fluctuations and have higher costs than we otherwise
would have due to the need to comply with foreign laws.
Our operations in Canada are subject to the risks normally associated with international operations. These include: (i) the need to convert
currencies, which could result in a gain or loss depending on fluctuations in exchange rates; and (ii) the need to comply with Canadian laws and
regulations, as well as U.S. laws and regulations, applicable to our operations in Canada. Changes in such laws or regulations, or any material failure to
comply with any applicable laws or regulations, could increase our costs, affect our reputation, limit our business and otherwise impact our operations in
adverse ways. In addition, laws or regulations or the interpretations thereof can conflict among jurisdictions, and compliance in one jurisdiction could result
in legal or reputational risks in another jurisdiction.
Risks Related to Our Common Stock
We are controlled by one shareholder and his affiliate.
Collectively, Mr. Rush and his affiliate own approximately 0.3% of our issued and outstanding shares of Class A common stock and 47.3% of our
issued and outstanding Class B common stock. Mr. Rush collectively controls approximately 41.8% of the aggregate voting power of our outstanding
shares, which is substantially more than any other person or group. The interests of Mr. Rush may not be consistent with the interests of all shareholders.
As a result of such ownership, Mr. Rush has the ability to exercise substantial control over the Company, including with respect to the election of directors,
the determination of matters requiring shareholder approval and other matters pertaining to corporate governance.
Our dealership agreements could discourage another company from acquiring us.
Our dealership agreements with Peterbilt impose ownership requirements on certain officers of the Company. All of our dealership agreements
include restrictions on the sale or transfer of the underlying franchises. These ownership requirements and restrictions may prevent or deter prospective
acquirers from acquiring control of us and, therefore, may adversely impact the value of our common stock.
Additionally, Mr. Rush granted Peterbilt a right of first refusal to purchase his shares of common stock in the event that he desires to transfer in
excess of 100,000 shares in any 12-month period to any person other than an immediate family member, an associate or another Dealer Principal. This right
of first refusal, the number of shares owned by Mr. Rush and his affiliate, the requirement in our dealership agreements that the Dealer Principals retain a
controlling interest in us and the restrictions on the sale or transfer of our franchises contained in our dealer agreements, combined with the ability of the
Board of Directors to issue shares of preferred stock without further vote or action by the shareholders, may discourage, delay or prevent a change in
control without further action by our shareholders, which could adversely affect the market price of our common stock or prevent or delay a merger or
acquisition that our shareholders may consider favorable.
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Actions by our shareholders or prospective shareholders that would violate any of the above restrictions on our dealership agreements are
generally outside of our control. If we are unable to renegotiate these restrictions, we may be forced to terminate or sell one or more of our dealerships,
which could have a material adverse effect on us. These restrictions may also inhibit our ability to raise required capital or to issue our stock as
consideration for future acquisitions.
Our Class A common stock has limited voting power.
Each share of Class A common stock ranks substantially equal to each share of Class B common stock with respect to receipt of any dividends or
distributions declared on shares of common stock and the right to receive proceeds on liquidation or dissolution of us after payment of our indebtedness
and liquidation preference payments to holders of any preferred shares. However, holders of Class A common stock have 1/20th of one vote per share on all
matters requiring a shareholder vote, while holders of Class B common stock have one full vote per share.
Our Class B common stock has a low average daily trading volume. As a result, sales of our Class B common stock could cause the market price of our
Class B common stock to drop, and it may be difficult for a stockholder to liquidate its position in our Class B common stock quickly without adversely
affecting the market price of such shares.
The volume of trading in our Class B common stock varies greatly and may often be light. As of December 31, 2022, the three-month average
daily trading volume of our Class B common stock was approximately 17,500 shares, with twenty-five days having a trading volume below 10,000 shares.
If any large shareholder were to begin selling shares in the market, the added available supply of shares could cause the market price of our Class B
common stock to drop. In addition, the lack of a robust resale market may require a shareholder to sell a large number of shares of our Class B common
stock in increments over time to mitigate any adverse impact of the sales on the market price of our Class B common stock.
If W.M. “Rusty” Rush were forced to sell shares of our common stock that he has pledged to secure a personal loan obligation, such sales could cause our
stock price to decline.
Mr. Rush has pledged certain of his shares of Class A and Class B common stock as collateral in connection with a personal loan. If the price of
our common stock were to decline substantially, Mr. Rush could be forced by the lender to sell shares of his Class A and/or Class B common stock to
satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline, particularly
with respect to our Class B common stock, which typically has a low average daily trading volume, as noted above.
We are not a party to Mr. Rush’s loan, but we have entered into a right of first refusal agreement with Mr. Rush and the lender. The right of refusal
agreement provides us with the right, but not the obligation, to purchase the shares pledged as collateral in the event Mr. Rush is ever in default under the
terms of his loan.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters are located in New Braunfels, Texas. As of December 2022, we also own or lease numerous facilities used in our
operations in the following locations: Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky,
Missouri, New Mexico, Nebraska, Nevada, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia and Ontario, Canada.
We lease a hangar in New Braunfels, Texas for our corporate aircraft. We also own and operate a guest ranch of approximately 10,500 acres near
Cotulla, Texas, which is used for client development purposes.
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Item 3. 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. 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. As of December 31, 2022, we
believe that there are no pending claims or litigation, individually or in the aggregate, that are reasonably likely to 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 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
Our common stock trades on The NASDAQ Global Select MarketSM under the symbols RUSHA and RUSHB. During 2022, our Board of
Directors approved four quarterly cash dividends on all outstanding shares of common stock totaling $0.80 per share. We expect to continue paying cash
dividends on a quarterly basis. However, there is no assurance as to the payment of 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, financial conditions and such other factors as the Board of Directors deems relevant.
The following table sets forth the high and low sales prices for our Class A common stock and Class B common stock for the fiscal periods
indicated and as quoted on The NASDAQ Global Select MarketSM and dividends declared.
Dividends
Declared
2022
High
Low
Dividends
Declared
2021
High
Low
Class A Common Stock
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Class B Common Stock
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
.19 $
.19
.21
.21
.19 $
.19
.21
.21
60.89 $
54.37
52.99
55.06
58.01 $
52.75
60.01
58.26
47.34 $
46.73
42.72
44.15
44.73 $
44.18
46.88
48.46
.18 $
.18
.19
.19
.18 $
.18
.19
.19
51.92 $
51.98
48.76
57.66
47.10 $
46.81
47.40
57.40
39.21
41.06
40.95
45.00
36.40
36.20
36.21
45.78
As of February 2, 2023, there were approximately 18 record holders of Class A common stock and approximately 28 record holders of Class B
common stock.
As of December 31, 2022, we have not sold any securities in the last three years that were not registered under the Securities Act.
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A summary of our stock repurchase activity for the fourth quarter of 2022 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)
October 1 – October 31, 2022
29,477 $
45.74
(4)
29,477 $
6,873,493
November 1 – November 30, 2022
December 1 – December 31, 2022
Total
–
113,192
142,669
–
(5)
51.21
–
113,192
142,669
6,873,493
144,200,145
(1)
(2)
(3)
(4)
(5)
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.
The shares represent Class A and Class B common stock repurchased by us.
We repurchased shares in 2022 under a stock repurchase program announced on November 30, 2021, which authorized the repurchase of up to
$100.0 million of our shares of Class A common stock and/or Class B common stock. This plan was terminated effective December 1, 2022; we
repurchased $93.1 million shares of our Class A and Class B common stock under the plan prior to its termination. On December 2, 2022, we
announced the approval of a new stock repurchase program, effective December 2, 2022, authorizing management to repurchase, from time to
time, up to an aggregate of $150.0 million of our shares of Class A common stock and/or Class B common stock.
Represents 29,477 shares of Class A common stock at an average price paid per share of $45.74.
Represents 104,179 shares of Class A common stock at an average price paid per share of $50.96 and 9,013 shares of Class B common stock at an
average price paid per share of $54.07.
Information regarding our equity compensation plans is incorporated by reference from Item 12, “Security Ownership of Certain Beneficial
Owners and Management and Related Shareholder Matters,” of this annual report on Form 10-K and should be considered an integral part of this Item 5.
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Performance Graph
The graph below matches the cumulative 5-Year total return of holders of Rush Enterprises, Inc.'s common stock with the cumulative total returns of the
S&P 500 index and a customized peer group of four companies that includes: Lithia Motors Inc, Paccar Inc, Penske Automotive Group Inc and Werner
Enterprises Inc. The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of
dividends) was $100 on December 31, 2017 and tracks it through December 31, 2022.
12/17
12/18
12/19
12/20
12/21
12/22
Rush Enterprises, Inc.
S&P 500
Peer Group
100.00
100.00
100.00
71.19
95.62
85.20
94.80
125.72
127.99
124.05
148.85
155.30
174.19
191.58
177.55
175.28
156.89
187.26
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
The foregoing performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act,
or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the
Securities Act or the Exchange Act. The stock price performance included in this graph is not necessarily indicative of future stock price performance.
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Item 6. Selected Financial Data
The information below was derived from the audited consolidated financial statements included in this report and reports we have previously filed
with the SEC. This information should be read together with those consolidated financial statements and the notes to those consolidated financial
statements. These historical results are not necessarily indicative of the results to be expected in the future. The selected financial data presented below may
not be comparable between periods in all material respects or indicative of our future financial position or results of operations due primarily to acquisitions
which occurred during the periods presented. See Note 15 to the Company’s Consolidated Financial Statements for a discussion of such acquisitions. The
selected financial data presented below should be read in conjunction with our other financial information included elsewhere herein.
2022
Year Ended December 31,
2021
(in thousands, except per share amounts)
2020
SUMMARY OF INCOME STATEMENT DATA
Revenues
New and used commercial vehicle sales
Aftermarket products and services sales
Lease and rental
Finance and insurance
Other
Total revenues
Cost of products sold
Gross profit
Selling, general and administrative
Depreciation and amortization
Gain (loss) on sale of assets
Operating income
Other income
Interest expense, net
Income before income taxes
Provision (benefit) for income taxes
Net Income
Less: Noncontrolling interest
Net Income attributable to Rush Enterprises
Net income per common share:
Basic
Diluted
Cash dividends declared per share
Weighted average shares outstanding:
Basic
Diluted
OPERATING DATA
Unit vehicle sales −
New vehicles
Used vehicles
Total unit vehicles sales
Commercial vehicle lease and rental units
$
$
$
$
$
4,351,370 $
2,372,439
322,257
29,741
25,863
7,101,670
5,614,511
1,487,159
927,836
55,665
2,455
506,113
22,338
19,124
509,327
117,242
392,085
703
391,382 $
3,039,953 $
1,793,363
247,234
27,964
17,628
5,126,142
4,033,844
1,092,298
731,340
53,354
1,432
309,036
6,417
1,770
313,683
72,268
241,415
−
241,415 $
7.06 $
6.85 $
0.80 $
4.32 $
4.17 $
0.74 $
2,863,309
1,600,445
236,223
21,949
14,014
4,735,940
3,860,473
875,467
665,258
57,456
1,852
154,605
6,132
9,014
151,723
36,836
114,887
−
114,887
2.09
2.04
0.41
55,400
57,151
55,892
57,878
54,866
56,242
2022
Year Ended December 31,
2021
2020
29,842
7,078
36,920
10,326
23,259
7,527
30,786
8,914
23,113
7,400
30,513
8,104
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BALANCE SHEET DATA
Working capital
Inventories
Total assets
Floor plan notes payable
Long-term debt, including current portion
Finance lease obligations, including current portion
Total shareholders’ equity
2022
Year Ended December 31,
2021
(in thousands)
2020
$
439,069 $
1,429,429
3,821,066
933,203
275,433
122,692
1,763,022
320,950 $
1,020,136
3,119,977
630,731
334,926
116,530
1,466,749
330,932
858,291
2,985,393
511,786
529,654
117,113
1,268,037
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a full-service, integrated retailer of commercial vehicles and related services. We operate one segment - the Truck Segment. The Truck
Segment operates a network of commercial vehicle dealerships primarily under the name “Rush Truck Centers.” Most Rush Truck Centers are a franchised
dealer for 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. We offer an integrated approach to meeting
customer needs by providing service, parts and collision repair (collectively, “Aftermarket Products and Services”) in addition to new and used commercial
vehicle sales and leasing, insurance and financial services, vehicle upfitting, CNG fuel systems and vehicle telematics products.
Our goal is to continue to serve as the premier service solutions provider to the end-users of commercial vehicles. Our strategic efforts to achieve
this goal include continuously expanding our portfolio of Aftermarket Products and Services, broadening the diversity of our commercial vehicle product
offerings and extending our network of Rush Truck Centers. Our commitment to provide innovative solutions to service our customers’ needs continues to
drive our strong Aftermarket Products and Services revenues.
Our Aftermarket Products and Services include a wide range of capabilities and products such as providing parts, service and collision repairs at
certain of our Rush Truck Centers, a fleet of mobile service units, technicians who work in our customers’ facilities, a proprietary line of commercial
vehicle parts and accessories, vehicle upfitting, a broad range of diagnostic and analysis capabilities, a suite of telematics products and assembly services
for specialized bodies and equipment. Aftermarket Products and Services accounted for 61.7% of our total gross profits in 2022.
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, which
was 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-K have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest period
presented.
The COVID-19 Pandemic and Its Impact on Our Business
While business conditions have improved significantly since the onset of the COVID-19 pandemic in the second quarter of 2020, our industry
continues to be impacted by supply chain issues generally believed to be attributable to the COVID-19 pandemic that are negatively affecting new
commercial vehicle production and the availability of aftermarket parts.
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Summary of 2022
Our results of operations for the year ended December 31, 2022 are summarized below as follows:
● Our gross revenues totaled $7,101.7 million, a 38.5% increase from gross revenues of $5,126.1 million in 2021.
● Gross profit increased $394.9 million, or 36.1%, compared to 2021. Gross profit as a percentage of sales decreased to 20.9% in 2022, from
21.3% in 2021.
● Our new Class 8 heavy-duty unit sales increased 51.8%, compared to 2021, which accounted for 6.3% of the total U.S. market and 1.8% of
the total Canadian market.
● Our new Class 4-7 medium-duty unit sales increased 5.2%, compared to 2021, including buses, which accounted for 4.6% of the total U.S.
market and 2.2% of the total Canadian market.
● New light-duty truck unit sales increased 18.4% in 2022, compared to 2021.
● Used truck unit sales decreased 6.0%, compared to 2021, however, used truck revenues increased 28.5%, compared to 2021 due to a sharp
increase in used truck values in the first half of 2022.
● Aftermarket Products and Services revenues increased $579.1 million, or 32.3%, to $2,372.4 million, compared to $1,793.4 million in 2021.
● Lease and rental revenues increased $75.0 million, or 30.3%, to $322.3 million, compared to 2021.
● Selling, General and Administrative (“SG&A”) expenses increased $196.5 million, or 26.9%, to $927.8 million, compared to $731.3 million
in 2021.
● On May 2, 2022, we completed the acquisition of an additional 30% equity interest in RTC Canada, resulting in us now owning an 80%
controlling interest in RTC Canada.
All of the above increases in new commercial vehicle sales, lease and rental revenues and Aftermarket Products and Services revenues and SG&A
expense for 2022 are primarily due to the acquisition of Summit Truck Group, LLC in December 2021 and the inclusion of RTC Canada results of
operations beginning in May 2022.
2023 Outlook
According to A.C.T. Research Co., LLC (“A.C.T. Research”), a commercial vehicle industry data and forecasting service provider, new U. S.
Class 8 truck retail sales are estimated to total 255,155 truck units in 2023, a 7.8% decrease compared to 259,220 units sold in 2022. We expect our U.S.
market share of new Class 8 truck sales to range between 6.0% and 6.5% in 2023. This market share percentage would result in the sale of approximately
15,300 to 16,500 new Class 8 trucks in 2023. We expect to sell approximately 1,000 additional new Class 8 trucks in Canada in 2023.
According to A.C.T. Research, new U. S. Class 4 through 7 commercial vehicle retail sales are estimated to total 253,600 units in 2023, an 8.5%
increase compared to 233,679 units sold in 2022. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between
4.2% and 4.7% in 2023. This market share percentage would result in the sale of approximately 10,750 to 11,900 new Class 4 through 7 commercial
vehicles in 2023. We expect to sell approximately 250 additional new Class 5 through 7 commercial vehicles in Canada in 2023.
We expect to sell approximately 1,800 to 2,000 light-duty vehicles and approximately 7,000 to 7,200 used commercial vehicles in 2023.
We expect lease and rental revenue to increase 9% to 11% during 2023, compared to 2022. This projected increase in lease and rental revenue in
2023, compared to 2022, is primarily related to a result of strong demand for rental commercial vehicles and the consolidation of RTC Canada into our
operating results.
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We continue to make progress on our strategic initiatives to increase our Aftermarket Products and Services revenues. We believe our Aftermarket
Products and Services revenues will increase 9% to 12% in 2023, compared to 2022. This projected increase in Aftermarket Products and Services
revenues in 2023, compared to 2022, is primarily related to price increases by the manufacturers of parts we sell and the consolidation of RTC Canada into
our operating results.
The above projections for new commercial vehicle sales will depend on our ability to obtain commercial vehicles from the manufacturers we
represent and such projections could be negatively impacted by manufacturer allocation decisions and supply chain issues affecting manufacturers’
production. In addition, we continue to monitor inflation and rising interest rates, which may negatively impact consumer spending and capital
expenditures across a variety of industries we support.
Key Performance Indicator
Absorption 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 our Aftermarket
Products and Services departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used
commercial vehicle departments and carrying costs of new and used commercial vehicle inventory. When 100% absorption is achieved, all of the gross
profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit. Our commercial
vehicle dealerships achieved a 136.6% absorption ratio for the year ended December 31, 2022 and 129.8% absorption ratio for the year ended December
31, 2021.
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 preparation of these consolidated financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
We believe the following accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial
statements.
The Company’s significant accounting policies are disclosed in Note 2 of the Notes to Consolidated Financial Statements.
Inventory Reserves
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.
Purchase Price Allocation, Intangible Assets and Goodwill
Purchase price allocation for business combinations and asset acquisitions requires the use of accounting estimates and judgments to allocate the
purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. We determine whether
substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the
single asset or group of assets, as applicable, is not a business. If not, we determine whether the single asset or group of assets, as applicable, meets the
definition of a business.
In connection with our business combinations, we record certain intangible assets, including franchise rights. We periodically review the estimated
useful lives and fair values of our identifiable intangible assets, taking into consideration any events or circumstances that might result in a diminished fair
value or revised useful life.
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The excess purchase price over the fair value of assets acquired is recorded as goodwill. We assess goodwill for impairment annually in the fourth
quarter, or whenever events or changes in circumstances indicate an impairment may have occurred. If impaired, the carrying values of the assets are
written down to fair value using Level 3 inputs. See Note 2 – Significant Accounting Policies for further discussion of Level 3 fair value.
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 income tax returns are periodically audited by tax authorities. These audits include questions regarding our tax filing positions, including the
timing and amount of deductions. In evaluating the exposures associated with our various tax filing positions, we adjust our liability for unrecognized tax
benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant
taxing authority to examine the tax position or when more information becomes available.
Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to
estimate the exposures associated with our various filing positions. Our effective income tax rate is also affected by changes in tax law, the level of earnings
and the results of tax audits. Although we believe that the judgments and estimates are reasonable, actual results could differ, and we may be exposed to
losses or gains that could be material. An unfavorable tax settlement would generally 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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Results of Operations
The following discussion and analysis includes our historical results of operations for 2022, 2021 and 2020. The following table sets forth for the
years indicated certain financial data as a percentage of total revenues:
Revenue
New and used commercial vehicle sales
Aftermarket Products and Services sales
Lease and rental
Finance and insurance
Other
Total revenues
Cost of products sold
Gross profit
Selling, general and administrative
Depreciation and amortization
Gain (loss) on sale of assets
Operating income
Other income
Interest expense, net
Income from continuing operations before income taxes
Provision (benefit) for income taxes
Net income
Net income attributable to noncontrolling interest
Net income attributable to Rush Enterprises, Inc.
2022
Year Ended December 31,
2021
2020
61.3%
33.4
4.5
0.4
0.4
100.0
79.1
20.9
13.1
0.7
0.0
7.1
0.3
0.2
7.2
1.7
5.5
0.0
5.5%
59.3%
35.0
4.8
0.6
0.3
100.0
78.7
21.3
14.3
1.0
0.0
6.0
0.1
0.0
6.1
1.4
4.7
0.0
4.7%
60.5%
33.8
5.0
0.4
0.3
100.0
81.5
18.5
14.0
1.2
0.0
3.3
0.1
0.2
3.2
0.8
2.4
0.0
2.4%
The following table sets forth the unit sales and revenue for new heavy-duty, new medium-duty, new light-duty and used commercial vehicles and
the absorption ratio for the years indicated (revenue in millions):
Vehicle unit sales:
New heavy-duty vehicles
New medium-duty vehicles
New light-duty vehicles
Total new vehicle unit sales
Used vehicles sales
Vehicle revenue:
New heavy-duty vehicles
New medium-duty vehicles
New light-duty vehicles
Total new vehicle revenue
Used vehicle revenue
Other vehicle revenue:(1)
2022
2021
2020
16,778
11,025
2,039
29,842
7,078
11,052
10,485
1,722
23,259
7,527
2,715.3
959.1
104.0
3,778.4
$
$
1,661.9
857.1
79.4
2,598.4
$
$
10,670
11,311
1,132
23,113
7,400
1,587.9
919.7
50.1
2,557.7
552.9
$
430.4
$
291.5
% Change
2022
vs
2021
2021
vs
2020
51.8%
5.2%
18.4%
28.3%
-6.0%
63.4%
11.9%
31.0%
45.4%
28.5%
3.6%
-7.3%
52.1%
0.6%
1.7%
4.7%
-6.8%
58.5%
1.6%
47.7%
20.1
$
11.2
$
14.1
79.5%
-20.6%
$
$
$
$
Dealership absorption ratio:
136.6%
129.8%
118.7%
5.2%
9.4%
(1) Includes sales of truck bodies, trailers and other new equipment.
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The following table sets forth for the periods indicated the percent of gross profit by revenue source:
Gross Profit:
New and used commercial vehicle sales
Aftermarket products and services sales
Lease and rental
Finance and insurance
Other
Total gross profit
Industry
2022
2021
2020
27.9%
61.7
6.7
2.0
1.7
100.0%
27.7%
62.7
5.4
2.6
1.6
100.0%
25.3%
66.7
3.9
2.5
1.6
100.0%
We operate in the commercial vehicle market. There has historically been a high correlation between new product sales in the commercial vehicle
market and the rate of change in U.S. industrial production and the U.S. gross domestic product.
Heavy-Duty Truck Market
The U.S. retail heavy-duty truck market is affected by a number of factors, including general economic conditions, fuel prices, other methods of
transportation, environmental and other government regulation, interest rate fluctuations and customer business cycles. According to data published by
A.C.T. Research, total U.S. retail sales of new Class 8 trucks in the last ten years have ranged from a low of approximately 187,600 in 2013 to a high of
approximately 281,440 in 2019. Class 8 trucks are defined by the American Automobile Association as trucks with a minimum gross vehicle weight rating
above 33,000 pounds.
Typically, Class 8 trucks are assembled by manufacturers utilizing certain components that may be manufactured by other companies, including
engines, transmissions, axles, wheels and other components. As commercial vehicles and certain commercial vehicle components have become
increasingly complex, the ability to provide service for commercial vehicles has become an increasingly competitive factor in the industry. The ability to
provide such service requires a significant capital investment in diagnostic and other equipment, parts inventory and highly trained service personnel. EPA
and Department of Transportation regulatory guidelines for service processes, including collision center, paint work and waste disposal, require
sophisticated equipment to ensure compliance with environmental and safety standards. Differentiation between commercial vehicle dealers has become
less dependent on price competition and is increasingly based on a dealer’s ability to offer a wide variety of services to their clients in a timely manner to
minimize vehicle downtime. Such services include the following: efficient, conveniently located and easily accessible commercial vehicle service centers
with an adequate supply of replacement parts and other aftermarket products and services; financing for commercial vehicle purchases; leasing and rental
programs; and the ability to accept multiple unit trade-ins related to large fleet purchases. We believe our one-stop center concept and the size and
geographic diversity of our dealership network gives us a competitive advantage in providing these services.
A.C.T. Research currently estimates approximately 255,155 new Class 8 trucks will be sold in the United States in 2023, compared to
approximately 259,220 new Class 8 trucks sold in 2022. A.C.T. Research currently forecasts sales of new Class 8 trucks in the U.S. to be approximately
212,000 in 2024.
Medium-Duty Truck Market
Many of our Rush Truck Centers sell medium-duty commercial vehicles manufactured by Peterbilt, International, Hino, Ford or Isuzu, and
provide parts and service for medium-duty commercial vehicles. Medium-duty commercial vehicles are principally used in short‑haul markets as delivery
vehicles; they typically operate locally and generally do not leave their service areas overnight. We also sell light-duty vehicles (Class 3 and under) at
several of our Ford dealerships.
A.C.T. Research currently forecasts sales of new Class 4 through 7 commercial vehicles in the U.S. to be approximately 253,600 units in 2023,
compared to 233,679 units in 2022. A.C.T. Research currently forecasts sales of new Class 4 through 7 commercial vehicles in the U.S. to be
approximately 252,750 in 2024.
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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenues
Total revenues increased $1,975.6 million, or 38.5%, in 2022, compared to 2021.
Our Aftermarket Products and Services revenues increased $579.1 million, or 32.3%, in 2022, compared to 2021. The increase in Aftermarket
Parts and Services revenues was primarily a result of strong demand, inflation, the Summit acquisition and the consolidation of RTC Canada into our
operating results.
Our revenues from sales of new and used commercial vehicles increased $1,311.4 million, or 43.1%, in 2022, compared to 2021. The increase in
commercial vehicle revenues was primarily a result of strong demand, the Summit acquisition and the consolidation of RTC Canada into our operating
results.
We sold 16,778 new heavy-duty trucks in 2022, a 51.8% increase compared to 11,052 new heavy-duty trucks in 2021. Our share of the new U.S.
Class 8 commercial vehicle sales market increased to approximately 6.3% in 2022, from 4.9% in 2021. This increase in new Class 8 truck sales and market
share was primarily a result of strong demand for new commercial vehicles, the Summit acquisition and the consolidation of RTC Canada into our
operating results.
We sold 11,025 new medium-duty commercial vehicles, including 1,237 buses, in 2022, a 5.2% increase compared to 10,485 new medium-duty
commercial vehicles, including 959 buses, in 2021. In 2022, we achieved a 4.6% share of the Class 4 through 7 commercial vehicle market in the U.S.,
compared to 4.2% in 2021. Our new Class 4 through 7 commercial vehicle sales increased due to strong demand for new commercial vehicles, the Summit
acquisition and the consolidation of RTC Canada into our operating results.
We sold 2,039 new light-duty vehicles in 2022, an 18.4% increase compared to 1,722 new light-duty vehicles in 2021. Our light-duty vehicle sales
benefited from the increased demand for light-duty vehicles in the U.S.
We sold 7,078 used commercial vehicles in 2022, a 6.0% decrease compared to 7,527 used commercial vehicles in 2021. We believe used
commercial vehicle demand and values will continue to decrease as new commercial vehicle production increases to a level adequate to meet customer
demand.
Commercial vehicle lease and rental revenues increased $75.0 million, or 30.3%, in 2022, compared to 2021. This increase in commercial vehicle
lease and rental revenues was primarily a result of strong demand for rental commercial vehicles, the Summit acquisition and the consolidation of RTC
Canada into our operating results.
Finance and insurance revenues increased $1.8 million, or 6.4%, in 2022, compared to 2021. Finance and insurance revenues have limited direct
costs and, therefore, contribute a disproportionate share of our operating profits. We expect finance and insurance revenues to fluctuate proportionately with
our new and used commercial vehicle sales in 2023.
Other revenues increased $8.2 million, or 46.7% in 2022, compared to 2021. Other revenues consist primarily of document fees related to
commercial vehicle sales.
Gross Profit
Gross profit increased $394.9 million, or 36.1%, in 2022, compared to 2021. Gross profit as a percentage of sales decreased to 20.9% in 2022,
from 21.3% in 2021. This decrease in gross profit as a percentage of sales was a result of a change in our product sales mix. Commercial vehicle sales, a
lower margin revenue item, increased as a percentage of total revenues to 61.3% in 2022, from 59.3% in 2021. Aftermarket Services revenues, a higher
margin revenue item, decreased as a percentage of total revenues to 33.4% in 2022, from 35.0% in 2021.
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Gross margins from our Aftermarket Products and Services operations increased to 38.6% in 2022, from 38.1% in 2021. This increase in gross
margins was primarily due to increases in parts pricing, increases in parts rebates from our parts suppliers. Gross profit for Aftermarket Products and
Services increased to $916.8 million in 2022, from $684.1 million in 2021. Historically, parts operations’ gross margins range from 28% to 30% and
service and collision center operations range from 66% to 68%. Gross profits from parts sales represented 62.8% of total gross profit for Aftermarket
Products and Services operations in 2022 and 61.4% in 2021. Service and collision center operations represented 37.2% of total gross profit for
Aftermarket Products and Services operations in 2022 and 38.6% 2021. We expect blended gross margins on Aftermarket Products and Services operations
to range from 37.5% to 38.5% in 2023.
Gross margins on new Class 8 truck sales increased to 9.9% in 2022, from 9.0% in 2021. This increase was primarily due to strong demand for
new Class 8 trucks and the mix of purchasers during 2022. In 2023, we expect overall gross margins from new heavy-duty truck sales of approximately
8.8% to 9.9%.
Gross margins on new Class 4 through 7 commercial vehicle sales increased to 8.1% in 2022, from 7.8% in 2021. This increase was primarily due
to the mix of purchasers during 2022. For 2023, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 7.5%
to 8.5%, but this will largely depend upon the mix of purchasers and types of vehicles sold.
Gross margins on used commercial vehicle sales decreased to 9.9% in 2022, from 18.7% in 2021. This decrease was primarily due to declining
used commercial vehicle values as new Class 8 vehicle production increased during 2022. This margins in 2021 were primarily a result of the increase in
used commercial vehicle values due to strong demand for used commercial vehicles due to production constraints experienced by manufacturers we
represent. We expect margins on used commercial vehicles to return to our historical range of between 8.0% and 10.0% in 2023.
Gross margins from commercial vehicle lease and rental sales increased to 31.2% in 2022, from 23.9% in 2021. This increase is primarily related
to increased rental fleet utilization and changes initially made in the fall of 2021 with respect to how we finance commercial vehicles for our lease and
rental fleet. The interest associated with the WF Credit Agreement, the PLC Agreement and the RTC Canada Revolving Credit Agreement is recorded in
interest expense on the Consolidated Statements of Income. Prior to these credit agreements, interest expense associated with our lease and rental fleet
purchases was recorded in cost of sales because each borrowing was directly related to each lease and rental vehicle purchased. This change in the structure
of financing of our lease and rental fleet results in increased gross margins from our commercial vehicle lease and rental sales. We expect gross margins
from lease and rental sales of approximately 28.0% to 31.0% during 2023. Our policy is to depreciate our lease and rental fleet using a straight-line method
over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term.
This policy results in 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 revenues, as described above, have limited direct costs and, therefore, contribute a disproportionate
share of gross profit.
Selling, General and Administrative Expenses
SG&A expenses increased $196.5 million, or 26.9%, in 2022, compared to 2021. This increase primarily resulted from increased general and
administrative expense associated with the Summit acquisition and consolidation of RTC Canada into our operating results. SG&A expenses as a
percentage of total revenues decreased to 13.1% in 2022, from 14.3% in 2021. Annual SG&A expenses as a percentage of total revenues have ranged from
approximately 12.4% to 14.3% over the last five years. In general, when new and used commercial vehicle revenues increase as a percentage of total
revenues, SG&A expenses as a percentage of total revenues will be at the lower end of this range. For 2023, we expect SG&A expenses as a percentage of
total revenues to range from 13.0% to 14.0%. For 2023, 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 increased $2.3 million, or 4.3%, in 2022, compared to 2021.
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Interest Expense, Net
Net interest expense increased $17.4 million, or 980.5%, in 2022, compared to 2021. This increase in interest expense is a result of the increase in
inventory levels and rising interest rates on our variable rate debt compared to 2021. We expect net interest expense in 2023 to increase due to interest
related to lease and rental borrowings and floor plan debt, but the amount of the increase will depend on inventory levels, interest rate fluctuations and the
amount of cash available to make prepayments on our floor plan arrangements.
Income before Income Taxes
Income before income taxes increased $195.6 million, or 62.4%, in 2022, compared to 2021, as a result of the factors described above.
Income Taxes
Income tax expense increased $45.0 million, or 62.2%, in 2022, compared to 2021, as a result of the factors described above. We provided for
taxes at a 23.0% effective rate in 2022 and 2021. We expect our effective tax rate to be approximately 23.0% to 24.0% of pretax income in 2023.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
For a discussion of information on the year ended December 31, 2021, refer to Part II Item 7 in the 2021 Annual Report on Form 10-K. Inline
XBRL Viewer (sec.gov)
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 December 31, 2022, we had working capital of approximately $439.1 million, including $201.0 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
various credit agreements. The resulting interest earned on the Floor Plan Credit Agreement is recognized as an offset to our interest expense.
We continually evaluate our liquidity and capital resources based upon: (i) our cash and cash equivalents on hand; (ii) the funds that we expect to
generate through future operations; (iii) current and expected borrowing availability under our secured line of credit, working capital lines of credit
available under certain of our credit agreements and our Floor Plan Credit Agreement; and (iv) the potential impact of our capital allocation strategy and
any contemplated or pending future transactions, including, but not limited to, acquisitions, equity repurchases, dividends, or other capital expenditures. We
believe we will have sufficient liquidity to meet our debt service and working capital requirements, commitments and contingencies, debt repayments,
acquisitions, capital expenditures and any operating requirements for at least the next twelve months.
We have a line of credit that provides for a maximum borrowing of $20.0 million. There were no advances outstanding under this secured line of
credit at December 31, 2022, however, $14.1 million was pledged to secure various letters of credit related to self-insurance products, leaving $5.9 million
available for future borrowings as of December 31, 2022.
Our long-term debt, floor plan financing agreements and the WF Credit Agreement require us to satisfy various financial ratios such as the
leverage ratio, the asset coverage ratio and the fixed charge coverage ratio. As of December 31, 2022, we were in compliance with all debt covenants
related to debt secured by lease and rental units, our floor plan credit agreements and the WF Credit Agreement. We do not anticipate any breach of the
covenants in the foreseeable future.
We expect to purchase or lease commercial vehicles worth approximately $170.0 million to $180.0 million for our leasing operations during 2023,
depending on customer demand, most of which will be financed. We also expect to make capital expenditures for the purchase of recurring items such as
computers, shop tools and equipment and company vehicles of approximately $35.0 million to $40.0 million during 2023.
We are currently under contract to construct a new facility in Pontoon Beach, Illinois at an estimated cost of $13.9 million.
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During the fourth quarter of 2022, we paid a cash dividend of $11.4 million. Additionally, on February 14, 2023, our Board of Directors declared a
cash dividend of $0.21 per share of Class A and Class B common stock, to be paid on March 16, 2023, to all shareholders of record as of February 27,
2023. The total dividend disbursement is estimated to be approximately $11.4 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 December 2, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing management to
repurchase, from time to time, up to an aggregate of $150.0 million of our shares of Class A common stock 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, 2022.
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
December 31, 2022, we had repurchased $5.8 million of our shares of common stock under the current stock repurchase program. The current stock
repurchase program expires on December 31, 2023, and may be suspended or discontinued at any time.
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 December 31, 2022. 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
The following table summarizes our cash flows for the periods indicated (in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash
Cash Flows from Operating Activities
2022
Year Ended December 31,
2021
2020
$
$
294,400 $
(240,930)
(690)
118
52,898 $
422,346 $
(432,905)
(153,343)
−
(163,902) $
762,982
(127,457)
(505,097)
−
130,428
Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During 2022,
operating activities resulted in net cash provided by operations of $294.4 million. Net cash provided by operating activities primarily consisted of $392.1
million in net income, as well as non-cash adjustments related to depreciation and amortization of $199.1 million, deferred income tax of $4.3 million and
stock-based compensation of $25.3 million. Cash used in operating activities included an aggregate of $304.5 million net change in operating assets and
liabilities. Included in the net change in operating assets and liabilities were primarily the result of $31.4 million from the increase in accounts payable,
$34.1 million from the increase in customer deposits and $32.8 million from the increase in accrued liabilities which were offset primarily by cash outflows
of $74.6 million from an increase in accounts receivable and $324.5 million from an increase in inventory. The majority of commercial vehicle inventory is
financed through our floor plan credit agreements.
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During 2021, operating activities resulted in net cash provided by operations of $422.3 million. Net cash provided by operating activities primarily
consisted of $241.4 million in net income, as well as non-cash adjustments related to depreciation and amortization of $169.5 million, deferred income tax
of $13.7 million and stock-based compensation of $22.2 million. Cash used in operating activities included an aggregate of $17.4 million net change in
operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $32.3 million from a decrease in accounts
receivable, $12.1 million from the increase in accounts payable and $3.0 million from the increase in customer deposits, which were offset by cash
outflows of $33.6 million from an increase in inventory and $31.0 million from the decrease in accrued liabilities.
Cash Flows from Investing Activities
During 2022, cash used in investing activities totaled $240.9 million. Cash flows used in investing activities consist primarily of cash used for
capital expenditures and business acquisitions. Cash used for business acquisitions was $20.8 million during the year ended December 31, 2022. See Note
15 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions. Capital expenditures totaled $243.1 million
during 2022 and consisted primarily of purchases of property and equipment, improvements to our existing dealership facilities and $168.5 million for
purchases of rental and lease vehicles for the rental and leasing operations.
During 2021, cash used in investing activities totaled $432.9 million. Cash flows used in investing activities consist primarily of cash used for
capital expenditures and business acquisitions. Cash used for business acquisitions was $269.3 million during the year ended December 31, 2021. See Note
15 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions. Capital expenditures totaled $167.2 million
during 2021 and consisted primarily of purchases of property and equipment, improvements to our existing dealership facilities and $164.6 million for
purchases of rental and lease vehicles for the rental and leasing operations.
Cash Flows from Financing Activities
Cash flows used in financing activities include borrowings and repayments of long-term debt and net payments of floor plan notes payable. During
2022, our financing activities resulted in net cash used in financing of $0.7 million. The cash outflows consisted primarily of $1,099.2 million used for
principal repayments of long-term debt and capital lease obligations during 2022 and $8.7 million for taxes paid related to net share settlement of equity
awards. Additionally, during 2022, we paid cash dividends of $44.6 million and used $93.7 million to repurchase shares of Rush Class A common stock
and Rush Class B common stock. These cash outflows were partially offset by $273.9 million from net draws on floor plan notes payable (non-trade),
borrowings of $958.3 million of long-term debt and $13.3 million from the issuance of shares related to equity compensation plans.
During 2021, our financing activities resulted in net cash used in financing of $153.3 million. The cash outflows consisted primarily of $468.8
million used for principal repayments of long-term debt and capital lease obligations and $33.6 million used to purchase shares of Rush Class A common
stock and Rush Class B common stock during. Additionally, during 2021, we paid cash dividends of $41.1 million. These cash outflows were partially
offset by $118.9 million from net draws on floor plan notes payable (non-trade), borrowings of $260.3 million of long-term debt related to the lease and
rental fleet and $10.9 million from the issuance of shares related to equity compensation plans.
On September 14, 2021, we entered into the WF Credit Agreement with the WF Lenders and the WF Agent which was amended effective
November 30, 2022. Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $175.0 million of revolving credit
loans for certain of our capital expenditures, including commercial vehicle purchases for our Idealease leasing and rental fleet, and general working capital
needs. We expect to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles
for our Idealease lease and rental fleet. We may borrow, repay and reborrow amounts pursuant to the WF Credit Agreement from time to time until the
maturity date. Borrowings under the WF Credit Agreement bear interest per annum, payable on each interest payment date, as defined in the WF Credit
Agreement, at (A) the daily SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or (B) on or after the term SOFR transition
date, the term SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio. The WF Credit Agreement expires on September 14, 2024,
although, upon the occurrence and during the continuance of an event of default, the WF Agent has the right to, or upon the request of the required lenders
must, terminate the commitments and declare all outstanding principal and interest due and payable. We may terminate the commitments at any time. On
December 31, 2022, we had approximately $40.5 million outstanding under the WF Credit Agreement.
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On October 1, 2021, we entered into the PLC Agreement. Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $300.0 million
of revolving credit loans to finance certain of our capital expenditures, including commercial vehicle purchases and other equipment to be leased or rented
through our PacLease franchises. We may borrow, repay and reborrow amounts pursuant to the PLC Agreement from time to time until the maturity date,
provided, however, that the outstanding principal amount on any date shall not exceed the borrowing base. Advances under the PLC Agreement bear
interest per annum, payable on the fifth day of the following month, at our option, at either (A) the prime rate, minus 1.55%, provided that the floating rate
of interest is subject to a floor of 0%, or (B) a fixed rate, to be determined between us and PLC in each instance of borrowing at a fixed rate. The PLC
Agreement expires on October 1, 2025, although either party has the right to terminate the PLC Agreement at any time upon 180 days written notice. If we
terminate the PLC Agreement prior to October 1, 2025, then all payments will be deemed to be voluntary prepayments subject to a potential prepayment
premium. On December 31, 2022, we had approximately $185.0 million outstanding under the PLC Agreement.
Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 days or less from the date the
commercial vehicles are invoiced from the factory. On September 14, 2021, we entered into Floor Plan Credit Agreement with BMO Harris and the lenders
signatory thereto. The Floor Plan Credit Agreement includes an aggregate loan commitment of $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) one month LIBOR rate, determined on the last day of the prior month,
plus (B) 1.10% and are payable monthly. Loans under the Floor Plan Credit Agreement for the purchase of used inventory are limited to $150.0 million and
loans for working capital purposes are limited to $200.0 million. The Floor Plan Credit Agreement expires September 14, 2026, although BMO Harris has
the right to terminate at any time upon 360 days written notice and we may terminate at any time, subject to specified limited exceptions. On December 31,
2022, we had approximately $762.9 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor
Plan Credit Agreement were $638.6 million during the year ended December 31, 2022. 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.
On May 31, 2022, RTC Canada entered into the RTC Canada Revolving Credit Agreement with BMO. Pursuant to the terms of the RTC Canada
Revolving Credit Agreement, BMO agreed to make up to $120.0 million CAD of revolving credit loans to finance certain of RTC Canada’s capital
expenditures, including commercial vehicle purchases and other equipment to be leased or rented through RTC Canada’s Idealease franchise, with an
additional $20.0 million available upon the request of RTC Canada and consent of BMO. Advances under the RTC Canada Revolving Credit Agreement
bear interest per annum, payable on the first business day of each calendar month, at CDOR, plus 1.35%. The RTC Canada Revolving Credit Agreement
expires September 14, 2026. On December 31, 2022, we had approximately $49.9 million outstanding under the RTC Canada Revolving Credit
Agreement.
On July 15, 2022, RTC Canada entered into the RTC Canada Floor Plan Agreement with BMO. Pursuant to the terms of the Agreement, BMO
agreed to make up to $116.7 million CAD of revolving credit loans to finance RTC Canada’s purchase of new and used vehicle inventory. Loans to
purchase used vehicle inventory are limited to twenty percent (20%) of the credit limit available at such time. RTC Canada may borrow, repay and
reborrow loans from time to time until the maturity date, provided, however, that the outstanding principal amount on any date shall not exceed the credit
limits set forth above with respect to new and used vehicles. Advances under the RTC Canada Floor Plan Agreement bear interest per annum, payable on
the first business day of each calendar month, at CDOR, plus 0.90% and in the case of an advance required to be made in USD dollars, at LIBOR, plus
1.10%. The RTC Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2022, we had approximately $44.6 million outstanding
under the RTC Canada Floor Plan Agreement.
Navistar Financial Corporation and Peterbilt offer trade terms that provide an 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.
Cyclicality
Our business is dependent on a number of factors including general economic conditions, fuel prices, interest rate fluctuations, credit availability,
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, total U.S. retail sales of new
Class 8 commercial vehicles have ranged from a low of approximately 187,600 in 2013, to a high of approximately 281,440 in 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.
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Item 7A. 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 market risk through interest rates related to our floor plan financing agreements, the WF Credit Agreement, the PLC
Agreement, the RTC Canada Revolving Credit Agreement and discount rates related to finance sales. Our floor plan debt is based on LIBOR and CDOR,
the WF Credit Agreement is based on SOFR, the RTC Canada Revolving Credit Agreement is based on CDOR and the PLC Agreement is based on the
prime rate. As of December 31, 2022, we had outstanding floor plan borrowings and lease and rental fleet borrowings in the aggregate amount of $1,208.6
million. Assuming an increase or decrease in LIBOR, SOFR, CDOR or the prime rate of 100 basis points, annual interest expense could correspondingly
increase or decrease by approximately $12.1 million.
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Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Income for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
47
48
50
51
52
53
54
55
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Rush Enterprises, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Rush Enterprises, Inc. and subsidiaries (the Company) as of December 31, 2022 and
2021, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2023, expressed an
unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the account or disclosures to which it relates.
Used Commercial Vehicle Inventory Reserves
Description of the Matter
At December 31, 2022, the Company’s used commercial vehicle inventory balance is approximately $80 million, which is
net of management’s estimate of used commercial vehicle inventory reserves in the amount of approximately $7 million. As
described in Note 6 to the consolidated financial statements, management adjusts the value of its inventory to net realizable
value to the extent it determines inventory cost cannot be recovered. Management estimates future demand and sales prices
to calculate the used commercial vehicle inventory reserves and to make corresponding adjustments to the carrying value of
these inventories to reflect the lower of cost or net realizable value.
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Table of Contents
Auditing management’s estimate of the used commercial vehicle inventory reserves involved auditor subjective judgment
because the estimate is sensitive to changes in management’s assumptions for forecasted product demand and future sales
prices.
How We Addressed the
Matter in Our Audit
We evaluated and tested the design and operating effectiveness of controls over the Company’s processes to estimate the
used commercial vehicle inventory reserve, which included management’s review of the underlying significant assumptions.
Our substantive audit procedures included, among others, evaluating the significant assumptions described above, and we
tested the completeness and accuracy of underlying data used in the estimation calculations and evaluating significant
assumptions. We also compared the cost of on-hand used commercial vehicle inventories to customer demand forecasts and
historical sales. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of
significant assumptions to evaluate the changes in the used commercial vehicle inventory reserves that would result from
changes in the assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
San Antonio, Texas
February 23, 2023
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Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Amounts)
December 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other
Total current assets
Property and equipment, net
Operating lease right-of-use assets, net
Goodwill, net
Other assets, net
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable
Current maturities of finance lease obligations
Current maturities of operating lease obligations
Trade accounts payable
Customer deposits
Accrued expenses
Total current liabilities
Long-term debt, net of current maturities
Finance lease obligations, net of current maturities
Operating lease obligations, net of current maturities
Other long-term liabilities
Deferred income taxes, net
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2022 and
2021
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares
authorized; 42,345,361 Class A shares and 12,083,085 Class B shares outstanding in 2022; and
43,107,867 Class A shares and 12,398,606 Class B shares outstanding in 2021
Additional paid-in capital
Treasury stock, at cost: 1,626,777 Class A shares and 1,112,446 Class B shares in 2022; and 339,786 Class
A shares and 492,052 Class B shares in 2021
Retained earnings
Accumulated other comprehensive income (loss)
Total Rush Enterprises, Inc. shareholders’ equity
Noncontrolling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
$
201,044 $
220,651
1,429,429
16,619
1,867,743
1,368,594
102,685
416,363
65,681
3,821,066 $
933,203 $
29,209
15,003
171,717
116,240
163,302
1,428,674
275,433
93,483
89,029
19,455
151,970
148,146
140,186
1,020,136
15,986
1,324,454
1,278,207
69,008
370,331
77,977
3,119,977
630,731
26,695
12,096
122,291
80,561
131,130
1,003,504
334,926
89,835
57,976
26,514
140,473
-
-
572
500,642
(130,930)
1,378,337
(4,130)
1,744,491
18,531
1,763,022
3,821,066 $
563
470,750
(36,933)
1,031,582
787
1,466,749
-
1,466,749
3,119,977
The accompanying notes are an integral part of these consolidated financial statements.
50
Table of Contents
Revenues
New and used commercial vehicle sales
Aftermarket products and services sales
Lease and rental sales
Finance and insurance
Other
Total revenue
Cost of products sold
New and used commercial vehicle sales
Aftermarket products and services sales
Lease and rental sales
Total cost of products sold
Gross profit
Selling, general and administrative
Depreciation and amortization
Gain on sale of assets
Operating income
Other income
Interest income (expense):
Interest income
Interest expense
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
2022
Year Ended December 31,
2021
2020
4,351,370 $
2,372,439
322,257
29,741
25,863
7,101,670
3,937,091
1,455,616
221,804
5,614,511
1,487,159
927,836
55,665
2,455
506,113
22,338
639
(19,763)
(19,124)
509,327
117,242
392,085
703
391,382 $
7.06 $
6.85 $
0.80 $
3,039,953 $
1,793,363
247,234
27,964
17,628
5,126,142
2,736,502
1,109,249
188,093
4,033,844
1,092,298
731,340
53,354
1,432
309,036
6,417
657
(2,427)
(1,770)
313,683
72,268
241,415
-
241,415 $
4.32 $
4.17 $
0.74 $
2,863,309
1,600,445
236,223
21,949
14,014
4,735,940
2,641,487
1,016,574
202,412
3,860,473
875,467
665,258
57,456
1,852
154,605
6,132
713
(9,727)
(9,014)
151,723
36,836
114,887
-
114,887
2.09
2.04
0.41
$
$
$
$
$
Total interest expense, net
Income before taxes
Income tax provision
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to Rush Enterprises, Inc.
Net income attributable to Rush Enterprises, Inc. per share of common stock:
Basic
Diluted
Dividends declared per common share
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Net income
Other comprehensive income (loss), net of tax:
2022
2021
2020
$
392,085 $
241,415 $
114,887
Foreign currency translation
Reclassification of currency translation related to equity method accounting
Other comprehensive income (loss) attributable to Rush Enterprises, Inc.
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to Rush Enterprises, Inc.
$
$
(4,316)
(601)
(4,917)
387,168 $
703
386,465 $
(82)
-
(82)
241,333 $
-
241,333 $
532
-
532
115,419
-
115,419
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In Thousands)
Common Stock
Shares
Outstanding
Class A Class B
$0.01 Par
Value
Capital
Additional
Paid -In
Accumulated
Other
Comprehensive
Income (Loss)
Total
Rush
Enterprises,
Inc.
Shareholders’
Equity
Noncontrolling
Interest
Total
Shareholders’
Equity
Treasury
Stock
Retained
Earnings
Balance, December 31, 2019
Stock options exercised and
stock awards
Stock-based compensation
related to stock options,
restricted shares and
employee stock purchase plan
Vesting of restricted share
awards
Issuance of common stock under
employee stock purchase plan
Common stock repurchases
Cancellation of treasury stock
Cash dividends declared on
Class A common stock
Cash dividends declared on
Class B common stock
Other comprehensive income
Net income
Balance, December 31, 2020
Stock options exercised and
stock awards
Stock-based compensation
related to stock options,
restricted shares and
employee stock purchase plan
Vesting of restricted share
awards
Issuance of common stock under
employee stock purchase plan
Common stock repurchases
Cash dividends declared on
Class A common stock
Cash dividends declared on
Class B common stock
Other comprehensive income
Net income
Balance, December 31, 2021
Stock options exercised and
stock awards
Stock-based compensation
related to stock options,
restricted shares and
employee stock purchase plan
Vesting of restricted share
awards
Issuance of common stock under
employee stock purchase plan
Common stock repurchases
Cash dividends declared on
Class A common stock
Cash dividends declared on
Class B common stock
Reclassification of foreign
currency translation related to
equity method
Foreign currency translation
adjustment
Noncontrolling interest equity
Net income
Balance, December 31, 2022
41,930
12,360
$
465 $ 397,267
$ (304,129) $ 1,065,553
$
337
$
1,159,493
–
$
1,159,493
1,247
–
–
–
–
10
19,582
–
19,356
339
2
(2,459)
177
(843)
(7)
–
(225)
(4)
–
–
–
–
–
–
–
–
2
–
72
–
–
–
–
3,900
–
–
–
–
–
–
–
–
–
–
(24,807)
326,057
–
–
–
–
–
–
–
–
–
(326,129)
(17,062)
(5,399)
–
114,887
–
–
–
–
–
–
–
–
532
–
19,592
19,356
(2,457)
3,902
(24,807)
–
(17,062)
(5,399)
532
114,887
–
–
–
–
–
–
–
–
–
–
19,592
19,356
(2,457)
3,902
(24,807)
–
(17,062)
(5,399)
532
114,887
42,504
12,470
$
551 $ 437,646
$
(2,879) $
831,850
$
869
$
1,268,037
–
$
1,268,037
784
–
–
–
–
8
14,157
–
22,246
347
3
(7,447)
149
(329)
–
(418)
–
–
–
–
–
–
–
–
1
–
–
–
–
–
4,148
–
–
–
–
–
–
–
–
–
(34,054)
–
–
–
–
–
–
–
–
–
(31,816)
(9,867)
–
241,415
–
–
–
–
–
–
–
(82)
–
14,165
22,246
(7,444)
4,149
(34,054)
(31,816)
(9,867)
(82)
241,415
–
–
–
–
–
–
–
–
–
14,165
22,246
(7,444)
4,149
(34,054)
(31,816)
(9,867)
(82)
241,415
43,108
12,399
$
563 $ 470,750
$
(36,933) $ 1,031,582
$
787
$
1,466,749
–
$
1,466,749
390
–
–
–
–
4
8,029
–
25,315
304
3
(8,669)
134
(1,287)
–
(620)
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
5,217
–
–
–
–
–
–
–
–
–
–
–
(93,997)
–
–
–
–
–
(34,207)
(10,420)
–
–
–
–
–
–
–
–
–
–
–
–
–
8,033
25,315
(8,666)
5,219
(93,997)
(34,207)
(10,420)
–
(601)
(601)
–
–
391,382
(4,316)
–
–
(4,316)
–
391,382
–
17,828
703
–
–
–
–
–
–
–
–
8,033
25,315
(8,666)
5,219
(93,997)
(34,207)
(10,420)
(601)
(4,316)
17,828
392,085
42,345
12,083
$
572 $ 500,642
$ (130,930) $ 1,378,337
$
(4,130) $
1,744,491
$
18,531
$
1,763,022
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities
$
Depreciation and amortization
Gain on sale of property and equipment, net
Gain on joint venture transaction
Gain on business acquisition
Stock-based compensation expense related to employee stock options and
employee stock purchases
Provision (benefit) for deferred income tax expense
Change in accounts receivable, net
Change in inventories
Change in prepaid expenses and other, net
Change in trade accounts payable
Payments on floor plan notes payable – trade, net
Change in customer deposits
Change in accrued expenses
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of property and equipment
Proceeds from the sale of property and equipment
Business disposition
Business acquisitions, net of cash
Other
Net cash used in investing activities
Cash flows from financing activities:
Draws (payments) on floor plan notes payable – non-trade, net
Proceeds from long-term debt
Principal payments on long-term debt
Principal payments on finance lease obligations
Proceeds from issuance of shares relating to employee stock options and employee
stock purchases
Taxes paid related to net share settlement of equity awards
Payments of cash dividends
Common stock repurchased
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate on cash
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
Income taxes paid, net
Noncash investing and financing activities:
Assets acquired under finance leases
$
$
$
$
2022
Year Ended December 31,
2021
2020
392,085 $
241,415 $
114,887
199,149
(2,467)
(12,500)
(6,958)
25,315
4,261
(74,607)
(324,508)
1,340
31,438
-
34,121
32,789
(5,058)
294,400
(243,060)
7,124
27,500
(20,762)
(11,732)
(240,930)
273,906
958,328
(1,084,465)
(14,780)
13,255
(8,669)
(44,556)
(93,709)
(690)
52,780
118
148,146
201,044 $
169,497
(1,432)
-
-
22,246
14,034
32,312
(33,572)
(252)
12,053
-
2,993
(31,337)
(5,611)
422,346
(167,177)
3,447
-
(269,332)
157
(432,905)
118,945
260,336
(455,064)
(13,774)
18,313
(7,443)
(41,060)
(33,596)
(153,343)
(163,902)
-
312,048
148,146 $
21,694 $
102,038 $
22,224 $
101,987 $
33,654 $
29,044 $
177,347
(1,852)
-
-
19,356
(37,858)
11,223
536,682
5,822
(23,336)
(114,958)
31,514
48,974
(4,819)
762,982
(136,200)
5,783
-
-
2,960
(127,457)
(369,592)
157,255
(255,279)
(11,192)
23,498
(2,461)
(22,461)
(24,865)
(505,097)
130,428
-
181,620
312,048
38,806
36,364
49,523
The accompanying notes are an integral part of these consolidated financial statements.
54
Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND OPERATIONS:
Rush Enterprises, Inc. (the “Company”) was incorporated in 1965 under the laws of the State of Texas. The Company operates a network of commercial
vehicle dealerships that primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, IC Bus or Blue Bird. Through its
strategically located network of Rush Truck Centers, the Company provides one-stop service for the needs of its commercial vehicle customers, including
retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.
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, which was 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-K 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
While business conditions have improved significantly since the onset of the COVID-19 pandemic in the second quarter of 2020, our industry continues to
be impacted by supply chain issues generally attributable to the COVID-19 pandemic that are negatively affecting new commercial vehicle production and
the availability of aftermarket parts. 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 of the COVID-19 pandemic and its effect on global economic trends and the various
supply chains serving the commercial vehicle industry.
Foreign Currency Transactions
The functional currency of the Company’s foreign subsidiary, Rush Truck Centres of Canada Limited (“RTC Canada”), is the local currency. Results of
operations for RTC Canada are translated to USD using the average exchange rate on a monthly basis during each quarter. The assets and liabilities of RTC
Canada are translated into USD using the exchange rate in effect on the balance sheet date. The related translation adjustments are recorded as a separate
component of the Company’s Consolidated Statements of Shareholders’ Equity in accumulated other comprehensive income (loss) and the Consolidated
Statement of Comprehensive Income.
2.
SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements presented herein include the accounts of Rush Enterprises, Inc. together with its consolidated subsidiaries. All
significant inter-company balances and transactions have been eliminated in consolidation.
Estimates in Financial Statements
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management
to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of
contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Management
analyzes the Company’s estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances,
however, actual results could differ materially from such estimates.
Cash and Cash Equivalents
Cash and cash equivalents generally consist of cash and other money market instruments. The Company considers all highly liquid investments with an
original maturity of ninety days or less to be cash equivalents.
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Allowance for Credit Losses and Repossession Losses
The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic
conditions. Accounts receivables consist primarily of commercial vehicle sales receivables, manufacturers’ receivables, leasing and parts and service
receivables and other trade receivables. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that
the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.
The Company provides an allowance for repossession losses after considering historical loss experience and other factors that might affect the ability of
customers to meet their obligations on finance contracts sold by the Company when the Company has a potential liability.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by specific identification of new and used commercial vehicle
inventory and by the first-in, first-out method for tires, parts and accessories. As the market value of the Company’s inventory typically declines over time,
reserves are established based on historical loss experience and market trends. These reserves are charged to cost of sales and reduce the carrying value of
the Company’s inventory on hand. An allowance is provided when it is anticipated that cost will exceed net realizable value.
Property and Equipment
Property and equipment are stated at cost and depreciated over their estimated useful lives. Leasehold improvements are amortized over the useful life of
the improvement, or the term of the lease, whichever is shorter. Provision for depreciation of property and equipment is calculated primarily on a straight-
line basis. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest, when
incurred, is added to the cost of the underlying assets and is amortized over the estimated useful life of such assets. The cost, accumulated depreciation and
amortization and estimated useful lives of the Company’s property and equipment are summarized as follows (in thousands):
Land
Buildings and improvements
Leasehold improvements
Machinery and shop equipment
Furniture, fixtures and computers
Transportation equipment
Lease and rental vehicles
Construction in progress
Accumulated depreciation and amortization
$
2022
2021
162,641 $
570,595
42,236
96,584
98,609
116,327
1,067,006
14,585
(799,989)
156,169
552,965
39,665
92,762
84,728
103,611
947,318
6,664
(705,675)
Estimated Life
(Years)
–
10 – 39
2 – 39
5 – 20
3 – 15
3 – 15
1 – 8
Total
$
1,368,594 $
1,278,207
The Company recorded depreciation expense of $177.1 million and amortization expense of $22.1 million for the year ended December 31, 2022,
depreciation expense of $148.3 million and amortization expense of $21.2 million for the year ended December 31, 2021, and depreciation expense of
$157.8 million and amortization expense of $19.5 million for the year ended December 31, 2020.
As of December 31, 2022, the Company had $114.7 million in lease and rental vehicles under various finance leases included in property and equipment,
net of accumulated amortization of $49.1 million. The Company recorded depreciation and amortization expense of $143.5 million related to lease and
rental vehicles in lease and rental cost of products sold for the year ended December 31, 2022, $116.1 million for the year ended December 31, 2021 and
$119.9 million for the year ended December 31, 2020.
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Purchase Price Allocation, Intangible Assets and Goodwill
Purchase price allocation for business combinations and asset acquisitions requires the use of accounting estimates and judgments to allocate the purchase
price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The Company determines
whether substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. If
so, the single asset or group of assets, as applicable, is not a business. If not, the Company determines whether the single asset or group of assets, as
applicable, meets the definition of a business.
In connection with the Company’s business combinations, it records certain intangible assets, including franchise rights. The Company periodically reviews
the estimated useful lives and fair values of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a
diminished fair value or revised useful life. See Note 15 – Acquisitions in the Notes to the Financial Statements for further discussion.
Goodwill represents the excess, at the date of acquisition, of the purchase price of an acquired business over the fair value of the net tangible and intangible
assets acquired. In addition to goodwill, the Company recognizes separately identifiable intangible assets for rights under franchise agreements with
manufacturers.
The fair value of the intangible franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The
carrying value of the Company’s manufacturer franchise rights was $12.3 million as of December 31, 2022 and $8.6 million as of December 31, 2021, and
is included in Other Assets on the accompanying Consolidated Balance Sheet. The Company has determined that manufacturer franchise rights have an
indefinite life, as there are no economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the
historically long lives of the manufacturers’ brand names. Furthermore, to the extent that any agreements evidencing manufacturer franchise rights have
expiration dates, the Company expects that it will be able to renew those agreements in the ordinary course of business. Accordingly, the Company does
not amortize manufacturer franchise rights.
Due to the fact that manufacturer franchise rights are specific to a geographic region, the Company has determined that evaluating and including all
locations acquired in the geographic region is the appropriate level for purposes of testing franchise rights for impairment. The Company is subject to
financial statement risk to the extent that manufacturer franchise rights become impaired due to decreases in the fair market value of its individual
franchises.
The Company assesses goodwill and intangible franchise rights for impairment annually in the fourth quarter, or whenever events or changes in
circumstances indicate an impairment may have occurred. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.
See Fair Value Measurements below for further discussion of Level 3 fair value inputs.
For the annual goodwill and intangible franchise rights impairment assessment conducted in the fourth quarter of 2022, the Company elected to perform a
qualitative assessment and determined that it was not more-likely-than-not that the fair values of the Company’s reporting units were less than their
carrying values.
No impairments of goodwill or intangible franchise rights were recorded during the years ended December 31, 2022, 2021 and 2020.
The following table sets forth the change in the carrying amount of goodwill for the Company for the year ended December 31, 2022 (in thousands):
Balance December 31, 2021
Acquisitions during 2022
Currency translation
Balance December 31, 2022
Equity Method Investments
$
$
370,331
47,437
(1,405)
416,363
On February 25, 2019, the Company acquired 50% of the equity interest in RTC Canada, which acquired the operating assets of Tallman Group, the largest
International Truck dealer in Canada. Prior to acquiring an additional 30% equity interest on May 2, 2022, for approximately $20.0 million, the Company
accounted for the equity interest in RTC Canada using the equity method of accounting. Subsequent to the Company’s acquisition of the additional 30%
equity interest on May 2, 2022, operations of RTC Canada are included in the accompanying consolidated financial statements. Income (loss) related to the
20% equity owner of RTC Canada is reflected in the accompanying consolidated financial statements as a noncontrolling interest. See Note 15 –
Acquisitions in the Notes to the Financial Statements for further discussion.
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On January 3, 2022, a subsidiary of Cummins, Inc. acquired a 50% equity interest in Natural Gas Fuel Systems, LLC (“NGFS”) from the Company for
$27.5 million. NGFS previously conducted business as Momentum Fuel Technologies. The $12.5 million gain realized on the transaction is included in
Other income on the Consolidated Statements of Income. The Company is accounting for the business as a joint venture and recognizes the investment
using the equity method. The Company’s equity income in NGFS is included in the line item Other income on the Consolidated Statements of Income.
Income Taxes
Management’s judgment is required to determine the provisions for income taxes and to determine whether deferred tax assets will be realized in full or in
part. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. When it is more likely than not that all or some portion of specific deferred income tax assets
will not be realized, a valuation allowance must be established for the amount of deferred income tax assets that are determined not to be realizable.
Accordingly, the facts and financial circumstances impacting deferred income tax assets are reviewed quarterly and management’s judgment is applied to
determine the amount of valuation allowance required, if any, in any given period.
In determining its provision for income taxes, the Company uses an annual effective income tax rate based on annual income, permanent differences
between book and tax income, and statutory income tax rates. The effective income tax rate also reflects its assessment of the ultimate outcome of tax
audits. The Company adjusts its annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events such
as audit settlements or changes in tax laws are recognized in the period in which they occur.
The Company’s income tax returns are periodically audited by tax authorities. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions. In evaluating the exposures associated with its various tax filing positions, the Company adjusts its liability
for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations
expires for the relevant taxing authority to examine the tax position or when more information becomes available.
The Company’s liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment
to estimate the exposures associated with its various filing positions. The Company’s effective income tax rate is also affected by changes in tax law, the
level of earnings and the results of tax audits. Although the Company believes that the judgments and estimates are reasonable, actual results could differ,
and the Company may be exposed to losses or gains that could be material. An unfavorable tax settlement would generally require use of the Company’s
cash and result in an increase in its effective income tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in
the Company’s effective income tax rate in the period of resolution. The Company’s income tax expense includes the impact of reserve provisions and
changes to reserves that it considers appropriate, as well as related interest.
Revenue Recognition Policies
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the
Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are
within the scope of ASU 2014-09, Revenue from Contracts with Customers ("Topic 606"), the Company performs the following five steps: (i) identify the
contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to
the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only
applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it
transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or
services promised within each contract and determines those that are performance obligations. The Company then assesses whether each promised good or
service is distinct and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied. For a complete discussion of accounting for revenue, see Note 17 – Revenue of the Notes to Consolidated Financial
Statements.
Rental and Lease Sales
The Company leases commercial vehicles that the Company owns 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.
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Cost of Sales
For the Company’s new and used commercial vehicle operations, cost of sales consists primarily of the Company’s actual purchase price, plus make-ready
expenses, less any applicable manufacturers’ incentives. For the Company’s parts operations, cost of sales consists primarily of the Company’s actual
purchase price, less any applicable manufacturers’ incentives. For the Company’s service and collision center operations, technician labor cost is the
primary component of cost of sales. For the Company’s rental and leasing operations, cost of sales consists primarily of depreciation and amortization, rent,
maintenance costs, license costs and interest expense considered direct and incremental on the lease and rental fleet owned and leased by the Company.
There are no costs of sales associated with the Company’s finance and insurance revenue or other revenue.
Leases
The Company leases commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a lease
at its inception. For leases with terms greater than twelve months, the Company records a lease asset and liability at the present value of lease payments
over the term. Many of the Company’s leases include renewal options and termination options that are factored into its determination of lease payments
when appropriate.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a
readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on
information available at lease commencement.
Taxes Assessed by a Governmental Authority
The Company accounts for sales taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction on a net
(excluded from revenues) basis.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of incentive based compensation for sales, finance and general management personnel,
salaries for administrative personnel and expenses for rent, marketing, insurance, utilities and other general operating purposes.
Stock Based Compensation
The Company applies the provisions of ASC topic 718-10, “Compensation – Stock Compensation,” which requires the measurement and recognition of
compensation expense for all share-based payment awards made to employees and directors, including grants of employee stock options, restricted stock
units, restricted stock awards and employee stock purchases under the Employee Stock Purchase Plan, based on estimated fair values.
The Company uses the Black-Scholes option-pricing model to estimate the fair value of share-based payment awards on the date of grant. The value of the
portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods.
Compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense
is recognized based on awards expected to vest. Accordingly, stock based compensation expense has been reduced for estimated forfeitures. Forfeitures are
estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company determines the fair value of share-based payment awards on the date of grant using an option-pricing model that is affected by the
Company’s stock price, as well as assumptions regarding a number of highly complex and subjective variables. These variables include the Company’s
expected stock price volatility over the term of the awards and actual and projected stock option exercise behaviors. Option-pricing models were developed
for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s stock
options have characteristics that are significantly different from traded options and because changes in the subjective assumptions can materially affect the
estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of fair value and it may not be indicative of
the fair value observed in a market transaction between a willing buyer and a willing seller.
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The following table reflects the weighted-average fair value of stock options granted during each period using the Black-Scholes option valuation model
with the following weighted-average assumptions used:
Weighted-average stock volatility
Expected dividend yield
Risk-free interest rate
Expected life (years)
Weighted-average fair value of stock options granted
$
34.97%
1.44%
2.13%
6.0
16.81
$
36.03%
1.65%
1.07%
6.0
14.77
$
33.11%
1.20%
0.80%
6.0
6.36
2022
2021
2020
The Company computes its historical stock price volatility in accordance with ASC Topic 718-10. The risk-free interest rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield assumption is based on the
Company’s history and expectation of dividend payouts. The expected life of stock options represents the weighted-average period the stock options are
expected to remain outstanding.
Advertising Costs
Advertising costs are expensed as incurred. Advertising and marketing expense was $8.7 million for 2022, $7.5 million for 2021 and $7.9 million for 2020.
Advertising and marketing expense is included in selling, general and administrative expense.
Accounting for Internal Use Software
The Company’s accounting policy with respect to accounting for computer software developed or obtained for internal use is consistent with ASC topic
350-40 (Internal Use Software), which provides guidance on accounting for the costs of computer software developed or obtained for internal use and
identifies characteristics of internal-use software. The Company has capitalized software costs, including capitalized interest, of approximately $4.2 million
as of December 31, 2022, net of accumulated amortization of $14.9 million, and had $5.5 million as of December 31, 2021, net of accumulated
amortization of $13.6 million.
Insurance
The Company is partially self-insured for a portion of the claims related to its property and casualty insurance programs. Accordingly, the Company is
required to estimate expected losses to be incurred. The Company engages a third-party administrator to assess any open claims and the Company adjusts
its accrual accordingly on an annual basis. The Company is also partially self-insured for a portion of the claims related to its worker’s compensation and
medical insurance programs. The Company uses actuarial information provided from third-party administrators to calculate an accrual for claims incurred,
but not reported, and for the remaining portion of claims that have been reported.
Fair Value Measurements
The Company has various financial instruments that it must measure at fair value on a recurring basis. See Note 9 – Financial Instruments and Fair Value of
the Notes to Consolidated Financial Statements, for further information. The Company also applies the provisions of fair value measurement to various
nonrecurring measurements for its financial and nonfinancial assets and liabilities.
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three
levels of the fair value hierarchy:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are
derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
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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.
Acquisitions
The Company uses the acquisition method of accounting for the recognition of assets acquired and liabilities assumed through acquisitions at their
estimated fair values as of the date of acquisition. The purchase price allocation for business combinations and asset acquisitions requires the use of
accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based
on their respective fair values. As a result, during the measurement period, which is not to exceed one year from the date of acquisition, any changes in the
estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period
or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the
Consolidated Statements of Income.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848).” In January 2021, the FASB clarified the scope of that guidance with
the issuance of ASU 2021-01, “Reference Rate Reform: Scope.” The new accounting rules provide optional expedients and exceptions for applying GAAP
to contracts, hedging relationships, and other transactions affected by reference rate reform. In December 2022, the FASB deferred the expiration date of
Topic 848 with the issuance of ASU 2022-06, “Reference Rate Reform: Deferral of the Sunset Date of Topic 848.” The new accounting rules extend the
relief in Topic 848 beyond the cessation date of USD LIBOR. The new accounting rules must be adopted by the fourth quarter of 2024. The Company is
currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and
disclosures.
3.
SUPPLIER CONCENTRATION:
Major Suppliers and Dealership Agreements
The Company has entered into dealership agreements with various manufacturers of commercial vehicles and buses (“Manufacturers”). These agreements
are nonexclusive agreements that allow the Company to stock, sell at retail and service commercial vehicles and sell parts from the Manufacturers in the
Company’s defined area of responsibility. The agreements allow the Company to use the Manufacturers’ names, trade symbols and intellectual property
and expire as follows:
Manufacturer
Peterbilt
International
Isuzu
Hino
Ford
Blue Bird
IC Bus
Expiration Dates
May 2023
May 2023 through December 2027
Indefinite
Indefinite
Indefinite
August 2024
May 2025 through December 2027
These agreements, as well as agreements with various other Manufacturers, impose a number of restrictions and obligations on the Company, including
restrictions on a change in control of the Company and the maintenance of certain required levels of working capital. Violation of these restrictions could
result in the loss of the Company’s right to purchase the Manufacturers’ products and use the Manufacturers’ trademarks.
The Company purchases its new Peterbilt vehicles from Peterbilt and most of the parts sold at its Peterbilt dealerships from PACCAR, Inc, the parent
company of Peterbilt, at prevailing prices charged to all franchised dealers. Sales of new Peterbilt commercial vehicles accounted for approximately 59.6%
of the Company’s new vehicle sales revenue for the year ended December 31, 2022, 62.5% of the Company’s new vehicle sales revenue for the year ended
December 31, 2021, and 59.0% of the Company’s new vehicle sales revenue for the year ended December 31, 2020.
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Primary Lenders
The Company purchases its new and used commercial vehicle inventories with the assistance of floor plan financing programs as described in Note 7 to
these Notes to Consolidated Financial Statements. The Company finances the majority of all new commercial vehicle inventory and the loan value of its
used commercial vehicle inventory under the Floor Plan Credit Agreement with BMO Harris. The Floor Plan Credit Agreement includes an aggregate loan
commitment of $1.0 billion. The Company’s floor plan financing agreements provide that the occurrence of certain events will be considered events of
default. In the event that the Company’s floor plan financing becomes insufficient, or its relationship with any of its current primary lenders terminates, the
Company would need to obtain similar financing from other sources. Management believes it can obtain additional floor plan financing or alternative
financing if necessary.
From time to time, the Company uses the WF Credit Agreement to finance its Idealease lease and rental fleet vehicles and for other working capital needs
Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $175.0 million of revolving credit loans for certain of the
Company’s capital expenditures, including commercial vehicle purchases for the Company’s Idealease lease and rental fleet, and general working capital
needs. The Company expects to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing
commercial vehicles for the Company’s Idealease lease and rental fleet.
The Company uses the PLC Agreement to finance its PacLease lease and rental fleet vehicles. Pursuant to the terms of the PLC Agreement, PLC agreed to
make up to $300.0 million of revolving credit loans to finance commercial vehicle purchases and other equipment to be leased or rented through the
Company’s PacLease franchises.
RTC Canada uses the RTC Canada Revolving Credit Agreement to finance its Idealease lease and rental fleet vehicles. Pursuant to the terms of the RTC
Canada Revolving Credit Agreement, BMO agreed to make up to $120.0 million CAD of revolving credit loans to finance certain of RTC Canada’s capital
expenditures, including commercial vehicle purchases and other equipment to be leased or rented through RTC Canada’s Idealease franchise, with an
additional $20.0 million available upon the request of RTC Canada and consent of BMO.
RTC Canada uses the RTC Canada Floor Plan Agreement to finance its new and used vehicle inventory. Pursuant to the terms of the RTC Canada Floor
Plan Agreement, BMO agreed to make up to $116.7 million CAD of revolving credit loans to finance RTC Canada’s purchase of new and used vehicle
inventory.
Concentrations of Credit Risks
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and
accounts receivable. The Company places its cash and cash equivalents with what it considers to be quality financial institutions based on periodic
assessments of such institutions. The Company’s cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit
Insurance Corporation insurance limit.
The Company controls credit risk through credit approvals and by selling a majority of its trade receivables, other than vehicle accounts receivable, without
recourse. Concentrations of credit risk with respect to trade receivables are reduced because a large number of geographically diverse customers make up
the Company’s customer base; however, substantially all of the Company’s business is concentrated in the United States commercial vehicle markets and
related aftermarkets.
The Company generally sells finance contracts it enters into with customers to finance the purchase of commercial vehicles to third parties. These finance
contracts are sold by the Company both with and without recourse. A majority of the Company’s finance contracts are sold without recourse. The Company
provides an allowance for doubtful receivables and a reserve for repossession losses related to finance contracts sold with recourse. Historically, the
Company’s allowances and reserves have covered losses inherent in these receivables.
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4.
ACCOUNTS RECEIVABLE:
The Company’s accounts receivable, net, consisted of the following (in thousands):
Trade accounts receivable from sale of vehicles
Trade receivables other than vehicles
Warranty claims
Other accounts receivable
Less allowance for credit losses
December 31,
2022
2021
$
83,158 $
96,978
13,060
29,776
(2,322)
37,599
68,884
9,290
26,003
(1,590)
Total
$
220,651 $
140,186
Accounts receivable as of January 1, 2021 was $172.5 million.
5.
INVENTORIES:
The Company’s inventories, net, consisted of the following (in thousands):
New commercial vehicles
Used commercial vehicles
Parts and accessories
Other
Less allowance
Total
6.
VALUATION ACCOUNTS:
Valuation and allowance accounts include the following (in thousands):
2022
Reserve for parts inventory
Reserve for commercial vehicle inventory
2021
Reserve for parts inventory
Reserve for commercial vehicle inventory
2020
Reserve for parts inventory
Reserve for commercial vehicle inventory
Accounts Receivable and Allowance for Credit Losses
December 31,
2022
2021
$
955,485 $
86,306
369,562
34,564
(16,488)
617,225
95,051
290,007
26,232
(8,379)
$
1,429,429 $
1,020,136
Balance
Beginning
of Year
Net Charged
to Costs and
Expenses
Net Write-
Offs
Balance
End
of Year
$
$
$
7,460 $
919
7,378 $
13,653
(5,415) $
(7,507)
9,315 $
6,075
3,520 $
(536)
(5,375) $
(4,620)
7,661 $
9,602
4,501 $
9,598
(2,847) $
(13,125)
9,423
7,065
7,460
919
9,315
6,075
The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. Under Accounting
Standards Topic 326, Financial Instruments Credit Losses, the Company is required to remeasure expected credit losses for financial instruments held on
the reporting date based on historical experience, current conditions and reasonable forecasts.
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Accounts receivable consists primarily of commercial vehicle sales receivables, manufacturers’ receivables and leasing, parts and service sales receivables
and other trade receivables. The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging
and current economic conditions. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the
likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.
Inventory
The Company provides a reserve for obsolete and slow moving parts. The reserve is reviewed and, if necessary, adjustments are made on a quarterly basis.
The Company relies on historical information to support its reserve. Once the inventory is written down, the Company does not reverse any reserve balance
until the inventory is sold.
The valuation for new and used commercial vehicle inventory is based on specific identification. A detail of new and used commercial vehicle inventory is
reviewed and, if necessary, adjustments to the value of specific vehicles are made on a quarterly basis.
The following table summarizes the changes in the allowance for credit losses (in thousands):
Balance
December 31,
2021
Provision for
the Year
Ended
December 31,
2022
Write offs
Against
Allowance, net
of Recoveries
Balance
December 31,
2022
$
$
76 $
419
1,069
26
1,590 $
105 $
2,580
2,673
-
5,358 $
(21) $
(2,426)
(2,153)
(26)
(4,626) $
160
573
1,589
-
2,322
Commercial vehicle receivables
Manufacturers’ receivables
Leasing, parts and service receivables
Other receivables
Total
7.
FLOOR PLAN NOTES PAYABLE AND LINES OF CREDIT:
Floor Plan Notes Payable
Floor plan notes are financing agreements to facilitate the Company’s purchase of new and used commercial vehicle inventory. These notes are
collateralized by the inventory purchased and accounts receivable arising from the sale thereof. The Company’s Floor Plan Credit Agreement provides for a
loan commitment of up to $1.0 billion and has the interest rate benchmarked to LIBOR, as defined in the agreement. The interest rate under the Company’s
Floor Plan Credit Agreement is the one month LIBOR rate plus 1.10%. The effective interest rate applicable to the Company’s Floor Plan Credit
Agreement was approximately 5.24% as of December 31, 2022. The Company utilizes its excess cash on hand to pay down its outstanding borrowings
under its Floor Plan Credit Agreement, and the resulting interest earned is recognized as an offset to the Company’s gross interest expense under the Floor
Plan Credit Agreement.
The Company’s RTC Canada Floor Plan Agreement provides for a loan commitment of up to $116.7 million CAD and has the interest benchmarked to
CDOR, as defined in the agreement. Loans to purchase used vehicle inventory are limited to twenty percent (20%) of the credit limit available at such time.
RTC Canada may borrow, repay and reborrow loans from time to time until the maturity date, provided, however, that the outstanding principal amount on
any date shall not exceed the credit limits set forth above with respect to new and used vehicles. Advances under the RTC Canada Floor Plan Agreement
bear interest per annum, payable on the first business day of each calendar month, at CDOR, plus 0.90% and in the case of an advance required to be made
in USD dollars, at LIBOR, plus 1.10%.
The Company finances substantially all of the purchase price of its new commercial vehicle inventory and the loan value of its used commercial vehicle
inventory under its Floor Plan Credit Agreement and RTC Canada Floor Plan Agreement, under which BMO Harris and BMO pay the manufacturer
directly with respect to new commercial vehicles. Amounts borrowed under the Company’s Floor Plan Credit Agreement and RTC Canada Floor Plan
Agreement are due when the related commercial vehicle inventory (collateral) is sold. The Company’s Floor Plan Credit Agreement expires September 14,
2026, although BMO Harris has the right to terminate the Floor Plan Credit Agreement at any time upon 360 days written notice and the Company may
terminate at any time, subject to specified limited exceptions. On December 31, 2022, the Company had approximately $762.9 million outstanding under
its Floor Plan Credit Agreement. The Company’s RTC Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2022, the Company
had approximately $44.6 million outstanding under the RTC Canada Floor Plan Agreement.
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The Company’s weighted average interest rate for floor plan notes payable was 1.56% for the year ended December 31, 2022, and 0.42% for the year ended
December 31, 2021, which is net of interest related to prepayments of new and used inventory loans.
Assets pledged as collateral were as follows (in thousands):
Inventories, new and used vehicles at cost based on specific identification,
net of allowance
Vehicle sale related accounts receivable
Total
Floor plan notes payable related to vehicles
Lines of Credit
December 31,
2022
2021
$
$
$
1,034,727 $
83,158
1,117,885 $
933,203 $
711,358
37,599
748,957
630,731
The Company has a line of credit that provides for a maximum borrowing of $20.0 million. There were no advances outstanding under this secured line of
credit as of December 31, 2022; however, $14.1 million was pledged to secure various letters of credit related to self-insurance products, leaving $5.9
million available for future borrowings as of December 31, 2022.
8.
LONG-TERM DEBT:
Long-term debt was comprised of the following (in thousands):
December 31,
2022
2021
Variable interest rate term notes
Less: current maturities
Total long-term debt, net of current maturities
$
$
275,433 $
-
275,433 $
As of December 31, 2022, long-term debt maturities were as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
$
334,926
-
334,926
-
40,475
185,024
49,934
-
-
275,433
On September 14, 2021, the Company entered into the WF Credit Agreement with the WF Lenders and the WF Agent. The WF Credit Agreement was
amended effective November 30, 2022. Pursuant to the terms of the WF Credit Agreement, the WF Lenders have agreed to make up to $175.0 million of
revolving credit loans for certain of the Company’s capital expenditures, including commercial vehicle purchases for the Company’s Idealease lease and
rental fleet, and general working capital needs. Borrowings under the WF Credit Agreement bear interest per annum, payable on each interest payment
date, as defined in the WF Credit Agreement, at (A) SOFR plus (i) 1.25% or (ii) 1.5%, depending on the Company’s consolidated leverage ratio or (B) on
or after the term SOFR transition date, the term SOFR plus (i) 1.25% or (ii) 1.5%, depending on the Company’s consolidated leverage ratio. The WF Credit
Agreement expires on September 14, 2024, although, upon the occurrence and during the continuance of an event of default, the WF Agent has the right to,
or upon the request of the required lenders must, terminate the commitments and declare all outstanding principal and interest due and payable. The
Company may terminate the commitments at any time. The Company expects to use the revolving credit loans available under the WF Credit Agreement
primarily for the purpose of purchasing commercial vehicles for the Company’s Idealease lease and rental fleet.
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On October 1, 2021, the Company entered into the PLC Agreement. Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $300.0
million of revolving credit loans to finance certain of the Company’s capital expenditures, including commercial vehicle purchases and other equipment to
be leased or rented through the Company’s PacLease franchises. Advances under the PLC Agreement bear interest per annum, payable on the fifth day of
the following month, at the Company’s option, at either (A) the prime rate, minus 1.55%, provided that the floating rate of interest is subject to a floor of
0%, or (B) a fixed rate, to be determined between the Company and PLC in each instance of borrowing at a fixed rate. The PLC Agreement expires on
October 1, 2025, although either party has the right to terminate the PLC Agreement at any time upon 180 days written notice.
On May 31, 2022, RTC Canada entered into the RTC Canada Revolving Credit Agreement. Pursuant to the terms of the RTC Canada Revolving Credit
Agreement, BMO agreed to make up to $120.0 million CAD of revolving credit loans to finance certain of RTC Canada’s capital expenditures, including
commercial vehicle purchases and other equipment to be leased or rented through RTC Canada’s Idealease franchise, with an additional $20.0 million
available upon the request of RTC Canada and consent of BMO. Advances under the RTC Canada Revolving Credit Agreement bear interest per annum,
payable on the first business day of each calendar month, at CDOR, plus 1.35%. The RTC Canada Revolving Credit Agreement expires September 14,
2026.
The interest associated with the WF Credit Agreement, the PLC Agreement and the RTC Canada Revolving Credit Agreement is recorded in interest
expense on the Consolidated Statement of Income. The WF Credit Agreement, PLC Agreement and RTC Canada Revolving Credit Agreement are general
borrowing facilities, whereas prior to these credit agreements, interest expense associated with the Company’s lease and rental fleet was recorded in cost of
sales as the borrowings were directly related to each lease and rental vehicle.
The Company’s floor plan financing agreements and the WF Credit Agreement require us to satisfy various financial ratios such as the leverage ratio, the
asset coverage ratio and the fixed charge coverage ratio. As of December 31, 2022, the Company was in compliance with all debt covenants related to its
floor plan credit agreements and the WF Credit Agreement. The Company does not anticipate any breach of the covenants in the foreseeable future.
9.
FINANCIAL INSTRUMENTS AND FAIR VALUE:
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Financial instruments consist primarily of cash, accounts
receivable, accounts payable and floor plan notes payable. The carrying values of the Company’s financial instruments approximate fair value due either to
their short-term nature or existence of variable interest rates, which approximate market rates. Certain methods and assumptions were used by the Company
in estimating the fair value of financial instruments as of December 31, 2022, and 2021. The carrying value of current assets and current liabilities
approximates the fair value due to the short maturity of these items.
The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is not quoted, estimates are based on
each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral and liquidity. Accordingly, the Company concluded
that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar
debt and the Company’s current credit standing. The Company has categorized such debt within Level 2 of the hierarchy framework. The carrying amount
approximates fair value.
10.
LEASES:
In February 2016, the FASB issued ASU No. 2016-02, “Leases (“Topic 842”),” which was intended to increase the transparency and comparability among
organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard
requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than twelve months. Leases are classified as either
finance or operating, with classification affecting the pattern of expense recognition in the income statement.
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A lease is classified as a finance lease if any of the following conditions exist on the date of lease commencement:
● The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
● The lease provides the lessee an option to purchase the underlying asset, and that option is reasonably certain to be exercised.
● The lease term is for the major part of the remaining economic life of the underlying asset.
● The present value of the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
● The underlying asset is of such a specialized nature that only the lessee can use it without major modifications.
● The lessor expects to have no alternative use for the leased asset at the end of the lease.
The Company adopted Topic 842 on January 1, 2019, and applied the practical expedients permitted, which among other things, allowed it to retain its
existing assessment of whether an arrangement is, or contains, a lease and whether such lease is classified as an operating or finance lease. The Company
made an accounting policy election that keeps leases with an initial term of twelve months or less off of the balance sheet and results in recognizing those
lease payments in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.
The Company leases commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a lease
at its inception. For leases with terms greater than twelve months, the Company records the related asset and obligation at the present value of lease
payments over the term. Many of the Company’s leases include renewal options and/or termination options that are factored into its determination of lease
payments when appropriate. The Company has elected not to account for lease and nonlease components as a single combined lease component as lessee.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a
readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on
information available at lease commencement.
Lease of Vehicles as Lessee
The Company leases commercial vehicles as the lessee under finance leases and operating leases. The lease terms vary from one year to ten years.
Commercial vehicle finance leases have always been reported on the Consolidated Balance Sheet, while operating leases were added to the Consolidated
Balance Sheet in 2019 with the adoption of Topic 842. These vehicles are then subleased or rented by the Company to customers under various agreements.
The Company received sublease income under non-cancelable subleases of $41.7 million for the year ended December 31, 2022 and $33.0 million for the
year ended December 31, 2021.
The Company usually guarantees the residual value of vehicles under operating lease and finance lease arrangements. As of December 31, 2022, the
Company guaranteed commercial vehicle residual values of approximately $64.4 million under operating lease and finance lease arrangements.
Lease of Facilities as Lessee
The Company’s facility leases are classified as operating and finance leases and primarily reflect its use of dealership facilities and office space. The lease
terms vary from one year to 83 years, some of which include options to extend the lease term, and some of which include options to terminate the lease
within one year. The Company considers these options in determining the lease term used to establish its right-of-use assets and lease liabilities.
The Company leases facilities in Ontario, Canada from entities owned by the noncontrolling interest holder of RTC Canada. In 2022, the Company
recorded approximately $2.8 million in operating lease expense related to these leases.
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Lease Costs and Supplemental Information
Components of lease cost are as follows (in thousands):
Component
Operating lease cost
Operating lease cost
Finance lease cost – amortization of right-of-use assets
Finance lease cost – interest on lease liabilities
Short-term lease cost
Classification
SG&A expense
Lease and rental cost of products sold
Lease and rental cost of products sold
Lease and rental cost of products sold
SG&A expense
Year Ended
December 31,
2022
December 31,
2021
$
11,288 $
6,081
20,135
4,783
413
9,826
4,449
19,138
5,749
135
Supplemental cash flow information and non-cash activity related to operating and finance leases are as follows (in thousands):
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Non-cash activity:
Operating lease right-of-use assets obtained in exchange for lease obligations
Year Ended
December 31,
2022
December 31,
2021
$
$
$
21,874 $
14,780 $
54,385 $
20,024
13,774
24,802
Weighted-average remaining lease term and discount rate for operating and finance leases as of December 31, 2022 are as follows:
Weighted-average remaining lease term (in months)
Weighted-average discount rate
Finance Leases
Operating
44
4.3%
122
4.3%
Maturities of lease liabilities by fiscal year for finance leases and operating leases as of December 31, 2022 are as follows (in thousands):
2023
2024
2025
2026
2027
2028 and beyond
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Lease of Vehicles as Lessor
Finance
Leases
Operating
Leases
33,854 $
32,863
26,930
18,752
11,553
11,948
135,900 $
(13,208)
122,692 $
18,297
18,274
14,245
13,149
10,923
58,167
133,055
(29,023)
104,032
$
$
$
The Company leases commercial vehicles that the Company owns to customers primarily over periods of one to ten years. The Company applied the
practical expedient permitted within Topic 842 that allows it not to separate lease and nonlease components. Nonlease components typically consist of
maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option
for the lessee to purchase the commercial vehicle.
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The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term. The lease unit is
depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross
margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.
Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales
revenue upon lease commencement. The receivable for sales-type leases as of December 31, 2022 in the amount of $6.0 million is reflected in Other Assets
on the Consolidated Balance Sheet.
Minimum rental payments to be received for non-cancelable leases and subleases in effect as of December 31, 2022, are as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
$
$
157,666
124,174
88,974
55,871
30,388
15,825
472,898
Rental income during the year ended December 31, 2022, and 2021, consisted of the following (in thousands):
Minimum rental payments
Nonlease payments
Total
2022
2021
$
$
278,330 $
43,927
322,257 $
214,400
32,834
247,234
11.
SHARE BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS:
Employee Stock Purchase Plan
The Company’s 2004 Employee Stock Purchase Plan, as amended and restated (the “Employee Stock Purchase Plan”) allows eligible employees to
contribute up to $10,625 of their base earnings every six months toward the semi-annual purchase of the Company’s Class A common stock. The
employee’s purchase price is 85% of the lesser of the closing price of the Class A common stock on the first business day or the last business day of the
semi-annual offering period, as reported by The NASDAQ Global Select Market. Employees may purchase shares having a fair market value of up to
$25,000 (measured as of the first day of each semi-annual offering period) for each calendar year. Under the Employee Stock Purchase Plan, there are
approximately 460,602 shares remaining of the 2,700,000 shares of the Company’s Class A common Stock that were reserved for issuance. The Company
issued 134,115 shares under the Employee Stock Purchase Plan during the year ended December 31, 2022 and 148,999 shares during the year ended
December 31, 2021. Of the 7,418 employees eligible to participate, approximately 2,104 elected to participate in the plan as of December 31, 2022.
Non-Employee Director Stock Option Plan
The Rush Enterprises, Inc. 2006 Non-Employee Director Stock Option Plan, as amended and restated (the “Director Plan”), reserved 750,000 shares of
Class A common stock for issuance upon exercise of any awards granted under the plan. The Director Plan is designed to attract and retain highly qualified
non-employee directors. Currently, each non-employee director receives a grant of the Company’s Class A common stock equivalent to a compensation
value of $145,000; provided however, that directors may elect to receive up to 40% of the value of such grant in cash. In 2022, three non-employee
directors each received a grant of 2,757 shares of the Company’s Class A common stock, two non-employee directors each received a grant of 1,654 shares
of the Company’s Class A common stock and $58,000 cash and one non-employee director received a grant of 1,930 shares of the Company’s Class A
common stock and $43,500 cash, for total compensation equivalent to $145,000 each. In 2021, three non-employee directors each received a grant of 2,875
shares of the Company’s Class A common stock and two non-employee directors each received a grant of 2,013 shares of the Company’s Class A common
stock and $43,500 cash and one non-employee director received a grant of 1,725 shares of the Company’s Class A common stock and $58,000 cash for
total compensation equivalent to $145,000 each. One director who was appointed to the Company’s Board of Directors in October of 2021 received 1,350
shares of the Company’s Class A common stock, for total compensation equivalent to $72,500. Under the Director Plan, there are approximately 134,643
shares remaining for issuance of the 750,000 shares of the Company’s Class A common stock that were reserved for issuance. The Company granted
13,509 shares of Class A common stock under the Director Plan during the year ended December 31, 2022 and 15,726 shares of Class A common stock
under the Director Plan during the year ended December 31, 2021.
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Employee Incentive Plans
In May 2007, the Board of Directors and shareholders adopted the Rush Enterprises, Inc. 2007 Long-Term Incentive Plan (the “2007 Incentive Plan”). The
2007 Incentive Plan provides for the grant of stock options (which may be nonqualified stock options or incentive stock options for tax purposes), stock
appreciation rights issued independent of or in tandem with such options (“SARs”), restricted stock awards and performance awards. The 2007 Incentive
Plan was amended and restated on May 20, 2014, May 16, 2017 and again on May 12, 2020, to increase the number of shares available for issuance under
the plan to 13,200,000 shares of Class A common stock and 4,800,000 shares of Class B common stock and to make certain other changes intended to
bring the 2007 Incentive Plan into conformance with current best practices.
The aggregate number of shares of common stock subject to stock options or SARs that may be granted to any one participant in any year under the 2007
Incentive Plan is 150,000 shares of Class A common stock or 150,000 shares of Class B common stock. Each option granted pursuant to the 2007 Incentive
Plan has a ten-year term from the grant date and vests in three equal annual installments beginning on the third anniversary of the grant date. The Company
has 13,200,000 shares of Class A common stock and 4,800,000 shares of Class B common stock reserved for issuance under the Company’s 2007 Incentive
Plan. As of December 31, 2022, approximately 1,756,629 shares of Class A common stock and 955,225 shares of Class B common stock are available for
issuance under the Company’s 2007 Incentive Plan. The Company issues new shares of its Class A or Class B common stock upon the exercise of stock
options or vesting of restricted stock awards. During the year ended December 31, 2022, the Company granted to employees 511,900 options to purchase
Class A common stock and 354,600 restricted Class B common stock awards under the 2007 Incentive Plan. Restricted stock awards are issued when
granted, but are subject to vesting requirements. During the year ended December 31, 2021, the Company granted to employees 498,700 options to
purchase Class A common stock and 340,650 shares of restricted Class B common stock awards under the 2007 Incentive Plan.
Valuation and Expense Information
Stock-based compensation expense related to stock options, restricted stock awards, restricted stock units and employee stock purchases was $25.3 million
for the year ended December 31, 2022, $22.2 million for the year ended December 31, 2021, and $19.4 million for the year ended December 31, 2020.
Cash received from options exercised and shares purchased under all share-based payment arrangements was $13.3 million for the year ended December
31, 2022, $18.3 million for the year ended December 31, 2021, and $23.5 million for the year ended December 31, 2020.
The following table presents a summary of the Company’s stock option activity and related information for the year ended December 31, 2022:
Options
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in Years)
Aggregate
Intrinsic
Value
Balance of Outstanding Options at January 1, 2022
Granted
Exercised
Forfeited
Balance of Outstanding Options at December 31, 2022
Expected to vest after December 31, 2022
Vested and exercisable at December 31, 2022
3,804,976 $
511,900
(376,860)
(24,750)
3,915,266 $
2,375,412 $
1,514,871 $
26.31
53.04
21.31
39.20
30.20
35.73
21.24
6.0 $
7.4 $
3.8 $
86,815,673
39,675,140
47,018,146
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of the Company’s Class A common
stock on December 31, 2022, which was $52.28. The total intrinsic value of options exercised was $11.6 million during the year ended December 31, 2022,
$23.4 million during the year ended December 31, 2021, and $20.8 million during the year ended December 31, 2020.
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The following table presents a summary of the status of the number of shares underlying the Company’s non-vested stock options as of December 31,
2022, and changes during the year ended December 31, 2022:
Non-vested Shares
Non-vested at January 1, 2022
Granted
Vested
Forfeited
Non-vested at December 31, 2022
Number of
Shares
Weighted
Average
Grant Date
Fair Value
2,576,614 $
511,900
(663,369)
(24,750)
2,400,395 $
9.35
16.81
8.96
12.05
11.02
The total fair value of vested options was $5.9 million during the year ended December 31, 2022, $5.0 million during the year ended December 31, 2021,
and $4.5 million during the year ended December 31, 2020. The weighted-average grant date fair value of options granted was $16.81 per share during the
year ended December 31, 2022, $14.77 per share during the year ended December 31, 2021, and $6.36 per share during the year ended December 31, 2020.
Stock Awards
The Company granted restricted stock awards to certain of its employees under the 2007 Incentive Plan and unrestricted stock awards to its non-employee
directors under the Director Plan during the year ended December 31, 2022. The restricted stock awards granted to employees vest in three equal
installments on the first, second and third anniversary of the grant date and are forfeited in the event the recipient’s employment or relationship with the
Company is terminated prior to vesting, except as a result of retirement or under certain circumstances associated with a change of control or involuntary
termination, as further described in the Company’s executive transition plan. The fair value of the restricted stock awards granted to the Company’s
employees is amortized to expense on a straight-line basis over the restricted stock’s vesting period. The shares granted to non-employee directors are
expensed on the grant date.
The following table presents a summary of the Company’s non-vested restricted stock awards at December 31, 2022:
Stock Awards and Units
Shares
Weighted
Average
Remaining
Contractual
Life (in Years)
Aggregate
Intrinsic
Value
Weighted
Average
Grant Date
Fair Value
Outstanding non-vested shares at January 1, 2022
Granted
Vested
Forfeited
Outstanding non-vested at December 31, 2022
Expected to vest after December 31, 2022
843,820
368,109
(458,252)
(1,000)
752,677
751,079
$
8.4 $
8.4 $
42,353,135
42,263,234
31.97
50.00
30.14
49.90
41.87
The total fair value of the shares issued upon the vesting of restricted and unrestricted stock awards during the year ended December 31, 2022 was $13.8
million. The weighted-average grant date fair value of stock awards granted was $50.00 per share during the year ended December 31, 2022, $44.86 per
share during the year ended December 31, 2021 and $21.98 per share during the year ended December 31, 2020.
As of December 31, 2022, the Company had $10.6 million of unrecognized compensation expense related to non-vested employee stock options to be
recognized over a weighted-average period of 2.2 years and $10.9 million of unrecognized compensation cost related to non-vested restricted stock awards
to be recognized over a weighted-average period of 1.3 years.
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Defined Contribution Plan
The Company has a defined contribution plan (the “Rush 401k Plan”) that is available to all employees. Each employee who has completed 30 days of
continuous service is entitled to enter the Rush 401k Plan on the first day of the following month. Participating employees may contribute from 1% to 50%
of their total gross compensation. However, certain highly compensated employees are limited to a maximum contribution of 15% of total gross
compensation. Effective February 1, 2012, for the first 10% of an employee’s contribution, the Company contributed an amount equal to 20% of the
employees’ contributions for those employees with less than five years of service and an amount equal to 40% of the employees’ contributions for those
employees with more than five years of service. Effective June 16, 2020, as part of the Company’s expense reductions due to the Covid-19 pandemic, for
the first 10% of an employee’s contribution, the Company contributed an amount equal to 5% of the employees’ contributions for those employees with
less than five years of service and an amount equal to 10% of the employees’ contributions for those employees with more than five years of service.
Effective March 15, 2021, for the first 10% of an employee’s contribution, the Company contributed an amount equal to 20% of the employees’
contributions for those employees with less than five years of service and an amount equal to 40% of the employees’ contributions for those employees
with more than five years of service. The Company incurred expenses related to the Rush 401k Plan of approximately $12.1 million during the year ended
December 31, 2022, $8.2 million during the year ended December 31, 2021 and $6.0 million during the year ended December 31, 2020.
Deferred Compensation Plan
On November 6, 2010, the Board of Directors of the Company adopted the Rush Enterprises, Inc. Deferred Compensation Plan (the “Deferred
Compensation Plan”) pursuant to which certain employees and directors may elect to defer a portion of their annual compensation. The Deferred
Compensation Plan was amended and restated effective May 18, 2021 in order to bring the plan into conformance with current “best” practices. The
Company established a rabbi trust to finance obligations under the Deferred Compensation Plan with corporate-owned variable life insurance contracts.
Participants are 100% vested in their respective deferrals and the earnings thereon. The first deferral election period began on January 1, 2011. The
Company’s liability related to the Deferred Compensation Plan was $19.4 million on December 31, 2022 and $21.3 million on December 31, 2021. The
related cash surrender value of the life insurance contracts was $13.0 million on December 31, 2022 and $12.7 million on December 31, 2021.
The Company currently does not provide any post-retirement benefits nor does it provide any post-employment benefits.
12.
EARNINGS PER SHARE:
Basic earnings per share (“EPS”) were computed by dividing income from continuing operations by the weighted average number of shares of common
stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversions of potentially dilutive options, restricted shares
awards and restricted stock unit awards that were outstanding during the period.
Each share of Class A common stock ranks equal to each share of Class B common stock with respect to receipt of any dividends or distributions declared
on shares of common stock and the right to receive proceeds on liquidation or dissolution of the Company after payment of its indebtedness and liquidation
preference payments to holders of any preferred shares. However, holders of Class A common stock have 1/20th of one vote per share on all matters
requiring a shareholder vote, while holders of Class B common stock have one full vote per share.
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The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for income from continuing
operations (in thousands, except per share amounts):
Numerator-
Numerator for basic and diluted earnings per share − Net income available to common
shareholders
Denominator-
Denominator for basic earnings per share – weighted average shares outstanding
Effect of dilutive securities− Employee and director stock options and restricted share
awards
Denominator for diluted earnings per share − adjusted weighted average shares outstanding
and assumed conversions
Basic earnings per common share
Diluted earnings per common share and common share equivalents
2022
2021
2020
$
391,382 $
241,415 $
114,887
55,400
55,892
54,866
1,751
1,986
57,151
7.06 $
6.85 $
57,878
4.32 $
4.17 $
1,376
56,242
2.09
2.04
$
$
Options to purchase shares of common stock that were outstanding for the years ended December 31, 2022, 2021 and 2020 that were not included in the
computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):
Anti-dilutive options – weighted average
2022
2021
2020
847
437
1,349
13.
INCOME TAXES:
The tax provisions are summarized as follows (in thousands):
Income before income taxes:
Domestic
Foreign
Total
Current provision
Federal
State
Foreign
Total
Deferred provision (benefit)
Federal
State
Foreign
Total
Provision for income taxes
2022
Year Ended December 31,
2021
2020
$
$
$
502,141 $
7,186
509,327
93,942 $
16,516
2,523
112,981
7,975
(565)
(3,149)
4,261
117,242 $
307,260 $
6,423
313,683
47,475 $
10,759
-
58,234
13,809
(631)
856
14,034
72,268 $
146,055
5,668
151,723
67,988
6,706
-
74,694
(37,683)
(1,254)
1,079
(37,858)
36,836
A reconciliation of taxes based on the federal statutory rates and the provisions (benefits) for income taxes are summarized as follows (in thousands):
Income taxes at the federal statutory rate
State income taxes, net of federal benefit
Tax effect of permanent differences
Foreign tax rate differential
Other, net
Provision for income taxes
2022
Year Ended December 31,
2021
2020
106,959 $
12,708
(488)
(2,134)
197
117,242 $
65,694 $
7,874
(2,502)
(313)
1,515
72,268 $
31,862
4,487
283
(111)
315
36,836
$
$
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The following summarizes the components of net deferred income tax liabilities included in the balance sheet (in thousands):
Deferred income tax (assets) liabilities:
Inventory
Accounts receivable
Finance lease obligations
Finance and operating leases
Stock options
Accrued liabilities
State net operating loss carry forward
State tax credit
Other
Difference between book and tax basis- Operating lease assets
Difference between book and tax basis- Depreciation and amortization
Net deferred income tax liability
$
$
December 31,
2022
2021
(4,710) $
(430)
(28,514)
(25,283)
(7,525)
(3,632)
(1,268)
(77)
(5,519)
24,989
203,939
151,970 $
(2,704)
(349)
(27,242)
(16,379)
(6,993)
(5,768)
(1,438)
(120)
(2,765)
16,132
188,099
140,473
The increase in the net deferred income tax liability from December 31, 2021 to December 31, 2022 includes $7.2 million in deferred income tax liability
related to the inclusion of RTC Canada in the Company’s consolidated financial statements subsequent to the acquisition of the additional 30% equity
interest on May 2, 2022.
As of December 31, 2022, the Company had approximately $23.5 million in state net operating loss carry forwards that expire from 2022 to 2041, which
result in a deferred tax asset of approximately $1.3 million. The Company has evaluated whether its state net operating losses are realizable and has not
recorded a valuation allowance against them. The valuation allowance did not change over the prior year ending December 31, 2021.
The Company had unrecognized income tax benefits totaling $5.3 million as a component of accrued liabilities as of December 31, 2022, and $4.3 million
as of December 31, 2021, the total of which, if recognized, would impact the Company’s effective tax rate. An unfavorable settlement would require a
charge to income tax expense and a favorable resolution would be recognized as a reduction to income tax expense. The Company recognizes interest
accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2022, 2021 and 2020, the Company recognized
approximately $22,800, $129,660, and $6,150 in interest expense. No amounts were accrued for penalties. The Company had approximately $302,000,
$279,000 and $150,000 of interest accrued as of December 31, 2022, 2021 and 2020, respectively.
Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $18.9 million at December 2022. Those earnings are
considered to be indefinitely reinvested. Upon repatriation of those earnings in the form of dividends or otherwise, the Company may be subject to state
and local taxes, and/or withholding taxes payable to the various foreign countries. The Company expects to be able to take a 100% dividends received
deduction to offset any U.S. federal income tax liability on the distribution of untaxed earnings and profits.
The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of December 31, 2022, the tax
years ended December 31, 2019 through 2022 remained subject to audit by federal tax authorities and the tax years ended December 31, 2018 through
2022, remained subject to audit by state tax authorities.
The table below presents the reconciliation of the change in the unrecognized tax benefits (in thousands):
Unrecognized tax benefits at beginning of period
Gross increases – tax positions in current year
Reductions due to lapse of statute of limitations
Unrecognized tax benefits at end of period
2022
2021
2020
4,309 $
2,025
(957)
5,377 $
3,306 $
1,512
(509)
4,309 $
3,007
651
(352)
3,306
$
$
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14.
COMMITMENTS AND CONTINGENCIES:
From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability
insurance, including product liability coverage, in amounts deemed adequate by management. However, an uninsured or partially insured claim, or claim
for which indemnification is not available, could have a material adverse effect on the Company’s financial condition or results of operations. As of
December 31, 2022, the Company believes that there are no pending claims or litigation, individually or in the aggregate, that are reasonably likely to have
a material adverse effect on its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance
that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of
operations for the fiscal period in which such resolution occurred.
15.
ACQUISITIONS
All of the following acquisitions, unless otherwise noted, were considered business combinations accounted for under ASC 805 “Business Combinations.”
Pro forma information is not included in accordance with ASC 805 since no acquisitions were considered material individually or in the aggregate.
On November 7, 2022, the Company acquired certain assets of Scheppers International Truck Center, Inc., which included real estate and an International
truck franchise in Jefferson City, Missouri, along with commercial vehicle and parts inventory. The transaction was valued at approximately $6.8 million,
with the purchase price paid in cash.
On May 2, 2022, the Company completed the acquisition of an additional 30% equity interest in RTC Canada, resulting in an 80% controlling interest in
RTC Canada. The acquisition was accounted for as an acquisition achieved in stages under ASC 805, Business Combinations. The acquisition-date fair
value of the previous 50% equity interest was $44.7 million, resulting in a gain of $7.0 million included in the line item Other income (expense) on the
Consolidated Statements of Income. The Company also recognized a reversal of deferred tax liabilities of $2.2 million and $0.6 million related to
reclassification of the foreign currency translation adjustment related to the remeasurement of the Company’s previous equity method investment in RTC
Canada.
As of May 2, 2022, the Company established a noncontrolling interest related to the minority holders. The fair value of the 20% noncontrolling interest in
RTC Canada is estimated to be $17.8 million. The fair value of the noncontrolling interest was estimated using a combination of the income approach and a
market approach. Since RTC Canada is a private company, the fair value measurement is based on significant inputs that are not observable in the market
and thus represents a Level 3 measurement as defined in ASC 820, Fair Value Measurement. The fair value estimates are based on: (i) a discount rate of
11%; (ii) a terminal value based on a long-term sustainable growth rate of 3%; (iii) financial multiples of companies in the same industry as RTC Canada;
and (iv) adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair value of the
noncontrolling interest in RTC Canada.
The preliminary purchase price was allocated based on the fair values of the assets and liabilities at the date of acquisition as follows (in thousands):
Cash
Accounts receivable
Inventory
Property and equipment, including real estate
Floor plan notes payable
Trade payables
Customer deposits
Accrued liabilities
Notes payable
Goodwill
Franchise rights
Other
Equity investment in RTC Canada
Noncontrolling interest
Gain on equity method investment
Total
$
$
4,310
19,072
56,255
80,337
(30,501)
(19,978)
(1,980)
(7,875)
(69,545)
44,033
3,906
3,422
(37,309)
(17,828)
(6,958)
19,361
The purchase price allocation has not yet been finalized. The Company is currently working with RTC Canada to obtain additional information that existed
at the time of the acquisition related to property and equipment, inventory and valuation of intangible assets. Management has recorded the purchase price
allocations based upon currently available information about RTC Canada. The goodwill of $47.9 million for the RTC Canada acquisition is primarily
attributable to the synergies expected to arise after obtaining a controlling interest in the entity.
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Prior to May 2, 2022, the Company accounted for its 50% equity interest in RTC Canada as an equity-method investment. Subsequent to the Company’s
acquisition of the additional 30% equity interest on May 2, 2022, operations of RTC Canada are included in the accompanying consolidated financial
statements.
On December 13, 2021, the Company completed the acquisition of certain of the assets of Summit Truck Group, LLC and certain of its subsidiaries and
affiliates (collectively, “Summit”) which included full-service commercial vehicle dealerships and Idealease franchises in Arkansas, Kansas, Missouri,
Tennessee and Texas. The acquisition included Summit’s dealerships representing International, IC Bus, Idealease, Isuzu and other commercial vehicle
manufacturers for a purchase price of approximately $205.3 million, excluding the real property associated with the transaction. The Company financed
approximately $102.0 million of the purchase price under its floor plan and lease and rental truck financing arrangements and the remainder of the purchase
price was paid in cash. In addition, the Company purchased certain real property owned by Summit for a purchase price of approximately $57.0 million,
which was paid in cash.
The operations of Summit are included in the accompanying consolidated financial statements from the date of the acquisition. The purchase price was
allocated based on the fair values of the assets and liabilities at the date of acquisition as follows (in thousands):
Goodwill
Franchise rights
Inventory
Property and equipment, including real estate
Other
Total
$
$
74,413
1,581
72,070
113,306
882
262,252
The goodwill of $74.4 million for the Summit acquisition is primarily attributable to the synergies expected to arise after the acquisition. The goodwill
acquired in the Summit acquisition will be amortized over 15 years for tax purposes.
16.
SEGMENTS:
The Company currently has one reportable business segment - the Truck Segment. The Truck Segment includes the Company’s operation of a nationwide
network of commercial vehicle dealerships that provide an integrated one-stop source for the commercial vehicle needs of its customers, including retail
sales of new and used commercial vehicles; aftermarket parts, service and collision center facilities; and financial services, including the financing of new
and used commercial vehicle purchases, insurance products and truck leasing and rentals. The commercial vehicle dealerships are deemed a single
reporting unit because they have similar economic characteristics. The Company’s chief operating decision maker considers the entire Truck Segment, not
individual dealerships or departments within its dealerships, when making decisions about resources to be allocated to the segment and assessing its
performance.
The Company also has revenues attributable to three other operating segments. These segments include a retail tire company, an insurance agency and a
guest ranch operation and are included in the All Other column below. None of these segments has ever met any of the quantitative thresholds for
determining reportable segments.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates
performance based on operating income.
The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. There were no
material intersegment sales during the years ended December 31, 2022, 2021 or 2020.
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The following table contains summarized information about reportable segment revenue, segment income or loss from continuing operations and segment
assets for the periods ended December 31, 2022, 2021 and 2020 (in thousands):
Truck
Segment
All
Other
Totals
2022
Revenues from external customers
Interest income
Interest expense
Depreciation and amortization
Segment operating income
Segment income from continuing operations before
taxes
Segment assets
Goodwill
Expenditures for segment assets
2021
Revenues from external customers
Interest income
Interest expense
Depreciation and amortization
Segment operating income
Segment income from continuing operations before
taxes
Segment assets
Goodwill
Expenditures for segment assets
2020
Revenues from external customers
Interest income
Interest expense
Depreciation and amortization
Segment operating income
Segment income from continuing operations before
$
$
$
taxes
Segment assets
Goodwill
Expenditures for segment assets
7,084,847 $
639
19,763
55,354
505,415
508,629
3,769,007
413,803
242,503
5,109,070 $
657
2,119
53,096
307,394
312,350
3,068,365
367,771
163,624
4,721,058 $
713
9,444
57,162
153,841
151,222
2,939,390
289,582
135,956
16,821 $
-
-
311
698
698
52,059
2,560
557
17,072 $
-
308
258
1,642
1,333
51,612
2,560
3,553
14,882 $
-
283
294
764
501
46,003
2,560
244
7,101,668
639
19,763
55,665
506,113
509,327
3,821,066
416,363
243,060
5,126,142
657
2,427
53,354
309,036
313,683
3,119,977
370,331
167,177
4,735,940
713
9,727
57,456
154,605
151,723
2,985,393
292,142
136,200
17.
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 from such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the
customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, arrangement of
associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle
parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
The following table summarizes the Company’s disaggregated revenue by revenue source, excluding lease and rental revenue, for the years ended
December 31, 2022, December 31, 2021 and December 31, 2020 (in thousands):
Commercial vehicle sales revenue
Parts revenue
Commercial vehicle repair service revenue
Finance revenue
Insurance revenue
Other revenue
Total
2022
2021
2020
4,351,370 $
1,436,981
935,458
16,992
12,749
25,863
6,779,413 $
3,039,953 $
1,059,382
733,981
16,385
11,579
17,628
4,878,908 $
2,863,309
911,102
689,343
12,047
9,902
14,014
4,499,717
$
$
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All of the Company's performance obligations 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 December 31, 2022 or December 31, 2021. Revenues related to commercial vehicle sales, parts sales,
commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.
For the sale of new and used commercial vehicles, revenue is recognized at a point in time when control is transferred to the customer, which is when
delivery of the commercial vehicle occurs. Revenue is measured as the amount of consideration the Company expects to receive in exchange for
transferring the commercial vehicle. When control is transferred to the customer, the Company has an unconditional right to payment and a receivable is
recorded for any consideration not received.
The Company controls the commercial vehicle before it is transferred to the customer and it obtains all of the remaining benefits from the commercial
vehicle relating to the sale, ability to pledge the asset or hold the asset. The Company is a principal in all commercial vehicle transactions. The Company
retains inventory risk, determines the selling price to the customer and delivers the commercial vehicle to the customer. The Company generally pays a
commission to internal sales representatives for the sale of a commercial vehicle. The Company will continue to expense the commission and recognize it
concurrently with the respective commercial vehicle sale revenue upon delivery of the commercial vehicle to a customer.
Revenue from the sale of parts is recognized when the Company transfers control of the goods to the customer and consideration has been received in the
form of cash or a receivable from the customer. The Company provides its customers the right to return certain eligible parts, estimates the expected returns
based on an analysis of historical experience and records an allowance for estimated returns, which has historically not been material.
Revenue from the sale of commercial vehicle repair service is recognized when the service performed by the Company on a customer’s vehicle is complete
and the customer accepts the repair. Because the Company does not have an enforceable right to payment while the repair is being performed, revenue is
recognized when the repair is complete. After a customer’s acceptance, the Company has no remaining obligations to transfer goods or services to the
customer and consideration has been received in the form of cash or a receivable from the customer.
Any remaining performance obligations represent service orders for which work has not been completed. The Company’s service contracts are
predominantly short-term in nature with a contract term of one month or less. For those contracts, the Company has utilized the practical expedient in Topic
606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part
of a contract that has an original expected duration of one year or less.
The Company receives commissions from third-party lenders for arranging customer financing for the purchase of commercial vehicles. The receipt of
such commissions is deemed to be a single performance obligation that is satisfied when a financing agreement is executed and accepted by the financing
provider. Once the contract has been accepted by the financing provider, the Company’s performance obligation has been satisfied and the Company
generally has no further obligations under the contract. The Company is the agent in this transaction, as it does not have control over the acceptance of the
customer’s financing arrangement by the financing provider. Consideration paid to the Company by the financing provider is based on the agreement
between the Company and the financing provider.
The Company receives commissions from third-party insurance companies for arranging insurance coverage for customers. The receipt of such
commissions is deemed to be a single performance obligation that is satisfied when the insurance coverage is bound. The Company has no further
obligations under the contract. The Company is the agent in this transaction because it does not have control over the insurance coverage provided by the
insurance carrier. Consideration paid to the Company by the insurance provider is based on the agreement between the Company and the insurance
provider.
The Company records revenues from finance and insurance products at the net commission amount, which includes estimates of chargebacks that can occur
if the underlying contract is not fulfilled. Chargeback amounts for commissions from financing companies are estimated assuming financing contracts are
terminated before the customer has made six monthly payments. Chargeback amounts for commissions from insurance companies are estimated assuming
insurance contracts are terminated before the underlying insurance contractual term has expired. Chargeback reserve amounts are based on historical
chargebacks and have historically been immaterial. The Company does not have any right to retrospective commissions based on future profitability of
finance and insurance contracts arranged.
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Other revenue consists mostly of documentation fees that are charged to customers in connection with the sale of a commercial vehicle and recognized as
other revenue when a truck is sold. The Company recognizes the documentation fees at the point in time when the commercial vehicle is delivered to the
customer.
18.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
The following table shows the components of accumulated other comprehensive income (loss) (in thousands):
Balance as of December 31, 2020
Foreign currency translation adjustment
Balance as of December 31, 2021
Reclassification of currency translation related to equity method of RTC Canada
Foreign currency translation adjustment
Balance as of December 31, 2022
$
$
869
(82)
787
(601)
(4,316)
(4,130)
The functional currency of the Company’s foreign subsidiary, RTC Canada, is its local currency. Results of operations of RTC Canada are translated in
USD using the average exchange rates on a monthly basis during the year. The assets and liabilities of RTC Canada are translated into USD using the
exchange rates in effect on the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in
accumulated other comprehensive loss and the statement of comprehensive income.
The Company reclassified the foreign currency translation adjustment related to its previously held equity investment in RTC Canada into net income upon
its acquisition of a majority equity interest according to ASC 830-30, Foreign Currency Matters.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the participation of
management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that its
disclosure controls and procedures were effective as of December 31, 2022, to ensure that information required to be disclosed in its reports filed or
submitted under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The
Company’s internal control over financial reporting is a process designed under the supervision of the Company’s President and Chief Executive Officer
and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial
statements for external purposes in accordance with generally accepted accounting principles.
As of December 31, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for
effective internal control over financial reporting established in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission (2013 Framework).
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this
annual report on Form 10-K, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2022. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting
as of December 31, 2022, is included in this Item 9A under the heading “Attestation Report of Independent Registered Public Accounting Firm.”
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Rush Enterprises, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Rush Enterprises, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, Rush Enterprises, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’
equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 23, 2023,
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Antonio, Texas
February 23, 2023
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Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information called for by Item 10 of Form 10-K is incorporated herein by reference to such information included in the Company’s Proxy Statement
for the 2023 Annual Meeting of Shareholders.
Item 11. Executive Compensation
The information called for by Item 11 of Form 10-K is incorporated herein by reference to such information included in the Company’s Proxy Statement
for the 2023 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information called for by Item 12 of Form 10-K, other than the equity compensation plan information set forth herein, is incorporated herein by
reference to such information included in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information called for by Item 13 of Form 10-K is incorporated herein by reference to such information included in the Company’s Proxy Statement
for the 2023 Annual Meeting of Shareholders.
Item 14. Principal Accountant Fees and Services
The information called for by Item 14 of Form 10-K is incorporated herein by reference to such information included in the Company’s Proxy Statement
for the 2023 Annual Meeting of Shareholders.
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Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
PART IV
Included in Item 8 of Part II of this annual report on Form 10-K are the following:
Report of Independent Registered Public Accounting Firm;
Consolidated Balance Sheets as of December 31, 2022, and 2021;
Consolidated Statements of Income for the years ended December 31, 2022, 2021, and 2020;
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020;
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021, and 2020;
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020; and
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
These schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related
notes.
(a)(3) Exhibits
Index to Exhibits:
Exhibit
No.
3.1
3.2
3.3
4.1
4.2
4.3
Identification of Exhibit
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)
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)
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)
Specimen of certificate representing Common Stock (now Class B common stock), $.01 par value, of Rush Enterprises, Inc.
(incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996)
Specimen of certificate representing Class A common stock, $.01 par value, of the Registrant (incorporated herein by reference to
Exhibit 4.1 of the Company’s Registration Statement on Form 8-A filed July 9, 2002)
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated
herein by reference to Exhibit 4.3 of the Company’s Form 10-K filed February 26, 2020 (File No. 000-20797) for the year ended
December 31, 2019)
10.1
Right of First Refusal dated December 19, 2012 between Peterbilt Motors Company and W. Marvin Rush (incorporated herein by
reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed December 20, 2012)
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10.2
10.3+
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
Right of First Refusal dated December 19, 2012 between Peterbilt Motors Company and W.M. “Rusty” Rush (incorporated herein
by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed December 20, 2012)
Rush Enterprises, Inc. 2004 Employee Stock Purchase Plan (Amended and Restated on May 12, 2020) (incorporated herein by
reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 15, 2020)
First Amendment to Rush Enterprises, Inc. Amended and Restated Employee Stock Purchase Plan (incorporated herein by reference
to Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed February 22, 2021)
Rush Enterprises, Inc. Amended and Restated 2006 Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit
10.10 of the Company’s Form 10-K (File No. 000-20797) for the year ended December 31, 2010)
Form of Rush Enterprises, Inc. 2006 Non-Employee Director Stock Option Agreement (incorporated herein by reference to Exhibit
4.4 of the Company’s Registration Statement No. 333-138556 on Form S-8 filed November 9, 2006)
Form of Rush Enterprises, Inc. 2006 Non-Employee Director Stock Plan Restricted Stock Unit Award Agreement (incorporated
herein by reference to Exhibit 10.1 of the Company’s Form 10-Q (File No. 000-20797) for the quarter ended June 30, 2012)
Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 of
the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 15, 2020)
First Amendment to Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan (incorporated herein by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed February 22, 2021)
Form of Rush Enterprises, Inc. 2007 Long-Term Incentive Plan Restricted Stock Unit Agreement (incorporated herein by reference
to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed March 14, 2012)
Form of Rush Enterprises, Inc. 2007 Long-Term Incentive Plan Stock Option Agreement (incorporated herein by reference to
Exhibit 4.4 of the Company’s Form S-8 (File No. 333-144821) filed July 24, 2007)
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Stock Option Agreement (incorporated
herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed March 8, 2019)
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Stock Option Award Agreement
(incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed
February 22, 2021)
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Restricted Stock Award Agreement
(incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed March
8, 2019)
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Table of Contents
10.15+
10.16+
10.17+
10.18+
10.19+
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Restricted Stock Award Agreement
(incorporated herein by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed
February 22, 2021)
Rush Enterprises, Inc. Deferred Compensation Plan (Amended and Restated Effective as of May 18, 2021) (incorporated herein by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 24, 2021)
Form of Indemnity Agreement (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K
(File No. 000-20797) filed January 7, 2015)
Rush Enterprises, Inc. Executive Transition Plan (as Amended and Restated Effective as of February 20, 2018) (incorporated herein
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed February 26, 2018)
First Amendment to Rush Enterprises, Inc. Amended and Restated Executive Transition Plan (incorporated herein by reference to
Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed February 22, 2021)
Form of dealer agreement between Peterbilt Motors Company and Rush Truck Centers (incorporated herein by reference to Exhibit
10.18 of the Company’s Form 10-K (File No. 000-20797) for the year ended December 31, 1999)
Amended and Restated Amendment to Dealer Sales and Service Agreements, dated December 19, 2012, by and among Peterbilt
Motors Company, a division of PACCAR, Inc., Rush Enterprises, Inc. and the subsidiaries of Rush Enterprises, Inc. named a party
therein (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K (File No. 000-20797) filed December 20,
2012)
Guaranty Agreement, dated December 31, 2010, by Rush Enterprises, Inc. and each other Guarantor party thereto in favor of
General Electric Capital Corporation. (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form
8-K (File No. 000-20797) filed January 6, 2011)
Guaranty Agreement, dated as of April 25, 2019 between Rush and the Bank of Montreal (incorporated herein by reference to
Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 1, 2019)
Fifth Amended and Restated Credit Agreement, dated as of September 14, 2021 by and among Rush Enterprises, Inc., the
subsidiaries of Rush party thereto as borrowers, the Lenders signatory thereto and BMO Harris Bank N.A., as Administrative Agent
and Collateral Agent (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No.
000-20797) filed September 20, 2021)
Credit Agreement, dated as of September 14, 2021 by and among Rush Enterprises, Inc., the subsidiaries of Rush party thereto as
borrowers, the Lenders signatory thereto and Wells Fargo Bank, National Association, as Administrative Agent (incorporated herein
by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed September 20, 2021)
First Amendment to Credit Agreement, dated as of November 30, 2022 by and among Rush Enterprises, Inc. and certain of its
subsidiaries, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (incorporated herein
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed December 2, 2022)
85
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10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Collateral Agreement, dated as of September 14, 2021, executed by Rush Enterprises, Inc. and the subsidiaries of Rush party thereto
as borrowers in favor of Wells Fargo Bank, National Association, as Administrative Agent (incorporated herein by reference to
Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed September 20, 2021)
Guaranty Agreement, dated as of September 14, 2021, executed by Rush Enterprises, Inc. in favor of Wells Fargo Bank, National
Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form
8-K (File No. 000-20797) filed September 20, 2021)
Amended and Restated Inventory Financing and Purchase Money Security Agreement, dated as of October 1, 2021 by and between
Rush Truck Leasing, Inc. and PACCAR Leasing Company (incorporated herein by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K (File No. 000-20797) filed October 7, 2021)
Promissory Note dated October 1, 2021 issued by Rush Truck Leasing, Inc. in favor of PACCAR Leasing Company (incorporated
herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed October 7, 2021)
Corporate Guarantee dated November 1, 2002, issued by Rush Enterprises, Inc. in favor of PACCAR Leasing Company
(incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed October
7, 2021)
Bank of Montreal Revolving Lease and Rental Credit Agreement, dated May 31, 2022 between Rush Truck Centres of Canada
Limited and Bank of Montreal (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K
(File No. 000-20797) filed June 6, 2022)
First Amended and Restated BMO Wholesale Financing and Security Agreement, dated as of July 15, 2022, between Rush Truck
Centres of Canada Limited and Bank of Montreal (incorporated herein by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K (File No. 000-20797) filed July 21, 2022)
Amended and Restated Guaranty Agreement, dated as of July 15, 2022, between Rush Enterprises, Inc. and Bank of Montreal
(incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 000-20797) filed July 21,
2022)
10.35*
Right of First Refusal Agreement entered into by and among Rush Enterprises, Inc., W.M. “Rusty” Rush and Frost Bank.
21.1*
23.1*
31.1*
31.2*
32.1++
32.2++
101.INS
Subsidiaries of the Company
Consent of Ernst & Young LLP
Certification of President and Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Instance 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.
86
Table of Contents
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)
*
+
++
Filed herewith.
Management contract or compensatory plan or arrangement.
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.
Item 16. Form 10-K Summary
Intentionally left blank.
87
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ W. M.”RUSTY” RUSH
W. M. “Rusty” Rush
President, Chief Executive Officer and
Chairman of the Board
Date: February 23, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated:
Signature
Capacity
Date
/s/ W. M. “RUSTY” RUSH
W. M. “Rusty” Rush
President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
/s/ STEVEN L. KELLER
Steven L. Keller
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
/s/ THOMAS A. AKIN
Thomas A. Akin
/s/ RAYMOND J. CHESS
Raymond J. Chess
/s/ DR. KENNON GUGLIELMO
Dr. Kennon Guglielmo
/s/ WILLIAM H. CARY
William H. Cary
/s/ ELAINE MENDOZA
Elaine Mendoza
/s/ TROY A. CLARKE
Troy A. Clarke
Director
Director
Director
Director
Director
Director
88
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
Exhibit 10.35
Execution Version
THIS RIGHT OF FIRST REFUSAL AGREEMENT (the “Agreement”), dated October 18, 2022, is entered into by and among Rush Enterprises,
Inc., a Texas corporation (“Rush”), W.M. “Rusty” Rush (“Borrower”), and Frost Bank, a Texas state bank (“Lender”).
RIGHT OF FIRST REFUSAL AGREEMENT
RECITALS
WHEREAS, Borrower intends to enter into a margin loan agreement (such margin loan agreement, together with the related promissory note,
pledge and security agreement, account agreement, and all other documents, instruments, or agreements executed and delivered by Borrower in connection
therewith, being the “Loan Documents”) with Lender;
WHEREAS, pursuant to the Loan Documents, to secure Borrower’s obligations thereunder, Borrower has granted Lender a security interest in,
among other things, certain shares of his Rush Class B Common Stock (the “Pledged Shares”);
WHEREAS, Borrower has authorized Lender, on his behalf, to deliver notices to Rush in accordance with this Agreement pursuant to the ROFR
Power of Attorney (as defined below);
WHEREAS, the Loan Documents permit Lender, under certain circumstances, to foreclose on its security interest in the Pledged Shares and to sell
those shares to pay, in whole or in part, the obligations of Borrower under the Loan Documents; and
WHEREAS, in connection with the Loan Documents, the parties hereto are entering into this Agreement with respect to the Pledged Shares in the
event that Lender ever forecloses its security interest in all or any portion of the Pledged Shares.
AGREEMENT
NOW THEREFORE, in consideration of the premises and for the mutual promises contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the respective meanings set forth below:
“Acceptance Deadline” means 12:00 p.m., San Antonio, Texas, time, on that date which is three (3) Business Days after delivery by Lender of a
ROFR Notice.
“Agreement” has the meaning assigned to it in the first paragraph of this Right of First Refusal Agreement.
“Borrower” has the meaning assigned to it in the first paragraph of this Agreement.
“Business Day” means a day, other than a Saturday or Sunday, on which commercial banks in San Antonio, Texas, are open for the general
transaction of business.
“Delinquent Amount” has the meaning assigned to it in Section 3 of this Agreement.
“Event of Default” has the meaning assigned to it in the Loan Documents.
“Lender” has the meaning assigned to it in the first paragraph of this Agreement.
“Loan Documents” has the meaning assigned to it in the recitals to this Agreement.
“Loan Payment Event” has the meaning assigned to it in Section 2 of this Agreement.
“Margin Call Price” means the average of the VWAPs for the two (2) full Trading Days most recently ended prior to the time of delivery by
Lender of the ROFR Notice.
“Margin Call Shares” has the meaning assigned to it in Section 3 of this Agreement.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental
authority, or other entity.
“Pledged Shares” has the meaning assigned to it in the recitals to this Agreement.
“ROFR Notice” has the meaning assigned to it in Section 2 of this Agreement.
“ROFR Power of Attorney” means a power of attorney granted to Lender pursuant to Section 9 of the Pledge and Security Agreement executed by
Borrower, for the benefit of Lender, granting Lender the authority to deliver a ROFR Notice on behalf of Borrower upon the occurrence of a Loan Payment
Event.
“Rush” has the meaning assigned to it in the first paragraph of this Agreement.
“Rush Notice” has the meaning assigned to it in Section 4 of this Agreement.
“Trading Day” means any day on which The Nasdaq Stock Market is open for trading during its regular trading session (it being understood and
agreed that any day on which The Nasdaq Stock Market is open for trading but is scheduled to close early in connection with a current or pending holiday
shall constitute a regular trading session).
“VWAP” means the volume-weighted average price.
2. Loan Payment Event. Upon an Event of Default, mandatory prepayment event, margin call, or any other event or circumstance that requires a
payment to be made by Borrower under any Loan Document (any or all of the foregoing events or circumstances being herein collectively referred to as a
“Loan Payment Event”), and, as a result of any such Loan Payment Event, Lender is entitled to foreclose upon and sell all or any portion of the Pledged
Shares in accordance with the terms of the Loan Documents, then Lender, pursuant to the ROFR Power of Attorney, will provide written notice of same to
Rush (“ROFR Notice”).
3. ROFR Notice. The ROFR Notice will specify (a) the amount of any payment(s) due but unpaid by Borrower under the Loan Documents (the
“Delinquent Amount”), (b) the number of Pledged Shares determined by Lender in its reasonable judgment to be sufficient to pay the Delinquent Amount
and to cause Borrower to come into full compliance with all of its obligations under the Loan Documents (the “Margin Call Shares”), and (c) the Margin
Call Price. The ROFR Notice will constitute a binding, irrevocable offer by Borrower to sell to Rush the Margin Call Shares at the Margin Call Price, and
by its signature below Borrower hereby agrees and acknowledges that any Delinquent Amount to be paid by Rush in exchange for such Margin Call Shares
shall be paid directly to Lender via Lender’s account identified on Schedule A hereto.
2
4. ROFR Process and Procedure.
(a) No later than the Acceptance Deadline, Rush may agree, by written notice to Lender (the “Rush Notice”), to acquire the number of Margin
Call Shares offered under such ROFR Notice at the Margin Call Price. If a Rush Notice meeting the requirements specified herein is not
delivered to Lender at or prior to the Acceptance Deadline, then Rush will be deemed to have rejected the opportunity to purchase the Margin
Call Shares offered under such ROFR Notice, and such ROFR Notice shall terminate and be of no further force or effect.
(b) Upon delivery of a Rush Notice meeting the requirements specified above at or prior to the Acceptance Deadline, Borrower will be obligated
to sell, and Rush will be obligated to purchase, all of the Margin Call Shares for the Margin Call Price, payable in cash by wire transfer of
immediately available funds to Lender’s account identified on Schedule A hereto. The closing of such sale and purchase shall occur at such
time and place as Lender and Rush may mutually agree, but in any event no later than 4:00 p.m., San Antonio, Texas, time, on that date which
is two (2) Business Days after the Rush Notice is delivered to Lender.
5. Miscellaneous.
(a) The provisions of this Agreement may not be amended, modified, or supplemented, and waivers of or consents to departures from the
provisions hereof may not be given, unless approved in writing by the parties hereto.
(b) This Agreement shall be binding upon, shall inure to the benefit of, and be enforceable by, the parties hereto and their respective successors
and permitted assigns; provided that, with respect to any successor and/or assign of Lender under this Agreement and the Loan Documents,
such successor and/or assign must expressly assume all of Lender’s rights and obligations under this Agreement.
(c) All notices and other communications required to be delivered pursuant to this Agreement in connection with a Loan Payment Event shall be
in writing and shall be delivered by courier to the respective address specified for each Person party to this Agreement on the signature
page(s) hereto. Notices or other communications shall be deemed to have been delivered when received by the party to whom such notice or
other communication is addressed; provided that, if such notice or other communication is received after 5:00 p.m., San Antonio, Texas, time
on any Business Day or is received on any day that is not a Business Day, such notice or other communication shall be deemed to have been
delivered on the immediately succeeding Business Day.
(d) This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to such state’s conflicts
of laws principles.
(e) Headings of sections and subsections of this Agreement are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
3
(f) This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall
constitute one and the same Agreement) and shall become effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement via e-mail shall be
effective as delivery of a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.
RUSH ENTERPRISES, INC.
By: /s/ Steve Keller
Name: Steve Keller
Title: Chief Financial Officer and Treasurer
Address:
Rush Enterprises, Inc.
555 IH 35 South, Suite 500
New Braunfels, TX
Attn: Steve Keller
With a copy to:
Rush Enterprises, Inc.
555 IH 35 South, Suite 500
New Braunfels, TX
Attn: Michael Goldstone
BORROWER:
/s/ W.M. “Rusty” Rush
W.M. “Rusty” Rush
Address:
Rush Enterprises, Inc.
555 IH 35 South, Suite 500
New Braunfels, TX
Attn: Rusty Rush
4
FROST BANK, a Texas state bank
By: /s/ Kendal Volz
Name: Kendal Volz
Title: Senior Vice President
Address:
Frost Bank
111 W. Houston Street, 9th Floor
San Antonio, TX
Attn: Kendal Volz
With a copy to:
Frost Bank
111 W. Houston Street, 9th Floor
San Antonio, TX
Attn: Clay Jones
5
SUBSIDIARIES OF THE COMPANY
EXHIBIT 21.1
Rush Truck Centers of Alabama, Inc.
Name
Rush Truck Centers of Arizona, Inc.
State of
Incorporation
Delaware
Delaware
Rush Truck Centers of Arkansas, Inc.
Delaware
Rush Medium Duty Truck Centers of California, Inc.
Rush Truck Centers of California, Inc.
Delaware
Delaware
Rush Medium Duty Truck Centers of Colorado, Inc.
Delaware
Names Under Which Subsidiary Does Business
Rush Truck Center, Mobile
Rush Peterbilt Truck Center, Mobile
Rush Truck Center, Flagstaff
Rush Peterbilt Truck Center, Flagstaff
Rush Truck Center, Phoenix
Rush Peterbilt Truck Center, Phoenix
Rush Truck Center, Phoenix East
Rush Peterbilt Truck Center, Phoenix East
Rush Truck Center, Tucson
Rush Peterbilt Truck Center, Tucson
Rush Truck Center, Yuma
Rush Peterbilt Truck Center, Yuma
Rush Truck Center, Jonesboro
Rush Truck Center, Lowell
Rush Isuzu Trucks, Springdale
Rush Truck Center, North Little Rock
Rush Truck Center, Pine Bluff
Rush Truck Center, Russellville
Rush Truck Center, Ceres
Rush Truck Center, Fontana
Rush Peterbilt Truck Center, Fontana
Rush Truck Center, Fontana Collision Center
Rush Medium Duty Truck Center, Fontana
Rush Peterbilt Medium Duty Truck Center, Fontana
Rush Isuzu Trucks, Fontana
Rush Towing Systems, Fontana
Rush Truck Center, Fontana Used Trucks
Rush Truck Center, Fontana Vocational Service
Rush Truck Center, Long Beach
Rush Peterbilt Truck Center, Long Beach
Rush Peterbilt Truck Center, Pico Rivera
Rush Truck Center, Pico Rivera
Rush Peterbilt Truck Center, Los Angeles
Rush Truck Center, Los Angeles
Rush Truck Center, San Diego
Rush Peterbilt Truck Center, San Diego
Rush Truck Center, Sylmar
Rush Peterbilt Truck Center, Sylmar
Rush Truck Center, Victorville
Rush Peterbilt Truck Center, Victorville
Rush Truck Center, Whittier
Rush Isuzu Trucks, Whittier
Rush Peterbilt Truck Center, Whittier
Rush Medium Duty Truck Center, Denver
Rush Medium Duty Ford Trucks, Denver
Rush Towing Systems, Denver
Rush Truck Centers of Colorado, Inc.
Delaware
Rush Truck Centers of Florida, Inc.
Delaware
Rush Truck Centers of Georgia, Inc.
Delaware
Rush Truck Centers of Idaho, Inc.
Delaware
Rush Truck Centers of Illinois, Inc.
Delaware
Rush Truck Center, Colorado Springs
Rush Peterbilt Truck Center, Colorado Springs
Rush Truck Center, Denver
Rush Peterbilt Truck Center, Denver
Rush Isuzu Trucks, Denver
Rush Truck Center, Greeley
Rush Peterbilt Truck Center, Greeley
Rush Truck Center, Pueblo
Rush Peterbilt Truck Center, Pueblo
Rush Truck Center, Haines City
Rush Peterbilt Truck Center, Haines City
Rush Truck Center, Jacksonville
Rush Peterbilt Truck Center, Jacksonville
Rush Truck Center, Jacksonville East
Rush Peterbilt Truck Center, Jacksonville East
Rush Truck Center, Lake City
Rush Peterbilt Truck Center, Lake City
Rush Truck Center, Miami
Rush Truck Center, Miami Northwest
Rush Truck Center, Orlando
Rush Peterbilt Truck Center, Orlando
Rush Isuzu Trucks, Orlando
Rush Isuzu Truck Center, Orlando
Rush Truck Center, Orlando Light & Medium Duty
Rush Truck Center, Orlando North
Rush Isuzu Trucks, Orlando North
Rush Truck Center, Orlando South
Rush Peterbilt Truck Center, Orlando South
Rush Truck Center, Orlando Used Trucks
Rush Truck Center, Tampa
Rush Peterbilt Truck Center, Tampa
Rush Bus Center, Atlanta
Rush Truck Center, Atlanta Collision Center
Rush Truck Center, Atlanta
Rush Isuzu Trucks, Atlanta
Rush Medium Duty Truck Center, Atlanta
Rush Truck Center, Augusta
Rush Truck Center, Columbus
Rush Truck Center, Doraville
Rush Isuzu Trucks, Doraville
Rush Truck Center, Gainesville
Rush Truck Center, Macon
Rush Truck Center, Smyrna
Rush Truck Center, Tifton
Rush Bus Center, Tifton
Rush Truck Center, Valdosta
Rush International Truck Center, Boise
Rush Truck Center, Boise
Rush International Truck Center, Idaho Falls
Rush Truck Center, Idaho Falls
Rush International Truck Center, Lewiston
Rush Truck Center, Lewiston
Rush International Truck Center, Twin Falls
Rush Truck Center, Twin Falls
House of Trucks, Willowbrook
Rush Truck Center, Bloomington
Rush Truck Center, Carol Stream
Rush Truck Center, Champaign
Rush Truck Center, Chicago
Rush Truck Center, Effingham
Rush Truck Center, Elk Grove
Rush Truck Center, Huntley
Rush Truck Center, Joliet
Rush Truck Center, Pontoon Beach
Rush Truck Center, Quincy
Rush Truck Center, Springfield
Rush Truck Centers of Indiana, Inc.
Rush Truck Centers of Kansas, Inc.
Rush Truck Centers of Kentucky, Inc.
Rush Truck Centers of Missouri, Inc.
Delaware
Delaware
Delaware
Delaware
Rush Truck Centers of Nebraska, Inc.
Rush Truck Centers of Nevada, Inc.
Rush Truck Centers of New Mexico, Inc.
Delaware
Delaware
Delaware
Rush Truck Centers of North Carolina, Inc.
Delaware
Rush Truck Centers of Ohio, Inc.
Delaware
Rush Truck Center, Gary
Rush Truck Center, Indianapolis
Rush Truck Center, Olathe
Rush Truck Center, Salina
Rush Truck Center, Topeka
Rush Truck Center, Wichita
Rush Truck Center, Bowling Green
Rush Truck Center, Cape Girardeau
Rush Truck Center, Jefferson City
Rush Truck Center, Joplin
Rush Truck Center, Kansas City
Rush Truck Center, Kansas City Used Truck
Rush Truck Center, St. Joseph
Rush Truck Center, St. Louis
Rush Truck Center, St. Peters
Rush Truck Center, Springfield
Rush Truck Center, West Plains
Rush Truck Center, Omaha
Rush Truck Center, Las Vegas
Rush Peterbilt Truck Center, Las Vegas
Rush Truck Center, Albuquerque
Rush Peterbilt Truck Center, Albuquerque
Rush Truck Center, Farmington
Rush Peterbilt Truck Center, Farmington
Rush Truck Center, Las Cruces
Rush Peterbilt Truck Center, Las Cruces
Rush Truck Center, Asheville
Rush Truck Center, Charlotte
Rush International Truck Center, Charlotte
Rush Isuzu Trucks, Charlotte
Rush Truck Center, Charlotte Collision Center
Rush Truck Center, Hickory
Rush Truck Center, Akron
Rush Bus Center, Akron
Rush Truck Center, Cincinnati
Rush Bus Center, Cincinnati
Rush Isuzu Trucks, Cincinnati
Rush Truck Center, Cleveland
Rush Bus Center, Cleveland
Rush Truck Center, Columbus
Rush Bus Center, Columbus
Rush Truck Center, Dayton
Rush Bus Center, Dayton
Rush Isuzu Trucks, Dayton
Rush Truck Center, Lima
Rush Bus Center, Lima
Rush Truck Centers of Oklahoma, Inc.
Delaware
Rush Truck Centers of Pennsylvania, Inc.
Rush Truck Centers of Tennessee, Inc.
Delaware
Delaware
Rush Truck Centers of Texas, L.P.
Texas
Perfection Equipment
Perfection Truck Parts & Equipment, Oklahoma City
Perfection Crane Repair
Rush Truck Center, Ardmore
Rush Peterbilt Truck Center, Ardmore
Rush Truck Center, Oklahoma City
Rush Peterbilt Truck Center, Oklahoma City
Rush Isuzu Trucks, Oklahoma City
Rush Truck Center, Tulsa
Rush Peterbilt Truck Center, Tulsa
Rush Truck Rigging
Rush Used Truck Center, Tulsa
Custom Vehicle Solutions
Rush Truck Center, Greencastle
Rush Truck Center, Memphis
Rush Truck Center, Memphis Collision Center
Rush Truck Center, Memphis Used Trucks
Rush Truck Center, Nashville
Rush Peterbilt Truck Center, Nashville
Rush Towing Systems, Nashville
Custom Vehicle Solutions
Rig Tough Used Trucks, Dallas
House of Trucks, Dallas
Rush Crane and Refuse Systems International
Rush Truck Center, Abilene
Rush Peterbilt Truck Center, Abilene
Rush Truck Center, Amarillo
Rush Peterbilt Truck Center, Amarillo
Rush Truck Center, Arlington
Rush Peterbilt Truck Center, Arlington
Rush Bus Center, Arlington
Rush Truck Center, Austin
Rush Peterbilt Truck Center, Austin
Rush Isuzu Trucks, Austin
Rush Bus Center, Austin
Rush Truck Center, Austin North
Rush Truck Center, Beaumont
Rush Peterbilt Truck Center, Beaumont
Rush Truck Center, Brownsville
Rush Peterbilt Truck Center, Brownsville
Rush Truck Center, Bryan
Rush Truck Center, College Station
Rush Peterbilt Truck Center, College Station
Rush Isuzu Trucks, College Station
Rush Truck Center, Corpus Christi
Rush Peterbilt Truck Center, Corpus Christi
Rush Isuzu Trucks, Corpus Christi
Rush Bus Center, Corpus Christi
Rush Truck Center, Cotulla
Rush Peterbilt Truck Center, Cotulla
Rush Truck Center, Dalhart
Rush Peterbilt Truck Center, Dalhart
Rush Truck Center, Dallas
Rush Peterbilt Truck Center, Dallas
Rush Medium Duty Truck Center, Dallas
Rush Isuzu Trucks, Dallas
Rush Bus Center, Dallas
Rush Truck Center, Dallas Light and Medium Duty
Rush Truck Center, Dallas Medium Duty
Rush Truck Center, Dallas South
Rush Peterbilt Truck Center, Dallas South
Rush Truck Center, Dallas TRP
Rush Truck Center, Denton
Rush Truck Center, El Paso
Rush Peterbilt Truck Center, El Paso
Rush Isuzu Trucks, El Paso
Rush Truck Center, Fort Worth
Rush Peterbilt Truck Center, Fort Worth
Rush Bus Center, Fort Worth
Rush Truck Center, Houston
Rush Peterbilt Truck Center, Houston
Rush Bus Center, Houston
Rush Towing Systems, Houston
Rush Truck Center, Houston Used Trucks
Rush Truck Center, Houston Medium Duty
Rush Truck Center, Houston Northwest
Rush Peterbilt Truck Center, Houston Northwest
Rush Truck Center, Laredo
Rush Peterbilt Truck Center, Laredo
Rush Bus Center, Laredo
Rush Truck Center, Lubbock
Rush Peterbilt Truck Center, Lubbock
Rush Truck Center, Lufkin
Rush Peterbilt Truck Center, Lufkin
Rush Bus Center, Lufkin
Rush Truck Center, Odessa
Rush Peterbilt Truck Center, Odessa
Rush Truck Center, Pharr
Rush Peterbilt Truck Center, Pharr
Rush Bus Center, Pharr
Rush Truck Center, San Antonio
Rush Peterbilt Truck Center, San Antonio
Rush Bus Center, San Antonio
Rush Refuse Systems
Rush Towing Systems, San Antonio
Rush Truck Center, Sealy
Rush Peterbilt Truck Center, Sealy
Rush Isuzu Trucks, Sealy
Rush Bus Center, Sealy
Rush Truck Center, Texarkana
Rush Peterbilt Truck Center, Texarkana
Rush Bus Center, Texarkana
Rush Truck Center, Tyler
Rush Peterbilt Truck Center, Tyler
Rush Bus Center, Tyler
Rush Truck Center, Victoria
Rush Peterbilt Truck Center, Victoria
Rush Truck Center, Waco
Rush Medium Duty Truck Center, Waco
Rush Peterbilt Truck Center, Waco
Rush Isuzu Trucks, Waco
Rush Bus Center, Waco
Rush Truck Center, Wichita Falls
Rush Bus Center, Wichita Falls
Rush Peterbilt Truck Center, Wichita Falls
World Wide Tires
Rush International Truck Center, Ogden
Rush Truck Center, Ogden
Rush Truck Center, Farr West
Rush International Truck Center, Salt Lake City
Rush Truck Center, Salt Lake City
Rush International Truck Center, Springville
Rush Truck Center, Springville
Rush International Truck Center, St. George
Rush Truck Center, St. George
Rush Truck Centers of Utah, Inc.
Delaware
Rush Truck Centers of Virginia, Inc.
Rush Truck Leasing, Inc.
Delaware
Delaware
Rush Truck Centres of Canada Limited
Ontario, Canada
Rush Truck Center, Chester
Rush Truck Center, Richmond
Rush Crane Systems
Rush Idealease, Charlotte
Rush Refuse Systems
Augusta Idealease
Asheville Idealease
Boise Idealease
Champaign Idealease
Charlotte Idealease
Chicago Idealease
Cincinnati Idealease
Cleveland Idealease
Columbus Idealease
Dayton Idealease
Effingham Idealease
Hickory Idealease
Indianapolis Idealease
Indy Idealease
Joplin Idealease
Kansas City Idealease
Lima Idealease
Lowell Idealease
Macon Idealease
Memphis Idealease
Norfolk Idealease
North Little Rock Idealease
Quincy Idealease
Richmond Idealease
Salina Idealease
Salt Lake City Idealease
Springfield Idealease
St. Louis Idealease
Wichita Idealease
Rush Truck Centres, Belleville
Rush Truck Centres, Cornwall
Rush Truck Centres, Kemptville
Rush Truck Centres, Kemptville Collision Centre
Rush Truck Centres, Kingston
Rush Truck Centres, Markham
Rush Isuzu Truck, Markham
Rush Truck Centres, Mississauga
Rush Truck Centres, Oshawa
Rush Truck Centres, Ottawa East
Rush Truck Centres, Ottawa West
Rush Truck Centres, Pembroke
Rush Truck Centres, Sault Ste. Marie
Rush Truck Centres, St. Catharines
Rush Truck Centres, Sudbury
Rush Truck Centres, Timmins
Rush Truck Leasing, Belleville Idealease
Rush Truck Leasing, Kemptville Idealease
Rush Truck Leasing, Kingston Idealease
Rush Truck Leasing, Markham Idealease
Rush Truck Leasing, Mississauga Idealease
Rush Truck Leasing, Oshawa Idealease
Rush Truck Leasing, Ottawa Idealease
Rush Truck Leasing, St. Catharines Idealease
Rush Truck Leasing, Sudbury Idealease
Rush Truck Leasing, Timmins Idealease
Advance Premium Finance, Inc.
AiRush, Inc.
Associated Acceptance, Inc.
Associated Acceptance of Florida, Inc.
Associated Acceptance of Georgia, Inc.
Associated Acceptance of Illinois, Inc.
Associated Acceptance of Oklahoma, Inc.
Brauntex Indemnity Company
Commercial Fleet Technologies, Inc.
Idealease of Chicago LLC
International General Agency, Inc.
Los Cuernos, Inc.
Rig Tough, Inc.
RTC Nevada, LLC
Rush Accessories Corporation
Rush Administrative Services, Inc.
Rush Momentum Holdings, Inc.
Rushcare, Inc.
Rushco, Inc.
Rush Logistics, Inc.
Rush Real Estate Holdings, Inc.
Rush Retail Centers, Inc.
Rushtex, Inc.
Truck & Trailer Finance, Inc.
1187394B.C. Ltd.
California
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Illinois
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Canada
None
None
Automotive Industry Insurance
Associated Truck Insurance Services
Rush Truck Insurance Services
None
None
None
None
None
Partsriver, Inc.
None
None
Los Cuernos Ranch
Rush Truck Center, Birmingham
None
Chrome Country
None
None
None
None
None
None
None
None
None
None
EXHIBIT 23.1
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
1. Form S-8 No. 333-242488 pertaining to the Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan and Rush Enterprises, Inc.
Amended and Restated 2004 Employee Stock Purchase Plan,
2. Form S-8 No. 333-219878 pertaining to the Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan,
3. Form S-8 No. 333-198080 pertaining to the Rush Enterprises, Inc. 2007 Long-Term Incentive Plan,
4. Form S-8 No. 333-170732 pertaining to the Rush Enterprises, Inc. Deferred Compensation Plan, and
5. Form S-8 No. 333-138556 pertaining to the Rush Enterprises, Inc. 2006 Non-Employee Director Stock Plan
of our reports dated February 23, 2023, with respect to the consolidated financial statements of Rush Enterprises, Inc. and subsidiaries and the effectiveness
of internal control over financial reporting of Rush Enterprises, Inc. and subsidiaries, included in this Annual Report (Form 10-K) of Rush Enterprises, Inc.
for the year ended December 31, 2022.
/s/ Ernst & Young LLP
San Antonio, Texas
February 23, 2023
EXHIBIT 31.1
I, W. M. “Rusty” Rush, certify that:
1. I have reviewed this annual report on Form 10-K of Rush Enterprises, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 23, 2023
By: /S/ W. M. “RUSTY” RUSH
W. M. “Rusty” Rush
President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
EXHIBIT 31.2
I, Steven L. Keller, certify that:
1. I have reviewed this annual report on Form 10-K of Rush Enterprises, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 23, 2023
By: /S/ STEVEN L. KELLER
Steven L. Keller
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with this annual report of Rush Enterprises, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. M. “Rusty” Rush, President, Chief Executive Officer and Chairman
of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/S/ W. M. “RUSTY” RUSH
By:
Name: W. M. “Rusty” Rush
Title:
President, Chief Executive Officer and
Chairman of the Board
February 23, 2023
Date:
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with this annual report of Rush Enterprises, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven L. Keller, Chief Financial Officer and Treasurer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/S/ STEVEN L. KELLER
By:
Name: Steven L. Keller
Title:
Date:
Chief Financial Officer and Treasurer
February 23, 2023